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Laurie Penny: Face the facts, Labour’s fingerprints were all over the Budget

Osborne may have smacked us in the face, but Harman, Darling and co stabbed us in the back.

Panto season came early this year. Watching George Gideon Osborne take the floor on Tuesday to announce the execution of the welfare state was a bit like being in the audience at a raucous Christmas show, with booing and howling on cue from the Labour benches as the Chancellor tore successive chunks out of sickness benefit, housing benefit, lone-parent support and the dole, before setting out plans for a wildly regressive VAT hike, a freeze on public-sector pay and a hefty tax break for businesses.

The sheer brazenness of it all felt farcical, almost unreal. You half expected Osborne to burst into a musical number about how fun it is to be the baddie, announce the closure of all orphanages and vanish from the Commons in a puff of green smoke.

The response from Labour and the liberal press has been equally pantomimic. After all, when a new cabinet, 80 per cent of whose members are in private life millionaires, pulverises welfare and housing with a fistful of broken sums before declaring that "We're all in this together", what can you really say except "Oh no, we're not"?

By far the most astute summary came from the activist and comedian Mark Thomas, who tweeted: "That wasn't so much a Budget as class war committed with a calculator." The controlled ferocity of the emergency Budget was almost kinky, presuming you have a fetish for being kicked repeatedly in the soul by a man with a stack of papers and a glass of mineral water.

Labour and the liberal press have condemned the proposals -- but the fiery indignation of Harriet Harman and Alistair Darling rings hollow when one considers that the groundwork for many of the proposed welfare cuts had already been done before Labour lost the election.

Uncomfortable as it may be for the left to recall, some of the most regressive changes in this Budget -- forcing lone parents with school-age children into work; sanctions for the mentally ill and the long-term jobless; elimination tests for sickness benefits -- were Labour policies a few short months ago.

Absurd incentives

As the liberal press laments the proposed rationing of disability living allowance, it seems to have forgotten that Labour has already cleaned up on every other benefit offered to the infirm.

In 2009, the Labour Representation Committee accused the government of ripping off Tory welfare-reform proposals wholesale. They were right: Labour’s green paper on benefit reform and the then shadow cabinet’s proposals to downsize and privatise the welfare state were functionally identical.

In January, John Cruddas and Jonathan Rutherford explained in an essay for New Statesman how Labour had "lost its way" on welfare, abandoning the long-term jobless and undermining state support for the most vulnerable, with tragic consequences.

Earlier this year, the BBC exposed the brutality of the new Employment and Support Allowance tests, which are designed to deny sick people benefit by any means necessary and which have required patients dying of cancer to prove their incapacity by walking until they fall over.

Despite the absurdity of imposing punitive "incentives to work" in a climate where there is simply no work to be had, outliers like John McDonnell who have spoken out against welfare reform were condemned as cranks. And during the election campaign, not one Labour MP made the strong case for social justice and a protective welfare state that so many of us ached to hear.

Osborne’s emergency Budget is class war and nothing else, unashamedly shoring up the private sector while stripping vital support from those who already have nothing. The bitter truth, however, is that Osborne would not have been able to get away with this if New Labour had not already laid the ideological foundation for the destruction of welfare in Britain.

For those of us who have lived at the sharp edge of Labour’s welfare reforms, for those of us who have lost homes, friends and partners to poverty and unemployment, for those of us who have organised, campaigned and fought to push stories about the savagery of benefit sanctions into the press, the centre left’s sudden attack of conscience is colossally insulting.

Delayed outrage

For the young, the sick and the poor, the energy of Labour’s outrage over welfare reform has come far too late. The Guardian’s Jackie Ashley commented that these cuts represent “the absolute triumph” of the Tories’ “softening-up process” -- but that process occurred under Labour.

At some point over the past decade, it became acceptable to stereotype families and communities as "scroungers", to scapegoat lone parents and the long-term jobless, and to imply that the long-term sick are merely malingering. Somehow, it became admissible to speak of poverty and hopelessness as "incentives to work".

