LSE on the UK gov’s new housing plans

"The fundamental problems with housing remain the same as in the last fifteen years and of those the most fundamental is the lack of land for development. Only fundamental reforms of our housing supply process will help and this proposes none. Indeed it in some ways goes backwards. It goes from a set of (not very good) mechanisms delivered in 2007 with the Regional Spatial Strategies to a set of aspirational gestures. Frankly the Secretary of State could build more houses with a magic wand."

From the Spatial Economics Research Centre blog

Why Germany is probably doing more for Syria than the UK

How do you compare the good that the UK is doing with its whopping 0.7% aid budget, against the good that Germany is doing by accepting large numbers of refugees? A smart (German) friend asked me if there are any numbers on the size of the remittances we might expect to see from Syrian refugees in Germany to Syria. Of course, remittances are far from the most important reason for accepting refugees, but they do allow for a nice easy cash sum with which we can make a comparison to aid flows.

The UK is spending somewhere between £200 million and £400 million on Syria this year. For comparison, whilst Germany is ramping up aid spending, it is still less than 0.4% of GDP overall.

But in terms of numbers of refugees, Germany expects to take 800,000 this year (compared to just a few thousand in the UK), though fewer than that have been documented so far, and not all will be Syrian. Let’s assume for a moment that the total will be 400,000 from Syria, and they will be quickly processed so that they are able to work. If every Syrian refugee in Germany was able to send home £1,000 to family and friends, that already equal Britain’s aid budget for Syria. Is £1,000 a realistic prospect? One way to think about this is to look at remittances from existing migrants in Germany (p33) to the middle east. There are currently around 67,000 migrants from Lebanon living in Germany, who send back to Lebanon almost $1 billion a year - that’s around £9,500 each, which seems almost implausibly large, but who knows, the Chinese and Vietnamese also send home large sums, and the Nigerians send home even more. In any case, it certainly seems plausible, even likely, that Syrian refugees to Germany, once permitted to work for even low German salaries, will be able to send home at least £1,000, if not more.

Celebrating more Brits

The population of the UK has increased by 500,000 in the last year.

Unlike what you may read elsewhere, this is great news.

- British people are great - having more of us is better
- London is the best part of Britain, and not coincidentally the most populous and densely populated part
- Population growth is concentrated in cities
- Larger cities support economies of scale, more specialisation and diversification, enabling the clusters of activity and agglomeration that drive innovation
- A larger population means a greater supply of innovators
- A larger population means a greater demand for innovators, and a bigger market for producers
- A larger population means more people to share the burden of fixed costs, including national debt

Of course there are costs to crowding, and we need to plan for more infrastructure provision (not least building more housing), but that’s just part of life and really shouldn’t be beyond our wit.

Does spending on education increase learning?

Evidence from the Guardian UK university ranking, which scores universities both on their value-added (final exam scores minus pre-university exam scores - a measure of how much students learnt at university), spending, and student-staff ratio.

aaaand surprise surprise, spending looks totally uncorrelated with learning.

Smaller class sizes do seem to be doing something (small sample sizes, correlation not causation, yadda yadda), which makes you wonder what the high-spend, large class-size universities are spending all their money on.

"I didn't come into politics to distribute money to people in the Third World!"

Justine ‘I didn’t come into politics to distribute money to people in the Third World’ Greening, the UK Development Minister, spoke at Sussex yesterday. I wanted to ask her if the above quote was true, but she over-ran the allotted 20 minutes, leaving time for only 3 questions before she was whisked off by her advisors. I also wanted to ask, given she was apparently so proud of her focus on emergencies and the UK response to Syria, why the UK has only taken in 143 Syrian refugees out of 380,000 people in need of resettlement, and whether, given her pride in cross-government collaboration, she agrees with the actual real not-taking-the-piss Foreign Office policy that it is better to let Syrian refugees drown in the Mediterranean, because rescuing them would create a "pull factor", or whether on the contrary she agrees with the churches, that this is an "abdication of moral responsibility."

 

She also seems to think that she invented the idea of economic development and that investing in ports and infrastructure might be an original idea. Did someone forget to brief the Minister about what the "WORLD BANK" has been doing for the last 50 years? Also whilst it may be important to make the case for aid to many audiences, this was not one of them. Seriously, she told us about the importance of aid for our own (UK) self interest about 3 different times (note probably at least half of IDS and I imagine the audience were not even British, and those that were are presumably firmly committed development people).

