Tomorrow, vote for change
This election is not a choice between higher taxes and higher spending, but a chance for a break from instability and neo-liberal governance, says John McTernan
Change. That’s the proposition. Labour promise a break from instability. Instead of five Prime Ministers in six years they offer just one – Keir Starmer. A man with a plan for a decade of renewal. On the face of it, stability should be attractive. What some call a “moronic risk premium” hits all of us – from home-buyers to businesses – who have to borrow money.
In one very obvious way, the argument has been made and won – and for a considerable time. Opinion polls since October 2022 have given Labour a commanding lead of around 20 points. And though polls traditionally close in an election year, and an election campaign, this time they have only narrowed between the Conservative party and Nigel Farage’s Reform who are fighting them from the right.
The cliché about the election is that Keir Starmer has been carrying this poll lead as carefully as if it were a precious Ming vase. And when Labour’s manifesto for government was launched it received a lukewarm reception from journalists. The professionalism of the launch was praised but where, rose the cry from journalists covering it, where the “rabbits from the hat”. The point, of course, is that if your offer is stability you are committed to no surprises. All Labour’s policies had already been socialised, but what Keir Starmer offers is radical.
It is a break from neo-liberal governance. In place of the extension of the market into every sphere of economic, public, and social life, Labour offers “mission-driven government”. Their five missions focus on growth, crime, health, decarbonisation, and social mobility. In each of these areas, the party says “We have a problem! What are we going to do about that?” That is both a liberating and a mobilising question. Every individual, community and business in the UK can play their role.
There are some small, carefully costed investments in public services such as the imposition of VAT on private school fees to pay for investment in state education. Similarly, a windfall tax on oil and gas profits will build a National Wealth Fund to invest in modern industries such as “green hydrogen” and “green steel”. There is a clear offer for young people. Votes at 16. Expanding childcare. Tackling youth mental health. Halving violence against women and girls, including challenging its root cause – misogyny, and vetting police officers properly. An immediate pay rise for 300,000 adults by removing the National Living Wage discriminatory age bands above 18. Ending zero hours contracts. Reforming the private rented sector by ending Section 21 and no fault evictions.
The most radical break with the recent past is Labour’s central commitment to grow the UK economy faster. The strategy for this has two main pillars. First, accelerating the decarbonisation of the UK economy with the creation of a nationally owned energy company, GB Energy, with £8bn of capital to derisk investment in innovation in the renewable energy sector. Second, to radically reform the planning legislation that holds back the building of the national infrastructure needed for the green economy. A change in planning laws will also allow the building of 1.5m homes giving an opportunity for ownership to those currently locked out.
This industrial strategy is backed by a restoration and extension of employment rights. Creating a fairer balance between capital and labour. With an extension of devolution to cover the whole of England and responsibility for employment services to local mayors, Labour offers huge and progressive change in the labour market.
This radicalism was missed because of the myopic debate that is caught in the contours of the past. The right call for tax cuts and spending cuts. The left counter with demands for higher spending and higher taxes.
Starmer’s Labour reject that stark choice. There is a third way – growth. It cannot be delivered solely by government but the right conditions can be created. Stability, both in policy and in political leadership is a fundamental requirement for business investment and consumer confidence.
Max Weber famously said they “Politics is a strong and slow boring of hard boards. It takes both passion and perspective.” Keir Starmer embodies that approach. He reformed his party. He tore down two Tory Prime Ministers – a record unmatched by any other Labour leader. Now he is offering real and sustained change to voters.
The reward is not simply growth but a restoration of trust, both in public institutions and in the business of politics itself. Boris Johnson gave us ‘Partygate’, Liz Truss gave us a disastrous Budget and a premiership that was shorter than Harriet Harman’s time acting as Labour Leader. Rishi Sunak’s campaign has seen him soaked in the rain, scuttling back early from the D Day 80th anniversary commemoration, and unable to condemn the sordid spectacle of his staff and close aides gambling on the election date with insider knowledge. The case for change could not be more forcefully made than this.
John McTernan is a political strategist and commentator and former adviser to Tony Blair
To avoid five more wasted years, vote for a strong opposition
Without the growth needed to fund the higher spending his MPs and voters demand, Starmer will resort to appeasing them with anything he can deliver on the cheap: constitutional meddling, banning things and red tape. A mega-majority just makes this more likely, so vote Conservative tomorrow, urges Henry Hill
To read some of the commentary around this election, you’d think we were about to experience a decisive break in our national politics. Goodbye to the Tories and all the chaos and instability of the past few years. As parties of the radical right make headway on the Continent, Britain will have a social-democratic government with an historic majority. Stability awaits.
