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How will the EU referendum result affect university research? Dr Robert Marchand discusses on Sheffield Live

Monday, August 1st, 2016

Dr Robert Marchand has discussed the vote to leave the EU in relation to universities and their research, particularly in the area of funding for work on renewable energy and sustainability projects.

He also discussed how university campuses could become carbon neutral.

On the initial impact on the leave vote, Rob said: “The initial impact has been uncertainty. All sectors in the UK are looking for certainty – if we’re going to Brexit, let’s do it so at least we know what’s happening and we can plan. Researchers on multi-million pound Horizon 2020 bids are already being affected, and these are very important to universities. However, the University of Sheffield isn’t totally reliant on EU funding.

“European partners are concerned about partnering with British universities because it might have an effect on funding during a project. That makes your project unsustainable; you can’t publish, and everything that leads to building reputation disappears.

“The good thing we can take from the referendum is that it will make us more dynamic when it comes to thinking about research funding and perhaps this is an opportunity to work more closely with businesses and local authorities.”

On identifying alternative funding or approaches to research, Rob suggested that there are opportunities on our doorstep: “Engaging with our city and using that as a step forward to being a world-leader and centre of expertise could make a rosy future for us – if we think about it in the right way. There are opportunities to use the knowledge within Sheffield to help the local community and that can also help the university keep doing good research.”

“We want to make sure the north (of England) doesn’t lose out, so as a university we’re going to try and take a leadership in maintaining that level of investment and engagement. That means looking for new sources of funding.”

Click here to listen to a podcast of the programme (Sounzaboutright, Sheffield Live – 28.07.16)

Management School Associate Dean forecasts a positive quarter for the Sheffield City Region

Tuesday, July 19th, 2016

Professor Andrew Simpson

The Sheffield City Region Quarterly Economic Survey – an authoritative private sector business survey, based on nearly 400 responses from firms across the region – suggests that regional economic growth was generally positive in the second quarter of 2016, and that firms held a positive outlook on the regional economy looking forward.

Professor Andrew Simpson, Associate Dean for External Business Advancement at the Management School, analysed the survey results and presented a snapshot of how the region performed to delegates from all four regional chambers of commerce, the LEP and sponsors RBS in Chesterfield on 12 July.

He said: “Overall the results show a confident regional view of the economy. The forward-looking predictions are likely to see some measure of fluctuation in the short term following the referendum, and the next quarter’s survey will be critical in understanding the effects of the vote to leave the EU.

“It’s important that Sheffield University Management School is at the heart of discussion around the regional economy and being involved with the Quarterly Economic Survey has given us great insight into the progress and fluctuations we see locally.

“The next survey will be distributed in August and should reveal any potential impact of the EU referendum result on the business economy.”

The Q3 survey opens on 22 August and runs through 12 September 2016. Everyone who responds will be entered in a prize draw to win free flights to Berlin. Visit for further information.

Comment: Lionel’s messy tax affairs are part of a bigger problem in football. By Dr Thomas Hastings

Monday, July 11th, 2016

One thing’s for sure, it has not been a good summer for Lionel Messi. Following a fourth international cup final defeat, the diminutive Argentine announced his retirement from international football on June 26, aged just 29. The “Don’t go, Leo” campaigns had barely subsided before he and his father were handed a 21-month jail sentence for tax fraud.

They were found guilty of not declaring £3.5 million of earnings between 2007-2009, linked to the use of tax havens in Belize and Uruguay. Football lovers fearful of the loss of (arguably) the world’s greatest player should be comforted by the fact that sentences under two years can be served outside of prison in Spain.

Messi maintains his innocence and will appeal the decision. But this and the fact that he can keep playing does little to address the serious issue of how some footballers manage their finances – something many in the industry struggle with.

In the dock. EPA/Alberto Estevez/Pool

Messi’s case is not unique in Spain or (for that matter) Barcelona. Earlier this year, Messi’s Brazilian team-mate Neymar was also reprimanded and fined €45.9 million for failure to disclose earnings from a range of sources. Neymar also maintains his innocence and is making an appeal.

Money, money, money

From one perspective, Messi’s tax dealings should not come as much of a surprise. The use of tax havens is seemingly the done thing for the super-wealthy, the world over. But there are aspects of the beautiful game which may lend themselves more generally to the aggressive pursuit of even greater earnings.

The game’s global union FIFPro has long urged an abolition of transfer fees so pivotal to the concept of player “ownership”, as well as caps on agent earnings. Outside of player registrations, the concept of economic rights for players has also proliferated in recent years, adding exposure and marketing revenue to the game’s more famous stars, the clubs they play for and the brands/products they advertise.

Happier times. EPA/Alberto Estevez

Messi earns a purported £256,000 per week after tax – so why would any player risk biting the hand that feeds them? One partial explanation may lie in recent adjustments to the Spanish tax system. Previous low rates of tax, linked to a source of competitive advantage for the top flight of Spanish football, La Liga, have since been hiked. The Spanish tax rate for top earners more than doubled in 2012 to 54%.

