Monthly Archives: August 2012

Is there unfinished business over the #NPPF and the Green Belt?

Yes there is.

Of course It is unwise to open up all the debates again from last year and Osborne’s motivation is entirely ideological and anti-planning as it has been for years in back Policy Exchange reports calling for scrapping of the Green Belt.  The best short term plan of action is to see if the NPPF works in practice and seek to unjam the mortgage market,

But I am not so naive as to believe that the NPPF is the perfect and forever settlement of our key planning policy issues.  It is riven with contradictions and unresolved tensions.

Green Belt was designed to be ‘permanent’ but that meant over a horizon of 20 years, and as the prime minister conceded in his surprise planning speech last year it depended on regional planning to disperse the constrained development elsewhere, such as to New Town and Garden Cities, and later Inner City redevelopments.

That time is now up.  Many areas such as Stevenage, Woking etc. cannot grow without either selective relaxation of the Green Belt.  This was the key problem that underpinned the regional spatial strategies.  It of course was controversial and the current government ducked the problem through proposed abolition.  They now realise I think that this problem returns to haunt them as there is no solution for many towns embedded in Green Belt without either strategic review or strategic diversion.

The duty to cooperate clauses are now forcing many authorities to look at Green Belt reviews.  Places such as Reigate, York and Bath simply wont get their local plans through without it and in some cases that may mean forced reviews across local authority boundaries – strategic planning.  Within a couple of years there will be .several dozen major towns forced to undertake such reviews.

For towns outside the Green Belt the NPPF is clear, if you cant demonstrate 5 years supply then you get permission – even if it is not the best site – if their is no draft plan in place.  For Green Belt towns however Green Belt overides the presumption – so you have to wait a couple of years for this to work through the system.

Would designating these under the ‘national infrastructure’ provisions help?  If it is already in a development plan is their such a problem, apart from a small minority of cases where LPAs are trying to disown their own development plans.  If not the key problem is that these would have to wait until there was a national policy statement for large scale housing – err would that not be a nation plan?  Hardly localism.  Of course the SoS could rely on RSS  but in the South East this issue was delayed due to legal challenge because of the strange idea that Green Belt needed only ‘selective’ rather than ‘strategic’ review around towns such as Oxford and Woking.  Similarly there was challenge in Herts because the panel did not consider the alternatives.  It would seem then short of rank centralisation of ignoring the EU SEA directive there is no way around having to go through the painful but necessary surrogate regional planning process we are now going through.

Of course the broader question is whether contemporary decision taking processes are fit for purpose for large scale new housing schemes such as Garden Cities.  I don’t think they are are a three stage process, local, inspector, SoS is to my mind crazy – but that is a separate issue from the establishment of the principal of where the housing should go.

Key Brownfield First SoS Decision in Sedgemoor #NPPF

Here

Land at Cokerhurst Farm, to North of A39, Wembdon, Bridgwater, Somerset 2159400

A few appeals in recent weeks have confirmed that under the NPPF you have limited scope to resist green field sites if you have no five year supply and your plan has not yet indicated preferred sites or been submitted.

There was no steer yet though to confirm whether or not the NPPF wording was strong enough to refuse greenfield sites where a plan showed preferred and deliverable brownfield alternatives.

In this case there was a 5.1 year supply with a 5% buffer.  If there had been persistent under-delivery it would have been a different outcome.  The DCLG have refused to answer questions on the meaning of the NPPF on this issue.

the Secretary of State agrees with the Inspector that release of a greenfield broad location such as the appeal site before it is needed would significantly undermine the spatial strategy, and would therefore conflict with CS Policies S1, S3, D5 and P1. The Secretary of State therefore agrees with the Inspector’s conclusion at IR11.107 that there is no need to release this greenfield site.

In this case though the core strategy was recently adopted.  If it had not been the focus would have been on the NPPF not the development plan.  Hence the NPPF still has to be fully tested on this issue.

Central Bank Attempting to Control the Money Supply

Thank you to Windyanabasis

Sean Spears – A Strong Green Belt is Good for Our Cities #NPPF

Telegraph

Following a week of rumours that the Chancellor is the Chancellor is gunning for the green belt, it was good to read the interview with interview with Grant Shapps, the housing minister, in Saturday’s Daily Telegraph. Shapps stated unequivocally that the green belt issue was “settled”. He also made clear that it is not the green belt or the planning system that is holding back development: “We’re not short of schemes to get housing built, we just need to get out there, roll up our sleeves and get developments going.”