Yet a closer examination of the Labour campaign suggests that a Starmer Government seems very likely to fall into many of the exact same traps that the Conservatives have hurled themselves into time and again.
Promising to be better than Boris Johnson or Liz Truss isn’t a foundation for lasting popularity (ask Rishi Sunak). Nor is a majority built on a vague manifesto of nice promises a recipe for successful government (ask Boris).
Yet there’s a reason the opposition is playing those tunes: because on the substance of the questions that really matter, there is far less between them and the Tories than anyone would expect in what is supposed to be a transformational election.
Yes, Rachel Reeves talks a lot about growth – including, if her rhetoric around “living standards” is anything to go by, the important, per-capita sort. Yes, Starmer is talking a big game on housing, even leaning into Yimby talking points about building on the green belt.
If we were assessing the parties on talk, however, the Conservatives are going to deliver 1.6m new homes by turning central London into Barcelona. Talk is cheap; what matters is the actual policy agenda.
This is where the varnish starts to peel from Labour’s promises. Where they are specific they are often either trivial (non-doms, VAT on private schools) or inadequate (housing); more often, they are so vague as to be esoteric.
Starmer’s defenders argue that he isn’t chained to his manifesto once he enters office, which is true. But manifestos are important: not only do they give voters a clear idea of what to expect from their government, but they help to discipline MPs. Even those who don’t like a controversial proposal will usually vote for it if they fought the election on a commitment to do so.
If Labour wins vast swathes of the traditional Tory shires on Thursday, is a hazy pledge to “rewire Britain” enough to persuade those MPs to back the up to 460,000 kilometres of new overhead pylons industry estimates will be needed to get the National Grid ready for net zero? Will evasive promises to make the points-based immigration system “fair” induce left-wing politicians to row in behind any serious push to wean the British economy off the mass import of cheap labour?
As for growth, well: every politician, outside the wilder fringes of the Green movement, likes growth. But what is Reeves’ analysis of why the British economy has stagnated for almost two decades? The problem precedes Truss, Brexit, and even the advent of Tory rule. It seems unlikely the answer is ‘devolution’, which looks like an exercise in making it someone else’s problem.
Even if the likely incoming Chancellor is serious, she will have to battle ceaselessly against her own party’s worst instincts. From the planned Race Equality Bill to Bridget Phillipson’s mothballed plans to make childcare a graduate profession, the Labour instinct is always to try and brute-force social and economic outcomes through regulation.
Britain is a testament to the fact that trying to regulate a way to prosperity doesn’t work. Real growth is dynamic, organic, and uneven; it doesn’t always create the winners you want, at least on the timeline you want.
Unless Reeves can persuade her party of that, we face the prospect of getting trapped in a very Labour doom-loop: without the growth needed to fund the higher spending his MPs and voters demand, Starmer will resort to appeasing them with anything he can deliver on the cheap: constitutional meddling, banning things and red tape.
Sadly, the Labour leadership seems to have ducked this challenge. Tony Blair transformed his party by doing the hard work of forging New Labour in opposition; he didn’t wait for Tory decay to put him in Downing Street and then spring it on his MPs.
Even as a Conservative, I take little pleasure in predicting that Labour will fail. I live in the country they aspire to govern and will have to live through five more wasted years along with everyone else.
But I fear they will – and that this is only more likely if they win the mega-landslide forecast by some of the polls.
A big majority is useful only if married to the will to use it; otherwise, it just breeds complacency. Again, ask Boris Johnson. A viable opposition – when the Conservatives have rebuilt themselves into one – is in everyone’s interests.
Henry Hill is acting editor of Conservativehome
Andy Murray OUT of Wimbledon singles – but he’s not saying farewell just yet
Andy Murray will not play in the gentlemen’s singles at Wimbledon this year, failing to recover from spinal cyst surgery in time to take his place in the draw today.
However the two-time Wimbledon champion will be playing doubles alongside his brother at the SW19 showpiece.
The Scot has already told fans that this will be his last Wimbledon tournament, with retirement on the way at the end of the year.
