Economic Trade-offs for the next government

[Nimrod103]

Related to this thread, there is a new report on the State of the UK Economy from the economists at UK in a Changing Europe.

https://ukandeu.ac.uk/reports/the-state ... nomy-2024/

It is quite long but has some interesting trends plotted out.

From the introduction:

It’s hard to sum this all up – and, as noted above, there is no single silver bullet
for the problems we face – but some themes do emerge.

One is the need for a longer-term, joined up approach in policy areas ranging
from education to public services to artificial intelligence. The UK has long been
plagued by short-termism, and the political instability of the past few years
has considerably aggravated this already damaging tendency. Incrementalism,
whereby further complications are layered onto existing systems to the point
where they are no longer comprehensible to policymakers, let alone the public,
also imposes considerable costs, the tax and planning systems being cases in
point. Both a clearer vision of how systems should work, and a feasible plan for
how to get there over the medium to long term, are required.

Second, we need to work both with our strengths and with the grain of
technological progress. The UK is fortunate in that our most successful sectors
– high-productivity tradeable services – are likely to represent a growing share of
the global economy. But to make the most of that we need domestic policies that
enable them to grow and to be more productive – in particular housing, planning,
and transport policies that foster growth in our major cities. And we need
trade and regulatory policies that make them globally competitive. Regulatory
uncertainty and political short termism should not be allowed to undermine
the obvious strengths the UK enjoys, for instance, around higher education and
artificial intelligence.

Finally, economics is not, and should not be, separate from broader social
policy concerns. The disappointing overall economic performance of the last
fifteen years has also seen existing inequalities entrenched and in many ways
exacerbated. There is no conflict between strategies to increase growth and those
to reduce inequalities. Indeed, in areas ranging from education to tax to regional
policy, they are complementary. The UK can be both a more prosperous and a
fairer society.

None of which is to say that this will be easy. Yes, simplistic or single-source
explanations – like austerity or Brexit – are insufficient, but there is no denying
that both have worsened the problems we face and will make addressing them
harder. Yet this is not a counsel of despair. What is needed, and what this report
provides, is a clear-eyed and honest analysis of where we are, as a basis for
planning how we might get where we want to be.

Enjoy!

FD

I frequently see economists mention the need for more housing as a critical factor in Britain's economic transformation. I've underlined it above. But I just don't understand in what way it is crucial, or even a nice to have. You can't export houses, or sell them abroad - the house has to stay where it is. Everyone already has plenty of living space to carry on their homelife and economic activities. I see comparatively few living on the streets. A house is a cost, a luxury. I would go as far as to say that all economists who mention housing in their analyses are talking out of their backside.

[Oggy]

I would go as far as to say that all economists who mention housing in their analyses are talking out of their backside.

Most so-called economists seem to talk out of their backside regardless or else state the blinking obvious. I receive far better advice from this website.

[NeilW]

The options in the poll are most amusing, couched as they are in the terms that are causing the problem rather than ones that would lead to a solution.

Here's a couple of quotes:

Given the level of activity, the quantity of private wealth and the rate at which it accumulates are determined entirely by the propensities of the private sector, which the government cannot change. But this is to imply (again given the level of activity) that government deficits and debts (being identically equal to, respectively, private savings and wealth) are endogenous variables which cannot be controlled by governments

Godley and Lavoie, Monetary Economics, 97

What is the essence of this new budgetary policy? It is that the Budget is made with reference to available man-power, not to money; that it becomes, in Mr Bevin's phrase, a "human budget". Man-power is a datum; it cannot be altered by State action; to take anything else as a datum and to try and fit use of man-power to it is to risk mass unemployment or mass fatigue.

Beveridge, Full Employment in a Free Society: A Report, §182, 136

We need to determine what needs to be done, and therefore what current physical resources are required to achieve that aim. Then we determine what those physical resources are currently doing that won't then get done. The political debate should be about the societal priorities between those two uses. Are we prepared to sacrifice B so we can achieve A?

Everything else is just accounting entries contending with out-of-date ideological beliefs. As we discover every time a bank needs bailing out or a pointless foreign war needs funding.