He also pointed to the important role house building can play in getting the economy moving. But the main reason we need many, many more new homes is that too many people in our country are poorly housed. We must not focus solely on numbers or see house-building principally as a means to economic growth. The homes we create should be well designed, reasonably spacious – and in the right places.

Shaking up the planning system will not result in the right housing in the right place, but nor will it lead to more houses being built. The planning systems for both housing and major infrastructure have been subject to repeated changes in recent years, and it certainly does not need yet another upheaval. Is it too much, then, to hope that the Chancellor will now state publicly that recent changes will be given time to work?

George Osborne’s frequent attacks on the planning system are based on little more than gut instinct. He has no serious understanding of planning, nor any desire to gain one. That is, of course, forgivable: he has a bigger job to do.

But he should stop interfering. He should beware of government by anecdote: there will always be people frustrated by their failure to get quick planning permission, but it would be a pretty useless planning system that always said yes to development. And he should stop reaching for old Treasury reports commissioned by Gordon Brown to demonstrate that planning holds back growth.

As the former cabinet secretary Gus O’Donnell said recently, it is important to be clear about the purpose of planning: “If it is to boost GDP, then the answer is simple: concrete over the South East. But of course that’s not what we want.” We need growth, but we also need decent places to live in. And we need – and most people greatly value – our countryside, including the pressured green-belt countryside around most of our major towns and cities. The Government as a whole recognises this, even if the Chancellor does not.

At last year’s Conservative Party conference, Eric Pickles, the Communities Secretary, gave “a clear and unequivocal assurance that the green belt will be protected under this Coalition Government”. I am sure that this commitment was sincere, and Mr Pickles has used his powers to turn down several major developments in the green belt.

But protecting the green belt is not easy: it is in the nature of economically vibrant towns to sprawl into the countryside, and only the green belt stands in the way. Moreover, the Government’s support for the green belt can clash with its commitment to localism, as many local authorities want to build on it or casually redraw its boundaries.

A report published today by the Campaign to Protect Rural England shows that the green belt in England is being eroded at an alarming rate, in spite of the Government’s good intentions. (Planning policy is a devolved responsibility, but green belts are also under great pressure in Scotland, Wales and Northern Ireland.)

The National Planning Policy Framework (NPPF) states that green belt boundaries are permanent and should be altered only in “exceptional circumstances”. Development in the green belt should be allowed only in “very special circumstances”. But our report reveals that if developments now likely are added to those given planning permission since the general election, more than 80,000 houses, seven new roads and 1,000 hectares of business parks and warehouses are set to be built in the green belt.

Many proposals are in northern areas with plenty of previously developed brownfield land available close by – places such as Chester, Dewsbury, Wigan, Widnes and Southport, some of which could do with regeneration, rather than seeing economic activity drifting to the countryside. One of the purposes of the green belt is “to assist in urban regeneration, by encouraging the recycling of derelict and other urban land”.

Official figures show that there is suitable brownfield land available for 1.5 million new homes, and still more for commercial and industrial development. Much of this is in the most pressured areas — enough for 400,000 homes in London, for instance — and the stock of brownfield land is growing all the time. A strong green belt encourages developers to use this land and improve urban areas. A weak green belt undermines towns, as well as destroying countryside.

The vast majority of green belt is open countryside, still rural in character despite being close to London, Birmingham and other cities. This “ordinary countryside” is as precious as our great national parks but it is under serious attack, from day-to-day planning proposals and from a Chancellor who is too ready to blame planning for bigger economic difficulties. It is down to Eric Pickles — backed, I hope, by the Prime Minister — to live up to the Government’s commitments and act to save the green belt.

Guardian – CPRE ‘Green Belt must be Safeguarded’

Guardian

Green belt land may be under threat from plans to build 81,000 new homes, according to the Campaign to Protect Rural England. Proposals to build houses, roads, industrial parks, mines and airport expansions, which are either out for consultation, have been submitted for planning permission or have already been approved, would cover protected land equivalent to a new town larger than Slough, the CPRE claims.

Plans include the expansion of Birmingham airport, proposals for freight terminals near St Albans, Luton and St Helens, an opencast coal mine at Broxtowe, in Nottinghamshire, and a golf course at Leatherhead, Surrey.

The government has committed to protecting from development the green belt, which makes up 12% of English land, but reform of the planning system this year has prompted concerns that protection for the wider countryside would be weakened. Campaigners say the government must honour its pledge to safeguard the green belt.

