The Common Agricultural Policy – a costly protectionist racket

‘The Common Agricultural Policy forces consumers to pay ‘two or three times more for food than we would pay without the policy’
Dalia Grybauskaite, EU budget commissioner 
The way to build lasting economic growth [in Africa] is for Europe to end the CAP
-Sir Digby Jones, former Chairman, CBI.

The Common Agricultural Policy is an EU-wide system of agricultural subsidies. It is a form of protectionism that represents the worst of European Union parochialism. It is designed to “defend” the European agricultural industry from cheaper products from outside producers. The EU spends between £45-50 billion per year (£49 billion in 2013) on this system which is approximately 43% of the total EU budget. The subsidies are combined with protectionist measures such as import tariffs and strict quotas on certain agricultural products from outside the EU. This has made European food prices some of the highest in the world and is seriously detrimental to foreign farmers.

The CAP subsidies have often caused overproduction, which has led to food being destroyed, or sold at below market prices through export subsidies or being stored thereby creating the, now infamous, “food mountains”. The subsidies exports are flooded into third world countries, especially Africa. By undercutting local farmers, who cannot compete with the low priced subsidised imports, the policy is distorting the market and impoverishing people. With growth and development being absolutely essential to the long term prospects of third world countries,the CAP is seriously harmful their underdeveloped economies. The subsidies prevent them from exporting agricultural produce to the EU on a level playing field, creating inflated food prices for us, and economic stagnation for them.

History

During negotiations on the creation of the “Common Market”, France used its influence as the second major power of the EU to lobby heavily for subsidies for its farmers which have stood ever since. This privilege was her price for agreeing to free trade in industrial goods and one of the many benefits France enjoys for its status as the secondary power behind the project. The CAP was created in 1957 under the Treaty of Rome and was implemented from 1962.

It aimed to increase productivity and to protect agriculture throughout the EU by controlling prices and levels of production, and to protect the countryside by subsiding the rural lifestyle. It has in-fact had the effect of protecting big agricultural businesses and enriching hereditary landowners while also damaging the rural environment. The subsidies led to big agri-businesses growing ever larger and stifling smaller producers. The CAP, by guaranteeing prices, encourages producers to use every bit of available land. Inevitably, they have altered the rural landscape with intensive farming. Every furrow is valuable thus efforts are made to use every bit of available space.

A landscape which had been unchanged for centuries and was famously pleasant and aesthetically pleasing is now less diverse. Ancient hedgerows have been torn up, swathes of land are blighted by industrialised prairies and polluted with high levels of chemicals and pesticides (leading to water pollution and soil degradation). The natural habitat of wildlife have been disrupted or destroyed, leading to widespread declines in the populations of many farmland bird species and other wildlife.

By the 1990’s the process of reform began in attempt to curb the amount of waste and address environmental concerns. By 2013, after the first full review since the policies inception, a number of reforms were been approved to be implemented in the period 2015-2020. They represent an attempt to move towards sustainable agriculture and prevent overproduction and include policies intended to preserve the environment and encourage new entrants into the industry. The reforms, while welcome, were a long time coming but have done nothing to address the fundamental problems with the policy. Further, far reaching reforms, of the kind sought by Britain for decades, are unlikely to happen because France and her allies benefit disproportionately from the subsidies and will not allow changes to that threaten the status quo.

Costly protectionism

Britain should strive to be an open, free-trading nation with a global outlook. The CAP is the very antithesis of free trade; it is protectionist central planning and economic isolationism. The cost of food has been steadily declining for decades but the great recession has created a cost of living crisis in Britain and across Europe, food prices have risen and the CAP exacerbates this, costing hard pushed consumers. The price inflation can be seen by comparing wholesale food prices in Europe to world market prices, this shows that we are paying 17% more for food than we would under market conditions.

Central planning and market intervention always creates distortions and unintended consequences. The worst of all the damage caused by the CAP is the way it punishes consumers, especially the poor. The Common Agricultural Policy should be abolished; this would represent a drastic measure to address the cost of living crisis, cutting food bills for all European citizens and bringing relief to impoverished households across the continent.

Advocates of the CAP will protest but for the way forward we need only look to New Zealand. Farmers there had enjoyed generous taxpayer funding and were disconcerted at the thought of losing out but in 1984 when the government was faced with a budget crisis it decided to repeal all subsidies. Did the predictions of disaster and an end to small family farms come true? No, since then the agricultural sector has thrived!

