The Last Post (for 2017)

A final piece for 2017 reflecting on the year now ending.

Brexit overwhelms most everything else. Back in the Spring, Duncan Maclennan and I presented a paper at the Housing Studies Association on our thinking about Brexit’s implications for UK housing. The consequences of Brexit remain far from clear (and that is the most constructive excuse I can give for not yet finishing that paper). That said, it seems evident that there will be important housing consequences flowing through exchange rate risk, medium term fiscal pressures, construction capacity shortages and the wider changes on economic prospects and how they feed in to housing demand.

The General Election was a curious affair. It seems like a long time ago now but even in the summer of 2016 when Theresa May became prime minister, people began to speculate on when the election she said would not be called, would actually, inevitably, happen. No-one in the media questioned the election until probably the day the publication of the manifesto pushed the funding reforms for social care. Very few people felt even on the day of the election that the Conservatives would not have their majority and mandate for their form of Brexit. Key assumptions have not been borne out or are at risk: a majority with the mandate to go forward with its vision of Brexit; a pliant Commons allowing them to ‘get on with it’; and, the capacity competently to manage the domestic economic and social agenda (what has come to be called in Scotland the ‘day job’).

In Scotland, we have now had a full year of the new Scottish Parliament and have settled in to a minority government and a new domestic political agenda majoring on the new tax and social security powers, narrowing the educational attainment gap, legislating on planning system reform, delivering affordable housing supply targets and doing more to tackle homelessness. This was also the year that legislation reformed the private rented sector creating open ended tenancies and the capacity for local rent pressure zones (a form of locally designated limited rent increases).

The Grenfell Tower disaster was a human tragedy and a collective failure of policy and practice. It is still, at this distance, hard to grasp the scale and horror of what happened. It will continue for many years to have substantial repercussions, especially for social housing high flats (just last week my council, North Lanarkshire, floated long term plans to demolish and replace their entire stock of multis). The response is also in part a recognition after the fire of the wider lack of understanding of contemporary social housing, who lives in it and what they experience. The enhanced concern with fire safety is also now rightly moving beyond the nonmarket stock to the rental market too. Grenfell in the short run is about understanding what happened that caused the fire and looking after everyone affected; in the longer run it will have wider consequences for housing, neighbourhoods and landlords.

The year for me, professionally, has been transformative. We established the UK Collaborative Centre for Housing Evidence, which started business in August in the Olympia Building in Bridgeton. After the best part of 10 years as a head of department and then directing Policy Scotland, I can now focus on housing research and have the privilege of working with an excellent team of co-investigators, staff and partners across the UK and beyond. It is all-encompassing and immensely enjoyable. However, we are now moving beyond set-up stage and into implementation and I look forward to delivering our projects and activities, and in playing a constructive role bringing evidence to housing policy across the UK.

Next year will see the Brexit story continue into its critical trade discussions. How will the key battlegrounds fare?  Domestic politics will be surely driven by Brexit and the capacity to manage domestic politics and policy as well as the complex realities of minority government and parliamentary tactics (i.e. shades of the late 1970s). Will Scottish politics remain primarily on the ‘day job’ next year?

In 2018, we will see a new green paper on English social housing, concerted work in different parts of the UK is now promoting good practice and evidencing innovations both to end rough sleeping and to consider effective homelessness prevention. I am involved in CiH’s new project on rethinking social housing, which will contribute evidence around the big themes in the green paper. I am also delighted to be on the shadow management board of the fascinating new evidence-focused homelessness impact centre, led by Ligia Teixeira (and is partnered with CaCHE). Next year will also undoubtedly see the first evidence of the impacts of the 2016 rental market legislation in Scotland, as well as the recent stamp duty changes for first time buyers. Hopefully, there will also be further work by groups like CaCHE, to make more sense of the housing system as a whole, how it interacts and how actions in one tenure or place have repercussions on others. Duncan and I also need to finish that Brexit paper.

Scottish Welfare Benefit: Using the New Powers

The Scottish Government last week announced the first use of its new devolved powers over welfare benefits. The 2016 constitutional legislation gave Scotland power over specific benefits amounting to around 15% of all benefit spend in Scotland as well as powers to top up and create new benefits in most areas (though not pensions) which would be funded from within Scotland, as well as discretion to amend specific benefit rules in certain ways as they apply to the application of Universal Credit. 