 

Snark aside, DFID gives us a lot to be proud of, we give a lot of money, and on the whole I think we give it well. It's just a bit depressing when our dear development leader looks so bored by the whole thing (or perhaps I'm just reading her as uninterested because of the alleged quote above?). Amusingly, the former accountant's eyes only really lit up when talking about a project sending folks from the Institute of Chartered Accountants to Zambia (though that is probably honestly a brilliant idea). She also clearly looked most pleased talking about the projects which involved some kind of new gadget or had some benefits for Brits - be it the aid match to double your donations to NGOs, the International Citizen Service, or school twinning. All fine ideas, but perhaps not the most transformative.

 

I should add that I didn’t think Mary Creagh’s vision was all that much more inspiring, despite Charlie’s reminder that the universal health care focus is a good one. Which is all quite odd in the context of the recent 0.7 bill. 

Zoe Williams shows numeracy is not her strong point

Stuart Broad, the England cricketer, tweeted:

I've heard if you earn minimum wage in England you're in the top 10% earners in the World. #stay #humble 

— Stuart Broad (@StuartBroad8) January 27, 2025

which apparently provoked a backlash. Renowned economist Zoe Williams added her insightful analysis thus:

"The cricketer’s minimum wage tweet shows numeracy is not his strong point. ... Money doesn’t mean anything out of context: its value is determined by what you can buy with it. Most people figure this out by the age of about seven."

Embarrassingly for Zoe, Stuart was right. Working full-time at the minimum wage earns £13, 124 per year. Plug that into the Global Rich List calculator, which, by the way, uses "Purchasing Power Parity Dollars (PPP$) in order to take into account the difference in cost of living between countries", and you're in the top 5.84% in the world. After accounting for cost of living differences.

You carry on being outraged on behalf of the relatively low income in the UK when you think they are being belittled Zoe, and I'll carry on being outraged on behalf of the absolutely low income in the rest of the world, in places like Gabon, where life expectancy is just 63 years, and 1 in 5 people live on less than the equivalent of what you could buy here for $2 per day. Just maybe try not to make such major conceptual errors when you are mocking people who point out the magnitude of global inequality.

Green Party are "Dotty Parochial Fruitcakes"

Bagehot, the column on Britain in the Economist magazine, says the Green Party of England & Wales have no grasp of economics and are fruitcakes, "dottier than UKIP," for backing a basic income policy. The same basic income policy which has received support from those other dotty fruitcakes with no grasp of economics; Martin Wolf, Tim Harford, Sir Tony Atkinson, and the late Milton Friedman.

This is the same fine Bagehot who happily elevates political objectives ahead of economic ones when celebrating the 2014 budget for its ideological approach to shrinking the state and cutting welfare regardless of the implications for the economy or for individuals affected in the short-run. The serious economists at the IFS said describing the same budget "policy choices have increased longrun risks to the public finances."

Bagehot also tells us that the Green Party are "parochial" and "contemptibly naive" for not thinking about the rest of the world enough. One might be forgiven for thinking that on the contrary it could be described as quite naive to expect political parties to spend all that much time focusing on people who don't vote in the UK. All this whilst we have a tory and liberal government which talks as if the main point of the aid budget should be promoting British business interests overseas, and likes to make a habit of offending our trade partners by insulting their citizens if they have the audacity to think of coming to the UK to work or study, including but not limited to putting actual vans on the streets with huge threatening "Go Home" signs written on them. No, it is the pro-immigration Green Party which is "parochial". 

"The world could use an economically literate and intellectually courageous British environmental party," Bagehot writes. We could also use an economically literate and intellectually courageous Bagehot column, but it seems we can't always get what we want.