Much like in Europe subsidised farmers in New Zealand had become dependent on government aid and were, in-effect, farming in such a way as to meet targets to make them eligible for subsidies.  This was detrimental to productivity and innovation. When all subsidies were removed farmers in New Zealand proved to be entrepreneurial, innovative and adaptable.  Now, instead of trying to maximise the amount of government aid received, agricultural practices are now motivated by the demands of consumers and farmers are focussed on good business practice. it is as simple as growing things that consumers want to eat. Productivity is up, efficiency and innovation has increased and the industry is thriving without taxpayer hand outs.

Abolish the Common Agricultural Policy and Europe could have a dynamic, diverse, prosperous and growing rural economy too, and we would all be saving money on our food bills.

Huzzah for the voluntary sector!

Hurrah, civil society is not dead! It warms one’s heart to know that there is still a great deal of compassion and get up and go amongst the British public. Just over six years ago an economic catastrophe of the kind not seen since the 1930’s sent us spiralling into a major recession. We are still suffering the consequences and will continue to do so for years to come. Unemployment rose, wages stagnated and a cost of living crisis struck; the poor struggled to pay bills and many found themselves unable to afford enough food for their families.

In response, various groups of empathetic people around the country got together by their own volition and decided to do something to help those in need. The aim was to provide the poor and needy with fresh food at the point of crisis. The food was provided by supermarkets and wholesalers and the food banks were set up purely through private charity, with not a single penny of public funding. They proved to be a resounding success and helped many people, thus they expanded across the nation and soon food supplies began to flood in from private individuals and businesses. Today, thousands of people are going to food banks and benefitting from the generosity and thoughtfulness of their fellow human beings. This is a national disgrace and a scandal according to left wing statists who have managed to shroud this great success story in political point scoring and negativity.

Ah, but they argue that a “rich” country like Britain should never have any need for food banks, that nobody in such an apparently rich country should ever struggle to afford food. They then use this notion, and the fact that the number of people using food banks has risen considerably, as an argument against austerity, and as a stick to beat the Tories with and prove that they are intent on starving poor people to death while they eat caviar from golden tea spoons and guffaw. Many even cite the issue as evidence that the whole capitalist system is fatally flawed and must be replaced. There a number of problems with these arguments.

First of all, calling Britain a “rich” country and pointing to its position in the economic league table as evidence that nobody should ever go hungry is a facile point to make. This country has a budget deficit of over 100 billion, a current account deficit of 70 billion and a national debt approaching 1.5 trillion (£1,500,000,000,000) that can never be paid back. The simple fact of the matter is that the United Kingdom plc. has gone bust.

There are however many wealthy individuals in this country (rather a different thing), but what do leftists want, to confiscate the property and money from the wealthy by force and hand them to the poor? Well, yes, many of them probably do. A few of them would probably rather like to put on their fresh-from-the-sweat- shop Guy Fawkes masks and string a few of the rich folk up before posing for selfies with Russell Brand. Revolution!

Imagine that, enacting such a redistribution process and marvelling at the subsequent exodus of people and wealth, the death of productivity and inevitable economic catastrophe- the food banks would not be able to cope with the queues formed. Those using food banks as an argument in their tedious theses that capitalism ought to be overthrown are wilfully ignoring the historical fact that shortages of food and goods are a permanent feature of centrally planned economies.

It is also important to realise that it is nonsense to believe that there were not many, many poor people struggling financially in previous decades, the economic crisis has simply exacerbated the problem. When I worked as a volunteer for a health and social care charity (mainly working with criminals and drug addicts) many clients sought referrals to food banks. The reasons that people use food banks are varied, around 1 in 5 cite low income and 1 in 6 cite benefit changes, beyond this the causes are wide ranging. There are social problems such as family break down, debt and crime that have been deeply engrained long before the current crisis, and glitches in the welfare bureaucracy are inevitable considering the sheer number of people on the books. The real shame is not that food banks exist at all, but that they haven’t existed for longer. The first one was set up in the year 2000 and was a success, due to this the initiative spread and many more opened. This fact rather discredits the argument that food banks are a symptom of coalition failure, unsurprisingly as more food banks appeared more people have made use of them.

