Wealden SPA/Core Startegy JR Heard in High Court

Here is the story from Uckfield News back in July about the JR.  The background is severe restrictions on development within a 7km radius of Ashdown Forest which is one of teh main reasons, as a uropean site, their corestrategy was allowed to go forward with m,uch less than meeting full need.

Wealden District Council is at high risk from a judicial review which has been launched into the imposition of a 7km zone around the Ashdown Forest which severely limits new housing and business development.

The zone affects Uckfield and Crowborough whose Chambers of Commerce have united to fight the ban which they believe is stifling economic growth.

Representatives will be meeting a government minister in June to discuss their concerns. See our previous story: Uckfield and Crowborough Chambers to lobby planning minister.

The forest restriction zone forms part of the district council’s core development strategy which has been approved by a government-appointed inspector.

At the same time a landowners, including the Nevill Estate and the Birch Grove Estate, have launched the legal challenge.

Wealden District Council maintains a “risk register” which shows how the council could be affected by different factors.

This includes financial resources, loss of key staff, industrial action, severe weather, illness pandemic, animal disease, failure of a key supplier to provide a service and civil unrest or terrorism.

One vulnerability is termed “local development framework” which could be triggered by the council losing the judicial review of its core strategy.

The risks are judged on likelihood of the event taking place and the likely impact it would have.
Likelihood is judged from A (very high) B (high) to F (almost impossible). Impact is rated  from 1 to 4 where 1 is “show-stopper”, 2 Critical, 3 Marginal and 4 Negligible.

The risk rating over the judicial review is put at B1 – a high likelihood with the impact as “show-stopper”.

A Wealden council report states: “The passing as sound of the Local Development Framework Core Strategy at the Examination in Public and adoption by full council has reduced the risk of a vacuum in planning policy.

“However, the Ashdown Forest Economic Development Partnership has lodged a Judicial Review of the Core Strategy citing the Secretary of State for Communities and Local Government, Wealden District Council and the South Downs National Park Authority as joint defendants.

“The council intends to contest the Judicial Review. There is a risk that the council may lose the Judicial Review and the Core Strategy is quashed in part or as a whole. This may require the council to renew evidence at significant cost and could lead to a vacuum in planning policy and developer-led speculative applications. There is also the possibility that if the Judicial Review finds significant headroom, that the northern area of the district could be required to find sites for significant increases in housing numbers.”

It could also lead to additional costs to re-do work, the loss of Section 106 money (a legal agreement which amounts to a roof tax) for infrastructure benefits and possible intervention by the government.

 

Osborne Planning Reforms ‘Clearly Working’

Guardian on his House of Lords Select Appearance

“I think the planning reforms are clearly working. You see planning applications up, planning approvals up, and the percentage of planning approvals up,” he said. “It is having I think a positive effect on creating new homes and those homes are being built in appropriate places.

So a slump in plan sound findings is a success, so the lowest level of completions since the 1920s is a success, so applications to see villages double or triple in size are a”appropriate places.’

Two Contrasting Inspectors Reports on ‘Brownfield First’

This week

Reigate and Banstead

The Council’s approach in the Submission [plan] was that urban extensions would only be required after 2022 when most of the supply from existing urban areas (plus Horley North East and North West sectors) was built out and no longer available. …
Many house-builder representatives argue that the urban land supply is so restricted that greenfield sites will be required throughout the plan period and should be released in tandem with urban development. However, introducing the often easier-to-develop greenfield sites at an early stage risks undermining the “urban areas first” strategy which lies at the heart of the [plan]. Consequently an approach which allows greenfield sites only when necessary to maintain a five year supply is sound.

Rotherham

Policy CS3 seeks to prioritise the development of the most sustainable sites. This appears to me to be a phasing policy and, even though you consider that it would apply to no more than a handful of sites, I do not consider that it accords with the Framework. Development which is sustainable, it says, should go ahead without delay. The Sites and Policies DPD should identify sustainable sites in accordance with the strategy set out in the Core Strategy and the Council should encourage their suitable development straightaway. I therefore ask you to re-draft this

Policy CS3 says

Policy CS 3
Location of New Development
In allocating and determining which sites are the most sustainable, for the purposes of phasing
in the Sites and Policies DPD, regard shall be given to the following considerations:
a. The need to prioritise the development of the most sustainable sites
b. The need to encourage the re-use of previously developed land
c. Maximising the proximity and accessibility of housing to service and employment centres
d. Maximising accessibility to public and private transport networks
e. Maximising the opportunities to meet the needs of Rotherham’s areas of highest deprivation

Clear as mud then.   Providing you can have phasing and still achive trajectory I see nothing wrong with policy CS3 above.   Requires an #NPPF clarification about whether unnecessary loss of less sustainable sites is ‘sustainable’ or not.  For my penneth I think the inspector at Rotheram got it wrong as consideration of nteh plan is one of the factors which makes a site sustinable.  An overly narrow reading of the NPPF.