Under the new planning policy, local authorities are required to allocate more than five years’ worth of building land for new housing, and CPRE has pointed out that councils are under pressure to allow building in the green belt to meet the target. There are also fears that planning laws could be relaxed to boost economic growth.

The CPRE warned ministers against “destroying the countryside” in a construction boom aimed at kickstarting the economy, and said that there was enough previously used, or brownfield, land available for 1.5m new homes.

Paul Miner, senior planning officer for the campaign group, said: “In times of economic slowdown, politicians can sometimes be tempted by the false promise of an easy construction boom. But destroying the countryside is not the path to lasting economic prosperity.”

A spokesman for the Department for Communities and Local Government said: “The green belt is an important protection against urban sprawl, providing a ‘green lung’ around towns and cities. The coalition agreement commits the government to safeguarding green belt and other environmental designations, which they have been in the new national planning policy framework.”

‘Forced Savings’, the Credit Accelerator and the ‘Revolving fund of Finance’

From the models we have produced in the previous weeks we are finally in a position to begin to tackle some of the fundamental puzzles and controversies of monetary theory.  Some of these controversies being forgotten in the neoclassical literature because of assumptions of money neutrality, equilibrium and the unimportance of credit/debt.

From our quadruple entry models of banking and investment we have shown that even within a framework where by definition (in the Keynesian sense) investment creates savings there are noticeable lags and periods over the term of a loan where they are not equal in terms of invested funding=additional balances, they balance only over the term of a good loan.  We have also shown that turnover matters and because of this excess reserves matters as does the turnover period of a loan.  In a sense we have extended the inquiry that Torrens began, that if turnover matters and profits equalise through capital markets then what must this mean for prices?  We have extended this approach to banking and what it means for growth.  The most striking result concerns our investigation of Keyne’s concept of a ‘Revolving Fund of Finance’  we have demonstrated that this can grow and service additional loans without any prior savings (in the sense of funding) once it begins profitable investment.  But in a striking result we have shown that this fund can only commence and expand above this ‘natural rate’ through prior ‘crusoe’ type savings.  A result that cuts rights across the debates of Keynes and Hayek – in a sense they were both partially right on this issue.

I want to explore this further.  One of Hayeks key obsessions was over ‘forced savings’ it is central to his concept of the business cycle and capital theory.  It is founded on the view that credit fuelled growth matters to pricing structure – it is a particular case of the Cnatillon effect.  This is intriguing because the rediscovery (I word I use deliberately) by Keen, Mayer et .al of a Credit Accelerator – a concept that undermines Says Law – is on exactly the same basis.

Of course the mainstream view has been that credit doesn’t really matter for pricing and business cycles (if it doesn’t matter for pricing then by definition it cannot matter for business cycles).  The point I think was most strongly put by Ricardo in 1819 during parliamentary cross-examination on the bullionist controversy.

Credit, I think, is the means which is alternately transferred from one to another, to make use of capital actually existing; it does not create capital; it determines only by whom that capital should be employed…Capital can only be acquired by saving [1]

Hayek certainly held that capital could only be created by prior ‘Crusoe’ type saving, but he disagreed on the issue of pricing extending the classical idea of ‘forced savings’.

The idea of forced savings has been poorly framed.  Machlup detected no fewer than 26 different uses of it.  Schumpteter thought the term unfortunate and confusing.

The form from which Hayek obtained it comes from late C19 economist Thomas Joplin – a key figure (founder of the Currency school and to my mind the Austrian school as well) in that it is from his conception of ‘forced savings’ that Wicksell adopted the concept of a ‘natural’ rate of interest.  (Viners treatment in Studies in the Theory of International Trade is recommended). Joplin:

If a person borrows one thousand pounds of a banker who issues his own notes, the banker…has at once added a thousand pounds to the capital and a thousand pounds to the currency of the country. To the party who has borrowed the money, he has given the power of going into the market and purchasing a thousand pounds’ worth of commodities, but in doing this he raises their price and diminishes the value of the money in previous circulation to the extent of one thousand pounds, so that he acquires the commodities by depriving those of them who held the money by which they were represented and to whom they properly belonged. On the other hand, if a person pays a thousand pounds into the hands of a banker, and the currency is contracted to that extent, both one thousand pounds of capital and one thousand pounds of currency are destroyed. The commodities represented by the money thus saved and cancelled, are thrown on the market, prices are reduced, and the power of consuming them is obtained by the holders of the money left in circulation[2]

You will note here a completely ‘horizontalist’ position.  The expansion of the monetary stock has a 1:1 impact on prices. Joplin did not consider this a good thing.

