The Institute for Public Policy Research (IPPR) compares the UK’s “moribund” housing developers to the basket cases of the previous years – the banks – which were shored up by massive government bail-outs in an effort to maintain an uneasy status quo because they were too big to fail.
But the status quo being maintained in the housing industry is one that has delivered decades of underperformance, argues the IPPR. Consolidation has meant larger but fewer companies have been building fewer homes, all the while reducing competition and edging out the smaller housebuilder. Meanwhile, these bulked-up housebuilders have been spending more time, energy and, most importantly, money on risky land speculation, while building smaller, shoddier homes in the UK compared to other developed nations even when house prices were sky-high.
But when the housebuilders’ heavily-bank-financed land hoards blew massive black holes in their balance sheets in the midst of the credit crisis, the response of the UK government was to throw hundreds of millions at the industry through direct subsidies (£400 million in 2009 with “Kick Start” and another £400m this year in the “Get Britain Building” fund). There has also been publicly backed shared ownership and “mortgage indemnity” support for buyers – in England and soon in Scotland – which has been to the benefit of sellers but not so great for buyers, who end up paying a higher-than-market price for a smaller share of their home.
The housebuilding industry is an essential bellwether of the UK economy while employing hundreds of thousands of people and providing the houses needed for the country’s growing population. The IPPR argues that, in the recent housing industry crisis, the lobbyists got what the lobbyists wanted which has kept land prices artificially high and been to the detriment of consumers. But like the slow but painful reform of the banks, which are unarguably essential for the functioning of our day-to-day lives, the carrots of support for the biggest housebuilders should also come with the sticks of reform to improve the functioning of the housing market.
Uncertain future posed by talk of independence
IF A vote were taken on Scottish independence tomorrow – in a “yes or no” referendum – more than 66 per cent would opt to go it alone, a report from Reform Scotland reveals today. And although the think tank itself is campaigning for greater fiscal powers for Scotland – what it calls “devo plus” – it found that just a quarter of respondents want this.
This suggests that the “safe option”, where the Scottish Government gets more spending and borrowing powers but questions on important issues like the currency and the military are tucked away, is losing its appeal. At least it is among those polled, whom Reform called “self-selected” participants – that is regulars and supporters of the think tank’s work, who may be more interested in questions of Scotland’s political future than the average Scottish voter.
But the headline should be a wake-up call to business owners and operators in Scotland who have yet to think through the implications of potential Scottish independence.
For one, multinationals will have to make a call whether the risk that they might have to switch currencies to operate here will be recompensed by a lower rate of corporation tax. And everyone else in the supply chain will have to prepare for the inevitable ructions that such uncertainties cause.
Businesses, we have been told, hate uncertainties, especially when they stem from shifts in government policies. But if we have learned anything in the past few years, from the collapse of the banks to the most recent twists and turns in eurozone crisis, it is that there are indeed few certainties in the world.