Regulating a global game

More generally, the problems emerging from the Messi case reflect the fact that, while the globalisation of football in economic and cultural terms is near-complete, the legal rights, regulations and procedures surrounding the sale of players remain highly varied across the globe. Footballers are recruited across a global labour market, though key regions (notably South America) operate with very different norms and regulations regarding ownership rights and recruitment procedures.

Third party ownership, for example, has become commonplace in certain regions of the world. This is where a third party individual or company will give a player or club money in return for owning a percentage of a player’s future transfer fee or “economic rights”. In the UK, the process has become synonymous with Carlos Tevez who arrived at West Ham against the rules of English football, under the ownership of businessman Kia Joorabchian.

Three’s a crowd. Sean Dempsey / PA Archive

But in South America third party ownership is common. It is also accompanied by a spate of high profile scandals involving tactics whereby players are temporarily registered and sold via low-tax jurisdictions (such as Uruguay) as a means of avoiding tax on transfer fees.

The point here is not to conflate issues of third party ownership with Messi’s own crime of tax avoidance, but to put the crime in context. Football is a global industry which operates differently in different parts of the globe. Added to this, many footballers emerge from humble backgrounds and difficult circumstances: combinations of ignorance, greed and acting on bad advice are likely to emerge.

Individual Responsibility

This is not to say that footballers, like workers in any other profession, are free from responsibility when it comes to paying tax or meeting their legal obligations. A major problem is that many people who stand to profit (which may include friends and family members) have an interest in taking risks on the player’s behalf.

Did Messi even know his actions were illegal? Barely a year goes by in football where a legal controversy of one form or another does not emerge, be it more serious cases of fraud or tax avoidance (as with Messi), illegal payments relating to transfer fees (see manager Harry Redknapp’s infamous case in 2012) or unlawful player gambling (including in games they are involved in).

Like Messi, Redknapp pleaded ignorance as well as innocence when it came to charges over his own illegal payments. As well as “knowing nothing” Redknapp went a stage further by citing an inability to text, write or type as part of his defence. He was cleared of tax evasion charges.

If ignorance is no defence, then football as an industry must ensure its players are educated on the legal rights and wrongs associated with the profession. This is particularly important for those elites at the forefront of the game and its marketing, not least because literally billions of viewers (including young, impressionable and avid fans) consume the global game.


This article was originally published on The Conversation. Read the original article.

Comment: Lifetime ISA – there’s a big part of the ‘next generation’ it will do little for. By Prof Josephine Maltby

Tuesday, March 22nd, 2016

By Prof Josephine Maltby Chair in Accounting at Sheffield University Management School. Originally published on The Conversation.

The mission statement for the 2016 budget delivered by George Osborne is to “put the next generation first” – a group he referenced 18 times in his speech.

The new lifetime ISA is fundamental to achieving this. Osborne touted it as “a completely new flexible way for the next generation to save”. But a closer look at the terms and conditions of the new ISA shows there are many it will not benefit.

So, what is it?

Starting in April 2017, savers aged between 18 and 40 who open the new lifetime ISA and put in up to £4,000 a year will get a 25% top-up from the government until they reach 50. That means a maximum of £128,000 in personal savings that will be topped up to £160,000 if you start at 18 and continue for the 32 years the ISA is available.

After the first 12 months of saving, investors can use the lifetime ISA balance to buy a house, provided it is a first-time purchase that costs no more than £450,000. And balances from the current Help-to-Buy ISA can be transferred across. After the age of 60, savers can withdraw funds “for retirement” free of tax. It is not clear whether that means the saver has to actually retire or just needs to be over 60.

Any withdrawals by savers under 60 who aren’t buying a house (unless they are terminally ill) will have the government top-up (plus any interest on it) deducted, and also suffer a 5% tax charge.


It is questionable how useful this new lifetime ISA is for the next generation. First off, it is not very flexible. Savers needing to draw money out before they reach 60 will be penalised if it is not being withdrawn for a first-time house purchase (or terminal illness). There is a dearth of opportunities for short or medium-term saving, and the budget offers no solution.

The Treasury’s own Policy Costings are also vague about what it will cost. The Treasury admits that:

The main source of uncertainty is the behavioural impact, because the cost of the top-up is extremely sensitive to it. In particular, assumptions are made about: the number of people choosing to use the lifetime ISA; how much they choose to save; and when they choose to withdraw.

There is little information that can be used to inform these assumptions and the behaviour is dependent on a variety of other factors, which amplifies the uncertainty.

Based on these uncertainties, the Treasury says it could cost £850m to service these ISA savings by 2021 – but this might be less or it might be more.

It all depends on the number of next generation members who can afford to use it. The £4,000-a-year maximum would be challenging for people on the median household disposable income, which for 2014-15 was £25,600 according to the Office for National Statistics.

On the other hand, as the Office for Budget Responsibility (OBR), the UK’s fiscal watchdog, points out, wealthy parents could give their over-18 offspring an annual £4,000 for the ISA, attracting the £1,000 a year top-up.

Knock-on effects

The lifetime ISA joins up with the Help-to-Buy Scheme, currently viewed as having boosted UK property prices – by an average of £8,250 according to a 2015 Shelter study. The OBR warns that the new ISA will only increase demand for the relatively fixed supply of UK housing. It estimates that this could lead to an additional 0.3% increase in house prices.

