The latest report from the IFS this week, ‘Cheapflation and the rise of inflation inequality’, found that in the years 2020 to 2022 inflation hit the poorest hardest. Their staples such as milk, butter and pasta rose more in price in supermarkets than did higher-priced foodstuffs. They paid 29.1% more for their groceries, compared with 23.5% for better-off households. The IFS calculated that if the poorest 25% of households had faced the same inflation rate for groceries as the richest 25%, their annual food bills would have been cut by £100.
While food price inflation has reduced in the last 18 months or so (rather contrary to many people’s perception) the slight rise in general inflation, now at 2.2%, seems expected by economists to continue. That is likely to continue to affect the less well-off more than the better-off because of their need to spend a greater proportion of their income on basics, whether foodstuffs or gas and electricity.
Households with unpaid carers are among those most likely to be affected. Carers UK reported in 2022 that there may be 10.6m unpaid carers. With the cost of living crisis, the charity reported, carers were facing unprecedented pressure on their finances, with a quarter cutting back on essentials like food and heating, and 63% extremely worried about managing their monthly costs. Some 44% of working-age adults who are caring for 35 hours or more per week are in poverty, according to the Joseph Rowntree Foundation in its 2022 UK Poverty report, cited by Carers UK.
Research from the TUC reported widespread poverty among workers in the care economy a year ago. It found that 62% of childcare workers and social care workers were earning less than the real living wage. Social care workers were earning only about 65% of the median salary for all employees, £21,500 a year compared with £33,000, while child care workers only earned £18,400, 56% of the median salary.
TUC research in June this year also reported on low wage growth generally, finding that over the past 14 years, child poverty has increased by, on average, an additional 1300 children a week in households with at least one working parent. The TUC said a ‘“toxic combination” of pay stagnation, rising insecure work and cuts to social security have had a “devastating impact on family budgets”’.
The Guardian has reported that the IFS said on June 24th that “30% of children now lived in households below the official poverty line – up from 27% in 2010. Over the course of the present Parliament an additional 670,000 children would be affected by the two-child benefit limit”, if it continues.
At the same time according to the Resolution Foundation, millions of ordinary British citizens are affected by low wage growth. “Average wages are now only £16 a week, or 2.5% higher in real terms than” when the Conservatives came to power in 2010. The TUC report in June showed people in insecure low-paid work had increased by nearly 1m to 4.1m during the Conservatives’ time in office. According to the Guardian the Resolution Foundation found that “precarious work accounted for most of employment growth since the financial crisis”.
That seems likely to continue. Age UK reported in June that some older people have found themselves needing to take part-time jobs after retiring last year. Perhaps intending to care for a spouse or parent, they have found that increases in fuel and utility bills mean that they have to supplement their work pensions. Carers UK had also reported that people aged 46-65 were the largest group to become unpaid carers between 2010 and 20. According to the Guardian the Fabian Society has ‘found that between 2010 and 2022, the number of people living in poverty aged between 60 and the (rising) state pension age had ballooned by about 800,000 to 1.20 million’. And government statistics show that nearly 1 million people aged over 66 are now living in deprivation.
Faced with all this hardship among many thousands of ordinary people, the last government’s inadequate response was to raise taxes by stealth and add to borrowing costs by reducing National Insurance payments. The new government can be applauded for giving unionised workers fair pay rises, but not as yet for helping the marginalised. Liberal Democrats surely need to speak up for many voices unheard by government, in our Conference decisions and the activities of our much-enhanced Parliamentary presence.
First of all let us insist that the new government in raising revenue gives attention to how the still rising cost of living can be alleviated for millions of citizens. Those who cannot work, or earn enough to give them a decent standard of living, need a boost to their income. The Joseph Rowntree Foundation on page 16 of its UK Poverty 2024 calls for the government to ensure that “social security provides sufficient income to afford the essentials, alongside forging a ‘social safety net’ of crisis support, practical help and social connection where people live”. Our policies have accepted that necessity, in our Fairer Society motion passed in York last year, which also when implemented will begin to tackle all relative poverty in our society. We have begun, and surely must continue, to stress that expenditure on welfare, along with that on the NHS, social care and local government services, will need to continue to grow, and must be funded from revised and enhanced taxation.
With assistance from Michael Berwick-Gooding
* Katharine Pindar is a long-standing member of the Cumberland Lib Dems
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54 Comments
If you ask Rachel Reeves about inflation she’ll tell you that she’s taking potentially unpopular measures, adopting tight fiscal rules etc to ensure that inflation doesn’t get out of hand.