Somehow, it became conscionable for the left to refer to welfare provision as "a drain on the state" rather than a central, vital function of the state. For the millions of us who have relied on meagre welfare support to survive the first dip of this recession, it was New Labour that held us down as we waited for the inevitable punches from the right.

And in one way, news of the coalition's outright assault on the life chances and dignity of the poor hurts a little less, because we saw it coming. Being smacked in the face is less painful than being stabbed in the back.

In the weeks and months to come, Labour might just begin to remember that it is not the party of business, the party of corporate Britain, but the party of Nye Bevan, Clement Attlee and Barbara Castle, the party of working people and the poor, the party of the NHS, of university grants, of Chartists and Levellers and Diggers and dreamers, of trade unions and of the welfare state.

Over the coming years of pain, Labour will serve the ordinary people of Britain best if it remembers its core values. For some of us, however, it may already be too late.

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Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

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Has Brexit burst the British housing bubble?

The fall in value of the pound is having a negative impact on property prices.

The high cost of housing in the UK has almost nothing to do with supply and demand. What matters is political control. Rents are high because landlords have gained the upper hand politically. The consequences are vividly illustrated in Ken Loach’s new film focusing on inequality in Britain, I’ Daniel Blake.  As a student in the 1980s I paid £9 a week to rent a room in a shared house in Newcastle upon Tyne. Private rent was low because for decades before then rents had been regulated. It was the lifting of that regulation that meant rents could rise so that now students have to borrow vast sums of money just to have a place to live. Today’s students pay many multiples more in rent than I ever did, and millions of families with children are also struggling because they have to rent privately.

Because rents have been allowed to rise as high as landlords can get away with, the landlords have been encouraged to buy up more and more properties that were once social housing or lived in by a family, who had bought the property with a mortgage. The number of people renting privately doubled between the last two censuses of 2001 and 2011. That has never happened before. It was the end result of years of deregulation and the withdrawal of our government from representing our interests in housing. Well-regulated private renting is a benefit, but without rent regulation it becomes a social evil.

Housing prices are not determined by supply and demand because you do not have a choice about needing to be housed. Allow an unregulated market to develop when social housing is also being cut and there is no choice not to buy what is on offer, other than sleeping on the streets. Prices will go sky-high. The purchase prices for mortgage borrowers also rise to astronomical levels as first-time buyers are competing with landlords to buy properties, and so have to be able to secure a mortgage equal to the amount a landlords can wring out of people desperate for a home.

In the first blog in this series on affordable housing published by Taxpayers Against Poverty, Stephen Hill, director of C2O Futureplanners, explained: “There are over one million less affordable homes than there were in 1980. The population has grown by nearly nine million people. Incomes at the median level are flat, and secure employment is increasingly scarce.” He is correct, but the situation is even worse than that — it is not lack of housing that is the problem. Each annual census in the UK records the amount of housing that exists at each point in time. It does this by recording the number of rooms in homes over a certain size. The number of rooms per person has risen at every census since 1981.

The 2011 census was the first to count bedrooms and found that in England and Wales there were 66 million for a population of 55 million (21 million of whom were married or in a civil partnership). So even if we make the ludicrous assumption that only married people share a bed and no children use bunk-beds, there were at least 22 million bedrooms empty on census night 2011. We have not been building a huge number of new houses or flats in recent years, but we have been adding extensions on to our existing homes and so we now have more housing than we have ever had before, per person and per family. We just share it out more unfairly than we have ever done before.

If housing prices were about supply and demand then our surplus of bedrooms would result in falling prices, but this is not a free market. You are not free to buy a flat that has been left empty in London to appreciate in value by its owner. They do not want to sell, or sometimes even rent it out, and you almost certainly would not have the money even if they did.

It is in the housing market that the majority of investments are made in the UK, housing is where most wealth is held. As we become more and more economically unequal it is through housing that we most clearly see that most of us are losers while just a few (who own multiple properties) are winners. Recent UK governments have been allowing wealth and income inequalities to rise and rise.