So, what is the future for food poverty and food banks in Britain? The Archbishop has called for the state to get involved but this is exactly the wrong solution. Food banks have been a resounding success and far from being a “disgrace”, as the self righteous Jack Monroe has said, they are a victory for the voluntary sector and a great achievement for the industrious individuals running them. How would state funding, and a new government department, improve what is already working so well? It is baffling to cite the failures of state bureaucracy as one of the reasons people are left short and then argue for the nationalisation of food banks. It makes no sense to call for taxpayer funding when we are facing years of cuts in public spending to bring the nation’s finances under control. Government profligacy is a major factor in our current economic plight; we have to look different solutions.

For a start the left must stop politicising this issue and using it to further their ideological agenda. Food banks are not an argument against austerity, especially when that so-called austerity involves borrowing £2 billion a week just to cover government expenditure. Their moralising over food poverty becomes transparent when they avoid discussing the inflation of food prices caused by the Common Agricultural Policy (heaven forfend that they would criticise their beloved EU), or the heavy taxation (including lifestyle taxes) of the poor as previously mentioned by Simon Gibbs.

What we need is for the state to keep out of food banks. If politicians want to help they should encourage and help their constituents set up independent food banks in their communities. The real solution is to expand the initiative further, food banks should become a permanent fact of our national life and we should celebrate them. Lets have one in every town! Many supermarkets already have donation baskets; I want one in every supermarket across the country! The fund raising operation should be expanded to help cover the costs of start ups and operation. Other charities have donation boxes in shops, fund raisers in the street, why not the great charities feeding our hungry? The call for the state to swallow the sector into its bloated and creaking welfare state is misguided. The success of food banks have shown us that with a little stimulus from conscientious individuals civil society can spring to life. Rejoice that our society is one capable of great humanity and compassion, let’s harness that and encourage the voluntary sector to even greater successes.

*Donate to the Trussell Trust*

Full Video: The Causes of the Cost of Living Crisis

The cause of the cost of living crisis in Britain is Government. That is the overwhelming message of our October 23rd panel event. The panel discussed the origins of the meme, the origins of the crisis. We agreed that a decent standard of living is to be earned, not taken from others.

On food pricing, the EU’s subsidies and trade barriers force tax payers to pay to increase the price of food, with ridiculous examples of agricultural subsidies flowing into London boroughs.

On energy, it is Government policy to restrict the demand for energy by increasing the price of it with carbon trading and micromanagement of the energy sector.

On housing, we didn’t even cover the money supply, but there was unanimous agreement that planning restrictions, especially the green belt undercut supply and force prices up.

On all our simple pleasures, and many of our necessities, indirect taxation adds 37% to the tax bill of the poorest in society.

Inequality is falling and the 1% are no longer racing ahead. It is time to end the war on wealth and give people the freedom to produce it, and the freedom to teach each other how.

Today George Osborne will be telling us how much Government can afford to give us – give it a break George.

Inequality and Labour Markets with Ben Etheridge

It has been said that Ed Miliband has grasped the nettle of inequality by reframing the debate around the cost of living crisis meme. For some, this represents a final hope of justice – social justice, that is.

Before considering the merits of the case I asked Ben Etheridge what had actually happened with respect to inequality since the 2008 crisis. Ben acknowledges the public discourse over the gap between the extreme top and extreme bottom he says that in fact overall inequality has gone down since the crisis six years ago.

The big story for Ben is that inequality has increased between the generations. Pensioners have done okay, but the young – regardless of their original earnings position – have suffered greatly. (I clarified this with Ben, pensioners have not improved their lot, they have merely suffered less)

Kristian asks whether the position of pensioners is uniform for pensioners that are, or are not homeowners, and if perhaps the reason for pensioners’ better position is timing – did they buy their assets before the crisis happened? Ben clarified that in fact the statistics he was thinking of related to current incomes, so housing is less of an important issue. One group that has done unusually well is older workers (something, I note, that Sam Bowman mentioned as a possible consequence of minimum wage rises). Ben explained that employment rates for workers over 55 have gone up, with people not wishing to retire and a relaxation of compulsory retirement over the last 5 years feeding that desire.