She probably won’t want to use the term economic austerity but this is what she’s doing and making the poor suffer most of all.
So we have a situation where the poor have suffered the most because of the recent high inflation and they’ll be suffering the most to help get it back to lower levels again!
Cutting pensioners winter fuel allowance is a political choice by labour – while at the same time it’s commited £3 billion a year that quagmire in Ukraine….All done under the illusion of tight fiscal controls – as always it’s Britain’s poorest that are bottom of the list ..
Just one question…you say “Those who cannot work, or earn enough to give them a decent standard of living, need a boost to their income.” What about those who could work but choose not to…do they not also need a boost to their income? If not, we are agreeing to the idea that there are people in society who are the deserving poor, and others who aren’t…
I agree with putting more stress on inequality but we should be actively resisting the Mainstream hysteria about Inflation. At around 2% Inflation is dangerously Low, we are only an Economic blip away from entering Deflation which would be farmer damaging to Society in General & The Poor in particular. Japan has spent Decades trying to escape Deflation, once in its very hard to get out.
We should recognise that Moderate Inflation ( say between 4% & 10%) can be very useful to people in Debt, something The Poorest are more likely to face.
Martin,
It’s interesting you mention defence spending. In the 1950s/60s this was running at around 9% of GDP gradually decreasing decade by decade to around 2.3% today. It was these cuts in defence spending that provided for the increases in health, pemsions and welfare spending over the decades. The reallocation of budget spending kept the tax take as % of GDP remarkably consistent at around 33% until recent years. Taxes as a proprtion of GDP have increased rapidly in the laat few years to circa 37% of GDP . The freezing of personal allowances alone is expected to generate a further 50 billion of income taxes than would otherwise have been the case.
Cuts in defense spending are no longer a realistic option to fund increasing demographic pressures on the NHS, Schools, Pensions, welfare, local government, justice etc. Neither is increased borrowing or money creation to fund transfer payments. That leaves two main alternatives – increased taxes on wealth (primarily land taxes) to finance redistribution/transfer payments and increased borrowing to fund infrastructure investment and housing to generate growth in productivity and hence economic growth (in place of increased population growth via immigration). That investment may take a decade to bear fruit. The fact that investment was cut so preciptously after the financial crisis is perhaps one of the key reasons why growth is so low today, it is so difficult to increase productivity in the NHS and Schools and there is a critical lack of prison space.
Excellent article! Thank you!
Might the (further) disadvantaging of the poor be, to some extent, connected with their failure to make sizeable political donations?
@Joe ….For many in those post industrial towns they must wonder why the British government spends so much abroad..To them seems like austerity is never ending.
They’ve lost significant amount of industries with well paying jobs that their parents might have spent 30/40 years with one company – these have mostly been replaced with warehouse agency mw being the norm .
Poor transport links , blighted town centres , poor amenities , crime and asb, lack of & a poor standard of social housing , & a disproportionate dispersal of asylum seekers across those towns …They are educated enough with a lived experience – that anything Farage or Robinson might tweet is superfluous in being angry …
Peter and Martin, thank you for your supportive comments.
Mary Fulton: our party’s acceptance of Guaranteed Basic Income will indeed ensure that everyone who chooses to participate can have a basic income. It could be activated within ten years, so I hope we will be able to persuade the new government of its value,
Paul Barker, I don’t see that accepting people living in debt would be a good idea. Most of us may have accepted hire purchase, but being forced into debt must be a constant worry for those who suffer it. Unfortunately the increased cost of borrowing for house owners with mortgages, and landlords as well, means that there are far too many people who have had to fall into arrears in the past year.
Steve Trevethan – thank you Steve, but we wouldn’t like to think in that cynical way, would we? 🙂
According to Britannica Money, there are four prevailing economic theories which aim to define and explain inflation. With some adaption they are here listed:
1) The quantity theory of money argues that an increase in the amount of money in circulation will directly cause a proportional increase in the price of goods and services over time.
2) The demand-pull theory of inflation suggests that the cost [price?] of goods and services rises when demand is greater than supply.
3) The cost-push theory of inflation attributes inflation to the rising costs of production and services amid a steady flow in demand.
4) The structural theory of inflation says that inflation is caused by structural weaknesses in the range and volume in the production of goods and services, poor infrastructure, outdated technologies, underproductivity creating imbalances between supply and demand.