Legitimately a banker can never lend money which has not been saved out of income. Money saved represents commodities which might have been consumed by the party who saves it. Interest is paid for the use of the commodities and not for the money.[3]

And Viner comments

If banks have the power to issue money, the amount of such issue is determined by the rate of interest which the banks charge on loans. If forced saving is to be avoided, banks should charge “the natural rate of interest,” which he defines as the rate which keeps savings and borrowings equal.[4]

For Joplin the quantity of money,

“which ought, if possible, to be as fixed as the sun-dial, came to depend upon the credit of bankers with the public, and the credit of the public with the bankers.. which ought no more to affect the amount of currency in circulation than the motions of the sun.”

This of course is exactly Hayek’s and Mise’s position, and setting aside the complications of their theory’s on capital structure and the business cycle this is the analytical core of their system.  Bank credit alters the price structure.  Hayek added to this what he called the ‘Ricardo effect’ that is with relative labour costs increased (because of the increase in prices of consumer goods) there would be capital/labour substitution which would alter the capital structure.

In an echo of the closely related classical concept it creates ‘fictitious capital’ or in his terminology ‘malinvestment’.  Because of the dogma that only savings create capital it is termed ‘forced savings’ when it in fact is not savings at all but disaving, being forced to run down idle reserves because of a price increase.  Note this is the exact opposite of the opposite dogma of Hahn (and Rae and – in part- Schumpter) that only credit can create capital.

[Note there is another partially related use of the term 'forced savings' in the literature relating to behaviour when credit is created under conditions of full employment.  This is the only use of the term treated by Keynes.  We are not concerned for the time being with this usage here but the broader concept used by Joplin and Hayek which applies in their schema throughout the entire upswing of the business cycle].

Hayek builds on this but does not alter this essential foundation.  For Joplin the objection was distributional, wage costs would rise before capital saw increased profits, debtors would receive income before creditors would receive interest.  There is little of this in Hayek or Mises for whom the objection relates to the alteration of capital structure.

The first point to note about this theory is that it is wholly incompatible with a ‘pure’ time preference theory of interest.  Although the Austrian Theory of the Business Cycle is often presented as one of where Central Bank induced distortions above and below the ‘natural rate’ drive the cycle, but in reality, as is very clear in its original form from Joplin, the objection is to fractional reserve banking, the use of credit and the expansion of credit (lending power in our terminology- which excess reserves allow) – which is the issue.  This is the presentation in the more thoughtful Austrian  treatments (such as at the Mises Wiki).

If it is the case then that the interest rate is influenced by monetary ‘distorting’ factors then it is not set by pure time preference, there is an additional influence.

On this issue Joplin, was very clear, clearer than Mises (in the Theory of Money and Credit) or Hayek (In Prices and Production, Hayek later modified much of his monetary approach), in his view the interest rate was not set by the supply and demand for saving but by the supply and demand for money.  It was a theory well ahead of its time – in essence Keynes Theory of liquidity preference even including a breakdown of the motivations to hold money at any one point in time.[5]  So for Joplin it was an imbalance in the demand for money, caused by an imbalance between savings and investment (though by no means the only potential imbalance) which caused the interest rate to vary above or below its ‘natural’ rate which he defined as that being as the rate design to keep savings and investments in balance.

In Hayek we can see a strong assumption that all monetary distortions that change price structures away from the relative values of a pure barter economy are a bad thing.  The assumption is that it is the excess demand for money (in Walrasian terms) which creates disequilibrium and drives the business cycle.  Whatever the weaknesses in Hayek’s approach due to his anti-credit bias this is an important insight.

However if all investment is forced to come from past capital accumulation then that presumes a past and steady period of capital accumulation to fuel future economic expansion.  This deeply ‘English’ assumption was challenged by many C19 political economists in America and Germany.  Without a period of past capital accumulation how were they to compete? This led to schools of writing where credit and infant industry protection were viewed favourably.  For example by the end of the century in Taussig’s writings we see the argument that when credit is advanced it is done so in anticipation of future profits.  The key here being that a high profit rate, justifying a high interest rate, can compensate for lack of past capital accumulation.

This all rather begs a question – so does ‘investment’ need to be balanced by ‘savings’ in terms of express withdrawal of balances which could be used for consumption (which we more accurately term funding rather than saving)?