While not underestimating in any way the importance of the devolved benefits to their recipients, it is in truth the medium term development of top-up, new benefits and the use of these discretionary rules that will mark out Scotland’s own path on welfare benefits mostly distinctively. And of course this will also be where the political debate will be most intense.
A strand of the party political discourse in recent months has been the Government’s reluctance to take on the new financial powers and use spending, tax and benefit powers to pursue a range of home-grown policies. In truth, there are plenty of reasons not to alter radically income tax rates, contemplate fundamental reform of council tax or spend block grant at the margin on extra benefit spending. The overall budget is undoubtedly under pressure which makes extra spending more difficult. Equally there is caution over raising taxes or being seen to threaten property owners via local tax reform. Third, Scotland has a minority government where tight votes over budget issues and their implications have to be carefully thought through. Fourth, the new benefit powers require new local policy and service delivery infrastructure that cannot be rushed – delay to the full devolution of benefits is inevitable and should not be surprising.
It was in this somewhat risk-averse context that it was encouraging to see the Scottish Government last week announce that it would (a) look at moving the frequency of Universal Credit payments to be shortened to fortnightly rather than monthly (with scope to consider who receives the payment too) and (b) that the rental element of Universal Credit could be paid direct to landlords, both social and private rental providers. These are low hanging fruit in the sense that they are relatively simple and low cost but they are important to the people affected, symbolic of what is possible and in the current circumstances, offer sensible policy development.
The direct payment issue is an interesting topic. Private landlords have longer experience of tenant responsibility for making rent payments but both social and private will undoubtedly welcome the security of payment offered by rent paid direct. It was always apparent that vulnerable households and people already in arrears should be exempt but that begs further questions about definitions of such categories and the opportunity cost of setting up systems to manage them and to prepare social tenants for payment responsibility. One might in principle want to shift over time cautiously  to a system of tenant payment responsibility but this is simply not realistic at present or in the foreseeable future. The benefits of direct payments to landlords far outweigh the cost.
The big challenges remain – in particular, for housing costs, removing the ‘bedroom tax’ and contemplating increasing the levels of housing costs covered by Universal Credit. These will have direct spending implications (though will be offset in the case of the bedroom tax by reducing the need for discretionary housing payments to go to help tenants meet the spare room charge as well as other contributions from the Scottish Government). But we do have a start in the announcements made last week. And, as Frank Herbert once said ‘a beginning is a difficult thing’.

Scottish Council Tax Banding Reforms

I was back giving evidence this morning at Holyrood. The Scottish Government has drafted a statutory instrument that seeks to increase the weight and consequent charge applied to properties in Band E, F, G and H. They have also proposed an amendment to the means-tested Council Tax Reduction Scheme (CTRS) such that those households on below median incomes who do not currently receive CTRS will be eligible for all of the increase being met by the CTRS if they are in the higher bands. The extra £100m that this will generate will be hypothecated to support the national priority of closing the educational attainment gap. Finally, it is proposed that the long standing council tax freeze will be replaced by a cap allowing up to 3% increases in annual average council tax bills.

There are wider related issues as well concerning ongoing consultation over localising a share of income tax receipts so as to promote local economic growth.  Second, the Government is also consulting over taxes that encourage the reuse of vacant and derelict land and tax development. Finally, councils will be given the power to charge the full council tax on second homes.

The whole process around the Statutory Instruments and related immediate changes is highly truncated with the rapidly approaching new financial year, changes to CTRS, the new cap – and of course local elections thereafter in 2017.

The proposals are the outcome of the process begun by the Commission on local tax reform. The proposals need to command a majority in Parliament. Not everyone in Holyrood agrees with this current band-tinkering direction of travel (e.g. the Scottish Greens).

There is interesting written evidence on the site, not least from David Bell and form the former minister and co-convenor of the Commission, Marco Biagi.  In the section below, I paraphrase the main reflections in my written evidence.

Reflections on Reform and Beyond

Is the proposal package more progressive (i.e. ‘fairer’)? It makes a regressive tax less regressive and offers significant exemption and hence compensation (albeit through a means-tested route) to all of those on below median incomes. The changes proposed do not appear on reflection to be massively difficult for councils to implement though there will inevitably be opportunity and transaction costs. However, I think there are wider questions and concerns.

While there was not complete consensus on the Commission for the action recommended there was agreement on the need to end the council tax and the freeze. What is being proposed, especially given the absence of a general revaluation, is clearly what the Scottish Government, in carrying through manifesto pledges, feels it can do. But what is maximal for them is less than the minimum in the context of the reasonable expectations generated by the Commission. My worry is that without further commitment to substantive reform we will back in five years saying here is a property-based tax which sets values on market levels from 30 years in the past. The weighting may be more fair but the values that place properties in bands will be in most cases wrong and increasingly illegitimate. It is hard not to see this as a political fudge which does not resolve the underlying problems indicated above.