Which of these do you think best fits our current situation?
It further states that inflation that stems from structural issues may not be easily changed by monetary policy, which is one of the problems we face.
Alas, it seems that no theory on inflation takes into account that some people have little money and, probably lots of debt whereas some have lots of money and gain from an increase in debt which comes with Neoliberal Austerity.
Might it help if the pay of those in government and the Bank of England had their pay related to levels of child poverty?
Might it help if the pay of those in government and the Bank of England had their pay related to levels of child poverty?
Thank you for all your work and care, Katherine!
Alas, might an element of cynicism help us to be closer to hard reality?
I like to think of myself less as cynical and more as dispassionately analytical.
Martin Gray. You seem to be describing the ‘left-behind’ towns which were meant to be helped in a previous Tory government scheme, Martin. Did the funds revive some of them? There won’t be funds available now to replace that scheme. Do you think that their insufficiency might possibly have contributed to the anger being demonstrated in those towns where there has been rioting?
More positively, people have elected Lib Dem councils and MPs who must help them constructively now. How? By avoiding austerity nationally and reviving local services, I suppose. And building social houses of course.
Joe Bourke – should we now demand land value taxes and reform of council tax from the new government? As you have said, I think, Joe, there must be new sources of taxation for government to help promote constructive investment.
Steve, I think the time of debating economic theories is perhaps over for the time being. There are so many actions needed. We should surely use our influence in this new government to promote them.
Katharine,
accordng to this article council tax reform is under consideration with Rachel Reeves and Lisa Nandy in favour but Keir Starmer reluctant Could Labour really reform council tax to charge 0.5% of a home’s value each year?
I think this is an area where Parliamentary pressure could be brought to bear and would be of immediate benefit to people in the North and Midlands especially.
Martin Gray,
‘Cutting pensioners winter fuel allowance is a political choice by Labour’
Indeed and it only saves £1.4 billion this year. The political cost might be rather high for such a small amount.
Paul Barker,
While I recognise that a higher level of inflation would help the government manage the national debt and would benefit those with mortgages and debts, it would not be good if the inflation target was increased to ‘say between 4% & 10%‘. Inflation is bad for those with savings and those on fixed incomes. It encourages people to spend rather than save as well as workers to demand higher wage rises in line with higher inflation.
Joe Bourke,
‘The fact that investment was cut so precipitously after the financial crisis is perhaps one of the key reasons why growth is so low today’. Indeed, cutting government investment after the 2010 general election was easier than cutting day-to-day spending. MPs should have understood the cost to the economy of these short-term policies.
A thought I have is abolishing the single person discount on council tax. This would bear down on under-occupation of housing but be very unpopular. There is also the question of council tax revaluation, which again would be very unpopular but ought to help local government finances.
Abolishing the single person’s allowance would be justly unpopular. Even with the allowance, single adult households are contributing a much higher proportion of their income to local government than other types of household. If you want to raise more money, add something on for the third and subsequent adults.
I agree with Peter Davies. Just think of some of those single person households – recently widowed older people, single parents whose partners have left, young people starting out on their own – we don’t want to make housing even more difficult than it is for them.
Joe, thank you for your helpful comment about government consideration of reform of council tax. Indeed, let’s help with parliamentary pressure on this needed reform. I will write to Sarah Olney, our economics spokesperson, and perhaps you can do so too? It only needs someone to cite those startling figures one hears about how much Buckingham Palace has to pay in council tax compared with ordinary householders to make this a popular cause, but on fairness grounds, those of us living in the Midlands or North have particular cause as you say to ask for parliamentary pressure on this.
Peter Davies. Thank you for that defence of the single-person household’s discount in paying council tax. As you say, single-adult households are contributing a much higher proportion of their income to local government. But I also object to Mark Frankel’s phrase of ‘under-occupation of housing’. Frankly, as a Liberal I would defend the right of people who have bought their homes, lived in them, shared them with family or sometimes visiting friends or refugees or just lived alone in them, to keep them as long as they want and are able to do so.
On under occupancy, a couple occupying a ten acre band ‘H’ mansion with their heir and a spare is clearly using the land less efficiently than the four staff in the band ‘A’ Estate cottages but they will be paying the same.
@ Katharine,
” as a Liberal I would defend the right of people who have bought their homes, lived in them, shared them with family or sometimes visiting friends or refugees or just lived alone in them, to keep them as long as they want and are able to do so.”