“Unfortunately, despite working incredibly hard on his recovery since his operation just over a week ago, Andy has taken the very difficult decision not to play the singles this year,” a spokesman said this morning.
“As you can imagine, he is extremely disappointed but has confirmed that he will be playing in the doubles with Jamie and looks forward to competing at Wimbledon for the last time.”
Earlier this week Andy Murray told reporters that “it’s getting better and the testing I’ve done has been good. I just need to decide whether it’s enough to compete.”
He played a lengthy practice match yesterday and had been hoping to step out on court in the singles just nine days after the surgery.
The decision to play doubles means that fans will have the chance to say goodbye to Britain’s most successful tennis player of the modern era later in the tournament.
Yesterday’s first day at Wimbledon saw last year’s gentlemen’s winner Carlos Alcaraz battle past Mark Lajal on centre court in the tournament opener.
And Emma Raducanu overcame a slow start to win her own first round match, also on Wimbledon’s centre court.
Other Brits including Jack Draper and Katie Boulter start their tournaments today.
Lloyd’s chair slams plans for Shard-height skyscraper next to Leadenhall Market
The chairman of insurance giant Lloyd’s of London has made a last-ditch bid to prevent the now-vacant Aviva building near Leadenhall Market being redeveloped into a new 73-story skyscraper.
The insurance market’s Bruce Carnegie-Brown has written to City of London officials warning that the skyscraper – known as 1 Undershaft – would “rob the City of a really important convening space,” according to reports in the FT.
1 Undershaft would top out at 304m, just six metres shy of the size of The Shard, and is designed by Eric Parry architects.
The new tower would take over much of the footprint of St Helen’s Square, the plaza which sits in between the modernist former home of Aviva, the Lloyd’s Building, and Aon, Brit and MS Amlin’s home in the Cheesegrater – otherwise known as 122 Leadenhall.
City of London officials have previously approved a design for the area but developers have re-submitted plans with a new design, more height, and an 11th-floor public garden.
Others objections to the redesign have come from architecture fans who argue the St Helen’s skyscraper – a sleek, black, modernist design reminiscent of Mies van der Rohe’s Seagram Building in New York – should be allowed to stand.
Aviva moved out last year to a new space on Fenchurch Street.
A vote on the new design will occur later today.
The Notebook: Will Labour have the City’s back?
Where the City’s movers and shakers have their say. Today, it’s Lucy McNulty, editor of Following the Rules podcast, with the notebook pen, talking politics, Brexit, and the need to celebrate the City.
Labour must celebrate the City
With Labour widely anticipated to end the week in government, concerns are growing within the City that the party does not care enough about its future.
Sure, the party has made enough of the right noises to garner decent support across the City – its announcement in January that it would avoid tampering too much with financial services rules was roundly welcomed after years of regulatory change and Brexit turmoil. But now City bosses are hankering for more.
Saker Nusseibeh, chief executive of the London arm of US fund giant Federated Hermes, told the Following the Rules podcast that politicians in the UK’s main parties had become too “ambivalent” towards the City. He wants to see more enthusiasm. “We have in the City created an extraordinary engine of wealth creation and growth for the country,” he said. “We don’t celebrate it enough. It’s a matter of celebrating what we did.”
It echoes comments from other influential City voices.
Mark Austin, a partner at law firm Latham & Watkins and a veteran of several reviews into London’s listing woes, last month said politicians, regulators and finance workers alike had “a responsibility now to talk positively” about recent efforts to encourage more business to the UK’s markets.
But this isn’t City bigwigs pushing for a collective pat on the back. This is an effort to reframe the increasingly negative post-Brexit narrative around the City’s prospects and to encourage a more rigorous promotion of the sector’s role in driving the UK’s future economic growth and global competitiveness. After all, the more effort is made to promote the City’s role as a wealth generator the more distributable value the sector is likely to generate.
This can only be welcome for a Labour government which will struggle to tackle its to-do list with public finances as they are.
Even so, Labour ministers are unlikely to want to join any cheerleading squad, not least because the City still has work to do to shake off post-crisis tropes in the eyes of its members. But for a sector still smarting from its often-strained relationship with recent Conservative governments, the value of steady support from the next government cannot be understated – whatever form that takes.
Finance bosses shouldn’t ignore Brexit noise
A scheduled review of the UK’s current trade deal with the European Union is nearing and already attention within the business community is shifting to the task ahead. The British Chambers of Commerce, the UK’s largest business organisation, last week called on the next government to deepen EU ties to boost trade and growth.