A second point is that fairness with property taxation is complex. It is not just about tax in relation to current income (important as that is) but it is also about the importance of inequality transmitted and reflected in the housing market and the relative failure to tax housing as an owner-occupier investment. While we repeatedly hear of the importance of social justice and tackling inequality, one of the key sources of that inequality (as well as damage through market volatility to economic productivity) is apparently sacrosanct. Moreover, as John Muellbauer at the University of Oxford pointed out, there are other ways to support low income households pay their local taxes, such as through allowances (like the Greens proposed), deferred payments as well as well-designed benefit systems.

Third, while the CTRS reform is in many ways a neat solution to compensating those in low incomes in higher value properties, it does add a further layer of means-tested complexity, and it is not clear at this point what will be done to ensure the highest levels of take-up. This is all the more germane given that the exemption would go much further up the income scale to immediately below median net incomes. There is a tension here with government policy elsewhere which will likely lead to councils setting full council tax on second properties on the basis to bring properties into more efficient use, yet at the same time CTRS is being used to help households stay in properties that are often only marginally affordable, if that.

Fourth, I was surprised that it was deemed unnecessary to carry out an equality impact assessment for the CTRS and that no wider assessments were required for either the tax change or the CTRS. The £7m figure for the additional cost of the CTRS must have assumptions about take up rates – it would be interesting to know more about these – as I think there would be grounds to think that rates might be relatively low. Additionally, aren’t the lessons from the land building transactions tax introduction that these sorts of tax changes do have market effects at the upper end of the housing market and that this is likely to have some degree of impact on when people decide to move how and could conceivably affect the labour market decisions of higher net worth households. I would have thought that was something working looking into.

Fifth, while ending the freeze and giving councils back the power to charge full council tax on second homes provides more discretion locally, this is offset by the implementation of hypothecation the extra £100 million to a national government priority.

Following the evidence session this morning, a few final thoughts struck me.

First, the truncated nature of the process has left a few uncertainties. There was a lengthy discussion this morning about the mechanism by which the £100 million for education will be managed and allocated locally. Second, we are unclear about the timeline and practical proposals for the localising of income tax receipts. Third, there is clearly no appetite for revaluation within the Scottish Government but the underlying problem and entropy of increasingly non-credible valuations will not go away. Fourth, there may be other unintended consequences and transaction costs if many high band property households seek to have their homes revalued down to lower bands – though I do not know the scope in practice for people to do this.

All in all, to paraphrase Marco Biagi, concerning the council tax, few people would have started from where we are now but equally on reflection how many will be happy with where we have ended up?

Brexit and Public Policy Capacity

The post was written with Des McNulty and is also avaialble on the Policy Scotland website.

In the shock and uncertainty following Thursday’s vote, the focus has primarily been on the constitutional, social and economic questions that flow from disengaging with the EU and on the political fallout. Important as these questions undoubtedly are, there is an underlying problem with policy capacity, not just because of immediate political vacuums in Westminster or the lack of a plan amongst those calling for Brexit about what that might mean beyond a few slogans. 

The challenge for both the UK and devolved governments is to carry on their normal work (and do so competently across their range of responsibilities), while urgently building up capacity so they can understand EU disengagement and thereby negotiate effectively. And at the same time they are having to manage and ride out downside economic risks (which will inevitably impact on their ability to balance these tasks). 

The scale of the challenge ahead is unprecedented. Following the 2016 Scotland Act, the Scottish Government is presently faced with implementing tax powers and the delivery of elements of social security. These are the biggest technical, policy infrastructure, scrutiny and personnel challenges since devolution was enacted in 1999. But they are as nothing compared to the requirements for expert analysis, negotiation and co-ordination across the thousands of often inter-related substantive areas affected by EU withdrawal. This is not just a challenge for Whitehall – there are huge implications for the devolved governments also. 

At this point, no-one really knows how big or complex a job this will be – we don’t know what objectives of any of the negotiating parties are likely to be, what the processes are or who will be at the table. This may be one reason why the UK Government wish to slow down the Article 50 decision (even if at the expense of the negative consequences of short run economic uncertainty). We do know that a co-ordinating body is being hurriedly established across all Whitehall departments to start this work. But one consequence of deficit reduction policies since 2010 has been the winnowing out of analytical expertise in Government departments (in Scotland and Wales as well as at UK level). 

The Scottish Government faces complex and in some respects contradictory pressures. First, they need to deliver competent government across their portfolios, at a time when local government and many public agencies are dealing with severe real terms reductions in their running costs budgets, which are likely to continue for years to come. Second, they have difficult choices to make about how to use their new fiscal and welfare powers, given expectations and the resources required to build the infrastructure needed to implement e.g. new social security arrangements. Third, they need to shift personnel and undoubtedly bring in people from outside to advise and assist on options in future EU/UK/Scotland negotiations. Fourth, alongside all of that, if the SNP administration wishes to put forward a new independence referendum proposal, they will want to provide a credible blue print that addresses the issues on which the Yes campaign was weakest, most notably the currency question.

Perhaps one of the lessons of the last few days is the danger of assuming that ‘other things do remain equal’. The leadership of the ‘leave’ side were wrongfooted by the prime minister’s resignation. They didn’t expect to win or to have to lead the implementing of Brexit, at least not the immediate stages hence the lack of a plan. In advance of the vote, economists identified turbulence caused by short run uncertainty, including inflationary devaluation and stock market reversals as risks. They also pointed to the longer term insidious effects of investment postponed or displaced, jobs moved abroad and longer lasting uncertainty associated with the trade deals that we may eventually secure (e.g. what kind of market relations including labour movement can be secured with the EU). In the EU referendum there was a wholesale rejection of expertise and evidence per se (when it does not suit) with decisions ultimately resting on attachment and perception (arguably something similar happened in the Scottish Independence referendum). But governments can’t work in that way – there is surely now a belated realisation of the need to strengthen government capability by reversing the hollowing out of analytical capacity.

The probability of a Brexit-induced recession or economic reversal is a significant constraint on capacity building for negotiation and analysis of EU disengagement, something that we see as vital if government, the civil service and other sources of expertise such as the universities are to rise to the complex multi level challenge that UK and devolved governments now face. At present the markets are discounting our ability to reduce the public deficit and at the same time expecting lower economic growth. Other forward indicators like bank and property sector shares are also uniformly negative. 

The fiscal stance of the UK Government in terms of deficit reduction may have to be relaxed in order to mitigate the consequences of economic slow down. But further austerity can also be anticipated, given the impact on government revenues. The pattern over the last few years has been to prune back civil service numbers and analytical capacity has taken a particularly heavy hit. But given the scale of the changes and pressures on government there is an urgent and continuing need for expertise if we are to properly understand the options that new circumstances confront us with and provide the information necessary to make properly informed choices. 

The EU referendum outcome is not one that most of the experts, whether in academia or government, would have preferred. Surely any implementation and other adjustments arising from the referendum must however be informed by available evidence and draw on relevant expertise, some of which is in short supply inside government itself. It is now up to the public policy community to mobilise and engage in a way it has not done before and to government to open out so that the challenges we all face are not met because we fail to provide or apply knowledge which would be helpful and relevant.

‘Five Years, that’s all we’ve got’: the Scottish election and challenges for the new Parliament

 

Earlier this month, the Additional Member System reasserted itself and ended majority government (just). The SNP continue in power but as a minority administration (just). One consequence expected from this turn of events is that there will inevitably now be more focus on the committees and a wider distribution across the parties of committee chairs. Will we see more scrutiny and more effective committee work as a result (e.g. of the coming spending review)? Budget-making and financial bills also take on a new heightened aspect now that their passing through Parliament is less straightforward.

The major substantive change for the new Parliament is of course how they use the new powers. Much of the election debate focused on the new fiscal powers and how progressive or otherwise any changes to income tax should be (and party proposals for local tax reform – see below). Much less was said about the coming welfare reforms which will devolve over many non-working age benefits as well as powers to amend the housing cost elements of universal credit. This is a massive step change for Scotland, perhaps the biggest single administrative challenge since 1999 (and that is even before contemplating policy change like benefit top-ups). It is not a particularly exciting thing to advocate but better done well than quickly.

Two interwoven constitutional matters remain very close to the surface. Next month is the European referendum and of course Scotland remains politically defined by the dualism of the 2014 referendum – what David Torrance and others have called the ‘Ulsterisation’ of Scottish politics between nationalism and unionism. As in Northern Ireland this seems currently to most benefit the two parties most associated with these positions (in Scotland, the SNP and the Conservatives), which again raises questions for the positioning of the diminished Scottish Labour party. While there is a small majority in favour of indepdendence in the Parliament, the appetite for a second vote will of course be driven by political calculation and risk. This could well be altered should the ‘material change’ of a vote to leave the EU occur while Scotland votes to stay.