You could also sat that ” As a Liberal” you’d defend the right of people to buy second or holiday homes in picturesque villages even though this prices young people out of the market. Or “As a Liberal” you’d defend the right of wealthy foreigners to buy up expensive property in London even though they might visit only occasionally and there are homeless people sleeping on the doorsteps of said properties.
It’s about striking a balance between the rights of the individual the rights of the community. At present the individuals can just about do what they like providing they have the money to do it.
So, no-one is suggesting we should make elderly single people homeless after their partners have died and their families have moved on. However, we do need to look at how and where our future families are going to live. One way would be to use a financial incentive to help people move out of properties which are too large for their needs.
@Peter Martin…..There are significant numbers of pensioners who are ‘property rich’ but have little in the way of income or savings outside the state pension . It’s not for the state to decide if they want to move – or impose a substantial financial burden on those pensioners that means they have no option to move . It’s not their fault they’ve purchased a house at a time when prices were aligned with a salary they could manage on . Houses that were available at 3.5 times an average salary 30/40 years ago etc – today an average salary would be nowhere near sufficient … Any revaluation would be deeply unpopular & thats why it hasn’t happened ..
Property tax is the single largest source of state and local revenue in the U.S. The capital is used to fund schools, roads, police, and other services.
There are several programs and strategies to help Low-income pensioners in the USA to manage these costs:
1. Property Tax Exemptions and Credits
Homestead Exemption: Many states offer homestead exemptions, which reduce the taxable value of a home. This is effectively a personal allowance for property taxes to make the tax more progressive.
Senior Citizen Exemptions: Some states offer additional exemptions specifically for seniors, which further reduce the property tax burden.
Veteran & disabled Exemptions: Veterans and others with disabilities, may be eligible for property tax exemptions.
Income-Based Tax Credits: Some states and municipalities offer tax credits based on income levels, which can directly reduce the amount of tax owed.
2. Property Tax Deferral Programs
Many states offer property tax deferral programs for low-income seniors. These programs allow eligible seniors to defer payment of property taxes until the home is sold or the homeowner passes away. The deferred taxes typically accrue interest.
3. Property Tax Circuit Breaker Programs
Circuit breaker programs are designed to prevent property taxes from “overloading” a taxpayer by limiting the amount of property tax owed relative to income. If property taxes exceed a certain percentage of income, the homeowner may be eligible for a refund or credit.
4. Tax Relief and Assistance Programs
Many local governments have programs specifically for low-income seniors to help them manage or reduce their property tax obligations. These programs can include outright tax reductions, assistance with applying for state and federal benefits, or even direct financial assistance.
Martin Gray. You are absolutely right, Martin, to draw attention to the pensioners who may be ‘property rich’ but have few financial resources outside the state pension. I remember when a dear friend, my first and lasting Liberal friend at University, died untimely, he said it was a comfort to him that he left ‘a rich widow’, to continue living alone in their family home, just sometimes entertaining their daughter’s new family and their friends. But 25 years later the expenses of my friend the widow, personal living costs and the maintenance of the house having greatly increased, meant she was no longer any better-off than the average person, having to count all expenditure carefully.
Nor, Peter Martin, should we be judging that anyone is living in a house ‘too large for their needs’; they might perhaps have built up the collection of a lifetime and found continuing joy in being surrounded by it, while becoming too immobile or poor to go on holidays abroad any more.
Of course we want wealthy families buying properties in London preferably to open them up to local people, but hopefully we are taxing them if they are non-doms. As to buying second homes in picturesque villages, I see no harm in that if people will share or let them part of the time. And I know landlords who have second or more homes because letting them ‘is their pension’, as I have been told. We Liberals should respect individual rights, and freedom from interference, if people are not harming others.
I don’t think anyone here is ‘judging’ people who live in a house too large for their needs – I don’t see any disagreement that we all understand why someone might want to do that, particularly if it’s a house that’s been their home for decades. But the reality is that the UK doesn’t have enough houses for everyone and that means many people are going homeless or living in cramped unsuitable places that are too small for their needs.
If – as an example – a single person is living in a house that’s big enough for 3 people, and that person could be persuaded (without implying any judgement) to downsize to a one-person-sized house, that immediately frees up space to house 2 people who currently don’t have adequate housing. I don’t personally see a problem with using property-based taxes to incentivise that. As Peter Martin says, it’s about striking a balance between the needs of different people.
Thank you Katherine for taking time out & responding to so many of the comments..