‘Savings’ can Increase Real Wages: A Reply to @asymptosis

I greatly admire Steve Roth’s (@asymptosis) blog as one of the best on theoretical monetary issues. His post on the characteristics of money is pretty definitive.

I take issue with a post of his No: Saving does not Increase Savings not because its or its underlying themes are wrong bit because it is only part right.

if you disagree with this post’s headline, you are thinking (perhaps unconsciously) in the “Loanable Funds” model. And the loanable funds model is complete, incoherent …

Think this through with me:

Your employer transfers $100K from their bank account to yours to pay you for your work. You’ve saved.

But is there more savings in the banks? More money to lend? Obviously not.

Thinking in this double entry way in terms of net drains and accretions to the banking system as a whole is a very useful way of avoiding accounting error. Steve pits the issue in a clear way though this perspective is not new being that held by the earliest endogenous money banking theorists (the earliest reference I can find is James Pennington in 1826, and it was repeated in terms nearly identical to Steve by Bostedo in his famous review of Bohm-Bawerk in 1901)..

So what is the problem? Well thinking solely in these terms makes the economy seem like a zero sum game where only the transfers of money matters. It is the same error I think made by Basil Moore and more recently Robert Barro in denying the Kenysian spending multiplier; in that it somehow manages to conjure ‘something out of nothing.’ Yet the capitalist process does manage to conjure more outputs than inputs, it creates a surplus and a profit from that surplus. If those profits are reinvested in capital formation rather than consumed we have economic growth.

The ‘monetary only’ perspective is in danger of ignoring five key issues:

  1. Value – it neglects value formation through production;
  2. Assets – it neglects the distinction between value formation through production and asset price speculation;
  3. Velocity – it neglects the importance of the velocity of money on prices and on the calculation of return on capital advanced. The higher the velocity of money the lower nominal profits needed to achieve a rate of return on capital advanced, even if the stock of money is unchanged.
  4. Profits – it neglects the importance of the link between profits and investment.
  5. Capital – it neglects the need for capital formation from savings in order to expand value formation.

An economy where 100% of profits were consumed rather than reinvested would see a boom in effectual demand that would be translated into inflation as the pace of production would not keep up with the demand for goods. None of this is incompatible with an endogenous money perspective. You may claim that future demand would create the demand and savings ex-poste through the S=I identity. However that rather dodges the point on how the loans would be financed? All loans must ex ante be financed through either enhanced equity of the lender (savings) or loans from another party (at extra costs) – eventually after several rounds of lending through lending the cost becomes prohibitive and all lending must be financed (ex ante) through savings. It is often poorly understood that the S=I identity is not an accounting identity that holds true at all times (Moore’s mistake) but in the medium run once monetary disequilibrium effects (multipliers) have run through. To quite from the General Theory.

‘An increment of investment in terms of wage-units cannot occur unless the public are prepared to increase their savings in terms of wage-units. Ordinarily speaking, the public will not do this unless their aggregate income in terms of wage-units is increasing. Thus their effort to consume a part of their increased incomes will stimulate output until the new level […] of incomes provides a margin of saving sufficient to correspond to the increased investment. The multiplier tells us by how much their employment has to be increased to yield an increase in real income sufficient to induce them to do the necessary extra saving …’ (Keynes 1936: 117)

Kaldor proved this though his ideas seem increasingly forgotten these days, he is a key player in this story. He had three key ideas, a model of growth (without production functions) where savings lead to capital formation, a nonlinear model of the business cycle where investment adjusts over time to the level of savings, and finally a proof of the Keynesian multiplier where through process analysis spending increased until the S=I identity was fulfilled and then the multiplier would cease.