There are two other substantive issues that will feature in the new Parliament. First, while the SNP came up with a remarkably modest set of proposals to reform local taxes that even failed to promise a general revaluation (not that dissimilar as a set of proposals from those of the Conservatives), the rest of the Parliament offered more radical property-based reforms.  This may be enough to neuter the call for more comprehensive tax reform (which would be disappointing and a lost opportunity) but alongside it, there is clearly interest in local government reform more broadly.

These two things cannot and should not be separated, as is equally true of the need to situate council tax reform in terms of wider amendment of local government finance as a system. Austerity rolls on and will impact hard on local government and its services in years to come. My colleagues Annette Hastings and Nick Bailey have shown clearly in work carried out with Heriot Watt University for the Joseph Rowntree Foundation that earlier spending cuts in England were often ‘pro-rich’ at the expense of the most disadvantaged. The Scottish Government and local authorities must actively minimize this possible outcome in Scotland in the years ahead.

Second, the SNP have pledged a target of 50,000 social and affordable homes over the life of the new parliament. The significant financial commitment is welcome but the attainment of 70% social housing within this total and the willingness and ability of non-profit providers to develop, the limits to borrowing by councils and the necessary step change in new supply required by private house builders to support affordable housing – raise major questions of implementation. The 30,000 target was achieved in the last Parliament but this is much more ambitious and takes place in a context where the enabling conditions to facilitate the levels of new supply are still very challenging. This is all at a time when the generally accepted levels of national housing need is 12,000 not 10,000 per annum and worrying evidence is emerging from our cities of rising street and repeat homelessness.

While I don’t actually feel as apocalyptic as the mood of David Bowie’s 1972 song in the title of this post – there are big challenges ahead and as always, governments, particularly devolved ones, are also at the mercy of larger external shocks, not least at the macroeconomic level. Nonetheless in terms of public policy reform and spending priorities, even in a context of austerity, the new government has considerable choice over how it allocates its funds, an opportunity set undoubtedly widened by the Scotland Act. There are real possibilities as well as constraints.

 

 

From Protest to Subversion

 

There is a long-standing history of protest in popular music. In my view a lot of it does not really stand the test of time though there are many honorable exceptions – Free Nelson Mandela by the Specials stands out as one. But many of such songs age, lose their anger and are less effective at directing emotion than other more direct or personal musical forms.

What I am here more interested in, as result of something I witnessed at the weekend, is the capacity of music and other performers to subvert live broadcasts. I remember Saturday morning TV phone-ins and that high risk that there might be a set up for a profanity fest as happened to Five Star. Or the Sex Pistols on Bill Grundy (though John Lydon said at the time that the real punk was the householder who was so horrified by the Pistols that he put his boot through the TV). You may also recall Jarvis Cocker’s stage assault on Michael Jackson at the Brits? A bit more impressive than hacking Corbyn’s tweets.

What happened on Sunday morning was that Andrew Marr has the PM on to discuss the European referendum and a much over-hyped social housing estate regeneration programme, which seemed from the dialogue to be yet more ideas to grow home ownership. Regular watchers will know that Marr often ends his show with live music. This week it was a new song by the venerable post-punk band Squeeze. There should have been a clue in the title of the song ‘From the cradle to the grave’ since this is a well-worn phrase in terms of the UK Welfare State. However, those naughty Squeeze boys changed their lyrics.

A new third verse added lines to the effect: ‘I grew up in a council house, part of what made Britain great, now someone is hell-bent seeking to destroy the welfare state’. You can see the action here.

First of all it was impressive because they cannot have had much warning and indeed chose such an apposite subject given the topic covered in the interview. Second, the Prime Minister seemed oblivious which made it all the more striking – I actually wondered if I had misheard till it was confirmed later.

Of course, we can be cynical about it and view it as a publicity stunt but I really don’t think so. It was rather well-targeted opportunistic subversion of the live music medium.

On this very sad day where we lost David Bowie, I was  reminded by a piece in the press that one of his many impressive acts was to twice refuse an honour from the British state – an act of subversion in itself?

 

Towards a New Social Security System in Scotland

A lot of my research these days is about public policy failure, what doesn’t work and why, as much as what does work. It is in this sobering context that I read and found much sense in the Welfare Reform Committee of the Scottish Parliament’s new report, ‘The Future Delivery of Social Security in Scotland’.

Welfare reform is the defining pinch point for the post Smith constitutional battle between the Scottish and UK Governments as they come to terms with what the new developed powers mean (and wrestle over the fiscal framework) and in particular try to make the new welfare powers and specifically the required integrated systems work properly from day one. Of course this is all happening in the middle of the DWP’s (contested) welfare reform project. But in addition to that there are quite fundamental policy implementation challenges ahead of whoever runs the Scottish Government after the election.