Also a lot of those pensioners get attached to properties they’ve brought their children up in over so many years. That emotional attachment can be very strong. The fault should never lie with those that are living in under occupied homes – but with governments who’ve totally failed to address our housing crisis …
@Simon. If…a single person…could be persuaded (without implying any judgement) to downsize to a one-person-sized house…
The problem with the Bedroom Tax was a lack of suitable houses, in suitable locations, for people to downsize to.
The problem with private housing is the same.
Thank you, Martin and Cassie. I think we have now given many reasons why people should not be obliged to move from houses they have lived in and want to remain in. Simon, your ‘could be persuaded’ to move rapidly seems like weasel words, as ‘incentivise’ is linked to taxing people to oblige them to do so. No, I hope Liberal Democrats don’t believe in forcing people in our country to move house, any more than we want to force them to take jobs unless the jobs are suited to them and training (and probably transport) are on offer. As to housing, as Martin and Cassie suggest, it’s the increase in supply that is needed.
Joe, thank you for the interesting information on how pensioners on low incomes can be helped by various schemes in the States. On ‘homestead exemptions’, I imagine that that is what would be aimed at in the glad day when land-value taxation is actually brought in by a British government.
Using taxes to disincentivise people from doing things that are harmful to others or to wider society is something that LibDems have tended to support for a long time. Examples include fuel duties and taxes on cigarettes and alcohol. So I’m not sure why @Katharine you think it amounts to weasel words to suggest the same thing of occupying housing that is obviously beyond one’s needs at a time when there is a massive housing shortage (and arguably we already do that to some extent anyway – via the council tax housing bands, since a large house is more likely to be in a higher band, albeit it’s a fairly imperfect and out-of-date correlation). I don’t believe asking someone to pay more to account for external costs to society is at all the same thing as forcing that person not to do something.
You are correct to say we need an increase in housing supply. But you can’t magic up millions of houses overnight! It takes time to plan out and build houses, and our housing crisis is now so acute that it will probably take decades to build enough new ones. So we need to do something in the meantime – and realistically, just about the only option is to do whatever we can to make sure the existing supply of houses is used more efficiently.
Simon, I suggest we should just refuse to be judges for anyone of their housing being ‘obviously beyond their needs’, without having to spell out any of the various reasons cited above as to why that might not be the case.
I think one of the housing issues for unheard people which our party should take up urgently is the unfair results of national imposition of council tax. The Times, reporting on August 16 on analysis by the TaxPayers’ alliance, found that residents are spending more than 10% of average pay on council tax in some parts of the country, with the north and west of England being hit hardest. The Times had already revealed this year that council tax bills were 20% higher in the north than in London, despite homes in the capital being nearly three times as expensive. Council tax rates are heavily criticised by economists as being based on property prices of 33 years ago, so now surely needing urgent revision.
However, in The Observer today an economist who has advised Rishi Sunak, Tim Leunig, is reported as calling for council tax to be scrapped altogether. He has written a report for the Onward thinktank, of which he is chief economist, stating that council tax is ‘a particularly regressive mess’, for instance showing that a terraced house in Burnley pays more than a mansion in Kensington. He is proposing replacing council tax with a levy on home values up to £500,000, and a minimum payment of £800 for any property. This is surely a proposal to be examined by us – as also possibly his further suggestion of also abolishing stamp duty.
Please note my last comment, concerning the need for urgent reform of Council Tax, and a new suggestion for combatting the problem, which it would be good to hear people’s opinions of.
Stamp duty is a tough one. It’s cheap to collect hard to evade and never paid by poor people. On the other hand it’s a big disincentive to moving and the cost of moving is one reason so many people are in the wrong homes. It’s not just the wrong size, people are also too far from work or schools or family. It would be hard to make abolishing it a priority but raising the money from a fair property tax (like LVT) would make economic sense.
Simon, where do you suggest people living in ‘homes beyond their needs’ move to?
A property website shows 65 places for sale within a mile of me. Of these, just six are two-bed, and two of those dearer you’d get selling a three-bed.
The only one-bed is a leasehold, ex-council flat, reduced because no one wants to live there.
Within five miles (1,178 results), 41 are one-bed. All flats, and again not somewhere you’d want to see out your days from choice (eg some above shops). There are a couple of retirement flats a few miles away: doesn’t say the annual charges, but I know an elderly relative paying £5k a year, which is the cheap end of things.