Up, up and away – house prices, that is.

The ISA has another possible function, as a first step in a move towards an ISA-based regime for pensions. Instead of getting tax relief on pension contributions (as you do now), people using a pensions ISA would contribute from income after tax, but get their retirement income from it tax free.

Critics claim that this change may deter savers, as well as creating confusion while the new auto-enrolment scheme is still bedding down. The Association of British Insurers has been very cautious in welcoming the new ISA, commenting that it “must not be a back door to a pensions ISA”. But there is agreement in the industry that the new ISA is a likely step in that direction.

The new lifetime ISA also looks like a move toward asset-based welfare. This is where welfare policies are made not simply because they are helpful for as many people as possible – like social housing or nationalised health services. The lifetime ISA is aimed at a particular set of relatively affluent individuals who can afford to save for the long term.

Many of the next generation will never be able to save; some won’t be able to start at 18 (and maybe not even at 40) and some won’t be able to leave a lot of money in an ISA for the long term. George Osborne’s new lifetime ISA has little to offer those members of the next generation.

The Conversation

This article was originally published on The Conversation. Read the original article.

Comment: Why Brexit would be bad for employment rights, by Prof Jason Heyes

Thursday, March 10th, 2016

Originally published on The Conversation.

Imagine a country in which there is no statutory right to paid holiday, no legal limit on the number of hours employees can be required to work, no right to a daily rest period, no laws to prevent employers discriminating against workers who are disabled or who have particular religious beliefs, and no right for employees to take time off work to look after a sick child.

This was the UK before the New Labour government was elected in 1997. Since then a substantial number of employment rights have been introduced – most of which have their roots in EU legislation.

Thanks to the EU, employers cannot treat part-time workers less favourably than full-time workers, working parents have a right to take leave to look after their children, and temporary agency workers and workers with fixed-term contracts are entitled to the same basic conditions as comparable workers with permanent contracts.

Employees also have rights to paid holiday and rest periods, as well as the right to be informed and consulted about matters that directly concern them at work. Employers, meanwhile, are forbidden from discriminating against their employees on grounds of religion or belief, disability, age or sexual orientation. There’s strong reason to believe that many of these rights would be lost should Britain leave the EU.

Intolerable meddling?

For many in the Out campaign, the EU’s influence on UK employment rights amounts to intolerable meddling. Consecutive Conservative Party general election manifestos, for example, have promised to “repatriate” powers over employment rights from Brussels to the UK. Until recently, the current government had implied that it would not support a continuation of the UK’s EU membership without an opt-out from EU legislation covering employment rights.

In the run up to David Cameron’s EU membership negotiations, it was widely reported that he would demand a full opt-out for the UK from the EU’s working-time directive and the agency workers’ directive.

In the end these demands were never made. They would have required substantial treaty changes that would never have been countenanced by the other 27 members of the EU.

The case against being bound by EU employment rights legislation is that it is damaging to the UK economy, imposing substantial costs on employers. But the UK labour market remains one of the most lightly regulated in the EU, despite the influence of EU legislation.

David Cameron did not negotiate any employment opt-outs in his deal with the EU.
EPA/Olivier Hoslet

EU employment laws have generally been introduced in a minimalist way. UK workers are “free” to opt-out of the 48 hours-per-week limit set by the working-time directive. Rights to information and consultation do not apply to firms with fewer than 50 employees. Plus, many agency workers are not entitled to the same pay as directly employed workers doing the same job.

Employment protection legislation, which regulates dismissals, is weaker in the UK than in most other developed economies, as measured by the OECD’s index of employment protection. The EU has some influence in this area, for example by requiring employee consultation where collective redundancies are planned. But matters such as notice and probation periods are not regulated by the EU. And, when the 2010-15 coalition government extended the minimum amount of time someone had to work for a company before being able to claim unfair dismissal (from one year to two), it had no difficulty in doing so.

Going its own way

There are many employment-related issues that are not subject to EU legislation. These include pay (the National Minimum Wage is a home-grown policy), industrial action, and vocational training. Enforcement mechanisms, which are essential if rights are to be respected in practice, are also a matter for national governments alone and the recent introduction of a fees regime for employment tribunals has effectively weakened enforcement in the UK.

If the UK leaves the EU, it not clear that there will be a bonfire of employment legislation. Much would depend on the UK’s subsequent relationship with the EU, which would need to be negotiated. If the UK became part of the European Economic Area, it might continue to be bound by EU Directives covering employment and social issues.

Even if Brexit left the UK free to dismantle employment rights, a Conservative government wishing to be re-elected might see little political advantage in removing rights to parental leave or allowing employers to discriminate against people because of their religion or sexual orientation. It is highly likely, however, that the EU’s working-time regulations, which is a particular bug-bear for the Conservative Party, and the regulations for agency workers would be amended or repealed.

It is also conceivable that rights relating to transferred staff and the right to information and consultation when changes are made to your job would be weakened. Were the Conservative Party to remain in power and shift further to the right, however, there would be little to prevent a far more substantial attack on employment rights.