[scotview]

What is the essence of this new budgetary policy? It is that the Budget is made with reference to available man-power, not to money; that it becomes, in Mr Bevin's phrase, a "human budget". Man-power is a datum; it cannot be altered by State action;

Mr Bevin eh ? And what about AI facilitating autonomous machines. Labour (L) will tend to zero.......where does classical economic theory go then ?

Anyone for UBI ?

[88V8]

Related to this thread, there is a new report on the State of the UK Economy from the economists at UK in a Changing Europe.

I frequently see economists mention the need for more housing as a critical factor in Britain's economic transformation. I've underlined it above. But I just don't understand in what way it is crucial, or even a nice to have.

No one is more anti-house building than me, but.... in terms of economic mobility, the easy availability of rental housing is valuable.
Yet the govt seems dedicated to making life unattractive for landlords, the latest measure being a proposed ban on no-fault eviction.

V8

[servodude]

Mr Bevin eh ? And what about AI facilitating autonomous machines. Labour (L) will tend to zero.......where does classical economic theory go then ?

Anyone for UBI ?

L_n perhaps but there's always L_(n+1)

coopers, computers, coal merchants..
... All jobs I can remember older family having that just aren't careers anymore

[Lootman]

I frequently see economists mention the need for more housing as a critical factor in Britain's economic transformation. I've underlined it above. But I just don't understand in what way it is crucial, or even a nice to have.

No one is more anti-house building than me, but.... in terms of economic mobility, the easy availability of rental housing is valuable.
Yet the govt seems dedicated to making life unattractive for landlords, the latest measure being a proposed ban on no-fault eviction.

Yes and the war on landlords will get worse under Labour.

I started winding down my BTLs 20 years ago as I could already see things starting to get worse for landlords. Of the 10 housing units that I sold only 1 is still rented. The others are now all owner-occupied.

So a sample size of one and anecdotal. But 90% of those units has been lost to the rental market. The halcyon days of landlording were the 1980s and 1990s. My kids are doing it as they have the energy and ambition, but one is already tiring of the hassle and risk.

[funduffer]

I frequently see economists mention the need for more housing as a critical factor in Britain's economic transformation. I've underlined it above. But I just don't understand in what way it is crucial, or even a nice to have.

No one is more anti-house building than me, but.... in terms of economic mobility, the easy availability of rental housing is valuable.
Yet the govt seems dedicated to making life unattractive for landlords, the latest measure being a proposed ban on no-fault eviction.

V8

Surely housing is just like any other infrastructure for a functioning economy, just like electricity, water, transport etc.?

If you want to grow the economy by setting up or expanding a business and you need workers, you need them to be able to live close by. Either that or you have to raise wages to allow workers to meet higher rents or house prices due to limited housing supply.

In the 19th century, some of the great industrialists, eg Titus Salt, built all the housing for their workers themselves close to their factories - eg Salt's Saltaire, Lever's Port Sunlight Village, Cadbury's Bournville village. Presumably, they did this to ensure their labour supply was available nearby.

If you don't somehow encourage a housing supply, surely you stifle economic growth?

FD

[Oggy]

In the 19th century, some of the great industrialists, eg Titus Salt, built all the housing for their workers themselves close to their factories - eg Salt's Saltaire, Lever's Port Sunlight Village, Cadbury's Bournville village. Presumably, they did this to ensure their labour supply was available nearby.

If you don't somehow encourage a housing supply, surely you stifle economic growth

Housing in itself does not create growth. The means to create growth has to be there in the first place before building. All the examples you mention had the houses built simultaneously with the factory/mill or else were built shortly after. They would never have been built without the workplaces associated with them.

[Lootman]

In the 19th century, some of the great industrialists, eg Titus Salt, built all the housing for their workers themselves close to their factories - eg Salt's Saltaire, Lever's Port Sunlight Village, Cadbury's Bournville village. Presumably, they did this to ensure their labour supply was available nearby.

If you don't somehow encourage a housing supply, surely you stifle economic growth?

But not everyone wants to live in a community that is comprised entirely of people they work with. Personally I preferred to live a bit further from my workplace.

So we need better roads and railways as much as housing.

[Nimrod103]

In the 19th century, some of the great industrialists, eg Titus Salt, built all the housing for their workers themselves close to their factories - eg Salt's Saltaire, Lever's Port Sunlight Village, Cadbury's Bournville village. Presumably, they did this to ensure their labour supply was available nearby.