Of course, moving even five miles could leave someone isolated from their current social network etc…
Joe Bourke,
I think it is very unlikely that the new government would reform council tax to a straight 0.5% on house values. It is not even our policy. Also it wouldn’t be across the board 0.5% the rate would vary between councils.
I was interested that you know of so many exemptions to a land tax on homes. Ones based on income would be best, but you have always given the impression that you dislike such exemptions.
Peter Davies,
In September 2018 we passed policy to replace business rates and non-residential stamp duty with what we called a Commercial Landowner Levy – a Land Value Tax on commercial land. The paper ‘Replacing business rates: taxing land, not investment (Introducing the Commercial Landowner Levy)’ seems to state that implementing this policy would reduce government revenue by over £1.4 billion for England & Wales.
Simon R. You say you can’t ‘magic up’ lots of new houses. Yes, it does take time, but no government has even attempted to do so since my youth. Here’s what’s necessary:
1. Provide money to train new skilled building workers.
2. Relax immigration to allow skilled workers from the EU to come here to build houses. [It could be short term visas]
3. Provide councils with access to borrowing permission to build new council houses.
4. Make it far too expensive for building companies to hoard land, through a hoarding levy
5. Insist builders create the homes people need, not expensive executive homes.
In my youth the UK was able to build up to 500,000 homes a year. I see no reason why, given political will, that we could do so again.
@Mick I don’t think the UK ever managed 500K homes/year. According to https://www.statista.com/statistics/746101/completion-of-new-dwellings-uk/, the most we achieved was just topping 400K in 1967 and 1968. But I doubt we want to emulate those years too much as a lot of those would have been sub-standard 1960s tower blocks. The UK certainly managed 300K/year for a long period though, so that’s possibly a more realistic aspiration. On the other hand, building standards are much higher these days and planning processes more complex which may make it harder to build as many dwellings.
I agree with some of your suggestions. But note that bringing in foreign builders, even temporarily, exacerbates housing shortages while they are here, and also presumes we’re not harming their own countries by depriving those countries of building labour. We probably ought to look at the planning system too (which I think the Labour Government are intending to do).
Michael BG,
Alter’s recommendations on council tax reform and/or Land Value tax have always included a homestead allowance and deferral of liabilities for low income pensioners until a property is sold or demised. On income allowances Alter has recommended that the tax value of any unused personal allowances be credited against billings in addition to a homestead allowance. That income allowance element could be expanded further as you suggest.
The most important element of inflation over the past 25 years has been house price inflation that is not reflected in CPI. That inflation is in large part attributable to the creation of money by commercial banks and its channelling into the mortgage market Housing UK 85% of private lending goes into the housing market with an increase in the housing stock from new builds of less than 1% per year.
That money creation/lending ultimately siphons off wealth from low and middle-income earners tenants and homeowners , from the North and Midlands, from small business owners and the government to pay the salaries bonuses and dividends of financiers in the City of London and Wall Steet.
Until we get a grip on this situation living standards of the majority will continue to decline or stagnate. Land Value tax can significantly ameliorate this toxic process of rent extraction by the wealthiest in society from the majority working population.
Simon R,
I couldn’t see the graph on the Statista website, but the NHBC state that the most homes built in a year was 413,700 in 1969 (https://www.nhbc.co.uk/binaries/content/assets/nhbc/foundation/homes-through-the-decades.pdf).
Joseph Bourke,
On the page you linked to I couldn’t see any reference to tax allowances for those on benefits, as applies to pensioners today and in the past applied to everyone on benefits according to their income. I do wish you could just state that those pensioners receiving pension credit and those adults whose only income are their benefit payments would be exempt from paying your LVT and not refer to deferrals.
I support our Commercial Landowner Levy and would like the party to adopt a policy to replace Council Tax with a tax on the value of homes.
@Michael GB. I feel we’re possibly debating pedantic trivia here, but on page 28, the NHBC document you link to states “High-rise and non-traditional construction led to more homes being built in the UK than at any other time (425,830 in1968)“, It repeats that 425K figure a few times, but then on page 44 slightly contradicts itself with a graph showing “1968 Peak of GB house building (413,700 homes)“. I’m guessing either there’s a typo, or slightly different methodologies in gathering data, or maybe calendar year vs financial year? The ONS confirms the 425K for 1968 figure at https://www.ons.gov.uk/peoplepopulationandcommunity/housing/datasets/ukhousebuildingpermanentdwellingsstartedandcompleted – download the excel spreadsheet and look at table 3a. I’d speculate that spreadsheet is maybe where Statistica and NHBC got their info from.