Ian volunteers that there is a curious phenomenon of the top 1% have done unusually well, but that once stripped out the ratio between the bottom and the remaining top incomes is surprisingly low – just 1:40 – and that this ratio is much more acceptable to him (there is simultaneous surprise at each end of the panel that a figure has been put to what would be acceptable inequality).

Ben replies that there was a long term trend for the top 1% to stretch ahead of the rest, but at the beginning of the crisis they did particularly badly and since there is no noticeable trend for them compared to anyone else – a statistical observation that differs wildly from the popular narrative.

Ian confesses to be quite seduced by Rawl’s argument that inequality ought to be tolerated to the extent it serves the interests of the poorest people in society. As such, he says, that the relative position of the 1% ought to be considered a problem because it cannot be demonstrated to serve people in the bottom income quintiles. Ian asks Ben whether there is evidence that the rise of the 1% does serve the poor.

Ben confines himself to further details of how the bulk of additional wealth in the US has gone to the 1% but considers the redistribution of that to be a political matter. He does not, however, have a problem saying that some of it should be distributed, only that the amount to distribute is a political question and not an economic one.

I ask Yaron, as a proponent of his own favoured moral theories, whether the Rawlsian position is one he identifies with. He does not. He does not believe that we measure our success according to the effect we have on others. He believes that there are sound rational reasons why the top 1% (in fact the top 0.1%) had got richer. They have not been exploiting the poor, instead it is because they are more productive – mainly because they have access to a global population as a market. For Yaron inequality is justice, because people are rewarded by the market based on their productivity. Unless it can be shown that the wealth of the rich was stolen, coerced or fraud has been committed then the income distribution is the result of voluntary transactions and it is therefore morally acceptable.

I turn to Kristian to introduce the topic of monetary policy. Kristian explains that quantitative easing – money printing, in effect – inflates the wealth of those who are already wealthy. Kristian is more interested, however, in the question of why it is the very top 1% of the income distribution who benefit from global markets and not the top 2%, for example.

Ben suggests there are many explanations that have been put forward but the answer is not properly known. He expands on the explanation offered by Yaron earlier that “superstars” – Jack Nicholas, Rory McElroy, leading brands – are known to global audiences now and to demand converges globally for those particular names or brands. Kristian wonders whether this fully explains that the trend is isolated to the very top, and whether the tax system may have a role. Ben is sure that nobody knows for sure. I press for names of people working on the problem and am given Thomas Piketty (whose work was discussed here recently) and Emmanuel Saez (who has worked with Piketty).

Yaron has, I understand, actually read Piketty and is keen to describe some of the problems. Piketty starts his book by describing inequality as immoral – something Yaron regularly disputes, in fact he had just done so. Yaron also claims that Piketty misunderstands the nature of capital, seeing it as an undifferentiated and passive actor in the economy that earns 8% return without effort, and his pricing of capital assumes an effective market for it, which is not a safe assumption. Yaron gives a perspective on the problems of the US tax system and how changes have not been reflected in Piketty’s treatment of the data, and references problems in the data that other commentators have picked up. Yaron is frustrated that this flawed book is given any credibility at all.

I turn next to the subject of Kristian’s research – the measurement of poverty as a relative thing – and whether this means there will always be some people who are poor. Kristian says that in fact it is possible to, mathematically to have an income distribution in which the lowest paid are within 60% of the median. To do it, you need an income floor and to compress the distribution. He says no society has ever done this, including progressive examples such as Sweden and Denmark. Instead he suggests that you measure living standards directly by measuring consumption, and avoid the use of a median.

Kristian explains that the conventional relative measurement of poverty tends to produce effects such as poverty declining during financial crises because the rich have become less rich, not because the poor have done better and improved their living standard. This quirk means that the recession under Labour reduced poverty more than their welfare largesse.

Yaron agrees, adding that World War II did a lot to reduce inequality because blowing up the assets of the rich tends to shift the wealth and income distribution that way (as does signing up the lower classes as soldiers and killing them). For Yaron inequality and relative poverty are not the right questions, for him the problem is one of freedom. He says there are lots of reasons that a larger global pool of employees, especially one that has brought in lots of developing nations. The most extreme talent is relatively rare in such a pool – Yaron gives the example of China creating demand for the “rare talent” of CEO’s that is unmatched by any additional supply from that country (for the time being). For Yaron this is a “reflection of justice” in which people are rewarded for their particular skills and abilities.