A Labour government will have to get creative in its approach to EU relations, not least because it will need to balance calls for a fundamental Brexit rethink with the competing preferences of its Brexit-voting supporters. It has already ruled out a return to the EU single market or a customs union with Brussels but promised to seek to improve ties in its manifesto.
For City bosses that have by now navigated being almost entirely shut out of EU markets, and been largely ignored in previous negotiations, the temptation to ignore the noise will be great. They shouldn’t. A change of government will also force a political reset with EU decision-makers. And that also presents an opportunity for the City to push to revisit its relationship with the bloc – a prospect to be grasped, not ignored.
Real-world sums
Just one per cent of UK primary schoolteachers believe the majority of their pupils have an “adequate” level of financial literacy, according to a recent study from the Social Market Foundation. Labour said in October it would introduce “real world” maths in primary schools if elected. Although light on detail, such a plan is undoubtedly a sensible step forward. But its success rides on all of us taking responsibility to educate the next generation on everyday finance and why understanding it matters.
Quote of the week
The lack of women in computing may lead to… the dominance of men in shaping the modern world.
The number of girls in England studying for a computing GCSE has more than halved since 2015, according to research from King’s College London.
What I’m reading
Things We Do Not Tell the People We Love by Huma Qureshi
Summer holidays provide a great excuse to re-read old favourites in my view. And this beautifully written collection of 10 short stories published in 2021 is just that to me. Written by the former journalist turned critically acclaimed author Huma Qureshi, the book brings the reader on a journey through bucolic English countryside, the bustling city of Lahore and the relative calm of southern France. Interlacing all stories are elements of shock, as well as unspoken truths and misunderstandings between loved ones, family members and otherwise close friends. It’s poignant and relatable and, perhaps most importantly for this time of year, easily digestible. You won’t want to put it down, but once you do you will find yourself revisiting it again and again.
How dual-class shares will help London attract tech IPOs
The FCA has made plenty of mistakes, but they are right about dual class share structures — these will encourage new listings and tackle the London Stock Exchange’s persistent short-termism, says Daniel Valentine
The Financial Conduct Authority is preparing reforms to the listing regime of the London Stock Market which have been described as “the biggest overhaul of the listing rules in 30 years”. Meanwhile, to critics the proposals represent evidence of desperation as the FCA slashes investor protections whilst bottom fishing for new IPOs.
The reform which has received most attention from the FCA’s package is the proposal to take a more permissive approach to dual-class share structures.
The logic behind dual-class share structures is to allow company founders to sell equity in their company without giving up control. These devices achieve this by creating two classes of stock, one with extra voting rights for founders and another with lesser voting rights for the general public — or no votes at all.
Profit sharing and company control are therefore separated, with shareholders being offered a share of profits but not a share of control. Dual-class share structures are hated by many governance purists who idolise “one share one vote” and the board’s independence from management. The dual-class structure however, has some beneficial effects; it encourages new firms to list substantial proportions of stock on the market, and it creates a more stable company, since the company is able to pursue a long-term plan insulated from market turbulences including activist shareholders, proxy battles, hostile takeovers and short-termism.
Dual-class stock structures are extremely popular on American stock exchanges, in fact it has become the default structure for tech IPOs. Many successful technology companies have selected these structures at the initial public offering stage, including; Google Facebook, Zoom, Meta, Snap, Shopify, Alphabet, Palantir, Snapchat, Lyft, Airbnb, and Dropbox. Dual-class shares are also common in Hong Kong and Singapore, territories where family succession planning is crucial. Attempts to retro-fit dual-class share structures onto companies which were created with a single share structure have been much less successful
Dual-class stock has a well-recognised potential for powering innovation. Protected from shareholder pressure for dividends, companies can reinvest profits in research and capex, creating groundbreaking innovations. Many UK-based retail investors and most institutional investors prefer dividends over high levels of capex, the dual-class share structure tips the balance of power towards managers and away from investors to give managers greater strategic latitude. The quid pro quo that investors demand in exchange is that the company selects a CEO of exceptional vision and remarkable ability, in whose hands the company’s future is secure.
It is the view of CGIUKI that dual-class structures have a role in a stock market and that permitting dual-share structures at IPO may help London to overcome its persistent short-termism and begin to attract tech listings again.
When Henry Ford founded his company in 1903, it took him only five months to make a profit. The time horizons to profitability are typically much longer now. It took Amazon nine years, and Twitter and Uber took twelve years a piece. Do we think that UK investors would allow boards such long periods of grace? The UK has a persistent problem with investors preferring dividends over capex, and dual-class structures enables managers to invest in capital expenditure with long pay-off horizons.
In reality, many investors neither have the appetite nor the skills to contribute to corporate decision-making. They simply want the company to pick the right leaders and the right strategy. Dual-class stock can help with both of these by separating ownership from control. We encourage investors and policy-makers to consider this element of the FCA proposal seriously. The London market has become notoriously short-termist, and dual-class stock may be exactly the antidote that London needs.
Daniel Valentine is head of communications at the Chartered Governance Institute UK & Ireland
Building Blocks: Smart contracts – the groundbreaking feature of blockchain technology
Every week Blockchain Sensei will be walking you through the basics of blockchain technology. Consider this your crash course in all things web3!
Blockchain’s ability to deploy “smart contracts” represents one of its most revolutionary aspects. Originally defined by pioneer Nick Szabo in 1994, then further developed in 2017 by Witek Radomski. Radomski is the author of the ERC-1155 standard – an advanced Ethereum token protocol that enables developers to deploy both fungible and non-fungible items in a single smart contract.
Despite the overwhelming hype around meme tokens and NFT artwork, those are mere fractions of the true capability of smart contracts. The applications of this technology are profound across industries like real estate, logistics and finance.
Smart contracts encapsulate the terms of an agreement in computer code and execute deals automatically based on predefined triggers. This circumvents the need for fallible human intermediaries. Instead, transactions occur transparently through a decentralised network architecture.
This matters tremendously for simplifying complex transactions. Settlement times for security trades could soon complete instantly instead of over days. Supply chains can embed self-executing logic for procurement, shipment and payment. Even time consuming, complex processes like commercial property leasing may transition to smart contract workflows. Cost, speed and accuracy all stand to benefit.
Make no mistake, monumental revenue potential exists in commercial and consumer discretionary smart contract applications – LVMH, Tiffany & Co, Starbucks are already utilising this technology to identify and refine high value customer relations. Nike has earned $185M dollars in NFT sales revenue and $90M in royalties from $1.3B in NFT sales volume which can’t be ignored.
However, the biggest financial opportunity extends far beyond marketing stunts. Mainstream Wall Street firms now aim to tokenize traditional assets like real estate on blockchain. Central banks across the globe are even prototyping digital currency projects and programmable money using smart contracts. As regulated capital markets adopt blockchain rails, a raging bull market for institutional investors becomes inevitable.
The ultimate promise of blockchain technology lies in something even greater than direct profit – evolving the very architecture of agreements themselves. By embedding complex contract terms directly into software, deals can execute immediately upon meeting mutual terms of satisfaction. Trust increases, fraud risk declines, while auditability soars compared to traditional methods. This unique automation of integrity is why many deem blockchain to be as critical as protocols like HTTP were to the internet. It launches technology’s next era.
Despite the immense promise and future potential of smart contracts, the path forward is not without challenges. Ethereum as the dominant smart contract pioneer currently averages $6 per blockchain transaction and faces severe scaling limitations. Alternative networks like Solana offer solutions focused on speed and low fees, as little as $0.003. However, speed comes at a different cost and Solana has experienced multiple network outages in times of severe demand.
What seems certain is that automation will accelerate, especially as artificial intelligence matures. The prospect of AI-agents transacting autonomously via blockchain raises provocative questions. But its transparency could also provide visibility into activities otherwise hidden from public eye. Ever bullish Cathie Woods, CEO of ARK Invest, forecasts estimates of $5 trillion in decentralised finance activity by this decade’s end. When automated agreements become the norm, blockchain’s relevance will truly be undisputed.
The Notebook: Rejoining the EU is the single biggest way to kickstart growth
Where the City’s movers and shakers have their say. Today, it’s James Chapman, director of Soho Communications, with the pen, talking Brexit, the cons of polling, and a reading recommendation
Brexit has left voters disaffected
Brexit, the great unmentionable of this general election campaign, is what has really sealed the Tories’ fate.
Those who voted to remain have been alienated and infuriated to watch the disaster that has unfolded. In traditionally true blue commuter belt seats like Esher and Walton, where I live, the Liberal Democrats look set to clean up at the expense of the Tories as a result.
Those who voted leave are no more impressed with the Tories’ handling of Brexit. They consider that the Brexiteers told them a pack of lies and can’t be trusted, a sense compounded by Boris Johnson’s dissembling over Partygate. The economic benefits that were promised have palpably failed to arrive, and instead the damage Brexit has done to the economy is obvious, even masked as it is by the impact of Covid.
As a result, voters are deeply disillusioned with the entire Brexit project. Less than a quarter (24 per cent) now think the UK should remain outside of the EU, while 71 per cent say the economy is worse off because of Brexit.
Polls consistently show that over 60 per cent of voters would opt to go back in, given the chance. Even if the UK was forced to join the euro as a condition of reentry (and surely an accommodation would be reached to enable the UK to stay out, given its longstanding position on the pound), almost half of all voters already want to rejoin.
Labour has steadfastly refused to engage with the subject in this campaign. Indeed, its election manifesto commits to staying outside the EU and even vows to ‘make Brexit work’. This is simply incompatible with Labour’s pledge to pull all the available levers to stimulate economic growth. The single biggest thing the party could do to kickstart the economy – rejoining the EU single market – is ruled out, apparently forever.
Promises of a better trading relationship seem certain to prove hollow given this position.
Having promised to make it work, Labour will quickly find that it owns the problem in government. If we have learned anything about Brexit, it’s that like all revolutions it devours its children. It will destroy Keir Starmer too, in the end, unless he changes course.
To poll or not to poll?
Like all political geeks, I’ve been glued to the opinion polls over the last few weeks. It has been diverting to watch the Tories plumb ever-lower depths thanks to their car crash campaign. But is there a case to ban polls in the run-up to polling day? Countries like Canada, Greece, Mexico and Norway all restrict pre-election polling. In 2015, the polls arguably distorted the result by pointing to a hung parliament which led to a relentless focus on a potential Labour deal with the SNP. Certainly, without all the polls we might have concentrated a little more in recent weeks on what the next government actually proposes to do for five years.
Reform’s selective hearing
Senior figures in Reform have started bleating in advance about the election result, complaining that the first past the post system fails to translate votes into seats for smaller parties. They have clearly forgotten that we had a referendum on electoral reform in 2011, and 68 per cent voted ‘no’ to ditching first past the post and adopting the alternative vote system. Surely Reform accepts that the referendum result reflects the ‘will of the people’ and can never be revisited? Or am I missing something?
Victoria Starmer impresses
Up until this weekend, Keir Starmer’s wife Victoria hadn’t appeared with him at a single political event in the campaign, with a charming picture of the couple attending a Taylor Swift concert marking the one other time she has been seen. Political gossip websites have shabbily tried to imply this might mean there is something wrong with the Starmer marriage. In reality, Starmer appears determined to shield his family from the toxic political spotlight. He and his wife have chosen never to disclose their children’s names publicly. This, and Victoria’s determination to leave the campaigning to her husband, seems entirely admirable.
What I’ve been reading
I have been re-reading my favourite contemporary novelist David Mitchell’s magnum opus Cloud Atlas, which is somehow 20 years old. Mitchell has developed a cult following and I am told my signed first edition is now worth hundreds of pounds, though I don’t intend to part with it. It has been a long wait since his last book in 2020 and I can’t wait for the next one, which hasn’t been announced. However there are rumours that it will be a Viking saga with the usual supernatural twist.
Build, Baby, Build: Affordable housing is too hard to sell
There is a quick fix to get house houses built: Reform Section 106 to make it more viable for developers to sell affordable housing, says Jonathan Seager
Housing has been one of the top issues during this general election campaign, with political parties jostling to one up each other in their pledges to tackle a key concern for voters across the UK and, particularly, London.
The capital needs to build at least 66,000 new homes a year but is falling considerably short of this target.
The rhetoric from the major political parties is seemingly pro-development. Commitments have been made about the number of homes that will be delivered accompanied by differing strategies about how this will be achieved. But these manifesto commitments are largely focussed on the long-term. In the short-term, what will get spades in the ground is finding ways around log-jammed systems such as the delivery of affordable homes through Section 106 agreements.
These agreements, made between a developer and a local planning authority, require the developer to mitigate the impact of their development on the local community. They act as a mechanism by which large residential developments provide a specified amount of affordable housing, with this affordable housing generally sold to and managed by a Registered Provider, which is typically a housing association.
To secure planning permission and start building, the affordable housing component must be secured through a Section 106 agreement, but the system isn’t working. Most of the largest housing associations that have traditionally bought Section 106 affordable homes are currently not pursuing these deals. The feedback from many developers in London is that this has now reached a critical level of concern.
What lies behind this lack of activity is a combination of factors curtailing the level of investment that housing associations can allocate to new homes. The same issues that have beset housebuilders are also impacting housing associations: high build cost inflation, regulatory uncertainty and an under-resourced and convoluted planning system. Additionally, housing associations are having to focus on improving their existing homes through a renewed focus on repairs and maintenance, upgrading energy efficiency and addressing fire safety concerns.
If that wasn’t enough to grapple with, over the past 10 years housing associations have had to contend with lower levels of grants to support their construction programmes and changes to agreed rent settlements. Both of which have necessitated savings to be found by reducing capital investment into new development.
Developers need housing associations to buy their Section 106 affordable housing, but associations are not in the market for such development. Historically, developers would tender these affordable homes, choosing a partner from a competitive process. Running such a process now generates, at best, a small number of interested housing associations which are struggling to pay a rate that is viable for the overall scheme or, at worst, no responses.
Recent years have seen the rise in for-profit registered providers coming into the market but their appetite for significant additional investment is currently limited due to the wider economic environment.
Pragmatic, short-term solutions could help kickstart delivery. In some instances, it makes sense for local authorities to receive the cash equivalent of the affordable homes from the developer, using this money to support their own affordable housing schemes. In other instances, simply expanding the list of registered providers that a local authority deems acceptable in their area may also help.
These quick fixes must, however, be supported by structural reform. A new Government should provide long-term certainty about both a future social rent settlement, ensuring its reflective of the costs that housing associations are facing, and its Affordable Housing Programme, ensuring the money is provided flexibly to reflect the cyclical nature of development. This long-term certainty would have the added benefit of also attracting more private investment into affordable housing, bolstering the limited amount of public funding that is currently provided which, when the economy allows, must ultimately be increased.
So, beware of headline grabbing, five-year manifesto solutions. Greasing the wheels of the existing system is vital to unlock new homes and development in the short-term, which will in turn support London and the UK to build, baby, build.
Jonathan Seager is policy delivery director for research and impact at BusinessLDN
Build, Baby, Build: Four things the next government must do if it’s serious about growth
Both parties say they will go for growth, but they are ducking some of the really big questions about how we get there, says James Vitali
Both main parties are conscious of how precarious the UK’s public finances will be over the next Parliament. Both are hopeful that a significant uptick in the UK growth rate might extricate them from having to make some very difficult decisions on taxation or public spending. Yet in their respective manifestos released last week, Labour and the Conservatives have produced markedly different visions for how that growth might be achieved.
When it comes to growing the economy, Policy Exchange’s has argued strongly for a greater sense of political strategy and prioritisation. What, then, are our priorities at this election, and how far have the two main parties addressed them? If we had to choose, we would say there are four: supply side reforms to make it easier to deliver housing and infrastructure; measures to support savings and investment; a simpler tax code that better supports work; and reforms to the civil service to get a grip on the ballooning size of the state.
Housing and Planning
If a government could do just one thing, we would want it to be planning reform. The current regime inculcates uncertainty, delay and vexation, and dampens the entire supply side of our economy.
Both parties have put forward sensible suggestions to get more homes built. The Conservatives have pledged to densify existing urban areas, regenerate estates and support self and custom housebuilding – all policies advocated in Policy Exchange reports like Homes for Growth and The Property Owning Democracy. We are also pleased to see a commitment for scrapping nutrient neutrality rules which are holding up hundreds of thousands of homes in areas of demand, and a pledge to deal with planning obstacles to non-residential development.
Labour too has offered sensible proposals to deliver housing near our cities, particularly on land near transport infrastructure on the green belt which is lacking in any environmental or aesthetic value.
And we are delighted to see both parties highlight the importance of widening property ownership in restoring the moral legitimacy of our economic model in the eyes of younger generations and how architectural beauty can help secure local support for new development – two things we have written about extensively.
