Not answering the question: How will you pay for it?
A question that floored poor Natalie Bennett on LBC the other day is one to which no credible politician can ever give a straightforward answer. Natalie took “not answering the question” to another level in that she just clammed up, whereas most of the others would have had a preprepared spiel of soundbites (that don’t answer the question) ready to fill the gaps in the airwaves. And there are those who love her for that, although I am not one of them. In my view she missed a crucial opportunity to put across some much more important points about Green Party policy on the economy and on climate change.
The fact is the economy is still in deficit. That means that the Government is already spending more than it is taking in tax. It has been doing so since the early 2000s (well before the financial crash of 2007/8). The last time debt fell as a proportion of GDP was 2003. If the normal household rules of prudent expenditure applied to governments (they don’t, by the way), none of the promises being made by politicians can be afforded.
The true answer:
“The Government can pay for anything if it really wants to. There will, however, be consequences”.
The consequences depend mostly on what you spend the money on.
The authorities, including the Bank of England which despite its nominal independence is owned by and ultimately responsible to the Government, have spent a great deal of money on propping up the financial system since 2008. They magicked the money from thin air, because the consequences of not doing so might well have been worse. £325bn of quantitative easing has boosted the wealth of the richest half of the population by £600bn, and done nothing for the bottom half. Mostly by inflating asset prices, particularly property.
Spending money on social housing has different consequences. It creates assets, owned by the public, that earn an income in the form of rent – so although the government debt goes up, it is balanced by assets on the other side of the balance sheet. Unlike private businesses, government doesn’t record the value of the assets it holds. (It should. It would make the debt look a lot less scary). A lot of that rent will be housing benefit. People already in private rented housing on housing benefit will move into more secure social housing. Private landlords, who have been doing very well out of their tenants’ housing benefit will lose out – the overall result will be more property available on the market, so that rents and house-prices will fall, or rise less quickly. Some of them will get out of the game, and put their money somewhere else – maybe investing in startups and other productive enterprises. Now that would be a good thing. Paying housing benefit to public-sector social landlords is better for the deficit than paying it to private-sector landlords – the public gets a lot more of it back.
Social housing changes the way money is transferred to the private sector. Instead of going as rent to private landlords, for which the public gets nothing in return, it goes as construction costs and wages to builders and in return the public gets lots of good quality housing. It boosts local economies – wages get spent locally, in cafes, pubs, shops. The simple act of building social housing has a redistributive effect and reduces inequality – it’s trickle-down that works. Private sector rent goes to pay off buy-to-let mortgages, back to the banks and concentrates wealth at the top, where trickle-down doesn’t work.
Public sector social housing built to modern green standards, with proper insulation so no heating is needed will push up demand for the skills needed to build efficient homes. Those skills will be transferred to the private sector as well – particularly if Government also enforces tougher regulations on home insulation.
So if building lots of social housing is so good, how come it’s not in everyone’s manifesto? Look at the losers: private-sector landlords and the banks. That explains the Tories; and the fact is that the others do all plan to build more, it’s just that the Greens plan to build the most.