Kristian volunteers that “extreme egalitarian” such as the authors of the Spirit Level, are fond of the war-time economies. Yaron adds that Piketty has made the same reference to the same period of falling inequality but repeated that the war and destruction which caused that fall should not be encouraged.

I offer the last word to Ben Etheridge who speaks up a little for the idea of worrying about inequality. He says it is equality essential for prosperity. To nods from the panel he mentions equality before the law and in front of civil institutions. Nods cease when he gets to mentioning universal healthcare and education as part of the same category as equality before the law. Finally, Ben worries that we ought to worry about the 1% stretching away because this will put the institutions he just mentioned under threat.

This last point proves a little too contentious to leave alone, so I challenge Ben to describe how the rise of the 1% is a threat to these institutions, “will they go and knock them down?”. Ben clarifies that he was talking about the capture of political institutions in particular and suggests that there are precedents in history for societies breaking down when elites take over.

Kristian asks Ben whether he felt that there would be less of a problem if politics was simply less important (an obvious libertarian solution to the corruption issue). There is much drawing of breath when Ben suggests “politics is always important”.

Yaron comes in because he feels the cause of potential breakdown is not at the top but at the bottom. He thinks the main issue there is that public education consistently fails the poor. Richer families are always able to afford a better education, but public schooling let’s down the poor and does not equip them with the kind of technological skills in particular that they need.

Ian Dunt smells a rat and asks if Yaron would abolish all public schools? Yaron says he “absolutely” would.

Suddenly there is intense debate again – we are not looking like finishing yet! Ian Dunt asks how people will afford to get to these schools. Yaron refers to fellow Micklethwait mentoree James Tooley’s “Beautiful Tree” which describes the systems of private education in surprisingly poor districts and says there “he does not think there is such as situation” in which the poor would be unable to afford a private education that pulls them up. This amazes Ian Dunt who speaks of the kind of person living in London working for Tescos on 16,000 a year who has difficulty surviving. Yaron says that the slums of Calcutta and Nigeria people do in fact afford education.

Yaron pulls out his trademark iPhone and, while qualifying that he would not simply privatise education and leave everything else alone, he would love to see the kind of melting pot of innovation that goes on in the App Store applied to the education industry. Cue applause from this audience!

Vice and Taxation with Christopher Snowdon

It stands to reason that if the purpose of a tax is to help someone – by reengineering their choices, as it is in this case – then the tax should have an effect that is essentially benign. After all what would be the purpose of driving a family to the point of starvation in order to discourage the expensive and environmentally unfriendly practice of running a car, or smoking and drinking? Notwithstanding the idea that such a policy is illiberal, and undermines personal autonomy, as a way of helping people it makes no sense on its face.

That Sin Tax is, by now, certainly high enough to create that sort of problem is something of a surprise to me. I asked Christopher Snowdon to tell the audience how serious it had become:

He explained that, in real terms, the British state spends more than 6 times what it did after the second world war. There is no way for it to find that money by taxing the rich or even by taxing just the people who have a job. It has to do it in very sneaky ways using indirect taxes, and the burden of indirect taxes is on beer, cider and wine, on cigarettes, fuel duty and also on VAT which has crept all the way up to 20%. This has been extremely regressive, and oppressive

In 1977, the poorest 20% of the population were spending 22% of their income on Indirect Taxes, which has now risen to 30% of their income. But for the rich, it was 20% and is now 15%. So it has become increasingly regressive, although everyone is now paying more in absolute terms than they were before. During good times, it’s relatively easy to justify indirect taxes on the basis of saving the environment and good public health, but when the economy goes backwards the problem is far more obvious.

Sin taxes and Indirect taxes are a central part of the causes of the cost of living crisis now. If you are in the bottom 20% of the income bracket and you drive a car a moderate amount, and if you’ve drunk within the Government’s extremely modest guidelines, and if you smoke an average amount, you will be spending 37% of your disposable income on Indirect Taxes, not the products but just on indirect taxes – VAT, alcohol duty, fuel duty, etc.

Christopher suggested that fuel, alcohol and tobacco duties should be halved, VAT should return to 15%. VAT and Fuel add to the cost of everything so if we want to solve the crisis, now is a good time to reduce these taxes.