To get back to the point of the article, our need to speak up for so many ordinary people whose voices aren’t heard, I am concerned about the cost of living probably rising again this autumn, notably with increasing costs of gas and electricity, and the Chancellor probably not making that a priority to help with in her autumn budget. The cost of living was one of the themes of our successful GE campaign, along with the problems of the health service, social care – and sewage – and I think we will need to emphasise it at Conference, and in our spokespeople’s statements. We are going to have to stress that the expected tax rises should be sufficient to cover the policies we are going to press on the new government, and demand that iron fiscal rules be relaxed as necessary to meet the needs of most citizens and start to tackle poverty, even before the necessary investments to make the economy vibrant again bear the expected fruit of growth.
Simon R,
Thank you for the link to the ONS. The 413,700 seems to be wrong and we can agree that the ONS is likely to be correct with 425,830 in 1968.
I think our party is going to have to confront Keir Starmer’s government on fighting poverty. A report in The Times that his child poverty ‘plan’ is to focus on returning parents to work makes him sound just like the Tories. We should say loud and clear, ‘It’s not just families with more than two children on Universal Credit who are living in poverty, because the basic rate of UC is too low since the £20 a week extra was removed, and very many families must dread the extra costs of living to come this autumn.’ We should also say loud and clear, ‘Yes, the welfare bill will continue to rise, and you need to find fair taxes to pay for it now and during your Parliament. Commit to ending deep poverty as we have asked to be done, within ten years of your hoped-for continuing government.’
” necessary investments to make the economy vibrant again [to] bear the expected fruit of growth.”
These sound lovely. I’ll take a dozen gross. Oh, btw, exactly what are they?
2
Hi, Jenny, these are the investments we suppose the government will be making, for instance with their energy and housing plans, to encourage private companies to do the bulk of the investing.
There is much that the new government seems to be planning that sounds good. For instance, their apparent intention that social security offices will advise and help people who want to work to get back into employment, not just deal with benefits, is I think what we had ourselves determined should happen, and we want the benefits handled separately.
But we have to push this government into supporting increased benefits for all the families who need them, making the relief of poverty a priority. And as economists keep saying, they shouldn’t accept fiscal restraints on borrowing (chiefly for investments) and bringing in new taxes as needed. We want Land Value Taxation, as Joe Bourke keeps on explaining, among the rest.
We should put pressure on the government to implement the Labour Party policies which were also our policies such as employing more GPs and sorting out access to NHS dentists. Our policy is to separate the administration of the benefits system from the provision of employment support. From what Katharine wrote I wonder if the Labour Government will take this up.
We should try to persuade the Labour Government to implement some policies from our recent manifesto such as, introducing free personal care, reinstating student maintenance grants, scrapping the two-child limit, the benefit cap and the bedroom tax, and restoring international development spending to 0.7% of Gross National Income.
We have many policies which didn’t feature during the general election which we should also be calling on the government to implement such as reducing the five week wait for Universal Credit, and reintroducing the £20 weekly uplift to Universal Credit and extending it to the legacy benefits.
So we are supporting diverting economic capacity into
Building – presumably solar & wind – energy infrastructure
Housing
Social security support for eg all children, student maintenance, etc
Free personal care
Ok, all wonderful. What should we stop doing to pay for it, as the economy has no spare capacity? Increased taxes would reduce activity, for example higher APD would reduce discretionary airline travel, higher fuel tax would reduce vehicle mileage. Etc.
Just as we expected, living costs will rise again in the autumn – in this case the now declared increase in energy costs from October – and they will inevitably hit the poorest hardest. Among the sufferers, as an interview on Radio 4’s World at One just illustrated, people stuck at home everyday caring for someone will particularly notice the extra cost of their continual energy usage.
I trust our party will demand the government acts to relieve households’ unmanageable extra costs. There was a suggestion on the programme that the billions saved by the government in axing the pensioners’ winter fuel payment (which isn’t always needed though always appreciated) be brought back to allow extra payments to ALL low income families. It sounded like a promising idea we could take up. Rather like the £20 a week extra Rishi Sunak as Chancellor gave Universal Credit recipients during Covid, which we believe should be restored anyway, but with the recipients of this proposed payment including people of low income not receiving UC. I wonder if it might work as we will eventually want to see Guaranteed Basic Income paid out, by annual assessment by a new government body and applications from individuals.