As Fred Harrison explained in the second blog in this series, government has not only withdrawn from regulating housing rents and profits to avoid this winner-takes-all-economics — it is now even prepared to provide £2bn to buy properties that home builders can’t sell so that they don’t need to lower prices even if landlords and first-time buyers will not buy their properties. The government sees renting-seeking as a social good, and believes that the market in housing should be regulated less and less with each year that passes, other than intervening to keep prices high and rising. Meanwhile, street homelessness rises, evictions rise, the debt of mortgage holders rises, housing prices rise and a small minority of the population become richer. So how will it end?

You might have thought that prices would stop rising when landlords stopped buying properties because the return on their investments in terms of rent would not making it worth their while paying, say, one million pounds for a three-bed house in a part of London near a tube station. Suppose that the most a family could pay was £20,000 a year in rent. The landlord’s “return” on their investment would only be two per cent a year, ignoring wear-and tear and anything else that they might be able to off-set against paying tax. If the forces that were actually at play were “supply and demand” then surely prices have to stop rising when people can no longer afford the rents?

However, landlords have another return: the escalating value of the property itself. If the property is rising by five per cent a year in value then they are making a seven per cent return when they rent it out, even if annual rents are just two per cent of its value. The rise of five per cent a year is due to speculation which is itself partly fed by a belief that the government of the day will do all it can to protect their investments, but it will only do that up to a certain point.

Because it needs to raise taxes a little given the state of the national finances, the UK government is now withdrawing its support of reckless profit taking by smaller landlords. In October 2016 a group of buy-to-let landlords lost their appeal in the courts to try to continue to be able to claim their mortgage interest payments as a business expense. From 2017 only the largest of landlords who set up companies to rent out their properties will be able to continue to do that.

The government knows that the housing market is in trouble. That is why Philip Hammond, the current Chancellor, announced that their “Help to Buy” scheme (which was aimed at the very best-off of potential first time buyers) will end in December 2016. The government knows that with the risk of falling house prices in future it cannot afford the guarantees that “Help to Buy” created. “Help to Buy” schemes were the previous Chancellor, George Osborne’s biggest spending commitment. They were designed to help inflate the housing market and keep prices rising, but eventually every speculative bubble has to burst.

On 21 September the first reports of a stalling market were released under headlines that included: “Q2 UK house sales at an all-time quarterly low says Land Registry”. UK Land Registry figures now show housing prices to have fallen in London by 7% so far in 2016, with the number of sales roughly halving. Investors have stopped buying; if a recent investor wants to sell they have to do so at a loss. Nationally prices fell by 4.5%.

So what happened to the magic-money-tree? In short the pound fell in value and it has been continuing to fall ever since the UK voted to leave the EU. There was always going to be “the event” that triggered the end of speculation and it is looking more and more likely as if Brexit was that event. Once the pound begins to fall in value then any overseas investor knows that if they buy property in the UK, even if its value in pounds does not fall, it will be worth less to them in future.

Suddenly UK housing is not a safe asset. Suddenly prospective landlords actually have to try to rely on their tenants’ rent to pay back their borrowings. Suddenly housing prices change despite no great alteration in supply or demand. Suddenly the whole edifice looks unsafe, not just for the majority of young and almost all poor people in Britain, but for the large majority of the population.

It was never “supply and demand” that determined our housing costs and profits. Relying on that belief did not result in greatly improved cheaper housing for most people, but it was easy to claim that somehow tomorrow would be better if we just left it to the market — until we left it to the ever more unregulated market for too long. Housing costs, prices and supply are determined by governments, including those that shirk their responsibilities and have too much concern for the economic fortunes of the affluent few.


This is part of a series of blogs on affordable housing published by Taxpayers Against Poverty. You can read others in the series on their website or sign up to attend their seminar in Parliament on the 16th November here: