We do not need an alternative speech; we need to look only at Labour in government in Wales. Let us look at Labour’s record on housing there. Labour has failed to boost house-building starts by a mere 1% as compared to 19% in England.
Labour in Wales hit the housing market with extra red tape, adding £13,000 to the cost of building a new home in comparison with England. Labour has cut the right to buy, abolishing it completely in parts of Wales. Labour has failed to introduce support for new home buyers. Their new-buy scheme will not start until next year.
Whether it be in England or Wales, Labour’s economic policy could be summed up, to paraphrase Ronald Reagan, as “If it moves, tax it; if it keeps moving, regulate it; if it stops moving, subsidise it”.
What is different about policy in Wales. National policy mandates code 3 as a minimum for all homes, not just social housing.
The HBF claculates the cost of this as £2,900 per typical semi detached lot, without considering any capitalisable benefits from lower energy bills.
There was a consultation that ended in October last year on how to implement zero carbon standards from 2015, a white paper with detailed impact assessment is due this year with draft changes to national policy wales later in the year.
This is exactly the same position as in England as the DECC as recently reconfirmed its committment to some form of zero carbon standard from 2015, though we await with baitred breath its exact form. Is pickles now saying we should not have any energy standards in new homes at all.
There is a genuine debate in Wales over whether a national enhanced standard will depress housebuilding in more fragile regions, but not policy conclusions have yet been reached. Where does Pickles get his £13k figure from?
This DCLG letter to Winsor and Maidenhead is worth sharing
PREDETERMINATION, BIAS AND ADVICE FROM MONITORING OFFICERS
Thank you for your letter seeking my views on an advice notes from Monitoring Officers to
councillors, and how this interacts with the Localism Act. Whilst Ministers cannot give formal
legal advice (on advice), I am happy to provide my informal view.
Under the last Administration, the Standards Board regime undermined freedom of speech in
local government. This was compounded by a further gold-plating of pre-determination rules,
fuelled by misconceptions about the flawed regime, going far beyond what was reasonable or
The Localism Act 2011 has abolished the Standards Board regime, and has also clarified the
position with regard to pre-determination and bias. Section 25 clarifies that a councillor is not
to be regarded as being unable to act fairly or without bias if they participate in a decision on
a matter simply because they have previously expressed a view or campaigned on it. The
effect is that councillors may campaign and represent their constituents – and then speak
and vote on those issues – without fear of breaking the rules on pre-determination.
In this context, I feel that blanket advice which states that councillors cannot participate in a
meeting purely because there is merely a ‘perception of bias’ or ‘risk of bias’ is potentially
wrong. It will, of course, depend on the individual circumstances, but the flexibilities and
freedoms laid out in Section 25 may apply.
It is worth drawing a distinction between pre- determination and pre-disposition.
Councillors should not have a closed mind when they make a decision, as decisions taken by
those with pre-determined views are vulnerable to successful legal challenge.1
Incidentally, where a councillor has a predetermined view because of having a disclosable pecuniary interest
in an item of council business, our guide for councillors makes clear that they may not participate in any
discussion or vote and that they should leave the room if their continued presence is incompatible with their
council’s code of conduct or the Seven Principles of Public Life.
However, before the meeting, councillors may legitimately be publicly pre-disposed to take a
particular stance. This can include, for example, previously stated political views or manifesto
At the decision-making meeting, councillors should carefully consider all the evidence that is
put before them and must be prepared to modify or change their initial view in the light of the
arguments and evidence presented. Then they must make their final decision at the meeting
with an open mind based on all the evidence. Such a fair hearing is particularly important on
quasi-judicial matters, like planning or licensing.
More broadly, monitoring officers can offer advice to councillors. But the final decision about
whether it is right to participate in discussion or voting remains one for elected members.
Councillors should take decisions with full consciousness of the consequences of their
actions. I hope the Localism Act has injected some common sense whilst allowing for
genuine debate, freedom of speech and democratic representation.
I hope this is of assistance. Further to your suggestion in your original letter, I am placing this
letter on my department’s website in case it may assist councillors in other local authorities.
BRANDON LEWIS MP
Brandon Lewis MP
This is the first political statement I have seen which stresses the position made by many lawyers. The localism act did not abolish the predetermination law merely allowing predisposition – which the courts had already allowed.
Where I have underlined should appear in the full council reports on all development plan decisions and should be read out by the leeader when making the motion. Then they can avoid the hole that some leaders like that of Sheshire East have dug themselves.
Civic Trust 13th May
When talking about neighbourhood planning in the early days, maybe a fault of the Government was allowing people to believe they could do what they want, when in reality it has always been about how things will be delivered, not what would be delivered. However, I do genuinely believe that in twenty years’ time, people will look back and say this policy was a real game changer for getting people involved in their local area”.
Residents are fighting plans to remove old-fashioned washing line poles used for 70 years.
Until now people on the Millbank Estate in Pimlico had been airing their clothes on lines held up by the same posts for generations.
But some of the poles and lines have been “removed urgently” by housing bosses, who claim they are a “health and safety hazard.” When workmen tried to take away the rest, residents blocked their path and refused to move.
Protest banners — old shirts — were sprayed with the slogan “Save Our Lines.” An online campaign to bring back the poles is planned. Resident Barbara Brady, a film costumier who is leading the campaign, said: “We need the lines because no one has any room in their flat for a tumble drier. They were removed in undue haste and nobody has been consulted.”
Millbank Estate Management Organisation, which runs the estate of 500 flats, said it wanted to buy new rotary driers instead but these were rejected as “ugly.”
It said: “We have written to residents… to let them know we would remove the corroded washing lines and would replace them. We want to provide better and more flexible facilities.”
Question – this estate is in a CA but unlike some older Peabody estates is not listed – so doesnt removal of the washing lines need CA consent? They are an integral part of the character of all Peaabody estates.
A short note in reply to @Frances_Coppola. She disagreed with a paper from Jan Kregal at Levy.
Kregal argues that there are two types of deposit, deposits of currency and coin, and deposits created when loans are made. If a bank makes bad loans
“it is the failure of the holder of the second type of deposit [loan-created deposits] to redeem its liability that is the major cause of bank failure”
so the first type of depositor (of currency and coin) should not bear the brunt of these bad decisions.
Coppola disagrees with this on a theoretical point via twitter.
deposits physically deposited by customers are receipts of deposits created via someone else’s borrowing.
Here we agree to a point, reserves created by loan are spent in excess of the liquidity preference of the borrower and such ‘excess reserves’ creates reserves in other bank account and further expands the lending power of banks to lend on these reserves. We have modelled in detail this process before, as did many other banking theorists when the endogenous ex nihilo creation of money was taken for granted in banking textbooks.
But only to a point because there can be two sources of deposits (setting aside for a moment any debt free state created money) as Kregal correctly points out – Crusoe like savings from balances in excess of liquidity preference – and the endogenous creation of moneys through loans.
This must be true as balances immediately spent are not available as idle balances to be leveraged as lending. Also imagine a bank starting up, it cannot start up without equity, similarly a bank cannot expand beyond its capital ratios without raising additional equity.
This arises from the fundamental equation of accounting applied to the business model of banking, Assets=liabilities+owners equity. When a new bank, or a bank extending its capital base, creates a new loan it creates a liability now and an asset redeemable only in the future, to ensure positive balances the bank must raise equity, or its own liability through borrowing from another body, the two sides of the equation must balance. If it borrows the bank reduces its profits, hence why banks borrow short. This in no way implies a loanable funds view of money, rather future profits have two sources, saved existing money and loans, invested. It is the anticipation of the future stock of such money, not the present stock, which constrains lending decisions.
So even with the ex nihilo creation of deposits for loans, which create deposits for loans etc. etc. their is always a residue both of the original equity and the created money. In banks with high reserve requirements it will be higher but there will even be a residue in regimes with no reserve requirements.
This argument is formally the same to that of Bose (1980) in discussing the classical concept of ‘originary factors’ – and the ‘dated reduction’ of originary factors. Every commodity is composed of another commodity (a resource) and an input of labour. Going back through time we find natural resources and labour. This means that no commodity can be ever reduced to ‘pure labour’ or ‘pure commodities’ there is always a residue of one or the other. (Mathematically it is a Taylor series where ratios between the two are invariant over time). Here we have not referred to ‘capital’ rather purely the physical economy. However the circuit for the physical economy is paralleled by the reverse circuit of money. For the classicals ‘capital’ was simply money advanced for profit, including money advanced for wages and interest (quite correctly), and this money also has two sources, savings and loans. This leads to a rather interesting flow identity for a specific investment, prices, at effectual demand, equal:
commodities + labour = change in saving + change in debt
It does not matter if the change in saving is from retained profits (self funding) or change in savings to create bank equity and further capital for lending.
Update: I should have stressed here the LHS is the full cost price of production and the RHS is what the later classical economists (such as Tausseg) called the ‘pool of funding’ both measured as flow variables over (Wicksell’s term modifying Bohm -Bawerck) the ‘Period of investment’. Also we are talking about the change in savings and debt that is spent not retained in idle balences, so both are multiplied by the Davidson k factor (the proensity to hold income in balances).
But the value of labour here is simply the labour share (α ) times velocity ( α .v )which is the same as (1-r).v (r=the profits share, v = the velocity of money).
So we have a flow equation
Commodity price =(Δequity+ Δdebt)/ (α .v)
You can of course rearrange this equation to make endogenously created bank debt the dependent variable, but you cannot ever eliminate saving on the RHS, there is always a residue. These equations should come as no surprise, they can be derived from Kalecki’s stock identities modeled in a flow input, flow output system.
Two other interesting things about this identity. Declining labour share is inherently deflationary, indeed during the great moderation we saw deflation and declining labour share, and incomes and profits can only remain even with increasing debt, increasing savings for equity is also deflationary.
So what happens when labour share falls towards zero in an ‘android’ economy. I will explore this in a future post (it isn’t pretty).
(Note: At no point do I assume the such dated quantities can be ‘added up’ to equate values, Sraffa demonstrates the problems in this. Rather I assume that all such inputs are valued at current prices).
Marx on Exploitation and Inequality: An Essay in Marxian Analytical Economics
Production of Commodities by Means of Commodities Sraffa
The Economics of Enterprise (HJ Davenport) 1813
Collected Works, Kalecki
Its a simple issue, and nothing to do with whether land is a ‘green’ or not which forms no part of the law or precedent. Rather the Growth and Infrastructure Act rejected introduction of a ‘character test’ but still prevents registration where land has been allocated for development by the local authority as part of a Local or Neighborhood Plan. The South Bank Centre has been allocated for mixed use development for many years in a development plan, I know I wrote the policy. Any application will be a waste of time and money for all involved.
The Lambeth UDP allows unrelated enabling development to be built in the South Bank Centre, provided that it is essential to the development and/or retention of arts and cultural facilities; that it would not undermine the character of the South Bank Centre as an arts and cultural quarter; and that the proceeds of any such development are applied exclusively to support and enhance the South Bank Arts and Cultural Centre. This is just what is proposed, a replacement facility is proposed 120 metres away.
This is carried forward in the draft Lambeth Local Plan 2013 now out to consultation.
The list of exempted local planning authority areas from the office to resi pd right.
Bizarre, many parishes in East Hampshire, some individual buildings ion Sevenoaks, and with a few odds and sods other than the Central Activities zone and K &CD (but bizarrely no other outer London areas) no where else makes the cut. Why6 should a single office remain in Wandsworth, Richmond or Kingstone for example. Crying out for a JR as I cant see any ryme or reason for it.
How do you make speculation endogenous to economic theory?
Further how do you make the full suite of potential profit making activities, speculation, hedging, arbitrage and investment endogenous?
By endogenous I mean a variable that is determined alongside other variables rather than outside the economic model.
The reasoning in this post comes was prompted in part from speculation by Steve Keen on to what extent the speculative drive is a necessary component of capitalism even though it is destabilising, partly from some dissatisfaction with the Minsky ‘Ponzi’ model of asset speculation, which has been too easily dismissed by neoclassicals as somehow individuals not behaving ‘rationally’. The model here is a generalisation of our earlier model of default risk in banking and insurance across all sectors.
In this model income not consumed – in the Keynesian vocabulary ‘saved’ – is split into a Tobinesque portfolio of investment, arbitrage, hedging or speculation. What about money held in bank balances? This is treated as speculation in that it is holding an asset, in this case money or near money, with some speculation about the retention of the purchasing power of money during the period with which it is held liquid. So then a portfolio is held with assets of varying degrees of liquidity, risk and expected return.
Imagine in an initial model perfect price information. Here arbitrage cannot exist so it simplifies to three variables.
Imagine a further wholly unrealistic simplification (which we will reject) that all expectations about future prices are correct. Here no profits can be made from speculation as all investment decisions will be made at correctly anticipated prices. Here there will be no risk premium on venture capital or corporate debt – and equity prices will instantly price in the results of successful investment. In such a world there would be alpha but no beta, or in more classical terms average profits but no excess profits. This shows the intimate relationship between speculation and investment. Once a financial asset is created by investment (whether debt or equity) that asset can be traded and speculated against. The initial investment provided financing the subsequent speculation does not, however if the price expectations of speculators raise prices of the financial asset it provide additional scope for financing of the investment term, either through raising new equity, extending loans (as the risks on the original loans are lowered) or through increased collateral (owners equity) allowing greater debt financing or investment through retained earnings.
An investment decision is a prediction of returns over period. Speculation involves estimations of whether there will excess profits or losses using knowable risks. Hedging is adopting the opposite position. So investment is a three way vector where any point on a future yield curve is the sum of the speculation vector (return x probability of return) and the hedge vector (loss X (1- probability of return)). Speculation and hedging being a zero sum game, they help prices of assets adjust to real prices but do not directly add to wealth, their effect is indirect.
Prior to Neidhoffer’s ‘The Speculator as Hero’ the tendency was to see speculation as entirely negative:
Let’s consider some of the principles that explain the causes of shortages and surpluses and the role of speculators. When a harvest is too small to satisfy consumption at its normal rate, speculators come in, hoping to profit from the scarcity by buying. Their purchases raise the price, thereby checking consumption so that the smaller supply will last longer. Producers encouraged by the high price further lessen the shortage by growing or importing to reduce the shortage. On the other side, when the price is higher than the speculators think the facts warrant, they sell. This reduces prices, encouraging consumption and exports and helping to reduce the surplus.
Neidhoffer shows is the amorality, rather than the immorality, of capitalism in this regard, much like the much misunderstood Machiavelli shows us the logic of political power. Speculation is an inevitable component of the price adjustment process when production or prices are not to expectations. This of course is not to say it is moral or the best means of allocating scarce resources (as for example when people might die before a new crop is grown or imports arrive).
Let us extend the unrealistic assumptions slightly by assuming that market agents do not know future prices but are able to successfully predict future risks, that is the probabilities of certain prices. This commits the ergodic fallacy, but lets test this expanded model for a moment. Here there is a role for speculation and hedging, indeed the prices of options, the prices of both can be calculated exactly. Here there is beta, but is simply impossible to know whether you will gain it, but you can adjust a portfolio to remove all downside risk by hedging, so you can guarantee alpha. Speculation and hedging are again a zero sum game.
How are prices different in this model from those in a world with no speculation and hedging? Speculation has a cost, it has a price, the cost is the cost of the hedge. This adds to the cost base of the firm and the price of goods (or the price of money if the commodity demanded is a loan). It shifts the supply curve upwards reducing the consumer surplus and increasing the producer surplus. This is not a disequilibriating facto, rather it defines a new pareto optimum position as the seller will not sell and the buyer will not buy without hedging risks. It defines the proper equilibrium position. As an additional risk it has an additional cost requiring additional financing, either through saving or newly issued debt.
In a final step towards realism lets introduce Keyne’s radical uncertainty, uncertainty rather than risk, what is unknown and unquantifiable about the future. Of course none ergodicity means that the future can never be like the past, all we have is evidence from past events about what the future is likely to be like. So lets assume we have a property, or any other type of asset bubble, but no one knows if it will pop this year or next or next decade, the evidence of history simply suggesting that prices of the asset will rise in the short term and collapse in the long term. If a bubble seems likely to pop it is rational therefore to increase estimation of risk and not to cease all altogether speculative investments but to adjust your portfolio and increase your hedging./ If you cease speculative investment altogether, unless your are preciant in your forecasting, you could lose altogether what alpha exists in the short run. With increasing risk, even if not wholly quantifiable there must be increased hedging and increased cost of hedging. In a market where asset prices continue to rise it is irrational to wait and undertake crusoe like savings – you lose out on a rising market, so demand for borrowing increases to finance the hedge costs. But that demand will push interest prices (the cost or money) up as banks or other lenders, now at the top of the market at maximum leverage of deposits must attract additional equity or loan funding (either forced by the market assessment of defulat risk or statutory deposit requirements if they exist). With interest rates rising the bubble may pop as the over leveraged default and credit dries up.
Note the key fact about this story. Note there is no irrational behaviour, it does not rely on Ponzi or speculative borrowers to use Minsky’s terms behaving irrationality, indeed all participants wisely hedge risks as much as they can given an uncertain future, and the more they wisely hedge the nearer the systemic crisis approaches. We are in the world of 2007 where despite massive hedging and covering of collateral financial collapse was not averted – indeed in the model presented here it is bright closer.
In this model there is no intermediation between the risk averse and the risk bearing, as with banking intermediation is not a function but an exposte rationalisation of net portfolio decisions. Some by the size and nature of their portfolios can afford to be greater risk takers than others but in this model all will rationally hedge these risks. In this model finance is from endogenous money and interest rates driven by demand and supply of liquid financing.
Seen from the perspective of the individual speculative or Ponzi financier their behaviour may bring thir own state of bankruptcy closer but not necessarily the state of breakdown closer, indeed in normal times bankruptcy is a good thing. Rather in the model presented here it is normal and well hedged financing which brings the breakdown closer regardless of the irrational behaviour of individuals, indeed the more ‘rational’ they are the quicker the breakdown comes. The instability fo capitalism comes not from foolishness it is endogenous.
Yesterday’s local elections, being primarily at county level, will change few areas if any in terms of balance of power. UKIP still dont empty a single dutbin, or publish a single local plan. Next year could be different.
But looking at the UKIP local elections manifesto what if they did control an LPA, or even national planning policy.
The manifesto weighs in against saloon bar topics, anti-wind, pro-green belt, pro-localism, equally important it proposes local referenda on controversial issues like local planning and a no whipping rule for local cllrs.
Consider first the prospect of local control by UKIP of a plan making authority. The likelihood of local referenda would make it unlikely that any authority would vote for significant green field release as many of those moving into new homes would be from outside the LPA, even if they lived in the same housing market area. Many of those wishing for form a household or even to downsize to smaller accommodation would not get a vote. Unsoundness, pah, the UKIP policy would be deliberate confrontationalism The prospect of losing appeals, the ‘stick’ the NPPF is based on, would not work. The theory behind open source planning was a basic respect for the rule of law in conservative middle england, but that respect has been breaking down across the neo-liberal world, witness the rise of the Tea Party and how many conservative MPS would flout eh european convention on human rights. Loyalty to the politics of place, the politics of blood and soil, are trumping the loyalty to rule of law. So we would be likely to see in such a UKIP ruled local world a deliberate flouting of the seeking of sound plans and a collapse in housing numbers. It would be the politics of the aged with homes and with mortgages paid off protecting their equity against all assaults by the young that don’t own their own homes. Indeed just as the modern conservative party was seen by Peel as an alliance of the landed and business classes under Cameron and Farage these have split into separate parties each representating their own class, business and house owners. Neo-cons and paleo-cons.
Undoubtedly in such a world housebuilding would collapse as it would be difficult to get any large scheme through a referenda, brownfield sites would be just as controversial so we would see a rise in house prices which would only see the rise in resistance of the houseowning classes to more housebuilding, as they cash in. Nor would we see increased redevelopment of existing plot or higher densities. The risks of another property bubble would be very high.