Ian Dunt differs from much of the left on these issues, and unlike his over-study he is uncomfortable with the level of taxation on so-called vices. Ian argued that sin taxes have proved to be a very poisonous cultural phenomenon. Firstly, when the budget comes around each year it is expected that a rise in sin tax is included. That impacts the way budgets are put together as we then expected a rise in these taxes, and they are not scrutinised.

The second point is more concerning, the way we’ve adopted a moralistic attitude towards people – the way we’ve started to look at health and life, not as something that should be had intensely and possibly for a shorter time, but something that should be assessed by how long it goes on for, regardless of the quality of the life itself. (Yaron looks extremely surprised by this comment), and this is an extremely authoritarian and toxic approach to public policy.

If you look at smokers, the truth is that smokers pay for themselves in the NHS. They do this by virtue of the fact that they often die (around 50% anyway) before the point in their life when they start costing the state money. Smoking is not something that kills you when you are 30. It tends to kill you (if at all) when you near 60. So all your working life is spent contributing to the state, and then you kill yourself when you are about to take any money from the state. Ian gets a laugh as the audience processes this gruesome idea. Ian does expose his collectivist streak when he suggests this is “good”, and accepts that it is in fact primarily good for the Treasury. According to Ian, we don’t just need to fight the taxes but the attitude and the culture that has turned authoritarian. In terms of fighting the cost of living, he does not accept that this is the best place to start.

Simon puts it to Yaron that alcohol is bad for you and surely a rationally self-interested person should not be engaging in it and since Yaron is committed to rational self-interest perhaps Yaron favours Sin Tax? In fact, says Yaron the state, your neighbour, and so-called society should not be telling me how to live my life. He agrees that it is stupid to smoke, for example, and it is self-destructive, but it is not automatically any of Yaron’s business. So Yaron asks why are we becoming more authoritarian, why do I we care about other people consuming bad food, etc? The reason he sees at work is that as healthcare is becomes more socialized, and if I am health and you are unhealthy, then I am subsidizing your unhealthy behaviour. The only way to step back from this authoritarian view of health is to step away from collective action in health and make people suffer the consequences of their own actions.

In a free market, he argues this would be automatic as – at a minimum – your insurance premium would go up, but then the collective is on then hook to pay for bad health then we start caring excessively and we become our neighbours watchmen.

Ian Dunt challenges Yaron on this because it does not correspond to the trend (or at least to other data). Typically America is where the fiercest anti smoking campaigns are happening, and this has been happening for the last 20 years but America is a free-market insurance based system. In a fascinating exchange Yaron corrects Ian claiming that even before Obamacare 51% of health spending was spent by the government largely because over-65s have a very high level of care provided so America has had socialised medicine since the late 1960s. Yaron agrees there is indeed a huge movement to regulate or tax fat and sugar, and soon the government might go as far as rewarding you if you exercise. Ian challenges Yaron on the point that people in America don’t consider that that is the system that they live in, instead typical-Americans think that they live in an insurance based system and so that doesn’t explain how that frenzied moral puritanism took over. Yaron, who watches the American elections for clues as to what ideas are dominant, describes how Republicans have campaigned to remove the socialised medicine that exists now and to protect free market healthcare but they always promise not to touch MediCare. As such there are actually conflicting opinions that are both popular and Yaron believes one of those conflicting opinions causes the puritan sentiment.

Christopher seems to settle matters by agreeing that the main argument people use to defend sin taxes is the cost to the NHS, but he believes this opinion is not sincerely held. The real underlying driver that they don’t approve of it and seek excuses to ban it. Kristian concurs, adding that 100 years ago people would say alcohol or smoking is bad because it’s immoral. Now nobody would say that because that would imply they are judgemental, so as a result they come up with all these rationalizations. In passing, Christopher remarks it is probably a good thing that blatant moralising is now frowned upon and that real puritans have been forced to hide it in order to make progress.

Before we break, Christopher Snowdon suggests that it all might be a lot simpler that this. The state is looting. Since the sinner, especially the smoker, is already the subject of opprobrium and is in a minority, it is a simple task to extract tax revenue from them because the majority will support it, and so punitive 37% rates of double taxation are imposed and the state gets away with it.