Joplin, in terminology later adopted by Austrians, saw ‘saving’ as simply being deferred consumption.  From the perspective of the law of large numbers if ‘saving’ and borrowing are occurring at the same rate then the inflationary expansion of spending at the beginning of a loan period would be balanced by the deflationary contraction in spending caused by deferred consumption (as John Rae rightly saw it) towards the end of the loan period.  This is also the way Hawtry verbally described the credit accelerator – in that a change in the rate of loans granted is necessary to have a net impact on effective demand and prices.  The same approach can also be used to describe the impact on effective demand from investment funded from Crusoe type savings.  At first saving is deflationary, but this as Austrians such as Strigl describe, simply builds up a ‘pool of funding’ for consumer goods during the period of production prior to sales.  Again deferred consumption of consumer goods.  Again the law of large numbers suggests that in a period of unchanging lending then the deflationary downswings are cancelled from the inflationary upswings.

The issue of inflation from credit has often been presented in terms of the special case of full employment where all labour is fully employed and where is ‘investment’ is fully funded by savings. (this is the second application of the term’forced savings’ in our note above).  In that special case (described by Bentham and Machlup amongst others) any increase in credit must lead to a direct increase in demand for productive goods which with all factors fully employed must lead to a rise in prices, a rise in profits and a forced reduction in money balances from consumers.

In the more general case though there is  no assumption that any factor is fully employed, merely that an increase in demand for a good may or may not lead to an increase in the price of the good depending on the elasticity of its supply curve.  The key though is whether of not NET there is an increase of decrease in demand in terms of the credit accelerator.  We have seen that if the rate of lending is static then the law of large numbers ensures that inflationary and deflationary pressures exactly cancel out.  If the credit accelerator rises there will be inflationary pressure, falls deflationary pressure.

You might imagine then that this would be equivalent to a world where ‘savings’ and investments are in equilibrium – you would be wrong.  It is at this point we can apply the results of our modelling.  What this shows is that even if such funding exactly balances investment it does not result in in a neutral position in terms of prices, that is because the revolving fund of finance enables the exponential growth of lending power due to profits from interest and not returned as dividends expanding lending power.  In that case with the supply of endogenous money increasing interest rates must be pushed down, even if ‘savings’ (funding) and investment are in balance.  We can see that this must be so from our finding that changes in lending power = changes in savings for funding, so if lending power is increasing from retention of the ‘bankers surplus’ it is possible for interest rates to remain static if there is compensating dis-saving – a negative and balancing rate of change in saving.

Ill present a simple model.  In the first we have a ‘frontier’ bank with limited initial equity $10,000 – lending in conditions of a high rate of profit.  Lets say it fractionally levers that to $90,000 of lending power leaving $1,000 in reserves.  Lets assume an interest rate of 7% of which the bank makes 5% profit.  (for simplicity for the moment we are leaving aside inflation), let us also assume that the bank pays a 5% dividend recycling 95% of the banking surplus to lending power.  I also assume that the k factor – that is the proportion of the new deposits retained in the bank but not spent is 0.05.

This produces the following:

Lending Power Interest Profits Dividends Reserves Excess Reserves Excess Reserves Levered
90,000 6,300 1,800 90 83,790 0 0
91,710 6,420 1,834 92 85,382 80 716
94,169 6,592 1,883 94 87,671 114 1,030
96,988 6,789 1,940 97 90,296 131 1,181
100,012 7,001 2,000 100 93,111 141 1,267
103,179 7,223 2,064 103 96,060 147 1,327
106,467 7,453 2,129 106 99,120 153 1,377

You can see from this can lending power overall increases much more rapidly than savings (in the Keynesian sense of unspent balances) because of the increase to the revolving fund of finance.  Two issues to make the model more realistic.  Firstly because of a wealth effect savings are likely to rise with income.  Secondly their is a second order effect with excess reserves being placed in other banks – this is a single bank model – the extent of this will depend on the turnover rate of balances.

The effect of this is that banks, at times of steady growth, will – over time – have less and less need to attract ‘savings’ (funding) to fund loans – so they can afford to lower deposit rates and hence increase profits because of the increased spread between savings and deposit rates.  There cannot be a stable period where savings (funding)=investment under endogenous money as because of the changing size of the revolving fund due to compound interest it is forever shifting.  Also remember investment = funding x turnover – and turnover is affected both by the turnover period of capital and the amount of excess reserves.  The relationship between savings and investment is a profoundly disequilibrium one.

But what if there were no revolving fund of finance – what say if the state taxed all bank profits at 100% and returned it to citizens as a citizens dividend.  In the model the effect would be identical in terms of expansion of lending power as what would be dividends in bankers accounts becomes reserves in citizens accounts and the excess reserves can equally be levered through fractional reserve lending.  This again is because of the crucial role of excess reserves, here all unspent balances become potentially available for ‘funding’ through fractional reserve lending.  If an investment is made then the funding for that loan creates savings mostly in other banks that are available for funding.  Whether that loan is made or the funding is successfully secured is another matter.  The critical difference between this scenario and that of the previous paragraph is that without the revolving fund there is no systematic downward pressure on interest rates.  Let us assume for the sake of argument that all loan funding comes from active asset purchases by depositors.  Here we have a 1:1 relationship between the requirements to fund investment and saving.  Yet even here this supports lending at 1/the reserve ratio – endogenous monetary expansion.  A faster rate of money creation than the rate at which it is saved.

But what if the bankers surplus is not returned as dividends, well it doesn’t matter because it becomes excess reserves in another bank account and the impact mathematically on lending power is identical, it expands to the extent of the reciprocal of the banks reserve ratio.It makes no sense then to complain of ‘forced savings’ in terms of an expansion of money in advance of saving – there is no such thing.  All increases in the rate of lending power must be preceded by an equal increase in saving (funding) – either directly through asset purchases or indirectly through excess reserves or banks own savings through retention of the bankers surplus (indeed this expansion of the term ‘savings’ – in the keynsian sense enables us to see the revolving fund as an example of prior savings as well).  The ‘flow’ of money liabilities through loans must be exactly balanced by the inflow of assets through principal and loan repayments and savings to fund these deposit draw-downs, even in those cases where through fractional reserve lending credit is created many times in excess of reserves.

So a key finding here is that the normal operation of the credit cycle, during a period of growth, has a natural tendency to push down the interest rate due to the increase in lending power. This is exacerbated by the accelerator effects of investment, as emphasised by Sraffa, wealth from investment further pushes down interest rates lowering costs and increasing costs raising wealth etc.  If the interest rate is falling then during periods of profit there will be an expansion of credit as the cost of servicing the credit is low.

With a tendency for the interest rate to fall even a constant level of saving will not lead to a constant level of prices – a conclusion also reached by Hayek on the basis that a constant level of savings would lead to an increase in output which would be deflationary with constant nominal spending.

Hayek and Mises set out there theory as a defence of the classical theory of growth – that capital is stored labour and land transferred for products, therefore if you wished to produce more in the future there had to be storage of unused labour and land (savings).  However our theory shows that the classical theory can be defended without any notion of ‘forced savings’ because credit acceleration depends on savings, either direct investment or idle excess reserves, and even with fractional reserve lending with no credit acceleration cash inflows to banks from productive loans exactly balance cash outflows, there is zero net inflationary effect.

The reflexive bias against credit and fractional reserve lending then is without basis.  It does not create per se inflation.

It is another argument altogether about whether or not it alters capital structure (the Ricardo effect) – although as it is investment per se which enlarges the pool of funding which provides the real wage and demand for consumer goods – whether crusoe type savings or credit – this argument must fall as well.  Such complication capital theory nonsense is not necessary to sustain the classical theory of growth – simple stock flow analysis of cash flows is sufficient.

This is not of course is not to argue that speculation and debt dont matter – to the contrary – simply to clear the way by removing fallacious Austrian diversions.

Can though am argument survive that the harmful effects of the Credit Cycle be diminished through 100% reserve money, as Fisher advocated?  Ill tackle that in a future article.

References

[1] Lords Committee, Report, 1819, pp. 192-93.

[2] An illustration of Mr. Joplin’s views on currency, 1825, p.28

[3] Views on the subject of corn and currency, 1826, p.35.

[4] Studies in the Theory of International Trade New York: Harper and Brothers Publishers Viner IV.32

[5] Outline of a Theory of Political Economy Thomas Joplin, London 1823

r. Hayek on Money and Capital,” in The Economic Journal, Vol. 42, No. 1, March, 1932, pp. 42-53

Ministers Ready Green Belt Grab – Independent #NPPF

Independent

Building on green belt land around towns and cities will “irreversibly damage the countryside” yet fail to deliver the Government’s hoped-for economic growth, the former poet laureate Sir Andrew Motion warns today, as ministers face charges that they are ignoring the needs of Britain’s rural communities.