@ Jenny Barnes. ‘No spare capacity in the economy’ is a fact disputed by many economists, who contradict the new government’s apparent acceptance of the fiscal straitjacket cited by the Tories. And I understand there are many means of taxation which could be tried without harm. I will leave it to our ever-active Lib Dem economists to give references as needed.
@ Mick,
“In my youth the UK was able to build up to 500,000 homes a year. I see no reason why, given political will, that we could do so again.”
I think there should be a “not” in there somewhere.
One reason why not is the presence of so much private debt in the economy. If enough houses were built to actually make them more affordable for young people, which I would say would be the reason for building them, the resulting fall in prices would leave many in a state of bankruptcy. The economy itself could crash if the increased level of bad debt creates an avalanche effect.
So although Governments may say they want lower house prices, they really don’t!
Current UK unemployment rate is about 4.5% (
https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment/timeseries/lf2q/lms
Most economists consider full employment to be an unemployment rate of 5% as there will always be some churn as people change jobs, join & leave the workforce, etc.
So no, I don’t think there is spare capacity. There are indeed all sorts of taxes. If they take money/resources out of the economy to put to some other use, then collectively, we have to do less of some of the things we were doing. If, for example, you use a lot of fossil fuel to mine and refine the steel, copper, lithium etc for your renewables, then it’s not so available for flying holidays or to make fertiliser for food or to run SUVs.
The money is an abstraction – it only has value as a claim on economic production, so moving the money around doesn’t directly get you more stuff.
Jenny,
the Biden administation Inflation reduction Act provides huge subsidies for Manufacturers of everything from electric-car batteries to wind turbines to relocate their production. The EU has loosened its state-aid rules to lure investment in green tech The Inflation Reduction Act is turning heads among British businesses
The UK will need to compete to retain these domestic industries here or see its manufaturing base dwindle even further and become reliant on the US for renewable energy equipment.
Where does the USA get its additional worlers – mass immigation. For the UK, the hope would be to shift workers employed in low wage service jobs in retailing and hospitality to higher paid jobs in advanced manufacturing. As the cost of producing renewable energy continues to fall the economic payoffs (in addition to the carbon emissions reduction) coood be substantial if we can get this nvestment right.
Things the USA can do with it’s unreasonable advantage as the creator of the default world currency (and it’s 1.5 $ trillion deficit so far this year) are probably not things the UK can do without huge market reaction- See Truss.
Renewable energy – only cheap when the wind is blowing or the sun is shining. On a still night the cost of renewable electricity tends to infinity.
@Peter Martin “the resulting fall in prices would leave many in a state of bankruptcy” a large fall in prices would see many people in negative equity (though in most cases, it would not result in reposession). You can have falling real-terms prices without creating any negative equity. You can even have falling paper prices of a few percent without creating negative equity for repayment mortgages provided remaining debt falls as fast as the price.
Jenny Barnes,
I don’t consider 5% unemployed as full employment. There are 1.44 million people unemployed who could work. If we could cure the health issues which are stopping people from working by performing more operations this would increase our economic capacity.
There is spare capacity in the economy because our economy has grown by 1.3% over the first six months of this year.
We have policies to build more homes and increase the supply of solar and wind energy, but we don’t talk of diverting economic resources to do so. I suppose you are correct some diverting will be necessary, even if it just diverting people from other countries to work here. As these are investments we would want them to be financed by increased borrowing. And this again might divert investment from the private sector as was claimed in the past, but now people talk of government investment stimulating private investment. This makes sense if more people are working and so have more money to spend thus increasing demand which will need to be met by increasing production.
If the government provide free personal care, increased benefits, and restore student maintenance grants then we would expect the government to finance these from increased taxes. In our recent manifesto we set out about £17 billion of increased tax revenues. Few of them would be paid by most people. There would therefore be some diversion of money from the wealthy.
Joseph, thank you for your points on the need for this country to continue with manufacturing to compete with the USA and Europe (I suppose this will involve government pump-priming of investment?) and to train up workers for more advanced roles in manufacturing. Perhaps the thousands of young men among the asylum-seekers holed up waiting for their cases to be heard could be invited to train for and take up the lower-paid jobs hopefully released by more advanced workers.
Wendy Chamberlain, our Work and Pensions minister, can be heard shortly in Radio 4’s Any Questions, at 8 pm. I hope she will be able to suggest ways our party may be able to help with the impending rise in the cost of living when the energy prices go up in October, and perhaps our Conference next month can agree on steps that can be taken.