Many thanks for responding to my twittering by setting aside £1bn to help get youngsters into work. The speed with which you have dreamed up and then announced this measure is very impressive and shows just how much you care about the votes of this, sorry, I mean the lives of this damaged group.
Yet again, however, the speed at which you are operating does suggest the possibility of error. You might just want to have a look back through the detail.
What is effectively a relaxation of the minimum wage for the young, in which you pay them the difference, is an interesting idea. However, a scheme with a direct subsidy to the employer against wages seems dangerous. How many employers will just grab some cheap labour and then, in six months, let that lot go and grab some more? It's a difficult one to guard against, and a longer scheme is probably a luxury we cannot afford. Or is it? What is the true cost of crime and exclusion? Of broken families? Of girls and boys doing things they will regret to earn blackmarket cash? Things that lead them to a permanent lifestyle outside the system, or worse.
It is tempting to say that you could have avoided the obvious riposte from the left if you had costed this human tragedy which will burden all of us and announced it as part of the scheme funding. Savings in this area might even enable you to justify a bigger or longer scheme. Even if that does not stack all the way up, it must account for some of it. If you paid on achievement of externally-moderated qualifications, rather than as a wage subsidy, it might make employers concentrate more on providing meaningful work than was the case in some of the YTS placements that I saw years ago. And then, at least if employers did let people go the employee would have something tangible to take with them. If the savings across the wider system were measured and captured as the scheme builds, it might even be possible to lengthen the placements once people are in situ.
In this way, by fully counting the societal benefits and the value of the qualifications, I would expect that you could argue this scheme to be a fine investment in the future. There would be some tangible immediate benefits alongside significant longer term impacts. I am also sure our young people would prefer to think that their government is investing in them, and their long term future, rather than just bribing someone to get them to empty the bins for a few months.
I am probably being a bit harsh with the last statement, but that is they way the 'man on the street' is talking about this. However well intentioned it is seen as government trying to capture votes by giving out cash. Change that to an investment and return dynamic, perhaps in the style of an Impact Bond, and change the scheme to have more meaningful and measured outcomes. You could make everyone happy.
Friday 25 November 2011
Tuesday 22 November 2011
Giving our money away
Hi Dave
I am not at all convinced by your idea to give £400m to private property developers in an attempt to get the housing market moving, although I do appreciate that you are thinking of us.
Many people offered £400m would simply emigrate. Some statistics suggest that 98% of the FT-SE 100 do not pay UK corporation tax, so I suspect many of these developers have got enough money from us and gone already. I suppose they might pop back for a few days to get some more if you make it worth their while. These commercial undertakings have no need of government help and as many of the larger firms do not pay tax in this country or have all of their shareholders here you could well be helping other nations more than us. Perhaps we should calculate by how much and add this to our international aid total so at least the rest of the world knows how generous we are.
For the government to try and help companies build houses in this way is one thing, but to then try and persuade people to buy them with state guaranteed mortgages is entirely another. OK, so the banks are terrified to lend as they need to clear the overhang of 'imaginary' debt which they invented to create a bubble, to look to their clients like they knew what they were doing and then pay their last tranche of handsome bonuses based on market movements that were just a result of financial wizardry. We all know that, but if you're going to guarantee the banks' debts you might as well take them all over. It would have been better if you could have come up with some stunning new mortgage product (there's one idea in the Green Paper) and sold it through Northern Rock, but you sold Northern Rock instead. For less than it cost. And kept the bad debts. Not sure about that either.
So, to summarise. You propose to help companies which operate entirely for profit, profit which is likely to end up outside the UK, to build houses which they are then going to seduce people into buying using incentives which they can afford to offer thanks to your generosity with our money through mortgages on which I, and all my fellow taxpayers, will take the risk.
Please do not do that. If I wanted to lend my future state pension to someone for a mortgage which they can barely afford even with interest rates at an all time low, on a newly-built house sold for more than it is worth because it is the only way the buyer can get a mortgage, I would have done so already.
You talk regularly of the big society. Would a big society help corporations to make money in this way? Would it encourage imprudence from its citizens? I think not. What is stopping housebuilders building is that the market is flat. Mortgages are not out there unless you have a huge deposit. Surely it would be better, if you insist on handing out our money, to give people an advance on their future earnings or tax, through some kind of mutual lender, secured on the value of the house being bought, but which can sit alongside their mortgage until the house is sold or their earnings improve? This could be targeted at first time buyers, those in low paid but essential jobs or any number of deserving groups that we would all approve of you helping and it might even repay you with a vote or two. I am not saying this is a good idea, but it seems more prudent than just giving money away, if you really believe that you must do something to shut the housebuilders up. It would at least enable everyone trying to sell a house (property developer or not) to have a roughly equal chance of selling it, match the money given away against a fairly-valued asset and give us a chance of getting the money back. Much better I think than just using a large giveaway to create another capitalist bubble adding to the bank balances of property developers at our expense.