The new childcare subsidy in the UK

The IFS:

"Today’s announcements indicate that the Government’s main motive is to help parents move into work. As we pointed out in the IFS 2014 Green Budget, we know remarkably little about the impact of the policies to support childcare that have been introduced in England in recent years. And there is no consistent evidence from other countries that childcare support has large effects on parental labour supply. While today’s announcements bring welcome simplifications to the new Tax-Free Childcare scheme, and an increase in generosity that will certainly be welcomed by families on Universal Credit using childcare, and better-off families who spend more than £6,000 a year on childcare, the extent to which it will deliver its intended goals is essentially unknown."

and Chris Dillow:

"It's fitting that Nick Clegg should have announced an increase in the state subsidy for childcare, because the policy is a sanctimonious front for something that is inegalitarian and economically illiterate."

More affordable housing for London?

"Affordable housing" is a phrase which needs to go on the banned list. What does it even mean? Something to do with affordability, and something to do with social (subsidised) housing. Mira Bar-Hillel of the Evening Standard notes the wikipedia definition - affordable for someone on median income - coming to a back-of-an-envelope value of around £100,000 (assuming a mortgage of 4 times a £25,000 salary).

She then seems to go off the rails a bit discussing the application of this concept to an actual development - the new central London Mt Pleasant development.

"of the 700-odd flats proposed, fewer than 50 may be for social renting. It also means that, based on current prices in the area, the private flats could easily fetch a total of over £4bn. And be mainly sold to foreign investors.

So based on those numbers (£4bn for 700 flats), each of these flats could sell for more than £5 million each. And the Evening Standard's Property and Planning correspondent thinks Britain should be selling off £5 million pieces of real estate for £100,000? Is it just me or does that sound totally insane to anyone else?

Meanwhile Labour councillors are angry about Royal Mail being "hell-bent on packing in as much private housing as possible" whilst there are "huge housing shortages in London." Does Labour want less homes in London or more homes?

Why does housing policy inspire such epic logic fails from otherwise seemingly intelligent people?

Breaking: The country is going to the dogs

One of many bizarre things about public opinion on immigration in the UK is the divergence in opinion between impacts "on your local area" and impacts on the country at large. People are much more worried about the country than about their local area. 

Sunder Katwala, Director of British Future who commissioned a recent survey showing this fact, said to the Guardian:

"People are obviously very anxious about immigration. But I was struck by how much higher it was as a national rather than a local tension. That to me suggests that managing local tensions is obviously very important, but it is probably not the answer entirely because people have this national-level concern. 

"I think it would be wrong to say that local concerns are real and national concerns are just driven by the media, but I think what is going on there is people asking: does the system work? And I don't think anyone has any confidence as how it is managed as a system. Also there is a concern around national cohesion, identity and ability to cope with the scale of change."

Clearly he's being polite here. How on earth do people know how immigration is affecting the rest of the country except through the media? Are survey respondents travelling up and down the country carrying out their own research each weekend?

A nation is an "imagined community." In your own local area you know people. By contrast: "[A nation] is imagined because the members of even the smallest nation will never know most of their fellow-members, meet them, or even hear of them, yet in the minds of each lives the image of their communion".

So almost by definition it is true that national concerns about immigration are driven by media. 

This phenomenon is not just limited to immigration. A recent Populus survey finds that people systematically think that things are going worse "for the country as a whole" than for "you and your family". Is it even possible for things to be going well for all of us as individuals but badly "for the country as a whole"? What is the country as a whole but the aggregation of all of us individually? 

Maybe just maybe it is in fact our relentless diet of media pessimism that is giving us a distorted view of reality?

Social Spending and ethnic diversity

The core of a David Goodhart's "left-wing" argument against immigration is that racial diversity makes it harder to sustain high levels of social spending. 

I don't necessarily disagree with the point, but harder does not mean impossible. 

The argument is motivated by work by Alberto Alesina and other economists at Harvard. Alberto Alesina is a smart, original, and prolific thinker who does a lot of interesting work. But this particular paper, was never actually published in a peer-reviewed journal. The chart below is the main empirical result driving their argument (from this paper). 

As David is not an economist, I'll break this down for him slowly. This is called a "scatterplot". Social welfare spending as a percent of GDP is on the vertical axis, and an index of racial fractionalization is on the horizontal axis. You can see that there is a negative relationship between the two, but there is also a lot of variation around the fitted line.

A few observations:

- All of the European countries have relatively low levels of racial fractionalization - below 0.2 - but being European actually tells you very little about levels of social spending, which are spread widely between low spending Iceland and Greece, and high spending Belgium and Luxembourg. 