This can be illustrated below:

A fully comprehensive, and stock flow consistent, treatment of a monetary theory of production must be able to rigorously account for the different ‘states’ of money flow in the circuit. This post is long enough so in the second part, and taking inspiration from Kaldor, I will attempt to classify these different ‘states’ of money in circulation and, in a step forward from his assumption of constant money prices, the impact of these ‘states’ in demand, capital formation, and prices. By adopting a comprehensive accounting framework there will be no ‘holes’ and we can derive accounting identities that must be true at all times whether at equilibrium or not that provide a proper bridge between pricing equations and the macroeconomy. From the identities describing any but one of the states of money you can derive the remaining one ‘ceritus paribus’.

My recent work looking at the ‘core contested ideas’ in economics has been looking in some detail at the history of debates on savings, the ideas of key players such as Turgot, Keynes, Kalecki, Bohm-Bawerk etc. It has shown be how very often theories talk past each other and never fully get to the bottom of an issue. There is an aspect of the ‘classical’ view of savings, which the Austrians, still hold to, which is worth ‘saving’ and of treated carefully is compatible with accounting identities and endogenous money.

Let me give a taste of the classification. I have avoided terms such as ‘liquidity preference’ as they can be ambiguous and the demand from money is in reality an amalgam of demand for different states of money some of which are demands for spending and some are not and which cannot wholly be encompassed into a single preference.

Class Monetary State Impact on Demand Impact on Investment
S1 Saving to Increase the Stock of Money (liquidity) without a plan to spend Decreases Demand Decreases Profits, Decreases investment in short terms. Creates a stock of money usable for investment in the longer term.
S2 Saving to defer consumption spending Decreases short term demand, though if used to save for a deposit on a loan the loan will increase demand once issued. Repayments of the loan will then decrease demand over term. Decreased demand for cheaper products will decrease investment in those. Increased investment in luxury goods.
S3 Saving to defer and increase consumption through capital formation As S2 Decreased demand reduces investment in the short term though lending will increase investment more than offsetting this.
S4 Saving to defer and increase consumption through asset purchases Decreases short term demand, though if used to save for a deposit on a loan the loan will increase demand once issued. Repayments of the loan will then decrease demand over term. As the asset supply is broadly fixed the impact of the spending will be to increase asset prices. For investment read speculation. Decreased short term demand more than offset by increased lending. So long as the asset price increases by more than the return on capital will fuel a bubble until the asset becomes unaffordable.

Only one of these can increase real wages. S3 – through capital formation, expansion of the market and introduction of new techniques. S1, S2 and S4 all can in different ways lead to collapse on effectual demand and capital destruction. Capital formation is just a transfer of bank reserves, but it increases value formation through putting idle account to work employing people. The issue is slightly complicated as financial intermediaries can pull off the Warren Buffet trick of ‘liquidity transformation’ ensuring the demanded outflow (S2+s3+s4) from a depositor is maintained whilst using deposits in excess of reserve requirements as S3 or S4 investments. This will be of little use for investment if there is a general increase in S1 savings as these intermediaries will be seeking safe assets rather than to make investments due to the collapse in demand.

The total stock of money in any portfolio must comprises of one of these four monetary classes. Therefore one can derive any of the four stock levels from the other three.

Hence we can turn to Bohm-Bawerks defence of the classical Tugot-Smith theory of saving/capital formation following an identical attack to Steve’s from Bostedo,

Mr. Bostedo .. says with special emphasis that every saving is only a transfer of purchasing power from the savers to other members of the community.

The fault in the .. It is that one of the premises, the one which asserts that a curtailment of “consumption for immediate enjoyment” must involve also a curtailment of production, is erroneous. The truth is that a curtailment of consumption involves, not a curtailment of production generally, but only, through the action of the law of supply and demand, a curtailment in certain branches. If in consequence of saving, a smaller quantity of costly food, wine and lace is bought and consumed, less of these things will subsequently and I wish to emphasize this word be produced. There will not, however, be a smaller production of goods generally, because the lessened output of goods ready for immediate consumption may and will be offset by an increased production of “intermediate” or capital goods.

The argument is not fully rigorous in that, unlike the Bostedo argument that inspired Keynes he does not allow for hoarding, nor does he distinguish between capital formation and speculation on assets. Subject to these modifications, and major modifications they are, the classical theory of capital formation is compatible with keysian theory and endogenous money. Saving matters.

Further Reading:

Anne Robert Jacques Turgot: The Importance of Capital Antoin E. Murphyin The Genesis of Macroeconomics December 2009 OUP

The Function of Saving Eugen Von Bohm-Bawerk Annals of the American Academy, Volume 17 (1901) 

Economic Writings of James Pennington 1826-1840 Psychology Press, 1997 –  114 pages

The Keynesian Multiplier Liquidity Preference And Endogenous Money Dr Paul Dalziel March 1995

Kaldor. N. “Speculation and Economic Stability.” Revi(‘w of /:’collolllic Studies, 1939, 7( I).