So desperate is the Treasury in its search for growth that George Osborne is said to want to redesignate protected land to kickstart large-scale housing schemes. Developers wanting to build on protected sites would have to provide new “green belt” elsewhere.

But the row puts the Tory’s claim to be the party of the countryside under serious threat, with MPs increasingly worried about the apparent indifference with which the leadership appears to view our green and pleasant land.

Sir Andrew, the president of the Campaign to Protect Rural England, told The Independent on Sunday: “It is unfortunate if some within the Government feel that undermining the green belt will help deliver economic growth. There is little evidence to support this, but plenty that it will irreversibly damage the countryside.”

The green belt was created to “prevent towns and cities sprawling into our beautiful countryside” and has been “hugely popular”. “Now is the time for all those who care for our green belt, and indeed for the countryside as a whole, to stand up for it – including the many MPs who have assured their electorates that the green belt is safe in their hands.”

The Government’s attitude towards rural areas is now the subject of a parliamentary inquiry, after the Government’s first “rural statement” was repeatedly delayed. Behind-the-scenes negotiations between the Department for Environment, Food and Rural Affairs (Defra) and the Treasury remain fraught. It is understood that the Department for Communities and Local Government is also resisting the attempt to alter green belt rules. A Treasury spokesperson said: “The Government constantly considers a wide range of measures that can contribute to its key priority of delivering sustainable and balanced growth to understand their impact, and will announce initiatives when decisions have been taken.”

However, opponents believe the latest assault on the countryside is not unexpected. Mary Creagh, the Labour environment spokesperson, said: “It’s clear that the Tories are increasingly out of touch with anyone who cares about the countryside. I have been clear that there are no no-go areas for us and we are committed to creating a rural economy that works for working people.”

Stuart Burgess, the chairman of the Commission for Rural Communities, said the chocolate-box perception of village life disguises real problems and hardship. “You can drive through many villages where the rural idyll seems to still be there superficially. But if you dig deeper, there are enormous difficulties.”

This year, large urban councils get £454 per person, a 7.5 per cent reduction, while their rural equivalents receive £302, down 8 per cent.

Graham Biggs, the chief executive of the Rural Services Network, said: “Rural residents pay more in council tax, receive less in government grant funding, get fewer services and have to pay a lot more to access those services.

“The cuts get down to the bone and marrow in rural areas, whereas they are breaking the skin and drawing blood in the urban areas.”

Shapps Opposed to Osborne’s Green Belt Moves #NPPF

Telegraph

Mr Shapps …indicates today that he is opposed to emerging Treasury proposals to deregulate further the planning system. The minister, tipped for promotion in the forthcoming reshuffle, says there is no need to build on the green belt as some have suggested.

Earlier this year, The Daily Telegraph and countryside groups such as the National Trust called on the Government to impose limits on the National Planning Policy Framework.

Mr Cameron intervened and the final planning regulations were welcomed as a compromise which would help business while protecting the countryside.

But Treasury sources have recently indicated that they wish to reopen the planning issue — and possibly allow building on the green belt.

Mr Shapps indicates he is opposed to any such move, saying: “We’re not short of schemes to get housing built, we just need to get out there, roll our sleeves up and get developments going.

It’s not the case that we’ll never need to do another piece of planning reform. But let’s concentrate on what we’ve got. We’ve got nearly half a million planning applications ready or nearly ready. We’ve got another hundred thousand-plus homes on government land [waiting to be developed on].”

The Conservative manifesto pledged to protect the green belt. Asked if this commitment was under threat, Mr Shapps replied: “No…the green belt issue is a settled issue.”

Ministers are working on plans for an economic regeneration Bill in the autumn. Mr Shapps is playing a key role in these negotiations, with new funding for housing developments expected to be central to the plan. He will concentrate his efforts on trying to kick-start developments where planning permission has already been secured but work has stalled.

Daily Mail – Ministers to Seize Power to Dedesignate Green Belt #NPPF

Daily Mail

Ministers are planning to seize chunks of the greenbelt to build housing developments and pave the way for a new hub airport, the Mail has learned.

The Treasury is prepared to ‘have a fight’ with green campaigners by pushing through rules which would let ministers redesignate areas of greenbelt as available for development.

Chancellor George Osborne plans to let ministers rather than local councils decide where to build hundreds of thousands of houses by reclassifying them as projects of national importance.

The plans are due to form a centrepiece of the Government’s new Bill to boost economic growth next month.

They will enrage groups such as the National Trust and Campaign to Protect Rural England.