- Removing the European countries would remove the negative trend. Japan (almost no diversity) has almost exactly the same social spending as high diversity Brazil or US. Low diversity Costa Rica has the same social spending as high diversity Mauritius. 

- Looking at the UK - imagine that the UK began to approach New Zealand or US levels of diversity - does that mean we would have New Zealand levels of social spending (higher) or US levels of social spending (lower).

The key point from just looking at this chart is that even if there is a relationship, which it is not even clear that there really is if you consider Europe separately to the rest of the world, diversity is not destiny. Social spending is a policy choice. Diversity might influence this policy choice, but so do a lot of other things. Even if diversity did make social spending harder, it does not make it impossible. Correlation is not causation. Etc. QED. 

Paul Collier's Migration Book

Drawing on original research and numerous case studies, Collier explores this volatile issue from three unique perspectives: the migrants themselves, the people they leave behind, and the host societies where they relocate. As Collier shows, those who migrate from the poorest countries, primarily though not exclusive the young, tend to be the best educated and most energetic in their cultures. And while migrants often benefit economically, the larger impacts of mass migrations remain unsettling. The danger is that both host countries and sending societies may lose their national identities-- an outcome that Collier suggests would be disastrous as national identity is a powerful force for equity. Collier asserts that migration must be restricted to ensure that it helps those who remain in sending countries and also benefits host societies that make the investment on which migrant gains rely. 

This might just be the point at which I stopped being a fan of Paul Collier. I was quite excited about this book because I presumed that naturally it would be pro-immigration. I suppose his old white man demographics have outweighed all his education? I'll probably still read it, as presumably he will at least have a better grasp of at least some of the actual evidence on the issue than Goodhart. Still, it makes my skin crawl. I understand that we aren't going to win around the UKIP racists and get open borders any time soon, but it is deeply depressing when even development people and/or supposed lefties harbour this fear and suspicion of poor foreigners. Maybe brown people threaten your national identity Paul, but they don't threaten mine.

Anyway for now I'll stick with the simple chart which debunks the line that "national identity is a force for equity." Actually, two-thirds of global inequality can be found between countries rather than within countries. So even a perfect income distribution within countries would still leave two-thirds of global income inequality intact.

Branko Milanovic, (via Tim Worstall). Incidentally, surely - surely, Collier should have read Milanovic?

Build on the greenbelt now

the true enemy of our threatened wildlife like the nightingale is not housing but agricultural intensification ... 

There is now more bio-diversity in back gardens than on English farms. ... 

Intensively farmed land has a negligible - even negative - environmental value and is almost sterile from the point of view of wild life; take a look at the 2011 National Ecosystem Assessment. That is the sort of land we should be allowing houses to be built on. The vehement opposition to building on any intensively farmed greenbelt land fails to recognise it for what it is - almost worthless from a social, environmental or amenity perspective. 

Paul Cheshire, Emeritus Professor of Economic Geography at LSE

From the department of baffling headlines

It's been a while since I've beaten on the Guardian (I love you really Guardian, you're* still my main newspaper, despite the typos in 3 out of 3 articles I read the other day).

But really:

Stowaway from Angola highlights airport security problems 

Police continue to try to identify man who fell from BA plane on to London pavement, the second African stowaway in recent weeks

Personally, I'd say that the story of a young man in his 20s, wearing a grey hoodie, jeans and trainers, who was so desperate for the chance of a better life that he risked and lost his life by sneaking into the hold of an aeroplane bound for London, mostly highlights the utterly grotesque global inequality that we choose to tolerate because they are mostly out of sight and out of mind, and we are worried about the impact of all these foreigners on our precious "community" or some other vague bullshit. Not fucking airport security.

(*embarrassing typo here fixed but whatevs, I can and will continue to beat on the Guardian for typos, because this is not a national newspaper it is a BLOG. Thanks as ever for the vigilant editing though K)

Nightingales not neighbours

Oh and just to add additional insult, Simon Jenkins thinks we should be prioritising habitat for 180 nightingales over houses for around 15,000 people, valuing each nightingale at nearly 100 people. I've got nothing against nightingales, but do they each really get priority over a hundred people?

Why aren't young people in England angry about housing?