What does the report say? First of all it talks about the culture shift required within a new Scottish system of social security to move beyond the current stereotypes of skivers and attitudes of suspicion and mistrust that seems to pervade the present arrangements. Instead, the new system, drawing on both DWP and Scottish administration, requires to be grounded in principles of dignity, person-centredness, respect for claimants, and that the system be non-punitive (accepting the need for conditionality but only using sanctions as a genuine last resort). Person-centred means not running the social security system for the ‘convenience of the bureaucracy’. They point out the growth in advocacy services for claimants, which is of course itself a failing of the system to use plain language, simplicity and transparency in its dealings with citizens. The system should also at heart be responsive, fair, consistent, helpful and supportive. The report also nicely points out that while signing up to and legislating for such principles is fine itself, achieving and implementing such principles in practice will be a ‘substantial task’.

The report identifies a list of ‘big issues and tough choices’.  First of all, the new system has to be coherent. The new proposals in the Scotland bill create a dual and therefore much more complex social security system for Scotland. This will require commitment, consistency and genuine inter-governmental working of a standard and level not really attempted since devolution. Second and related, there is a fundamental choice to be made between contracting DWP versus setting up a new Scottish agency to deliver social security. Neither option is without its problems. Third, there is the question of how much of the Scottish system ought to be devolved locally – again there are arguments in both directions. Fourth, although it will be fundamentally shaped by the ultimate fiscal framework deal, the Scottish government will have powers over topping up existing benefits but the Committee Report argues that this can readily have big funding implications and will require national debate before it can move forward on any major reform proposal. In the report they stick to more modest funding recommendations.

The report also makes a number of specific recommendations, which include:

• Introducing a long term DLA/PiP scheme for those with severe long term conditions, thereby doing away with multiple re-assessments. They also support the planned increase in carer allowances to JSA levels.
• The housing element of Universal Credit should be paid fortnightly directly to landlords and allow more than one payment per household, where necessary. They also advocate the immediate abolition of the ‘bedroom tax’, which would allow returning discretionary housing payments back to their original wider purpose.
• They also make proposals about widening the provision of ‘welfare to work’ programmes to promote more local operators and that the devolution of the Work Programme does offer the chance for the Scottish Government  to influence how sanctions are used – and this could be a genuinely progressive development (though would not remove all tensions over sanctions between respective Governments).

There is a lot to like here. The ideas about using the powers to impact on the conditionality regime in at least two areas (DLA/PiP and the Work programme) are constructive, the recognition of the administrative complexities of a dual system with different benefit regimes is welcome on this side of the Border, as is the implicit sense that top-up and real discretionary power has a cost attached to it which is part of the political choice associated with greater devolution. But this is happening in a context of austerity and further cuts to (unprotected) budgets. So, it is really important, it seems to me, that the political elites fully understand the difficulties and tough choices that lie ahead. This may be one of the biggest of these emerging tricky policy implementation areas in the devolution sphere, but it suggests that we need a political culture change as well as in the social security system. Hopefully, the Welfare Reform Committee have started that process.

 

 

Politics and the Local Tax commission Report

This morning the Commission for Local Tax Reform published its final report. They said that it is time to change the council tax system, to seek ways to end the council tax freeze, but they did not offer an alternative solution. Instead, as was widely expected, the Commission presented a menu of choices and evidence on the principles of three different systems – a property tax-based system, a land value tax approach, and a local income tax basis. The conclusion seemed to be that the predominant view among the Commission was that such an alternative should be property-tax based but should, if feasible, be broadened to include local income tax (sections 13.12 and 13.14 of the report). Indeed, at one point they make a case for a multiple local tax system around these two components. They argue that no tax alone meets all the important criteria: fairness, economic efficiency and local democratic accountability. There must be trade-offs and compromises. And, there must be a period of transition.

While this is not exactly a definitive statement, it is a reasoned and well-evidenced report. The plan is that this will now inform debates within political parties who are preparing their Scottish Parliament election manifestos and will come up with their own ideas for domestic local taxation. All major parties were signed up (apart from the Tories) and the shared diagnosis of the problem, to an extent, supported by the Scottish government who established the Commission, probably means a couple of important consequences.

First, in a finite time period, the council tax and the freeze are going to change in Scotland. Second, it seems unlikely now that the SNP will stick with the local income tax as the sole or principal means of funding the domestic local tax. The next few months will be the time for all the parties to build and then make a case for specific reforms. As one Commissioner said to me this morning – the real work (of persuasion) begins now.