Kaldor, N. and Trevithick. J. “A Keynesian Perspective on Money.” Lloyd’s Bank Neviell’. Spring 1981,139.
Keynes, J.M. Gneral Theory of Employment, Interest and Money . London: Macmillan, 1936.

 

Moore, BJ, ‘The Demise of the Keynesian Multiplier: A Reply to Cottrell.” Journal of Post Keynsian Economics, Fall 1994, 17( I).

 

Think Tank Proposes Clampdown on Non-EU House Buyers

Observer

Radical plans to stop rich overseas residents who live outside the EU buying British houses – as well as tight restrictions on them acquiring “newbuild” properties as investments – will be published in a report by a leading rightwing thinktank on Monday.

Free-market organisation Civitas castigates government ministers for allowing wealthy foreign investors to stoke a property boom that it says is driving up prices and locking millions of UK citizens out of the housing market.

The plans would prevent the likes of Roman Abramovich, owner of Chelsea football club, or other Russian oligarchs from adding to their multimillion-pound UK portfolios. They also aim to stem a flood of investment from countries such as China, Malaysia and Singapore.

Concerned that many middle and lower earners are being forced to pay high rents in London because they can’t afford to buy, Civitas calls on ministers to adopt a scheme similar to one operating in Australia, which ensures that no sale can take place to overseas buyers unless they can show that their investment will add to existing housing stock.

Such a system would mean that no existing home could be sold to a buyer from outside the EU, and that such buyers could acquire newbuild homes only if their investment led to one or more additional properties being built.

The report, called Finding Shelter, cites statistics showing that 85% of prime London property purchases in 2012 were made with overseas money. Estate agent Savills found that last year £7bn of international money was spent on “high-end” London homes, with just 20% of that spent by UK citizens. Two-thirds of homes bought by people from overseas were not purchased for owner-occupation but as investments.

Civitas says the problem is not confined to the top end of the market and that overseas buyers are also acquiring less expensive newbuild homes. It says that over the past two years only 27% of new homes in central London went to UK buyers, while more than half were sold to residents of Singapore, Hong Kong, China, Malaysia and Russia.

“The UK property market is being used as an investment vehicle by the global super-rich – and increasingly the simply well-to-do,” the report says. “The inflationary impact of this extra cash is good news for property owners – until they want to trade up the housing ladder.

“It is good news for estate agents on commission, who report with glee every pulse and surge in the market. But it is not good for those already being priced out at the bottom.”

Overseas investment, it adds, is also “distorting housebuilding priorities, with developers disproportionately attracted to high-value developments while ignoring the undersupply at lower levels of the market.”

Oligarchs including Abramovich and former Yukos Oil vice-president Konstantin Kagalovsky have bought London properties, with Belgravia, Knightsbridge, Kensington and Chelsea their favourite hunting grounds.

Under Australia’s scheme, all foreign non-residents and holders of short-term visas have to apply to the Foreign Investment Review Board if they want to buy property. Its rules state that they can do so only if their investment leads to an increase in available dwellings.

Civitas says that if a similar scheme were adopted here, people from outside the EU would be able buy a newbuild property only if they had invested in a building scheme.

In last year’s autumn statement the chancellor, George Osborne, announced that he was closing a loophole that had allowed foreign investors to make huge profits on sales of UK homes by avoiding any capital gains tax. Civitas says that move, while a step forward, is unlikely to deter them, because the booming British market remains so attractive.

Labour recently announced a series of measures to boost housebuilding and deter foreign investment in London, including changing the rules so that newbuild homes have to be marketed to Londoners first, rather than sold off-plan to investors around the world. It also plans to double council tax for homes left empty and will end another loophole that allows overseas owners to cut their tax bills by claiming their properties are “second homes” and furnishing them with minimal items such a single table and chair.

Sadiq Khan, the shadow London minister, said: “London is in the middle of a severe housing crisis, yet there are around 50,000 empty homes across the city. It’s complete madness. We must stop housing that’s built as family homes being used instead as a piggy bank for the world’s wealthiest people.

“We urgently need to build more affordable housing in London, but unless all new homes are made available for Londoners to buy, they won’t help solve the crisis.”