If you could get the market moving in this way, people who need to sell their house to reduce debt or realise cash might actually be able to do so, which would of course be much more useful to our economy than loading the balance sheets of property developers and guaranteeing the loans of the banks.
Please therefore run through this plan again before spending our cash, just to see where the benefit will really sit. I am sure there is a better plan just around the corner. In the Big Society Green Paper perhaps, where there are full details of my thoughts on giving away our money and a proposal for a new and far better way of enabling people to buy residential property. One which would in itself strengthen the balance sheets of the banks, safeguard the interests of the housebuyer and bring the market back to life through real transactions at fair value without government subsidy.
Many thanks
Gareth
I am not at all convinced by your idea to give £400m to private property developers in an attempt to get the housing market moving, although I do appreciate that you are thinking of us.
Many people offered £400m would simply emigrate. Some statistics suggest that 98% of the FT-SE 100 do not pay UK corporation tax, so I suspect many of these developers have got enough money from us and gone already. I suppose they might pop back for a few days to get some more if you make it worth their while. These commercial undertakings have no need of government help and as many of the larger firms do not pay tax in this country or have all of their shareholders here you could well be helping other nations more than us. Perhaps we should calculate by how much and add this to our international aid total so at least the rest of the world knows how generous we are.
For the government to try and help companies build houses in this way is one thing, but to then try and persuade people to buy them with state guaranteed mortgages is entirely another. OK, so the banks are terrified to lend as they need to clear the overhang of 'imaginary' debt which they invented to create a bubble, to look to their clients like they knew what they were doing and then pay their last tranche of handsome bonuses based on market movements that were just a result of financial wizardry. We all know that, but if you're going to guarantee the banks' debts you might as well take them all over. It would have been better if you could have come up with some stunning new mortgage product (there's one idea in the Green Paper) and sold it through Northern Rock, but you sold Northern Rock instead. For less than it cost. And kept the bad debts. Not sure about that either.
So, to summarise. You propose to help companies which operate entirely for profit, profit which is likely to end up outside the UK, to build houses which they are then going to seduce people into buying using incentives which they can afford to offer thanks to your generosity with our money through mortgages on which I, and all my fellow taxpayers, will take the risk.
Please do not do that. If I wanted to lend my future state pension to someone for a mortgage which they can barely afford even with interest rates at an all time low, on a newly-built house sold for more than it is worth because it is the only way the buyer can get a mortgage, I would have done so already.
You talk regularly of the big society. Would a big society help corporations to make money in this way? Would it encourage imprudence from its citizens? I think not. What is stopping housebuilders building is that the market is flat. Mortgages are not out there unless you have a huge deposit. Surely it would be better, if you insist on handing out our money, to give people an advance on their future earnings or tax, through some kind of mutual lender, secured on the value of the house being bought, but which can sit alongside their mortgage until the house is sold or their earnings improve? This could be targeted at first time buyers, those in low paid but essential jobs or any number of deserving groups that we would all approve of you helping and it might even repay you with a vote or two. I am not saying this is a good idea, but it seems more prudent than just giving money away, if you really believe that you must do something to shut the housebuilders up. It would at least enable everyone trying to sell a house (property developer or not) to have a roughly equal chance of selling it, match the money given away against a fairly-valued asset and give us a chance of getting the money back. Much better I think than just using a large giveaway to create another capitalist bubble adding to the bank balances of property developers at our expense.
If you could get the market moving in this way, people who need to sell their house to reduce debt or realise cash might actually be able to do so, which would of course be much more useful to our economy than loading the balance sheets of property developers and guaranteeing the loans of the banks.
Please therefore run through this plan again before spending our cash, just to see where the benefit will really sit. I am sure there is a better plan just around the corner. In the Big Society Green Paper perhaps, where there are full details of my thoughts on giving away our money and a proposal for a new and far better way of enabling people to buy residential property. One which would in itself strengthen the balance sheets of the banks, safeguard the interests of the housebuyer and bring the market back to life through real transactions at fair value without government subsidy.
Many thanks
Gareth
Welcome!
Thank-you for finding this blog! Gareth Stephenson is also on Twitter at @biggreensociety and Facebook as The Unofficial Big Society Green Paper. If you find this on Blogspot, it is also at www.bigsocietygreenpaper.org from 28th November 2011 along with more information and detail of how to buy the paperback and eBook.
All the best
Gareth
All the best
Gareth
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