Saving sustainably

We already encourage saving - why not encourage sustainable saving instead?

The post-Budget row over tax relief for charitable giving has obscured the fact that there are many tax reliefs given for profitable activities without any consideration for the public benefit of the activities being effectively subsidised. Around £40bn a year of relief against income or capital gains tax goes to support pension saving, ISAs and protect individual gains from the sale of residential property. In times of austerity shouldn’t we be looking more closely at how this money is used? Could the Government use the policy leverage created by such subsidies to encourage more responsible behaviour in the financial sector that benefits the taxpayer as well as the individual investor?

Britain’s economy before the credit crunch was based on high borrowing to fuel increasing consumption which drove economic growth. As individuals we didn’t save enough for our own financial security, and as a country, we haven’t invested enough in our economic future. To face the long term challenges to our economic prosperity like an ageing population or climate change, we will need a more resilient economy that has far stronger foundations of savings and investment.

So what happens to the money that we combine with the tax subsidy in order to save for the future?

Well, we know that pension funds and institutional investors place much of this in the stock market, but the evidence shows that more and more of this capital is used for high frequency trading rather than long term investing. Andy Haldane of the Bank of England is one high profile regulator who is very concerned with this development. Cash placed in ISAs earns a very low rate of interest and, in as much that these funds bolster bank balance sheets and help fund lending to the economy, we also know that the majority of such lending actually funds property loans and financial speculation. Less than 20 per cent of UK bank lending goes to the productive economy of growing businesses. Finally we know that fees and charges in the investment and banking sectors are notoriously opaque, and competition is far from perfect.

So there is an understandable lack of trust in the finance sector, yet the government has to find a way to convince the public not just to save more, but channel those savings into productive investment. One way to do this is for the government to be more explicit about encouraging savings and investments that apply responsibility criteria and enhance social and environmental well being, as well as financial returns. Moreover, it should be using the existing subsidies to enforce this principle. In an era where all subsidy has to be made to work harder for the public interest, there should be a principle that, in return for tax relief, savers and investors should be able to demonstrate a contribution to the public good. This will not be easy to do, but there is a growing set of voluntary standards and codes of practice which investment organisations can apply to demonstrate they are taking a responsible approach, looking a long term interests, not just short term profits.

In my recent report for Green Alliance, Saving for a sustainable future, I make the case for these principles to be used in public policy and set out a few ways in which it could be applied:

  • Pension tax relief could be made conditional on responsible standards being applied.

  • Banks could only be able to offer tax-free Cash ISA accounts if they could demonstrate responsible and transparent lending practices.

  • Capital gains tax relief for the sale of a residential property could be made conditional on certain energy efficiency improvements being made to the building.

There is political consensus on the need to rebalance our economy and reshape British capitalism in way that better incorporates the values of society. Applying these ideas to existing taxpayer subsidies is a good start.

Green - well, yellow - Britain. Photograph: Getty Images

Chris is an independent environmental policy consultant working on sustainable finance, climate change, energy policy and the green economy. He is a fellow of the Finance Innovation Lab, and an associate of Green Alliance, where he has written on the Green Investment Bank, environmental tax reform and sustainable savings policy.

He was previously head of Climate Change at the Environment Agency and senior research fellow for sustainability at IPPR. Follow @chrisjhewett on twitter.

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There is nothing compassionate about Britain’s Dickensian tolerance of begging

I was called “heartless” for urging police to refer beggars to support services. But funding drug habits to salve a liberal conscience is the truly cruel approach.

In Rochdale, like many other towns across the country, we’re working hard to support small businesses and make our high streets inviting places for people to visit. So it doesn’t help when growing numbers of aggressive street beggars are becoming a regular fixture on the streets, accosting shoppers.

I’ve raised this with the police on several occasions now and when I tweeted that they needed to enforce laws preventing begging and refer them to appropriate services, all hell broke loose on social media. I was condemned as heartless, evil and, of course, the favourite insult of all left-wing trolls, “a Tory”.