Apologies for being such a bore, but it drives me nuts that we aren't building enough houses in this country. Every year there are twice as many new households as there are new houses built. Every year. This is the first lesson of economics - prices are set by supply and demand - if demand continues to outstrip supply twofold every year then prices will continue to increase and houses will continue to be split into ever smaller fragments. I rented a beautiful apartment last month from a young married couple, both Oxford graduates, one of them a doctor. It was beautiful, except it was also quite symbolically the converted basement of a much more beautiful house above it. Even the most successful people of my generation are doomed to living in the basements of our parent's generation.

And yet simply building more houses, in the places that people want to live, and yes occasionally on some muddy field in a part of the greenbelt, would create jobs, reduce prices, reduce the housing benefit bill, and create all sorts of new positive dynamic externalities as places like Oxford are allowed to follow their natural economic geography and increase in density of smart people. But when the university does try to build more housing, on brownfield land next to the railway in the centre of town, campaigners complain about ruining the skyline. Not even building on "greenbelt," not destroying animal habitat or some beautiful piece of land itself, but obscuring the view of a church spire. Why aren't young people angry about the miserable hovels we are forced to live in? Most of us have been lucky enough to escape Britain at some point in our lives - we've seen the possibilities of better cheaper housing that exists in almost any other country in the world. Where is the angry youth pro-building lobby?

And now in addition to already having the smallest and most expensive houses in Europe to choose from, my  search in Oxford is thwarted by "Housing in Multiple Occupation" rules. Any rented house with more than one "household" in it needs to be registered, with increased legal obligations on the landlord, which means lots of landlords just don't want to bother registering, and so can't or won't rent to a group of young professionals instead of a family. So after being priced out of getting our own houses and basically forced to share because of government planning regulation, we're now thwarted in attempts to find a house which the government will allow us to share because of yet more well-meaning but utterly self-defeating regulation. Here's a better way to take power from landlords and give it to renters: Build. More. Houses.

UK Public Spending

I don't think I've seen any proper discussion of the composition of UK public spending amongst the current debates on cuts and benefits, so here are a few charts from the IFS. 

From a 2009 survey of public spending you can see what the main categories are - social security, NHS, education, and defence. 

Then this observation compares mid-Labour pre-crisis spending in 2003 to estimated spending by the end of the current government in 2007. They aren't all that different, except for increases in health spending, pensions, and debt interest.

Finally this 2012 survey of the benefit system breaks down the largest category, social security, into recipients. Unemployment benefits make up just 2.6% (though people out of work will also claim some of the low-income benefits such as housing allowance, and there are no doubt some people on sick and disability who could manage some form of useful paid activity, even if the reforms to the testing regime have been poorly handled and very unfair on some people). Nevertheless, 60% of social security is for the elderly and for children.

British attitudes to immigration

Analysis of the electorate's view of immigration, by the anti-racism campaigners Searchlight, the thinktank British Future and others, shows there is a majority for sanity and solidarity out there, which could be coalesced. A quarter of the population are hardline anti-immigrant - some of them racist. But another quarter, essentially Guardian and Economist readers, support multiculturalism. The remaining 50% are up for grabs, but can be won over.

Neal Lawson in the Guardian 

What do Indians think about British aid?

Following an exchange with Ian Birrell last week, I asked an entirely unrepresentative group of six Indian friends what they thought (all economists with degrees from UK or US). In general the British media's take seems to have been pretty devoid of voices of actual Indians who are not also politicians.

My hypothesis: that whilst Indian politicians might not want the stigma of aid, that people living in extreme poverty tend to be grateful when they get some free money, and don't really care where it comes from.

None of my friends knew of any surveys or data on the subject (though someone did remind me of this book from interviews with 6,000 aid recipients, not from India, who were in general grateful for the support but also had  their criticisms). 

Two of them agreed with me

"People would probably not care where aid is coming from. To people in the poorest sections, there is very little that distinguishes Britain from the politicians in Delhi in so far as both are equally removed."

and

"India does need the aid of course (small or big is irrelevant). Any extra help to India's efforts to bring down inequality and deliver services to the poor is highly appreciated, the important thing to worry about is the effectiveness of this aid."