Duncan Stott on Housing and planning

I put it to Duncan that the incredible cost of housing is down to the planning system and we’re unlikely to get any disagreement on that. Duncan agrees and uses a fantastic analogy with the car market to demonstrate just how overplanned and overcontrolled the system is and how this leads to shortages and spiralling prices. The audience cannot help but laugh, but of course this is real and has serious consequences for the housing market and the “countless” people that have been “Priced Out” of the house market.

Priced Out is the name of the campaign Duncan works on, one that favours house building programmes as the means to achieve a zero house price inflation target, and caps on the amount of a mortgage relative to income, both policies that would have proved controversial had they been discussed.

Duncan moves on to talk about the Green Belt claiming that the Green Belt (an area of restricted development around London and other towns) represents some of the best land to build houses on but this is not permitted. He says there is little hope of these restrictions being lifted.

Turning to mortgages Duncan did not mention his plan to cap lending but did argue that plans to help people afford homes by subsidising them would only raise prices still further. Yaron Brook volunteers a comparison with US institutions “Freddie Mac and Fannie Mae” which ran subsidy programmes in the US and which collapsed and (as I recall it, though it is rarely mentioned) precipitated the collapse of the entire US banking industry and lead to the global Credit Crunch, or which “contributed” to it according to Duncan.
Feeling a bit more combative than to earlier segments I turn to Ian Dunt and ask him about Ed Miliband’s plan to simply overrule all of the market distortions and malincentives already discussed by simply setting the price of rents. I ask Ian whether he believed this widely supported.

In fact, Ian tells us, the Labour Party would prefer something more radical, and more redistributive such as changing Council Tax bands. He doesn’t say whether this means penalising the owners of larger homes (one assumes it would, in order to be redistributive) nor what the effect would be on house prices for first time buyers.  According to Ian, the main issue is a lack of supply and it is well understood internally in the labour party and across the political spectrum.
Ian explains one barrier to progress is that there are no tory party policies that are not targeted specifically at the election. He attributes this to the appointment of the chancellor George Osborne as the election co-ordinator, it is this, he believes, that motivated the Chancellor to put “the entire economy of the country at risk so that people in the South East can find it a little easier to buy houses” – referring to the Help To Buy scheme.

Ian regrets a political culture which is which has stifled the communication of Labour Party policy saying “no interesting ideas have come out of the party”. In fact, in their 2 year policy review, ideas were stamped on very hard to make sure that nothing could be used against them in the media.
I ask Kristian why, if there is broad agreement within parties the problem cannot be solved immediately. The answer: full time NIMBYs. There is a culture of complaining about housing development in your own back yard, so to speak, and the people involved often do nothing else with the rest of their time. We all seem to have an idea of what needs to be done but no one does anything about it because there are these groups who purely work against any housing development. In fact it’s like an industry. Kristian talks about how they egg each other on on twitter, encouraging each other to sign petitions, contact planning officials, and write articles with the objective to stop housing development.

Duncan Stott agrees with the above and mentions the presence of these groups in places like Oxford. He says it is understandable as one would imagine that when you have already put the majority of your savings into a house, you would do everything you can to ensure the prices did not drop in value.

According to Yaron, the fundamental issue is the disregard for property rights – a term which seems to cause Ian Dunt some amusement. Yaron explains that once the government controls how individuals use their property, then various entities come into the scene and influence how things are run. You as the owner have very little say over how your property is used. The solution is having a property rights regime, so only the owners of the property have complete control over how that property is used and / or disposed.

I challenge Yaron to the effect that given complete freedom some property owners might build ugly homes, but Yaron believes the fact that people besides the owners want houses to look or be managed a certain way is not a reason to give give them that control. “You do not have a right to a view” of the green-belt or smart homes or anything else and peoples’ “wishes and wants” is not where the proper standard of rights or the standard of truth are derived from.

Kristian talks about a potential market solutions to the problem of preserving views. He recalls that before the Town and Country Planning Act individuals or groups bough restrictive covenants or development rights. This did not involving physically buying the plot of land or property but gives an “exclusionary right”. Such a system would allow neighbours to ban all or certain types of development – at an appropriate price. Such a solution would mean that an entity like the CPRE would have to buy these development rights. Instead of signing petitions then, they would have to collect money from their members in order to purchase what they wanted. Kristian was hinting that this would neatly and fairly disincentivise NIMBYism.

