Economic growth alone will not lower the cost of livingby Mark Littlewood / June 4, 2013 / Leave a comment
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…