Workers have gained much from the UK’s membership of the EU and there are clear benefits to society from limiting working time, outlawing discrimination and providing entitlements to parental leave. Many of those who wish to end EU influence over UK employment legislation have one aim in mind – to take employment rights away from workers. If the UK leaves the EU, they are likely to have their way.

The Conversation

This article was originally published on The Conversation. Read the original article.

Comment: Accounting for Kids Company – why charities’ books must add up. By Prof Josephine Maltby

Friday, February 12th, 2016

This article was originally published by on The Conversation by Prof Josephine Maltby. Read the original article.

The collapse of the charity Kids Company has attracted a huge amount of attention – not least as a result of the drama involved. Investigations into what went wrong have brought forth stories of teenagers queuing up to pick up envelopes of money from the charity that they promptly spent on drugs.

Reports also emerged that the charity claimed its closure would lead to riots and attacks on government buildings. And transcripts can be read of a long and rowdy session of the public administration and constitutional affairs committee of MPs, which investigated the closure of the charity and took evidence from Camila Batmanghelidjh, Kids Company’s founder:

Camila Batmanghelidjh: I would like to ask you on what basis you have decided that this is a failing charity. Because if it is on the basis –

Chair: Because it has gone bust.

The less dramatic story, and the more worrying one, is about financial control in Kids Company and the value placed on financial literacy across the charity sector.

Kids Company produced annual accounts which it duly deposited with the Charity Commission, the charity regulator. It went through the proper audit process every quarter, every year – something Alan Yentob, chair of the charity’s trustees, frequently mentioned in his evidence to the MP inquiry. However, the fact that every year referred to Kids Company’s shortage of reserves, and potential cash flow problems, seems to have been outweighed by the copious data making claims for its successes.

In 2013, for instance, its annual report (pdf) featured data on the problems of “750 exceptionally vulnerable young people” who had been successfully helped by the charity, and another 200 under-14s, one in four of whom had no tables and/or chairs in their houses. Kids Company was also very vocal in claiming that it supported “some 36,000 children, young people and vulnerable adults”. But this has been disputed, as only 1,900 cases have been passed onto London local authorities since its collapse.

MPs have asked questions of Kids Company founder Camila Batmanghelidjh and the charity’s chairman of trustees, Alan Yentob.
PA Wire

Even if all of Kids Company’s impressive data were true, the reader of the accounts has nothing to measure them against. How were these sample groups selected? What was the evidence for these problems? Is this better or worse than other charities, or than what might be expected of Kids Company? Reports of Kids Company’s good deeds were heeded over its financial viability, as indicated by exchanges between the government and senior civil servants.

Judging results

What has attracted less attention than the apparent overstatement of clients was the reluctance of Kids Company to let its results be monitored. The National Audit Office (NAO), tasked with certifying the accounts of all government departments, commented that the government had “relied heavily on Kids Company’s self-assessments to monitor its performance”. Until 2013, the key performance indicators that the NAO requested did not appear in Kids Company’s quarterly monitoring reports.

This improved in 2013-15 when the government specified some “delivery expectations”. As the NAO reported, Kids Company outperformed to a startling degree: “Against a target of 1,347 interventions in 2013-14, they delivered 30,217 interventions.” But how successful were the interventions in improving outcomes? There was no pre-arranged standard for measuring success so the government could not monitor it.

When the MPs inquiry asked Kids Company’s auditor about the charity’s reserves – how much he thought would be a safe level – he suggested six months of expenditure or roughly £12m would be an appropriate level. In its last available balance sheet for 2013, the last available, Kids Company shows its unrestricted reserves were just £434,282 in 2013, with a further £1.3m in restricted reserves and designated funds – about enough money to keep it going for a fortnight.

The trustees stated in the 2013 report that they were aware reserves needed to increase, but that their “business model is to spend money according to need, which is consistently growing. We aspire to build up our reserves when circumstances allow”. It seems that they deferred the aspiration for too long.

Causes vs accounts

Some have accused a focus on accounting as a distraction from worthy causes. Some decisions, it is argued, should not be made on the basis of purely financial costs and benefits. How can individual welfare or happiness – and the contribution of charity – be valued in monetary terms? Financial accounting is just a reductive simplification of the work charities do, treating people’s welfare as an expense to be contained. On this basis, we should not criticise Kids Company for its financial collapse – the work it did was invaluable.

But the alternative to measuring and monitoring charity performance is not the free flow of support to the deserving. It is the loss of resources that could potentially have been better managed and better used elsewhere. Kids Company received a total of £46m of public funding – £42m in central government grants, £2m from local authorities and £2m from lottery organisations – between 2000 and August 2015, when it filed for insolvency.

If Kids Company had been accountable, run by trustees who understood the financial risks they were taking, and monitored by funders against measurable outcomes, it might not have gone bust.

Comment: George Osborne’s ‘march of the makers’ will need Europe on its route map. By Prof Sumon Bhaumik

Monday, February 1st, 2016

This article was originally published by Prof Sumon Bhaumik on The Conversation. Read the original article.

The UK economy is in recovery, according to the latest government figures – but what is, on face value good news, is tempered by concern at the pitifully small contribution made by the manufacturing sector. Growth has been driven almost entirely by the services sector, and in particular by the business services and finance industries.

There is noticeable growth in only two manufacturing industries for which data are readily available: chemicals (and chemical products) and transport equipment. Most other industries have moved sideways between 2010 and 2014.

At a political level, this is problematic on two counts. First, this trend doesn’t alleviate concerns about UK’s exposure to future shocks to the global financial system. Second, the government has raised expectations about a “rebalancing” of the economy towards manufacturing – the chancellor of the exchequer, George Osborne, has made much of creating “a Britain carried aloft by the march of the makers”. But the numbers still don’t seem to bear that out.

Experts have offered a number of explanations about the persistent weakness of the manufacturing sector, some more justifiable than others. These include the persistence of low global demand for goods and commodities, the amount of debt in the household sector and its impact on household consumption, and the strength of the British pound.

Since the figures reported above are not forward-looking by their very nature, they do not tell us whether there are structural factors that could prevent the rebalancing of the economy back towards manufacturing industry and how feasible it would be. The challenge for rebalancing is significant.

Author provided

Data available from the World Bank suggest that of the major developed and emerging market economies of the world, only South Korea has been able to increase the manufacturing sector’s share of GDP between 1996 and 2014.

While the UK manufacturing sector’s share is considerably lower than that of Germany, it is comparable to that of France and the US. This, in turn, raises the question about the ability of a single country to significantly rebalance its economy in favour of manufacturing when global growth is weak and when many countries – for example, the “Make in India” initiative – are trying to do the same thing.

Finding the right niche

Perhaps the most important question for the UK’s manufacturing sector is where firms and corresponding industries are located along global value chains (GVCs). Recent research from the European Central Bank suggests that as the global production system becomes increasingly dominated by value chains – Apple, for example, has its intellectual property and design in the US, sources its chips from South Korea and assembles its phones, etc, in China – it will be important to “look beyond industries to understand trade and production patterns. Countries [would] specialise in specific business functions involving specific tasks rather than specific industries”.

The strategic focus, correspondingly, would have to be not so much in the development of entire industries but rather to find niche areas of expertise high up in the GVCs of a relatively wide portfolio of industries. This in turn has implications for innovation capacity that is both much discussed and where the UK, with a score of 62.42 for the Global Innovation Index, is ranked second globally – ahead of the US (5th, 60.10), Germany (12th, 57.05), South Korea (14th, 56.26) and Japan (19th, 53.97). While productivity growth continues to be a challenge, therefore, there is at least some evidence that the UK may be well positioned to grab a niche relatively high up GVCs, where much of the value is created.

This brings us to the two issues with huge political implications. First, are we asking the right questions about manufacturing sector growth and its share in the economy? If the future of manufacturing lies in innovation, will we see an inevitable period of industrial decline as industries in which UK firms do not have competitive advantage shrink while new industries and firms grow to make their mark?

Steel worker: left behind in the quest to modernise?
Reuters photographer

Second, what is the objective for growth of the manufacturing sector? Is the objective a more diversified UK economy that is not heavily reliant on the financial sector – or is there an unspoken subtext about generating demand for a well-paid and organised sector labour force harking back to the post- World War II era of manufacturing growth. While innovation-driven manufacturing sector growth may be quite feasible, it may not necessarily lead to the creation of a large number of well-paid jobs for people with all skills levels.

Going it alone?

Then there is the question of how at British exit from the EU might affect all this. While crystal ball-gazing is hazardous, two things immediately come to mind. If the future of UK manufacturing lies in an innovation-led move up the GVC ladder, it would need an economy that encourages innovation and clusters of enterprises that may be costly to develop within borders of a single country whose resources are limited. To the extent that Brexit would raise the transactions cost of forming these eco-systems and clusters in cooperation with other European countries, it would be more prudent to stay in than stay out.

Further, since integration with GVCs quite likely has implications for skill gaps at one end of the labour market and structural unemployment at the other, it may be imperative for the UK to be part of the intra-EU flow of labourers. Retraining of labourers in sunset industries to prepare them for sunrise parts of the sector sounds good in theory – and makes for good political speeches – but it cannot possibly be a substitute for free mobility of labour within 28 countries that will present opportunities for workers with particular skills to find the right niche and industries with particular needs to hire the right workforce.

Policymakers, in other words, would have to have clarity about the objective for manufacturing growth and rebalancing: either achieving greater diversity within our GDP portfolio so that we are not overexposed to future financial crises, or creating the space for a certain kind of employment. Importantly, it would be prudent to make those choices within the the EU.

Comment: Housing policy can’t be fixed until we treat houses as homes and not as stores of wealth

Monday, December 21st, 2015

First published on LSE’s Politics and Policy blog – click here to read the original edition.

Last week, Stewart Smyth outlined recent developments in Social Housing policy up to the Comprehensive Spending Review. In this follow-up article he looks to the future, arguing that lack of access, not lack of housing itself, is a crucial problem. He further highlights how the issue runs deeper still; until we treat houses as homes, and not as stores of wealth, the contradictions in housing policy cannot be solved.

Housing policy, no less than any other policy area, is full of tensions and contradictions. Some of these exist in the realm of political hyperbole: when the Chancellor promises the biggest house building programme since the 1970s, he omits that those levels were only achieved because of the contribution by local authorities. And his policy has no budget or role for council house building. Another contradiction is shown with the dramatic reduction in upfront capital grants for housing association new builds and the introduction of affordable rents: this apparent saving comes at a cost of increasing the housing benefit bill.

The Comprehensive Spending Review reported that house price increases have moderated down to an expected 6.2 per cent in 2015, from 9.9 per cent in 2014. Yet it also included a prediction from the Office for Budget Responsibility that average earnings will increase yearly by only 3.5 per cent, up to 2020. So addressing the housing crisis in a piecemeal manner will create winners and losers as one side of a contradiction is preferred for a period of time.

But the house price/wages increase contradiction hints at a deeper issue – what is the nature of the housing crisis? This seems like an odd question, as the common sense answer is that we are not building enough new homes. Certainly, in the dominant policy discourse this would appear to be the sole issue. For example, the Lyons Review takes as given that:

“For decades we have failed to build enough homes to meet demand. We need to build at least 243,000 homes a year to keep up with the number of new households being formed.”

Earlier this year, the Department for Communities and Local Government estimated household formation in England at 220,000 per year up to 2020. The Conservative government (appear to) accept the need to build more houses and have preferenced first-time buyers with their policies since the election. However, when you dig beneath this consensus the issue starts to metamorphosise. In his 2014 book, All that is solid, Danny Dorling convincingly shows that we have never had as much sheltered space available in Britain; the issue is one of inequalities in terms of access to that space. And Dorling is not alone.

The UK Housing Review Briefing Paper 2015 highlights the link between economic inequalities and access to housing:

“Among homeowners just over a quarter of all housing wealth was owned by people in the top income quintile with half owned by the top two quintiles.”

In an earlier report the same authors show that nearly half of owner-occupiers under-occupy their homes. Add in tax changes, such as increasing inheritance tax reliefs, and the conclusion is stark: “the housing market seems destined to continue to fuel inequalities in the UK”.

The conclusion here is that building more homes will only add to the problem as the inequalities continue. One potential solution would be for people under-occupying family homes to downsize instead. But this highlights a deeper issue..

Fundamental contradictions between exchange values and use values

For many owner-occupiers their home is a store of wealth based on its potential exchange value (i.e. what it could be sold for). This is the policy position we have all been encouraged to embrace whether it is through tax incentives, such as mortgage interest relief, or huge discounts through the generations of the Right to Buy policy. The contradiction occurs here when we consider the use value of a house, as a place of shelter, somewhere to live. Further, an address is needed to access a range of social services (such as health, social care and education) and participate in democratic society (for example, through elections).

The past forty years has seen consistent and persistent efforts to undermine the use values of housing, preferring ever-increasing exchange values; as David Harvey has summarised: “The reckless pursuit of exchange value destroyed, in short, the capacity for many to acquire and afterwards sustain their access to housing use values”.

Therefore, the fundamental contradiction is between the use value (somewhere to live) and exchange value (a source of wealth) for housing. Framing the housing crisis in this way allows us to see clearly the impact that policies will have. Further, understanding this is important as a misdiagnosis of the problem leads to the pursuit of inappropriate policy solutions. Current government policy is aimed at enhancing exchange values through subsidising homeownership. This is not surprising given the powerful institutional actors (construction firms, estates agents, lawyers, financiers etc.) who all gain from an expanding housing market.

But there is a desperate need to develop policies that emphasise use values. In general terms this will mean withdrawing increasing numbers of homes from market relations, by maintaining and expanding the socially rented sector. Policies that would contribute to that end include:

  • Ending the right to buy for council housing and abandoning its extension to housing associations (especially, as this will result in even more council housing being sold off to fund the discounts for housing association tenants);
  • Developing and enhancing a right to sell (or mortgage to rent scheme) policy. Such a scheme was introduced in the aftermath of the 2008 crash but as interest rates fell the levels of arrears also fell. With interest rates set to rise there will again be a need for an alternative to evictions;
  • And any new building must be for socially rented purposes (either through councils or housing associations).

At this point it is important to remember that social rented housing is financially sustainable, as a report for SHOUT and the National Federation of ALMOs has shown. For years, successive governments raided council housing rents, restricting the amounts spent on maintenance and management (this was highlighted by the Moonlight Robbery campaign). In addition, the housing association sector is making surpluses, over £2 billion in 2014.

The benefits of emphasising socially rented properties include: directly addressing those on waiting lists (including the hidden homeless such as sofa surfers); a reduction in the housing benefit bill as social rents are lower than either affordable rents or the private rented sector; and maintaining and developing mixed communities as opposed to the displacement currently taking in London and other city centres.

Expanding the social rented sector also provides a straightforward answer to the question, where are poor people supposed to live? And arguably, the most important effect of a bigger social rented sector is that any future property bubble has less room to inflate and therefore, the inevitable crash has a lower impact on the banking and finance system, the economy and society generally.

This leaves a twofold task for academics, practitioners and policymakers; first, to develop policies that emphasise use values (i.e. socially rented) in housing, and second, to find ways of popularising them among the population and politicians. No small challenge, then.

Comment: Lessons from history – why the push for savings for all is wide of the mark. By Prof Josephine Maltby

Thursday, December 17th, 2015

This article was originally published on The Conversation. Read the original article.

As predicted the US Federal Reserve has raised interest rates after nearly a decade, which means a slightly better rate of return for savers. Meanwhile in the UK, the Bank of England has kept the benchmark rate at a rock-bottom 0.5% for the 81st month in a row. All the while there are calls from policymakers and politicians for a grand vision for saving. People should take responsibility, the argument goes, for their own welfare.

And the state needs them to believe it. Otherwise, it’s claimed, a combination of factors – longer life expectancy and financial illiteracy – will create an impossible burden.

UK pensions are currently undergoing an apparently endless set of reviews and alterations. The steady rise in the age of qualification for state pension, the chance to use pension savings as a bank account, and the introduction of auto-enrolment at all workplaces by 2018 are all aimed at increasing savings for retirement.

And there may be more to come. Both Iain Duncan Smith, the work and pensions minister, and the prime minister David Cameron, called for a rethink of social security – potentially a move to a system where people would “save from day one”, along the lines of Singapore’s Central Provident Fund. This would involve making mandatory deposits into a fund to be used as needed, in times of sickness or unemployment.

Iain Duncan Smith wants us to be better savers.
EPA/Facundo Arrizabalaga

The calls for saving, with strong government support, are not new. They go back to the birth of the savings bank movement at the beginning of the 19th century. In the period after the French Revolution the British elite was worried about economic crisis, unemployment and labour unrest. Organisations like friendly societies and early trades unions brought working men and women together to defend their interests. Savings banks run by local elites (the vicar, the squire, the factory owner) were conceived as a solution to social and political anxiety. Promoting savings to the lower classes was aimed at cutting the “enormous” cost of the poor rates charged by parishes.

The movement took off with support from the two main parties, the Liberals and Conservatives, and from the churches. By 1861 there were 645 banks in cities, towns and villages nationwide. Savings were good for everyone, they claimed. The banks would foster the virtue of thrift, discouraging the poor from drinking and idleness.

Saving would also, literally, give them a stake in society, or as Scottish minister and theologian Thomas Chalmers said at the time: “An interest in the social order, in the peace and stability of the commonwealth.” A man with a bank balance was much less likely to call for the overthrow of the system. William Gladstone and Benjamin Disraeli, Liberal and Conservative party leaders, both suggested that a man with £50 or more in the bank deserved to be given the vote.

Criticisms of the savings movement

The banks’ drawbacks, though, attracted less attention. Their interest rate, tied to the return on government bonds, was not generous.

With amateurs on their boards, the banks were vulnerable to managerial fraud, and there were some sensational collapses – those of the Dublin and Cardiff banks were the highest in profile. Savers had no guarantee of repayment, and might lose every penny. Some people avoided the local savings bank because they did not want their bosses to know how much they had saved, in case the information was used against them when they asked for a pay rise. And there were continuing accusations that the banks were mainly used by the middle classes, because they were the ones with the spare cash. Being poor meant having no margin for savings.

Mill workers would have struggled to make enough to save.
Penny Magazine Supplement, December 1843

By the end of the 19th century, the number of savings banks, especially of the small village banks run by the gentry, was falling. New organisations run by and for their members – the building societies, the Co-operative movement and the trades unions – were getting bigger and stronger.

And there were now challenges across the Liberal and Socialist parties to the claim that the poor should be monitored and disciplined to make them behave better and consume less.

Writing in 1909, the Fabian Emily Townshend mocked the view that “for any man to enjoy any benefits which he has not definitely worked for and earned is injurious to his character”. She pointed out that she had done nothing to earn the annual dividend she got on her railway shares, or the “miraculous” news that “certain shares that were worth £4 yesterday are now worth £5”. Why should the poor be subjected to a harsher discipline than she was?

There are inescapable parallels with the birth of the savings movements in the 19th century with the political calls for savings today- for instance calls to be thrifty and help control public spending, while financial institutions with amateur non-executive directors ignore mismanagement until it’s too late. And today there are groups for whom saving is not an option. Recent research suggested that savings are difficult or impossible for a substantial number of working people and many do not qualify for auto-enrolment.

It goes to show that ideas around thrift might sound good and appeal to key parts of the voting electorate. But it begs the question: how will the excluded respond when they keep being urged to pay for a stake in society?

Comment: Inviting market forces in – financing social housing from the coalition to the spending review

Friday, December 11th, 2015


First published on LSE’s Politics and Policy blog – click here to read the original edition.

In the first of two articles, Stewart Smyth outlines the recent history of policy changes towards social housing, from the apparent certainty that had emerged at the start of the year, through to the changes that have occurred in the sector since the election in May, and finally up to the recent Comprehensive Spending Review.

At the start of 2015 there was a certainty surrounding social housing; after an initially tentative start by the Coalition government, a new settlement for building social housing had emerged, focused on dramatic cuts in up front grants and a greater emphasis on developing housing associations having to plug the gap.

The election campaign signalled potential large reforms including the extension of Right-to-buy to housing associations. As if that wasn’t a big enough change, the summer saw the first indications that housing associations would be reclassified as public organisations, with their debt (approx £60 bn.) being added to the government’s finances. This move was confirmed on 30 October by the Office for National Statistics.

We can use a financialization framework to help make sense of at least part of this.

Financialization is a term that is increasingly being used to capture a range of processes focused on the increasing power of financial capital through the financial services industry in relation to households. But financialization operates across a range of fields and in multifaceted processes.

There are two facets immediately relevant to understanding the Coalition’s social housing policy – the shareholder value revolution with its accompanying short-termism and the increased amount of debt within the economy in the UK economy. For example, the shareholder value revolution is focussed on achieving this year’s numbers; in this process, long-term capacity and productivity is reduced. According to the McKinsey Global Institute the UK’s total debt to GDP ratio now stands at 252 per cent; an increase of 30 points since 2007.

Both processes are evident in the Coalition’s social housing building programme – Affordable Homes Programme (2011-15). Under the AHP the government specified the types of homes (or products as they call them) they would fund:  affordable rent homes, affordable home ownership, mortgage rescue, empty homes and supported housing for the elderly. They also made it clear that homes at social rent levels would only be supported in exceptional circumstances.

In 2012, the National Audit Office investigated the AHP programme and showed how the financing was working. They noted that ‘the Programme is intended to build housing with a third of the grant per home of earlier affordable housing schemes’. In further detail, they added:

“It will involve housing providers spending some £12 billion on new homes, funded by a combination of government grant (£1.8 billion), borrowing by providers supported by rents on the new properties (we estimate around £6 billion), and funding from other sources (about £4 billion). Rents totalling around £500 million a year on new homes will be paid by tenants, approximately two-thirds of whom are supported by housing benefit.”

It was clear from the start that the AHP was designed to increase debt levels, debt that the government thought would be private.

The focus on short-termism is not as immediately obvious but is no less an important element, and can be seen in two aspects. First, in the shift from higher upfront capital funding (under the previous programmes) to a reliance on higher rent levels that increase the benefits budget (i.e. revenue expenditure) over the longer term.

This can also be seen in the government’s attitude towards value for money which was to deliver the largest number of homes given the funding available. However, according to the NAO this produced a lower benefit to cost ratio than the previous National Affordable Homes Programme (2008-2011).

The second aspect of short-termism concerns the use of housing association resources, whether that is through the rationalization of housing stock (e.g. the sale of voids or conversions of social rents to affordable rents) or utilizing any spare borrowing capacity. These are one time funding manoeuvres, which are considered to be unsustainable as a long-term funding model.

The AHP is incapable of addressing the lack of social housing supply and therefore cannot help the 1.7 million households on council waiting lists. Unless there was a change in policy direction, the AHP was leading to a debt bubble being inflated which at some point would become unsustainable; but it would be off the government’s balance sheet.

Therefore, the reclassification of housing associations as public bodies would then appear to be a major headache for the government; yet the response so far has been rather muted, with no mention of re-privatisation in the 2015 Spending Review.

Further, because the announcements confirming the extension of Right-to-buy to the sector and the ongoing reduction in rents came at the same time that the ONS started to look at housing association, there is a perception that these were the causal factors in the final reclassification decision. However, the ONS make no mention of either of these policies in their notification statement. Instead, the decision was backdated to 2008, to the Housing Regeneration Act (2008) introduced by the previous Labour government

This all gives support to the argument that the growth of the housing association sector was not about the artificial measurement of public debt but had more to do with a twofold ideological stance of successive government since the 1980s. First, is a strategy to undermine council housing through the stock transfer process. Second, is the belief that competitive market forces can deliver (mainly through some sort of trickle down process) social housing for the most needy in our society.

The concern now is that the government will treat housing associations in the same way as they have council housing and turn it into a Cinderella service through cuts in funding and the extended Right to Buy. This is what was behind the co-ordinated attack on housing associations in July by Channel 4 news and others.

Of course many of us have been critical of the excessive executive salaries in housing associations for many years; something successive governments have shown no concern about. It is the charge that housing associations are not building enough that is a deliberate misrepresentation of the sector. The housing association sector is not designed to deliver a mass building programme.

It is differentiated in its composition with many small associations who do not develop new homes. For example, of the 1,783 registered providers only 336 have more than 1,000 homes. Further, nearly half of these are stock transfer associations who were created for the sole purpose of improving the condition of the housing stock through the Decent Homes policy. There are a relatively small number of very large associations who have active development programmes. In 2014, the top 50 developing associations completed more than 40,000 homes.

In the space of nine months the financial and funding environment within which housing associations operate has changed utterly. There is now significant uncertainty about the future direction of government policy for the sector coupled with significant strains being placed on individual housing associations that have developed strategies based on one set of assumptions only for all those to change.