But Treasury sources say they are determined to press ahead because ‘having a fight with the critics will show the public that we are serious about  taking difficult decisions to boost growth’.

In the first move towards this  ministers will today back a report on the private rental sector by venture capitalist Sir Adrian Montague.

He says councils should waive the requirement for developers to devote 40 per cent of their projects to affordable housing when they are building homes specifically for rent.

Those demands are widely thought to be stalling projects that are ready to go because they have shrunk developers’ profit margins.

The report also recommends that the Government makes public land available to build rental accommodation and underwrites some of the risk of building developments.

The proposals were described by Housing Minister Grant Shapps as a ‘blueprint’ for boosting the housing market and the economy since it will give renters more choice.

At present the limits of protected greenbelt land are set by local authorities but government sources say plans are afoot to carve areas out of the land to build houses while keeping its overall size the same.

One said: ‘You would take an area from one place and hand a bit back from somewhere else. At the moment you can do it in certain circumstances. We want to make it easier.’

Plans which affect the greenbelt will be controversial because the Tories pledged to protect it in their last election manifesto.

In addition ministers are examining plans to designate housing developments as infrastructure projects, so ministers, rather than town halls, would give final approval.

That would put them on the same footing as power stations, roads and airports, which are all regarded as developments where national need overrules local objections.

Senior Tories have also revealed that the party will also go into the next election pledging a huge expansion at either Gatwick, Stansted or Luton airports, making one of them a multiple-runway hub airport.

The Chancellor and David Cameron have ruled out a third runway at Heathrow as politically impossible because of the effect on voters in West London.

They regard Boris Johnson’s plans for a hub airport in the Thames estuary as impractical since the proposed airport will clash with air routes into Amsterdam’s Schiphol airport.

Now think about this – the article is in none technical terms but it would seem the idea is to place housing projects above a certain size in the 2008 planning act regime.

What that would mean is that the housing, and re-designation of Green Belt, would be carried through ‘National Policy Statements’  which would require SEA etc.

>So much for no national or regional planning.
>
But how would housing projects get in – take for example – and there are many – South of Oxford?

Would the SoS now have to do strategic housing assessments, strategic green belt reviews etc?   Yes of course.

The National Policy Statements route would take years – look at the rail and roads statement still not produced.  Some such as Ports have only got through for being non spatial.  This would not be possible with housing.  Also Parliament would have to under take the function now undertaken by trained inspectors, it would have the opportunity to get completely bogged down.

There is a problem, no ‘fast track’ procedure for large housing projects that integrate policy and DT issues, but this is not a practical solution.

The Basic Economic Mistake in the Montague Report

Montague - Its as bad as Beecroft

Where is the evidence that planning obligations on affordable housing should be abandoned, even if the coming review of viability for pre 2010 consents shows they are viable?

It contains the following section – which is a basic fallacy

 

• All housing other than social housing can be sold to owner occupiers by the developer – there are no restrictions on that
• The result is that all housing land prices tend to be fixed according to the price of owner occupied housing
• Developers wishing to build housing for rental will therefore compete for land with house builders that sell to the owner occupied market
• Because property can switch freely between the owner occupied and private renting markets, the opportunity cost of an investment in housing is the price it could achieve on sale to an owner occupier, not another investor

However the correct approach is as follows:

• All housing other than social housing can be sold to either owner occupiers or buy to let landlords by the developer – there are no restrictions on that
• The result is that all housing land prices tend to be fixed according to the price of whichever is most profitable at any one point in time – owner occupied housing or buy to let
• Developers wishing to build housing for one tenure will therefore compete for land with house builders that sell to the other
• Because property can switch freely between the owner occupied and private renting markets, the opportunity cost of an investment in housing is the price it could achieve on sale to another tenure, not another investor

Can there be any disputing this?  Why should Grant Shapps back so enthusiastically this report when it contains such a wopping error.

The result is that one tenure – buy to let or owner occupier will tend to crowd out the other at any one time, social housing (if the scheme is viable) has absolutely nothing to do with it- duh!

If people and investor were indifferent between renting and borrowing then economic theory tells us that a no arbitrage condition would set the same price for both.  We see different prices because people are not in different and because the type of stock built for rent and owner occupation are quite different.  indeed the overbuilding of stock for buy to let is one of the biggest reasons why it is less profitable.  Does this feature in the report – no – only one place for Montague – waste paper basket – I am indiferrent to the marginal utility of re-reading the report or recycling it.

 

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