If you don't somehow encourage a housing supply, surely you stifle economic growth?

But not everyone wants to live in a community that is comprised entirely of people they work with. Personally I preferred to live a bit further from my workplace.

So we need better roads and railways as much as housing.

I always thought those 19th Century industrialists built housing in order to maintain control over their workforce. Most were driven by their religious beliefs, and one of their core beliefs was temperance. It can be very pleasant living in a planned, well designed, spacious estate, but not if you wanted to have a drink. Those ideas are unfashionable now.

[funduffer]

In the 19th century, some of the great industrialists, eg Titus Salt, built all the housing for their workers themselves close to their factories - eg Salt's Saltaire, Lever's Port Sunlight Village, Cadbury's Bournville village. Presumably, they did this to ensure their labour supply was available nearby.

If you don't somehow encourage a housing supply, surely you stifle economic growth?

But not everyone wants to live in a community that is comprised entirely of people they work with. Personally I preferred to live a bit further from my workplace.

So we need better roads and railways as much as housing.

Obviously.

I used a 19th century example to explain why you need housing for growth. Today, you need enough affordable housing within 'commutable distance' of your business commensurate with the wages you are willing to pay. Norman Tebbitt used to encourage people without a job to get 'on their bike' to find a job where they were available. But if you can't find housing you can afford, you don't move. It is called labour mobility and it is a problem in the UK today.

In the 1970's I moved from Northern England to the Thames valley to take my first job. I was offered a council house automatically, which I took, buying my own property a few years later. I doubt that would happen today, so my younger self would never move for that job.

FD

[Nimrod103]

But not everyone wants to live in a community that is comprised entirely of people they work with. Personally I preferred to live a bit further from my workplace.

So we need better roads and railways as much as housing.

Obviously.

I used a 19th century example to explain why you need housing for growth. Today, you need enough affordable housing within 'commutable distance' of your business commensurate with the wages you are willing to pay. Norman Tebbitt used to encourage people without a job to get 'on their bike' to find a job where they were available. But if you can't find housing you can afford, you don't move. It is called labour mobility and it is a problem in the UK today.

In the 1970's I moved from Northern England to the Thames valley to take my first job. I was offered a council house automatically, which I took, buying my own property a few years later. I doubt that would happen today, so my younger self would never move for that job.

FD

Since the inception of the Welfare State, we pay people to stay where they are, and discourage them from moving around and taking whatever jobs, short or long term, are available.

[Nimrod103]

In the 1970's I moved from Northern England to the Thames valley to take my first job. I was offered a council house automatically, which I took, buying my own property a few years later. I doubt that would happen today, so my younger self would never move for that job.

FD

That was a different World. In the last 20 years we have encouraged the World to come and settle here. Building houses for them will not only cripple us financially, and concrete over all that remains of the countryside, but it also will be to no avail while they keep arriving. There really is nothing to stop Southeast England looking like Hong Kong or Delhi in 20 years time.

[funduffer]

In the 1970's I moved from Northern England to the Thames valley to take my first job. I was offered a council house automatically, which I took, buying my own property a few years later. I doubt that would happen today, so my younger self would never move for that job.

FD

That was a different World. In the last 20 years we have encouraged the World to come and settle here. Building houses for them will not only cripple us financially, and concrete over all that remains of the countryside, but it also will be to no avail while they keep arriving. There really is nothing to stop Southeast England looking like Hong Kong or Delhi in 20 years time.

Not building houses is a recipe for slow decline in the UK relative to other faster growing economies.

Also if you incentivise investment in other areas of the country it won't have to be all in the South East.

If you read the report I posted, then there is huge potential for growth in UK cities other than London - Manchester, Birmingham, Leeds, Liverpool, Sheffield etc. Improve infrastructure here, invest in business and productivity will improve in these areas. It doesn't have to be always in the South East.

FD

[tjh290633]

In the 19th century, some of the great industrialists, eg Titus Salt, built all the housing for their workers themselves close to their factories - eg Salt's Saltaire, Lever's Port Sunlight Village, Cadbury's Bournville village. Presumably, they did this to ensure their labour supply was available nearby.