An article in the Guardian supported this knee-jerk consensus that I was a typically out-of-touch politician who didn’t understand the underlying reasons for begging and accused me of being “misguided” and showing “open disdain” for the poor. 

The problem is, this isn’t true, as I know plenty about begging.

Before I became an MP, I worked as a researcher for The Big Issue and went on to set up a social research company that carried out significant research on street begging, including a major report that was published by the homeless charity, Crisis.

When I worked at The Big Issue, the strapline on the magazine used to say: “Working not Begging”. This encapsulated its philosophy of dignity in work and empowering people to help themselves. I’ve seen many people’s lives transformed through the work of The Big Issue, but I’ve never seen one person’s life transformed by thrusting small change at them as they beg in the street.

The Big Issue’s founder, John Bird, has argued this position very eloquently over the years. Giving to beggars helps no one, he says. “On the contrary, it locks the beggar in a downward spiral of abject dependency and victimhood, where all self-respect, honesty and hope are lost.”

Even though he’s now doing great work in the House of Lords, much of Bird’s transformative zeal is lost on politicians. Too many on the right have no interest in helping the poor, while too many on the left are more interested in easing their conscience than grappling with the hard solutions required to turn chaotic lives around.

But a good starting point is always to examine the facts.

The Labour leader of Manchester City Council, Richard Leese, has cited evidence that suggests that 80 per cent of street beggars in Manchester are not homeless. And national police figures have shown that fewer than one in five people arrested for begging are homeless.

Further research overwhelmingly shows the most powerful motivating force behind begging is to fund drug addiction. The homeless charity, Thames Reach, estimates that 80 per cent of beggars in London do so to support a drug habit, particularly crack cocaine and heroin, while drug-testing figures by the Metropolitan Police on beggars indicated that between 70 and 80 per cent tested positive for Class A drugs.

It’s important to distinguish that homelessness and begging can be very different sets of circumstances. As Thames Reach puts it, “most rough sleepers don’t beg and most beggars aren’t rough sleepers”.

And this is why they often require different solutions.

In the case of begging, breaking a chaotic drug dependency is hard and the important first step is arrest referral – ie. the police referring beggars on to specialised support services.  The police approach to begging is inconsistent – with action often only coming after local pressure. For example, when West Midlands Police received over 1,000 complaints about street begging, a crackdown was launched. This is not the case everywhere, but only the police have the power to pick beggars up and start a process that can turn their lives around.

With drug-related deaths hitting record levels in England and Wales in recent years, combined with cuts to drug addiction services and a nine per cent cut to local authority health budgets over the next three years, all the conditions are in place for things to get a lot worse.

This week there will be an important homelessness debate in Parliament, as Bob Blackman MP's Homelessness Reduction Bill is due to come back before the House of Commons for report stage. This is welcome legislation, but until we start to properly distinguish the unique set of problems and needs that beggars have, I fear begging on the streets will increase.

Eighteen years ago, I was involved in a report called Drugs at the Sharp End, which called on the government to urgently review its drug strategy. Its findings were presented to the government’s drugs czar Keith Hellawell on Newsnight and there was a sense that the penny was finally dropping.

I feel we’ve gone backwards since then. Not just in the progress that has been undone through services being cut, but also in terms of general attitudes towards begging.

A Dickensian tolerance of begging demonstrates an appalling Victorian attitude that has no place in 21st century Britain. Do we really think it’s acceptable for our fellow citizens to live as beggars with no real way out? And well-meaning displays of “compassion” are losing touch with pragmatic policy. This well-intentioned approach is starting to become symptomatic of the shallow, placard-waving gesture politics of the left, which helps no one and has no connection to meaningful action.

If we’re going make sure begging has no place in modern Britain, then we can’t let misguided sentiment get in the way of a genuine drive to transform lives through evidenced-based effective policy.

Simon Danczuk is MP for Rochdale.