A third argued that it is about modalities

"Overall the debate about aid is clear, it is important, and it is a safety net for the poor. The debate over DFID money is not about aid in general, it is about the modality of delivery, the quantity of aid, and the ability of DFID to hold the Government of India to account for the way this aid is spent. All of this considered, I think it makes sense for DFID to reduce the amount of aid it gives to India directly and maybe, channel it through the World Bank or UNICEF or the like."

The other three mostly disagreed

"whether the extremely poor would be happy to receive any extra amount that might come their way irrespective of source—hell yes! They don’t care whether it’s DfID or Delhi. But is that a reason strong enough to justify Britain’s aid to India? I am someone who feels we (India) don’t need aid (British or otherwise). What we need is fixing the various inefficiencies in how we target and deliver health, education, free ration and the entire gamut of public services to the poor, and this is something India needs to figure out for itself."

and

"Public opinion is not super supportive, and Indians mostly 

1. Don't give a damn about aid
2. Are suspicious of most state actors, but think it does have a role (which can't be filled by DFID)
3. Are paranoid about foreign intervention and control (we did have the east India company!) 

Obviously though the response would be different if you were to ask the direct beneficiaries, but it isn't easy to assess the counterfactual. It's unlikely they would not have received support in the absence of DFID. My guess is if you did a census - 80% would not know or care about aid, 18% would oppose on nationalist grounds and 2% would support!"

and

"It makes a lot of sense for DFID to pull out of India and spend that money in Bangladesh, Cambodia, or Indonesia, where it can do as much good (dense poor populations) but is unlikely to run into that same thicket of issues (at least on the UK domestic front).  

Can DFID money do good in India? Yes. Do I think DFID are better than other donors at figuring out where to spend? Probably yes (for the most part). Does DFID involvement in India endanger UK aid even elsewhere? Almost certainly so! 

It's not worth the tradeoff."

I think at this point I may lean toward the issue of modalities - whilst giving cash to Indian governments might be best ruled out, should we really rule out supporting civil society or even individuals?

What do you think?

British history in 416 words

Bernard Porter (Emeritus Professor of History at the University of Newcastle) isn't impressed with the history chapter in the British Government's new "Britishness" syllabus for immigrants. Here is his excellent very short history of Britain in full:

"As immigrants to Britain, you are following in a long tradition. Britain's origins lie in successive waves of immigration from the European continent and Ireland: Celts first of all, then Romans, northern Germans, Scandinavians and Norman-French, most of them coming as conquerors, but some just to settle; and then bands of refugees from political tyrannies and economic deprivation from the 17th century to the present day. Many of her most distinguished later citizens have been, or have been descended from, these immigrants. They include some of her greatest artists, scientists, industrialists and statesmen and stateswomen; most of her older aristocracy; and her present Queen. 

"To complement this, Britain has also been a nation of emigration, sending 'settlers' to countries such as North America, Australasia and Southern Africa, usually displacing their original inhabitants; traders, investors and slavers all over the world; and conquerors and rulers to India, Africa and elsewhere. Some of the settlers could be regarded as 'economic' refugees from Britain and Ireland, driven thence by hunger. You will very likely have come across their descendants and the legacies of what is called 'British imperialism' in your countries of origin. There are differing opinions over whether the latter has overall been a force for good, or for ill. 

"Back home, Britons have long prided themselves on their toleration, which was what made possible their generous 'political asylum' policy in the past; the 'freedom' of her institutions, especially the law, and the jury system that underpins that; and - latterly - her parliamentary democracy. All these, however, have had to be struggled for, usually by the 'common people' against a political class that has not always shared the same values; and they can never be said to be absolutely secure. 

"Britain's historical 'identity' is confused, differing not only according to class, which is still a powerful factor; but also according to nationality (English, Scottish, Welsh, Irish); region (north-south); religion (Protestant, Catholic, secular, Muslim etc); and gender. Like every other nation in the world she has a mixed history of proud achievements, usually in defence of 'liberty', both her own and others' (slaves, Nazi-occupied Europe); and of egregious sins, some of them in her colonies. 

"Britain is not defined by her history, but is ever developing, in response to internal dynamics and global pressures, including movements of population. To become British is to identify with this complex and changing identity. To become a good citizen will involve embracing the best and most liberal features of it, and rejecting the worst."