But questions remain. For the Conservatives, the latest data for planning applications shows a seven per cent year on year plunge. With the scrapping of targets and changes to the NPPF, is there any reason to think that this figure will improve with their current proposals? When it comes to Labour, higher affordable housing requirements upon developers are likely to slow the actual delivery of homes in the short to medium term.
Savings and Investment
Britain’s low investment rate is the subtext of our economic malaise, as we set out in our report Economic Transformation: Lessons from History. It is why our businesses are not getting more productive and it is why our infrastructure is increasingly tired and dated. And what investment we do have is often funded from overseas, which puts pressure on our Current Account, and eventually the UK’s fiscal position. Of all the important macroeconomic indicators, our savings and investment rates are where we lag the most internationally.
The Government should be commended for its efforts to increase business investment, particularly the last Chancellor’s introduction of full expensing. And broader attempts to reduce the tax and regulatory burden will be supportive of business investment. But the Conservative Manifesto did not offer any powerful inducements to support savers, nor any reforms to incentivise investment in UK capital markets, which we believe is a missed opportunity.
Labour has made increasing investment a central part of manifesto pitch, particularly “catalytic” public investment. The case for greater public sector investment is strong indeed, but how it is to be funded is a thornier subject. With the state already larger than at any other point in peace time history, Labour is not pledging to finance that increased investment by rebalancing day-to-day spending, but by altering the fiscal rules to create room for borrowing for the purposes of investment. If Labour’s stated aim is to make the UK economy more resilient and more robust, this is the wrong way to think about funding an increase in the investment rate.
Taxation
Let’s start with the good. The Conservatives have maintained their pledge to cut employee National Insurance Contributions and eventually scrap them, reducing the tax burden on earned income. This is certainly a positive, pro-growth move, and will make a material difference to household finances (even taking into account frozen thresholds). Smoothing the cliff edge on VAT is a sensible move too, as is moving child benefit to a household basis.
The business rates system is outmoded, and fails to account for the vast shift towards online commerce. Labour’s commitment to reform it will support high streets and future proof revenues.
But beyond this, both parties’ policy platforms on tax have shortcomings. With an urgent need to bring down the tax burden as a proportion of GDP, it is entirely right for the Conservatives to scrutinise Labour on whether they might add to that burden.
But unfortunately, this contest to look the most hawkish on taxes has also led them to rule out reform in areas of the tax code where it is badly needed. Council tax is still based on valuations set when John Major was Prime Minister. Some of the homes which have seen the greatest capital gains in this time have the lightest tax liabilities.
Moreover, the Conservative commitment to scrap self-employed National Insurance Contributions at a cost of £2.6bn is a poor way to incentivise entrepreneurship and widens the wedge between employed and self-employed income.
Of far greater concern is the fact that the Labour party does not appear to see reducing the tax burden as a priority at all, nor to reconfigure the tax code to be more supportive of growth. Instead, lumping VAT on private schools may end up reducing the number of good school places in the UK and thus hamper one key driver of productivity – that is, skills and education.
Cutting the Size of the State
The driver of a higher tax burden and of anaemic productivity growth is the size of the state. Reducing government expenditure as a proportion of the economy is critical if we are to build a more dynamic economy.
It is on this subject perhaps where the difference between the two manifestos is starkest. The Conservatives have committed to a £12bn reduction in the welfare bill, and efficiency savings through reducing the swollen number of working-age benefit claimants post Pandemic, reducing spending on “EDI training”, consultancies, and “quangos”, and reducing the number of non-frontline NHS employees.
Labour, by contrast, have said there are no such savings to be had on the welfare bill. And it has made clear its commitment to a larger, more active state as part of its vision for “securonomics”, with new publicly owned companies, and an undertaking for more government intervention in labour markets. Growth, Labour argues, will be driven in large part by a “smarter” state. But while securonomics taps into a widely held desire for greater economic security, there is little reason to believe that their plans will leave households more resilient or robust. Indeed, higher taxes and greater dependency on state support will have the opposite effect.
We should welcome the fact that this election is being fought on growth, and that both Labour and the Conservatives are seeking to outbid each other on how best to enlarge the economy. That is the right conversation for our country to be having. But some tough choices are required to futureproof the government’s balance sheet, and to deliver per capita prosperity in the UK. And it is fair to say that both of these manifesto’s broadly duck or defer the really important ones.
Dr James Vitali is Head of Political Economy at Policy Exchange