There are many complexities. First, Labour do not appear to be keen on local income tax element particularly in the context of the introduction of the Scottish Rate of Income Tax (SRIT), though it is not clear whether this concern would extend to a comparatively small supplementary local income tax augmenting a property tax. Second, the pragmatic way out, the line of least resistance, is to reform the existing council tax and this might be minor tinkering or something more thorough-going.  This seems to be what the First Minster was hinting at in an interview a couple of weeks ago when she talked about a more progressive treatment of the bands (but without a general revaluation).

The third issue is how will the parties and the public respond? Infamously, Jack McConnell in 2006 rejected the Burt Inquiry’s call for a percentage tax on capital values before it was even published. The belief this time round has thought that the wider buy-in from across the political spectrum, makes the dismissal of the report and indeed putting the brakes on reform that much harder. Nothing I heard this morning or read in the report or associated media thus far suggests that the Commission’s work is heading for either the long grass or a high shelf where dust awaits.

A key test will be the Scottish budget statement on Wednesday from John Swinney which will also announce the first SRIT for 2016-17. Will we hear anything constructive about the end of the council tax freeze? Will the Government  be broadly supportive concerning the Commission’s conclusions? It will also be interesting to see whether he follows Osborne’s lead by increasing LBTT for second home and buy to let purchases. He has already indicated that he will in part be following the non domestic rate changes announced by the Chancellor. More significant, however, will be the translation of the Autumn Statement Spending review into spending changes across Scotland and for local government specifically.

Let’s hope that the report is the start of a feasible process of progressive local government finance reform, starting with the domestic local tax, and not the end of the story.

Fear is a Man’s Best Friend

With apologies to John Cale, fear probably is the appropriate word for many when contemplating the Spending Review, which is less than two weeks away. In recent weeks, several Scottish local authorities have warned us of eye-watering cuts ahead, of job losses and service reduction. In Scotland this is also in part to do with the council tax freeze; David Cameron, however, had less excuse when he contacted his constituency council to complain about its cuts.

I do not disagree with the general line taken about cuts and austerity that one would find in places like Mainly Macro  – this is a political choice that is more convincingly about shrinking the state than it is about the necessity for finding rapid fiscal corrections. However, with a majority government this is what we face and it is of course worth thinking about what HM Treasury may propose in the Spending Review.

To this end, the Institute for Government has published an interesting report by Daniel Thornton, Jonathan Pearson and Emily Andrews. Their premise is rather than doing more with less, the public services, particularly in the unprotected areas, will be managing with less. They note that while the cuts to public spending are not without precedent, the sustained nature of reductions over an entire decade, is new. In this context is there a way to a ‘smarter state’?

The authors argue that Departments have to show how they are going to achieve the SR objectives and continue to deliver what they prioritise. In the face of the Review cuts (whatever they turn out to be for specific corners of Government), each department should therefore publish their Single Department Plans by the end of the financial year (March 2016) with a short (i.e. feasible) set of priorities and achievable targets for the SR period and that this be supplemented by project implementation and workforce plans.

Second, the Government has a major projects portfolio and needs to assess which existing projects should be protected and which reduced or even ended.  Project failure risk has to be reduced as a priority by proactive government action, and, any new projects should be much more closely scrutinised before they are announced.

Third, they express muted enthusiasm for public service markets as ways of introducing innovation and efficiencies in to the public sector but recognise the ‘complex challenges in developing and managing effective markets for pubic services, and tee have been several recent failures’ (p.4). So, they recommend establishing a hub of expertise able to steward public service markets – this sounds like a new if necessary layer of regulation.

Fourth, recognising the undoubted importance of the devolution city deals and successive waves of such agreements, they argue for a principled approach to decentralisation. Of course, a key feature of city deals is the lack of a consistent process but rather a series of context-specific ad hoc deals, which look very different across the piece. But it is right that this process cannot simply be a top-down Whitehall-led programme.

Fifth, they recommend continuing to pursue the government’s ‘ambitious digital agenda’, but with strong oversight, including enforcing standards. This is critical to the high risk areas where digital by default is so exposed to possible failure; none more so than in the case of the roll-out and subsequent maintenance of the universal credit system.

Sixth, and in respect of arms-length businesses (which they argue can deliver efficiencies), the authors point to the wastefulness of some institutional reorganisations, which can be ‘disruptive, time-consuming and expensive’ (p.5). They argue instead for careful consideration of the  ‘do nothing’ case to be made and taken seriously whenever such institutional reforms are being actively considered.

