On Monday night, the Institute of Economic Affairs hosted a panel discussion on “Labour and the economy: addressing the cost of living.”It was chaired by Mark Littlewood (Director General of the IEA) and featured Dan Hodges (Telegraph blogger and columnist), Paul Ormerod (economist, author and entrepreneur), John Rentoul (chief political commentator for the Independent on Sunday) and Gisela Stuart (Labour MP for Birmingham Edgbaston). Prospect was the media partner.
We will put up a blog from one of the speakers every day this week.
Concerns about the high cost of living in Britain are emphatically not synonymous with worries about the weak, essentially flatlining, level of economic growth. For sure, healthy economic growth can mitigate the squeeze caused by the bare necessities of life becoming more expensive, but that is not the same as saying a growth strategy and a drive for lower living costs are the same. They are not.
In the last four decades, prices in general have risen by a factor of little more than ten. But the price of housing has shot up by a factor of around 40. A property selling for about £50,000 when I was born is likely to be worth around £2m today. This wasn’t caused by the 2008 banking crisis, but more permanent and systemic factors. Our absurdly restrictive planning laws are a major culprit.
Only about 10 per cent of land in Britain is developed and only 5 per cent is actually under concrete. House building has ground to a near halt. The entire retail space of the United Kingdom could just about fit onto the Isle of Wight. This isn’t necessarily bad news if you are a property owner—particularly one with a small mortgage. But it is a mounting concern—indeed, an often insurmountable obstacle—for those trying to get on the housing ladder. Recent research by the IEA shows that a programme of substantial planning liberalisation could reduce property prices by as much as 40 per cent. If your aim is to prop up the property market for homeowners, this proposal will not appeal. If, however, your aim is to reduce living costs, it will.
A swathe of environmental targets and initiatives are adding substantially to energy bills. Again, if your overriding aim is to reduce the UK’s total carbon footprint, you will want to persist with this approach. But you at least need to be aware that you are jacking up living costs by doing so, and that people are going to find it harder to afford to keep themselves warm in winter as a consequence.
Neither tobacco nor alcohol can really be considered to be amongst the essentials of life. If you’re determined to stop the relatively poor from enjoying a cigarette or a few glasses of wine, you’ll be eager to try and price them out of the market. You probably also favour taxes on sugar, fast food and fizzy drinks in the name of improving public health. If, however, you wish these pleasures to be readily affordable to the vast bulk of the population, you’ll reflect that sin taxes have now gone too far. You’ll also be delighted that the plans for a minimum alcohol pricing have been shelved—such a policy would have made it harder for those on tight budgets to enjoy a few cans of Tennent’s without affecting the prevailing price of Châteauneuf-du-Pape or other options favoured by the affluent.
The approach of tackling the cost of living through income transfers has been tested to destruction. The overall bill for welfare payments this year is likely to exceed £200bn—an average contribution of about ten grand per household.
Surely, we would be wise to shift our attention to policies which will lower costs and make a modest personal budget stretch further. Seeking to preserve vast expanses of “green” (or often brown) space, saving the planet from any risk of climate change and encouraging healthy lifestyle choices are not necessarily malign objectives. But the impact on living costs seems too often to be ignored.
A political party willing to make reducing the cost of living a very high priority—rather than something which can be readily sacrificed to secure other policy objectives—could expect to ride a swathe of support.
More from this series:
Moonshine politics: Talking about a cost of living crisis is just another way of talking about the recession, says John Rentoul
Rediscover town hall radicalism: Gisela Stuart on why Labour should focus on driving down the cost of goods
Pay the public sector less: Labour could save the country £75bn a year, says Paul Ormerod
We will put up a blog from one of the speakers every day this week.
Concerns about the high cost of living in Britain are emphatically not synonymous with worries about the weak, essentially flatlining, level of economic growth. For sure, healthy economic growth can mitigate the squeeze caused by the bare necessities of life becoming more expensive, but that is not the same as saying a growth strategy and a drive for lower living costs are the same. They are not.
In the last four decades, prices in general have risen by a factor of little more than ten. But the price of housing has shot up by a factor of around 40. A property selling for about £50,000 when I was born is likely to be worth around £2m today. This wasn’t caused by the 2008 banking crisis, but more permanent and systemic factors. Our absurdly restrictive planning laws are a major culprit.
Only about 10 per cent of land in Britain is developed and only 5 per cent is actually under concrete. House building has ground to a near halt. The entire retail space of the United Kingdom could just about fit onto the Isle of Wight. This isn’t necessarily bad news if you are a property owner—particularly one with a small mortgage. But it is a mounting concern—indeed, an often insurmountable obstacle—for those trying to get on the housing ladder. Recent research by the IEA shows that a programme of substantial planning liberalisation could reduce property prices by as much as 40 per cent. If your aim is to prop up the property market for homeowners, this proposal will not appeal. If, however, your aim is to reduce living costs, it will.
A swathe of environmental targets and initiatives are adding substantially to energy bills. Again, if your overriding aim is to reduce the UK’s total carbon footprint, you will want to persist with this approach. But you at least need to be aware that you are jacking up living costs by doing so, and that people are going to find it harder to afford to keep themselves warm in winter as a consequence.
Neither tobacco nor alcohol can really be considered to be amongst the essentials of life. If you’re determined to stop the relatively poor from enjoying a cigarette or a few glasses of wine, you’ll be eager to try and price them out of the market. You probably also favour taxes on sugar, fast food and fizzy drinks in the name of improving public health. If, however, you wish these pleasures to be readily affordable to the vast bulk of the population, you’ll reflect that sin taxes have now gone too far. You’ll also be delighted that the plans for a minimum alcohol pricing have been shelved—such a policy would have made it harder for those on tight budgets to enjoy a few cans of Tennent’s without affecting the prevailing price of Châteauneuf-du-Pape or other options favoured by the affluent.
The approach of tackling the cost of living through income transfers has been tested to destruction. The overall bill for welfare payments this year is likely to exceed £200bn—an average contribution of about ten grand per household.
Surely, we would be wise to shift our attention to policies which will lower costs and make a modest personal budget stretch further. Seeking to preserve vast expanses of “green” (or often brown) space, saving the planet from any risk of climate change and encouraging healthy lifestyle choices are not necessarily malign objectives. But the impact on living costs seems too often to be ignored.
A political party willing to make reducing the cost of living a very high priority—rather than something which can be readily sacrificed to secure other policy objectives—could expect to ride a swathe of support.
More from this series:
Moonshine politics: Talking about a cost of living crisis is just another way of talking about the recession, says John Rentoul
Rediscover town hall radicalism: Gisela Stuart on why Labour should focus on driving down the cost of goods
Pay the public sector less: Labour could save the country £75bn a year, says Paul Ormerod