Yaron makes a more general point that all of the problems discussed so far are caused by markets not being allowed to function, and that when they do they can be incredibly innovative at finding solutions.

While wrapping up Duncan makes the point that anarcho-capitalist solutions are a long way off, but in the meantime he would like help ensuring that councils are as ambitious as possible with targets. He says that Councillors are sensitive to the letters they receive so the next time you witness NIMBYism in action, send a snotty letter.

Chris Mounsey on Energy costs and climate policy

Chris Mounsey joined us for this section to talk about Energy prices. Chris’ superficially contentious central point – which none of the panelists actually disputed – was that the reason energy prices are high is becuase it is Government policy to increase them. That in order to protect the climate government policy has been to reduce the demand for energy by making it more expensive. This has happened through the Cap and Trade / Emmissions Trading scheme, through Green Energy mandates and other interventions. Chris observed that becuase energy costs are built into every economic transaction, increasing energy costs in this way silently pushes up costs throughout the economy, not just prices on energy bills. This narrative differed hugely from the oft repeated claim that Energy companies are extracting huge profits from consumer bills.

Kristian Niemietz’ research made two appearances. From the chair, I made the point that the increase in food bank use, seen as a moral and market failure by many (and a victory of both by me, if you want my opinion) is not just down to the increasing food prices we pay, but is caused by all of the various drains on our income, and energy is one of the major ones.

On his own behalf Kristian asked why it is that total carbon emmissions are capped and traded and  – at the same time – the energy market is micro-managed with certain industries and types of power generation protected or discouraged. Kristian’s view was that a cap and trade was enough and, that once the licences to emit were moving through the economy, the market would determine the best way to address the cap. Individual managers made decisions about what emission producing activities to cut and which to licence.

I also asked Chris whether the process of arriving at the selected mix of top down caps and micromanagement was fair, accurate and honest. He said that while it might be contentious, he suspects the answer is no. Chris gave a quick review of the controversy surrounding the University of East Anglia’s work on climate modelling. Some hacked data, code and emails had been released to the public and the emails had caused quite a stir (the “Hide the Decline” controversy) which ended in a select committee inquiry. However, for Chris the “smoking gun” was not the “Hide the Decline” email (which hinted that climate thoeries had been proved wrong) but the code and programmer’s commentary on the code which revealed a number of problems:

  • Data used inaccurately, reversing it’s meaning
  • A process that could not be reproduced
  • No process for handling invalid inputs

So alongside controversies about where this data came from in the first place Chris was doubtful (to put it mildly) as to whether the process was either honest or accurate.

By now the 2008 Climate Change Act had been mentioned a couple of times, and Chris had made the point that this hugely expensive (£80-140 billion) Act had been passed on Ed Miliband’s watch. I put it to Ian, therefore, that the problem was caused by “his lot” the social democratic progressives and Green enthusiasts in Labour, the Liberal Democrats and the Green Party. Ian disagreed on three counts:

  • That environmental policy was the result of a “perfect storm” of tory and left-wing ideology which prioritises the protection of the country-side and the eco-system.
  • That in fact not much climate change legislation had been passed recently – Cameron has “cut the green crap” during the crisis.
  • That it was not possible to reduce the cost by much anyway because extracting energy from the ground was inherently very expensive.

It was Ian’s view that the other panelists were on the wrong track and this was not a good place to start working on reducing the cost of living.

Picking up on the first point I put it to Yaron that there was an inherent contradiction at work when every political ideology stands in favour of policies that make every value – regardless of what it is – much more difficult to obtain (by driving up the cost of every economic transaction). Yaron described this as naive (professionaly naive, I assure you dear reader) and said that humans regularly “commit suicide” – as individuals and as collectives. The environmentalist movement is an example of this happening to the West, but at the moment enough common sense is prevailing to avoid unmitigated disaster. Yaron’s preferred course is to allow fracking, and oil extraction investments to be made freely because the benefit of having carbon based energy vastly outweigh the damage from climate change, even assuming it happens just as environmentalists sell it (incidentally, though it may sound incendiary the expert has – prior to the event – already highlighted the fact that his is an officially recognised option, one which culture seems biased against).