Leader: It is not “socialism” to say we are facing market failure on a grand scale

By refusing to accept that the market is not working for the majority, the Tories have put themselves at odds with the public.

For decades after the Thatcher revolution of the 1980s, politicians of the left and the right put their faith in a new economic paradigm as the guarantee of prosperity for the majority. Today, after the “Great Contraction” of 2008-2009, they can no longer do so with the same confidence. Economic growth in Britain has returned after three years of stagnation but it is forecast that real wages will not increase until 2015 and will not return to their pre-crash levels until 2023. A broken energy market, in which six companies control 98 per cent of supply, has left 4.5 million people in fuel poverty. Extortionate rents have forced millions to rely on housing benefit. By any measure, this is market failure on a grand scale.

The living standards crisis is a challenge for all political parties but most of all for the Conservatives, the natural defenders of capitalism. After Labour pledged to freeze gas and electricity prices until 2017 and to build 200,000 homes a year by 2020, David Cameron’s party had a chance to offer its own intelligent and imaginative solutions. But at its conference in Manchester, it retreated to its comfort zone. Aided by an ever more partisan right-wing press, speaker after speaker derided Mr Miliband as a “socialist” and a “Marxist”, as if concern at falling wages were comparable to a belief in world revolution.

In doing so, they failed to recognise that when Margaret Thatcher assailed her left-wing opponents in the 1980s, she did so in the confidence that her free-market policies retained popular support. Mr Cameron does not enjoy that luxury. Polls show that roughly two-thirds of voters support a 50p top income-tax rate, a mansion tax, stronger workers’ rights, a living wage and the renationalisation of the railways and the privatised utilities. If Mr Miliband is a socialist, so is much of the public.

The most unintentionally revealing moment of the conference came when George Osborne rebuked the Labour leader for suggesting that “the cost of living was somehow detached from the performance of the economy”. It was a remark that betrayed Mr Osborne’s failure to appreciate that the crisis is not merely cyclical (a problem exacerbated by his strategy of austerity), but structural. It was in 2003, long before the crash, that wages for 11 million earners began to stagnate.

Aside from a pledge to freeze fuel duty until 2015, the Tories had nothing significant to say in Manchester on the question of living standards. The most important announcements were the early introduction of the Help to Buy scheme and Mr Osborne’s commitment to achieve a Budget surplus by the end of the next parliament, both of which risk further depressing incomes. By inflating demand without addressing the fundamental problem of supply, Help to Buy will make housing less affordable, while Mr Osborne’s promise of a balanced Budget is likely to be met by imposing even greater cuts to benefits and services for the poorest. The Chancellor’s ideological fixation with the public finances ignores the greater crisis in voters’ finances.

On the fringes of the party, there is much good thinking. The Conservative campaign group Renewal, which aims to broaden the party’s appeal among northern, working-class and ethnic-minority voters, published a pledge card calling for the building of a million new homes over the course of the next parliament, a significant increase in the minimum wage, a “cost of living test” for all legislation and action against “rip-off companies”. However, there is as yet little sign that the Conservative leadership is prepared to embrace the kind of reformist, centrist agenda that secured Angela Merkel’s re-election in Germany.

The Tories’ error – compounded by the Prime Minister in his conference speech on Wednesday 2 October –has been to mistake the views of the strident right-wing press for those of the majority of the British public and to dismiss sensible calls for a more responsible capitalism as unreconstructed socialism.

George Osborne and Michael Gove listen to speeches at the Conservative conference in Manchester. Photograph: Getty Images.

This article first appeared in the 07 October 2013 issue of the New Statesman, The last days of Nelson Mandela

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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