If you don't somehow encourage a housing supply, surely you stifle economic growth?

But not everyone wants to live in a community that is comprised entirely of people they work with. Personally I preferred to live a bit further from my workplace.

So we need better roads and railways as much as housing.

Those days were when most people walked to work. Mining villages were similar, as were cotton mills in Lancashire. Oddly, in the Forest of Dean, most of the collieries were away from centres of population, like Cannop, New Fancy and Northern United. Probably a good mile from the nearest village, if not more. That was dictated by the geography of the coalfield.

Come the development of bus services in the 1920s and the end of passenger services on the Severn & Wye railway in 1928, there was a lot more travelling to work. With the advent of WW2, a lot travelled to the aircraft factories around Gloucester, 20 miles or so away. Then, when the coalfield was worked out, industry started developing, like Rank Xerox in Mitcheldean, H W Carter (now Beechams) in Coleford and Engelhardt in Cinderford for example.

Social history can tell us a lot.

TJH

[Lootman]

But not everyone wants to live in a community that is comprised entirely of people they work with. Personally I preferred to live a bit further from my workplace.

So we need better roads and railways as much as housing.

Those days were when most people walked to work. Mining villages were similar, as were cotton mills in Lancashire. Oddly, in the Forest of Dean, most of the collieries were away from centres of population, like Cannop, New Fancy and Northern United. Probably a good mile from the nearest village, if not more. That was dictated by the geography of the coalfield.

Come the development of bus services in the 1920s and the end of passenger services on the Severn & Wye railway in 1928, there was a lot more travelling to work. With the advent of WW2, a lot travelled to the aircraft factories around Gloucester, 20 miles or so away. Then, when the coalfield was worked out, industry started developing, like Rank Xerox in Mitcheldean, H W Carter (now Beechams) in Coleford and Engelhardt in Cinderford for example.

Social history can tell us a lot.

TJH

Another factor is that back then people often worked at one place all their life. Few do that these days, or want to. And if your housing is tied to your job, then losing your job makes you homeless. Frankly the idea of living in an employer ghetto sounds appalling to me, although Port Sunlight is a cute place.

I always chose my location first, and then chose a job in that location. Rather than the other way around.

[Wuffle]

There are some very specific things property can do though.
Primarily, it's ability to preselect a glide path for the offspring of the wealthy cannot be under estimated.
People come into the world with a well spread range of skills but the offspring of wealthier people don't consume as much of their skill on rent to someone else. They side step that.

So much of economics is just nepotism. It is amazing that any actual progress happens at all.

W.

[spasmodicus]

Jeremy's revenge? The Beeb reported recently that Jeremy Hunt is thinking, at the last minute, about tinkering with / abolishing non-dom tax breaks, to pay for tax cuts for the rest of us*** in the budget. This cunning wheeze would have the effect of taking away some of the money that Labour, assuming they win the election, would use to finance their spending program, leaving the cupboard bare, as it was after the 2008 financial crisis.
Abolishing non-dom tax would allegedly raise £3.2 billion. That's about 60 quid each for the UK population, but this assumes that said non-doms would stay put in the UK if they had to cough up tax on their foreign earnings.
S
*** assuming you lot out there are not non-doms. If you are, come on, own up, would you leave?

[Nimrod103]

Jeremy's revenge? The Beeb reported recently that Jeremy Hunt is thinking, at the last minute, about tinkering with / abolishing non-dom tax breaks, to pay for tax cuts for the rest of us*** in the budget. This cunning wheeze would have the effect of taking away some of the money that Labour, assuming they win the election, would use to finance their spending program, leaving the cupboard bare, as it was after the 2008 financial crisis.
Abolishing non-dom tax would allegedly raise £3.2 billion. That's about 60 quid each for the UK population, but this assumes that said non-doms would stay put in the UK if they had to cough up tax on their foreign earnings.
S
*** assuming you lot out there are not non-doms. If you are, come on, own up, would you leave?

According to the Telegraph the number of non-doms had dropped from 85,000 in 2015 to 55,000 in 2022, and probably has continued to drop since 2022. Since Hunt is facing certain ejection in November, he should tax the non-doms and use the money to reduce income tax. Then when Labour come in, and they have to jack up income tax, everyone will notice.