Category Archives: housing

Rebuild the local economy: prioritise labour-intensive sectors, difficult to automate, impossible to relocate abroad

Colin Hines, convenor of the UK Green New Deal Group, comments on the Guardian’s recent editorial on productivity and robots which ‘repeated the cliché that automation does cost jobs, but more are created’.

He says that the problem with this is that the new jobs are frequently in different places from where they are lost and require very different skills, hence exacerbating the problems for the “left behind”.

Also unmentioned was that just as automation is starting to really bite, the world faces a strong possibility of another serious credit-induced economic downturn, from China to the UK and a perfect storm of domestic unemployment soaring and export markets falling, as happened after the 2008 economic slump.

The answer to these problems has to be a shift of emphasis to rebuilding the local economy by prioritising labour-intensive sectors that are difficult to automate and impossible to relocate abroad.

Two sectors are key:

  • face-to-face caring from medicine, education and elderly care
  • carbon-reducing national infrastructural renewal.

This should range from making the UK’s 30m buildings energy efficient, constructing new low-carbon dwellings and rebuilding local public transport links.

Funding could come from fairer taxes, local authority bonds in which all could invest, green ISAs and a massive new green infrastructure QE programme.

This approach should become central to all political parties, set out in their next election manifestos because “jobs in absolutely every constituency” is the crucial vote-winning mantra.

 

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Green quantitative easing – good sense

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Richard Murphy and Colin Hines published the Green QE report, which is summarised below.

In March 2009 the Bank of England began a programme of quantitative easing in the UK – in effect, the Bank of England granted the Treasury an overdraft but to keep the European Union happy had to do so by buying Government gilts issued by the Treasury from UK commercial banks, pension funds and other financial institutions.

There were three reasons for doing this:

  1. To keep interest rates low;
  2. To provide banks with the money they needed to lend to business and others to keep the economy going.
  3. To make sure there was enough money in the economy to prevent deflation happening

No one was sure whether quantitative easing would work, and as we note, no one is sure for certain whether it has worked.

We do however suggest in this report that several things did happen:

  • The banks profited enormously from the programme, which is why they bounced back into profit so soon after the crash– and bankers’ bonuses never went away;
  • The entire government deficit in 2009/10 of £155 billion was basically paid for by the quantitative easing programme. If you wanted to know how the government met its costs, now you do; There was a shortage of gilts available for investment purposes as a result of the Bank of England buying so many in the market. Large quantities of funds were invested instead in other financial assets including the stock market and commodities such as food stuffs and metals.
  • The USA also undertook quantitative easing at the same time as the UK, which meant that despite near recessionary conditions commodity prices for coffee and basic metals such as copper have risen enormously. This has impacted on inflation, which has stayed above the Bank of England target rate;
  • Deflation has been avoided, although the relative role of quantitative easing in this versus the previous government’s reflation policies is unclear;
  • Interest rates have remained low.

However, one thing has not happened, and that is that the funds made available have not resulted in new bank lending. In fact bank lending has declined almost steadily since the quantitative easing programme began.

there is an urgent need for action to stimulate the economy by investing in the new jobs, infrastructure, products and services we need in this country and there is no sign that this will happen without government intervention.

For that reason we propose a new round of quantitative easing –or Green QE2 as we call it.

Green QE2 would do three things. First it would deliver the Green New Deal – the innovative programme for investment in the new economy the UK needs as outlined by the Green New Deal group in its reports for the New Economics Foundation. This would require three actions:

  1. The government would need to invest directly in new infrastructure for the UK.
  2. The government needs to invest in the UK economy, in conjunction with the private sector, working through a new National Investment Bank;
  3. The government must liberate local authorities to partner with the private sector to green their local economies for the benefit of their own communities, and it can do this by providing a capital fund for them to use in the form of equity that bears the residual risks in such projects.

A second round of quantitative easing should involve direct expenditure on new infrastructure projects in the UK.

For example there is a desperate need for new energy efficient social housing in this country, for adequate investment in railways, not to mention a reinstatement of the schools rebuilding programme. Undertaking these activities would give the economy and immediate shot in the arm as well as providing infrastructure of lasting use which would more than repay any debt incurred in the course of its creation.

This is the result of the ‘Keynesian multiplier’ effect. This is the phenomenon that occurs when government borrowing to fund investment takes place during a time of unemployment.

That borrowing directly funds employment.

That new employment does four things.

First it reduces the obligation to pay benefits.

Second, it means that the person in that new employment pays tax.

Third, it means their employer pays tax on profits they make.

And finally the person in employment can then save, which means that they help fund the government borrowing which has created their own employment.

As Martin Wolf, the eminent Financial Times columnist has said in this FT video: “Borrowing is no sin, provided we use the funds to ensure that we bequeath a better infrastructure to the future”.

This is what we believe the programme we recommend would do and this is precisely why it is appropriate to do it now when the cost of government borrowing is so low, a point Wolf and Skidelsky also make.

Borrowing now to spend into the economy is the basis for the first stage of Green QE2 – and of the Green New Deal.

Read the whole report here: http://openaccess.city.ac.uk/16569/1/GreenQuEasing.pdf

 

 

 

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Doreen Massey: government policy has been to acquiesce in and feed London’s voracious growth. Is this what we want?

Looking back through a Facebook page I saw with great regret that Professor Doreen Massey had died in 2016. After hearing her speak on Radio 4, I read her book, World City, Polity, 2007, and we corresponded by email several times. I think this photograph shows her warm and lively personality.

Yesterday, following input about ‘shrinking cities’ on WMNEG’s website, and as a belated tribute, some points made in that book will now be shared, selected from five pages of notes made at the time. Several references are relevant to the Grenfell Tower disaster. 

Extracts

In the world as a whole big cities are increasingly dominant and central to globalisation: the shining spectacular projects and the juxtaposi­tion of greed and need reflect their market dynamics.

The World Bank, one of the institutions whose policies have contributed to this massive flow of people into cities, has argued that it is through competitive cities that nations as a whole can develop.

Global cities are defined by their elite – the rest are invisible.

London is a political, institu­tional, economic and cultural power. Its influences and its effects spread nationally and globally but it increasingly overshadows everywhere else. National government policy accepts and also feeds its voracious growth.

Forces in the financial City took the lead in advocating and developing the deregulation that lies at the heart of globalisation; it is a command centre, place of orchestration, and significant beneficiary of its continuing operation.

Despite talk of `national sovereignty’, the first thing Margaret Thatcher did on coming to power in 1979 was to lift restrictions on for­eign currency exchange, to be followed in the mid-1980s by the deregulation of the City (the so-called Big Bang). A whole gamut of deregulatory and commercialisation policies, in pensions, housing, health care and education consid­erably increased the market for City activities.

Thatcherite policies benefited the private sector, financial services, the middle classes, London and the South East at the expense of the public sector, manufacturing, the old industrial regions and the working classes.

The colonisation by private capital of industries and services formerly provided by government – the utilities under Thatcher and Major, signifi­cant parts of the welfare state, especially health and education, under Blair – led to London’s reinvention and resurgence.

Policies of competitive individualism and individual self-reliance have been promoted –  people have been encouraged/required to take much greater financial responsibility for their own housing, pen­sions, health care and education. Previous notions of mutuality have been abandoned and the idea of the public good has been system­atically undermined.

The world’s biggest interna­tional financial centre

From the mid-1960s the City took advantage of an offshore status manufactured by British taxation policy . . . and became an off­shore extension of New York, creating a major market in eurodollars which now makes it the world’s biggest interna­tional financial centre. It has been a lucrative subservience, for some: out of this that the new elite has been born.

The emergence of the new elite includes those involved in business services as well as finance: real estate, renting and business activities. Advertising, research and development, accounting, auditing and taxation, legal serv­ices, market research and consultancy, personnel recruit­ment, renting of machinery and technical consulting, investigation and security have grown rapidly as part of London-global-city.

For the ultra-rich few, this country is now a vir­tual tax haven and princes, tycoons and oligarchs are making it their home. Others are attracted by the lucrative opportunities in the City – more than one in 10 professional staff in the City of London come from coun­tries outside the EU and the US, including the plunderers of Eastern Europe and the old Soviet Union. A report on French people working in the UK found 69% of them in London and half of those are working in finan­cial services in the City.

 The pattern of British chief executives’ pay is now openly modelled on the American lead

Directors paid 113 times more than the average UK worker in 2005 are awarding each other their increments. Over the last five years the average salary of a chief executive in Britain’s leading companies, including bonuses, has more than doubled, just as American remuneration has grown – bearing little relationship to company performance. This has resulted in levels of inequality far higher than in the major economies of continental Europe.

Such high salaries make London the most unequal city, and London and the South-East the most unequal region in the UK.This inequality of the extremes is character­istic of the `Anglo-Saxon’ version of neoliberalism and it is growing.

The exuberant, champagne-swilling claim of the success of London’s reinvention is, however, almost always hedged about with a regretful caveat – `but there is “still” poverty too’. The success and the poverty of London are the com­bined outcome of politico-economic strategies, establishing a two-tier society, corporate greed and the privatisation of need in the capital and at national level.

Some facts are indisputable. Inequality between rich and poor, the glaring starkness of class difference, is more marked in London than anywhere else in the country

  • Unemployment in Inner London is higher than in any other subregion in England, while Outer London hovers around the national average; on almost any index there is an enormous geographical variation between boroughs.
  • London has the highest incidence of child poverty, after housing costs have been taken into account, of any region in Great Britain.
  • The gender pay gap is wider in London than in Great Britain. London has local authority areas with both the highest and the lowest rates of means-tested benefit receipt in the country.
  • Nearly a quarter of London’s children (24 %) are living in households dependent on Income Support’ whilst the rate for Great Britain as whole is 16 %, and London’s rate is the highest of any region.
  • Poverty is common among pensioners, too; in Inner London, a quarter of people aged sixty and over are on Income Support  – only 15 % in Outer London and in Great Britain.
  • Homelessness and overcrowding are higher in London than elsewhere. The differ­ence in life expectancy, is stark even between the boroughs of London.
  • On average, women in Kensington and Chelsea live nearly six years longer than women in Newham; and men in Kensington and Chelsea (again) live nearly six years longer than men in Southwark .

People are trapped in poverty because of the high cost of living, and the cost of getting to work Those currently dependent on benefit find that loss of entitlement to benefits, particu­larly housing benefits can com­pletely erode gains from entering employment.  The higher cost of housing, transport and childcare are important factors in explaining the pattern of disadvan­tage in the city.

Within the UK the old ‘North-South divide’ has widened and has increasingly taken the form of an ever-­expanding London versus the rest of the country

The New Labour government & London-centred private capital share an understanding of London/the South-East as the golden goose of the national economy – the `single driver’ of the national economy – which lays golden eggs for everyone.

There is an insistence that encouragement to `the regions’ must in no way be allowed to challenge, question, or in any way restrain the growth in London and the South ­East of England. Her Majesty’s Treasury, in a joint document with the Department of Trade and Industry, argued that `attempts to address regional differentials must be done by a process of levelling-up, not levelling down … whilst regional economic policy must aim to strengthen the indigenous growth potential of all regions, the focus should be on the weakest regions, without constraining growth in the strongest’ .

Brain drain

London’s growth over recent years and as planned for the future, requires labour with degree-level qualifications. It is demand for this kind of labour that dominates the net increase in employ­ment in the capital. London does not provide all of this and in consequence draws in professional people from abroad and from the rest of the country.

Many workers come from Eastern Europe and the global South. London is dependent, for instance, on nurses from Asia and Africa. These countries can ill-afford to lose such workers, and they have paid for their training. So India, Sri Lanka, Ghana, South Africa are subsidizing the reproduction of London. It is a perverse sub­sidy, flowing from poor to rich. It is, moreover, a flow that is both fuelled and more difficult to address as a result of the increasing commercialisation/privatisation of  health services.

It is a brain drain that has a double effect. In London the dominance of demand for this kind of labour makes it more difficult for Londoners without those qualifications to find work and, through the influx of higher ­paid workers, increases the pressure on prices and therefore inequality within the capital. From the regions and nations of the North and West it drains a stra­tum of the population that could be significant to their eco­nomic growth.

(Yet) Gordon Brown has told the regions that their regeneration should be led by the knowledge economy and Alan Johnson, when minister for manufacturing, repeated the refrain that low skills are part of the regions’ problems. In other words, the regions are blamed for the losses they incur through feeding London’s demand.

Arguments that London is a ‘successful’ region which must not in any way be chal­lenged rest on a crucial assumption. This is that London has achieved its present position through its own efforts. As the hegemonic terminology has it:  to do anything to disturb London’s trajectory would be to buck market forces.

London’s transnational financing and service-providing roles have not, however, been the main driver underlying the city’s growth since the 1980s, nor do these functions represent the major ele­ment of London’s export base. London’s main export market is in fact the `rest of the UK’ (RUK) which takes 28.5 % of all London’s exports, compared with 12.33 % going abroad. For financial services, the comparable percentages are RUK 39.88 % and interna­tional 31.46 % and, for business services, RUK 32.89 % and international 12.08 %.

This data contradicts the notion that London, in eco­nomic terms, is floating free from the rest of the UK econ­omy into an international arena of its own. It directly contradicts the conclusion that in a globalised economy London does not need the markets of northern Britain. As a London School of Economics study puts it, `the London economy is still closely integrated with the overall UK econ­omy’.

Despite the facts, however  . . . there is also some resentment: an argument that London has been subsidising the rest of the country and can afford to do so to the same extent, voiced in a report for the London Chamber of Commerce and Industry (LCCI) entitled The London deficit – a business perspective provides an example:

The London economy is the largest and most successful regional economy in the UK. It has often been suggested that its success has been to the detriment of other UK regions, drawing highly skilled people away from other areas. The reality is more complex. As will be seen from this report, the UK’s progressive taxation structure ensures that London contributes a greater proportion of total income raised from taxation in the UK than any other region. In short, London subsidises the rest of the UK, enabling the nation as a whole to benefit from the capital’s success. 

The fig­ures for London, however, usually include expenditure on the bulk of the national Civil Service. But this service operates over the country as a whole and should not appear on London’s balance sheet. The presence of so many Civil Service jobs and functions within London also contributes significantly to London’s economic growth and helps to influence the drawing up of national economic policy.

From Doreen Massey’s conclusion: “In the United Kingdom, London increasingly overshadows everywhere else and government policy has been to acquiesce in and feed its voracious growth. Is this what we want? The question is rarely heard in democratic debate”.

This book followed her pamphlet advocating Decentering the Nation: a radical approach to regional inequality, written with Ash Amin and Nigel Thrift, Catalyst 2003, on which notes also were made.

 

 

 

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New generation QE could stimulate the economy, boost employment and tackle climate change

The Times reports that Howard Archer, chief economist at IHS Global Insight, predicts that quantitative easing, which has been on hold since 2012, will be revived in August, with an extension of the Funding for Lending Scheme, which provides cheap finance for major lenders in an attempt to get credit flowing.

QE – as currently administered – sees the Bank pumping money into the financial system by buying bonds from financial institutions. Adam Marshall, acting director general of the British Chambers of Commerce, said the employers’ group would support more QE in principle “given the exceptional circumstances of the Brexit vote”. However, he called for QE to be overhauled and “aimed at injecting money into corporates and small and medium-sized companies”.

Others would advocate more widely beneficial applications; a new-generation quantitative easing programme could stimulate the economy, boost employment and tackle climate change instead of – as before – simply adding more cash to bank balance sheets and inflating asset prices.

The latest policy proposal is Green Infrastructure Quantitative Easing (GIQE). Last year, economist Richard Murphy addressed the Convention of Scottish Local Authorities to present this in detail as a programme that would buy bonds issued by the Green Investment Bank to fund making every building in the UK energy efficient, and, where feasible, fitted with solar panels, which would reduce energy bills and in the process tackle fuel poverty and cut greenhouse gas emissions. In addition, it would fund sustainable energy projects and enable local authorities to pay for new houses, NHS trusts to build new hospitals and education authorities to build schools.

gnd coverThis concept of directing quantitative easing to fund the greening of the UK’s infrastructure was first included in the 2013 report ‘A National Plan for the UK’, issued by the Green New Deal Group, convened by Colin Hines.

The new economics foundation also published a substantial 2013 report ‘Strategic quantitative easing’, apparently targeted at the banking world, with an extensive analysis of the current monetary system and applications of quantitative easing and a reference to its role in increasing exports in addition to the Green Deal and housebuilding references.

MP Caroline Lucas persuasively summarised the proposal in the New Statesman:

“GIQE could contribute to strengthening the UK economy via a carefully costed, nationwide programme to train and employ a ‘carbon army’. This army would be at the frontline of the fight against cold homes by making all of the UK’s 30 million buildings energy efficient, and, where feasible, fitted with solar panels. This would, in the first instance, dramatically reduce energy bills and fuel poverty, whilst also cutting greenhouse gas emission and cutting current dependence on imported energy.

“Secondly, a GIQE programme could also help tackle the housing crisis by financing the construction of new affordable housing that’s highly energy efficient and built predominantly on brownfield sites.

“Thirdly, GIQE could help finance improved regional public transport networks to help revitalise local and regional economies. That’s more and better buses, trains and coaches, helping people to get around their communities and stay connected . . .

“It’s time that both the Government and the Opposition, rather than continuing to hand money over to the banks as they have done since the financial crisis, will seriously consider this plan to build a resilient economy, protect our shared environment and create thousands of new well paid jobs.”

 

 

 

Making housing available and affordable for local people

st ives

The northern Cornish seaside resort of St Ives voted overwhelmingly, in a recent referendum, to prevent property developers from selling new homes to non-residents. Over 80% of people voted in favour of the “neighbourhood plan”. More information on the restriction can be found here. The turnout was just over 47%.

St Ives parish, which includes the nearby towns of Carbis Bay and Lelant, already has in place a target for at least 50% of new homes to be “affordable”.

The FT reports that prices had risen sharply in the past 15 years, after an influx of holiday home buyers. Average house prices are now about £400,000, 18 times typical local salaries, according to data from the Office for National Statistics and Rightmove — more than double the national average. Many locals also struggle to find affordable rented accommodation. The tourism boom has led to landlords choosing to maximise revenue during the summer months.

Mayor Linda Taylor has been fielding calls from her counterparts across the country, and from journalists as far away as Canada and New Zealand. This measure has clearly “struck a nerve” in some communities, she says.

st ives2

Similar measures have been introduced to make housing available and affordable for ‘local occupants’ in Exmoor, Peak District, Yorkshire Dales, Snowdonia, Dartmoor, Brecon Beacons, Pembrokeshire Coast and further afield in Singapore.

Business reaction

“The problem is so much bigger than any neighbourhood plan is going to address,” commented James Berwick, a local estate agent. “It doesn’t matter where you are in the country — home prices are out of sync with salaries.”

Noble Francis, economist at the Construction Products Association said that what they’re trying to do is restrict demand when the problem is chronic undersupply and that is not going to solve the problem.

Developers also warn that the plan and the affordability target will make construction in St Ives unviable and have threatened to halt new homebuilding. Dan Potter of Underwild believes the result will have a negative effect on the economy as builders look for projects outside the parish borders.

Will a judicial review get the St Ives Neighbourhood Plan overturned?

Cornwall Council confirmed that it had received notice that RLT Built Environment Limited is seeking permission for a judicial review. In a statement it said: “Following the positive result of the referendum we will be carefully considering the grounds on which the claim for the judicial review has been made and seeking further legal advice if required. We are confident that the correct process has been followed in this case and will be fully defending this claim.”

Localism?

Mebyon Kernow, the party for Cornwall asks what has happened to the government’s localism policy, as parliament is said to be rushing through a bill to prevent people from deciding how their communities will develop.

MK ends: “St. Ives Council have bravely grasped the nettle and said enough is enough. No more second homes until there are enough affordable homes for local people especially youngsters. They have done this by a strictly legal process via a neighbourhood plan and a referendum and gained overwhelming support. Many other Cornish Town and Parish Councils now want to join in”.

 

Government collaboration can effectively address the housing crisis

tony croft stonesfield housing trust

Tony Crofts, has a noteworthy record in setting up housing  via the Stonesfield Community Trust in 1983. It now owns 15 dwellings for letting at affordable rents to young working couples, and single people of all ages, including single parents, the village Post Office and the village pre-school premises, and is celebrated as the first successful community land trust set up in Britain since Letchworth Garden City in 1903.

“The free market free-for-all in housing has failed” according to Labour leadership candidate Jeremy Corbyn. He continues, “ We need to be clear what we mean by ‘affordable’ – no longer should ‘affordable’ mean near-market levels under the doublespeak the government has promoted. Social rents in high-demand areas are typically a third to half the market rate, while so-called ‘affordable’ rents are up to 80% of private rents”.

He wrote in the Friend, 7 August 2015, “government is not going to solve the housing crisis because it clings to its market philosophy. When they talk about ‘affordable homes’, they are only talking about selling houses”. Crofts points out that a large section of the population can’t afford mortgages; what is needed is a large supply of community owned, permanently-affordable homes to rent. Housing associations were initially set up to provide decent homes for people in need, but many are developing into businesses that sell or rent at market levels. Jeremy Corbyn advocates returning them to their original purpose.

Both of criticise the Right to Buy legislation introduced in 1979 – since when over a million council houses have been sold at a discount. Corbyn points out that a third of these have ended up in the hands of buy-to-let landlords who relet them at higher rents.

He adds that even in areas of acute housing shortage there is land that has planning permission but is not being developed: “This is known as landbanking – a practice that Conservative London Mayor Boris Johnson has described as ‘pernicious’. We should consider introducing a Land Value Tax on undeveloped land that has planning permission, and ‘use it or lose it’ measures on other brownfield sites, to act as a disincentive to landbanking and to raise public funds for house-building. Councils should also be allowed to compulsorily purchase (CPO) sites at a fair value if their owners are not developing them”.]

Jeremy Corbyn writes in his Housing Policy document:

jc housing cover“Over 3.5 million people in Britain live in fuel poverty. Excess winter deaths are 23% higher than in Sweden, despite our milder winters. Retrofitting homes will reduce this toll of ill-health, unnecessary deaths and avoidable carbon emissions.

“Britain needs more energy efficient housing – both in current housing stock and new build. It means ensuring all homes are properly insulated. The model for this should be the Warm Zones approach of Kirklees council (between 2007-2010) which installed loft and cavity wall insulation across the Borough, for free.

french roofs plants“We also need new incentives – and obligations – to raise housing standards in the worst parts of the private rented sector. . . Zero carbon homes should become the norm. France now requires even commercial buildings to have roofs covered in either plants or solar panels. Germany uses its equivalent of the Green Investment Bank to drive (and de-risk) high energy efficiency standards. Denmark will not accept planning applications for new buildings dependant on fossil fuels. The Netherlands requires buildings to be flood-resistant. Britain needs to future-proof its housing standards.

“As with so many other policy areas, housing requires joined up policy between government departments, working with devolved government and local councils. The free market free-for-all in housing has failed. Only the government is able to play the strategic, co-ordinating role to tackle the housing crisis.

‘The homes we need’: safeguard social housing, build on brownfield sites

“A civilised society should be so ordered that every person has secure housing”

The FT reports that the Scottish parliament has voted to “safeguard Scotland’s social housing stock for the benefit of citizens today and for our future generations”. Its local authorities own over 300,000 social housing units.

Scotland had already restricted the right to buy in areas where social housing shortages were acute and in 2001 reduced the discount to houses’ market price to £15,000 or less.

margaret burgess msp housingHowever, the prohibition on using the purchase price to fund the building of new social housing made it more difficult for local authorities to provide suitable homes for disadvantaged groups and later generations of tenants.

Margaret Burgess, housing minister [far right] therefore said earlier this year: “With 185,000 people on waiting lists for council and housing association houses, we can no longer afford to see the social sector lose badly needed homes”.

In May, Shaun Spiers, Chief Executive of the Campaign to Protect Rural England (CPRE) wrote to the FT pointing out that successive major reforms in recent years have not led to an increase in housing output. He criticised the political corporate reluctance to build on brownfield sites because they believe that ‘no one wants to live on them’. He continued:

Edinburgh“Our most successful cities (Edinburgh, number one above) are full of people happily living on “old industrial sites” whose reclamation makes life better for everyone. But brownfield development is more likely to involve small-scale infill or the regeneration of existing housing estates or high streets than “old industrial sites”. CPRE’s research shows there is suitable brownfield land for at least a million new homes in England, most of it in London and the wider south east: let’s use it”.

He then raises the question of who is going to build the homes we need, saying: “There is absolutely no evidence that the industry is either willing or able to build on the scale promised by the political parties. When we consistently built more than 200,000 houses a year, the state built more than half of them”.

His conclusion? “Unless governments — and distinguished newspapers — focus on who is going to build and pay for the homes we need, the result will be the same as it was after the last round of planning reforms: too few homes built, too much countryside lost”.