Finally, the authors raise questions about the Government’s capacity to actually deliver the legislation it will need in some of these areas as a result of the SR. This needs to be fully considered when contemplating the kinds of changes discussed above. Second, they also question whether the civil service has the capability and capacity to ‘take on the challenge’ of the implications of the likely scale of change implied by the SR.

If we examine the likely SR proposals as they are understood and assess them against their own objectives, then there are a few critical points that can reasonably be made. First, Thornton and colleagues have demonstrated that there are many challenges to delivering the programme changes required and that adequate delivery requires a considerable  evaluating and monitoring infrastructure. Meanwhile, however, second, there are genuine issues about the capacity to deliver what would be required.

And in addition there is still the sense that the government will play short run political games and make 3rd best choices to achieve specific goals and often do this when they have not obviously thought everything through. Witness the recent unplanned bandying about of options to find the tax credit savings elsewhere in the welfare reform programme. At the same time, government continues to provide evidence of its lack of sure footedness over the things it proposes that are a part of this wider narrative.

On the other side of the Spending Review on the 25th, people like the IFS will provide detailed analysis of the Spending Review and I daresay there will be more posts. But I did think the Institute for Government’s analysis is a useful step beyond the big headlines and one that goes into just how the SR would actually be delivered in the departments where it will matter – and that it will not happen without much effort and further reform.

Housing and Wellbeing – blueprints and more

Earlier today I was part of a report launch jamboree in Edinburgh. This was the official presentation of the Commission on Housing and Wellbeing: A Blueprint for Scotland’s Future. This has been a two year programme of work supported by, but independent of, Shelter Scotland. I have been a research consultant to the project team throughout, tried to input into discussion and provide briefings, attended all the commission meetings and thoroughly enjoyed the process throughout.

The Commission was chaired and led by Bob Black. Bob has been a great colleague and a quietly dynamic figure keeping the process both moving forward and energised throughout. My project team colleagues Richard Grant and Paul Bradley were also a pleasure to work with throughout, as was everyone at Shelter Scotland. The members of the Commission were drawn from far and wide and only in one case had an explicitly housing-based career or expertise. This made for quite fundamental and first principle discussions, which were often daunting. I enjoyed talking through the diagnosis and the proposals with the commissioners greatly and will retain for a long time the particular challenge that Phil Hanlon gave us to be clear, succinct and unambiguous about how we characterised problems we perceived, understood and explained transmission mechanisms and potential solutions.

The launch involved presentations, ideas, Q&A and a keynote speech from the Cabinet Secretary, Alex Neil. The main messages I left with were, first, that there is considerable support for the thrust of the report and its proposals from Government and from the minister in particular. Second the report was a common sense call to arms that sought to place housing as a priority because of its wider preventative benefits to health, education, community and employment. Third, a focus on well-being is useful precisely because it makes us think about housing as home, as something inter-temporal and intergenerational that is at the heart of our neighbourhoods and places. Fourth, there are some grounds for optimism that will not just sit on the shelves alongside other worthy and less worthy times. We think this because of its obvious resonance and good timing with Government but also because it is likely to feature strongly in the forward Shelter Scotland strategy. There is also a specific future actions plan in the report itself

We had a question and answer session at the end and I had a chance to reheat some favourite themes: insider-outsiders in the housing market acting in self interest in opposition to long term and succeeding generations; rising house prices are not good things per se but the outcome of insiders capturing the political ground without considering the wider housing system; and, of course, the need for long term consensus to affect required policy transition e.g. from demand to supply subsidy systems.

The report has fully 47 recommendations but within them 18 ‘priorities’. These include:

1. Notional annual new supply target of 23,000 units until we have a better sense of needs and demand estimates.
2. Increase the social and affordable housing supply target from 6,000 to 9,000 a year, which would cost indicatively about an extra £160 million (net).
3. Mid market rental programme should be opened up to private landlords.
4. Community anchors should be established in all housing renewal areas and areas where there are demonstrable problems with the local neighbourhood.
5. Effective partnership arrangements should be worked out and implemented at the neighbourhood level.
6. The Scottish Government should implement an improved property tax. A land value tax should be introduced either nationally or locally as well, perhaps to replace LBTT – but could readily seek to be revenue-neural overall.
7. RICS Scotland proposals on a land agency for Scotland should be progressed, as should their proposals for more effective land supply.
8. The Scottish Government could provide more resources for housing services such as handyman tasks for the elderly. The Government should also move ahead with the rationalisation of the funding of adaptations.
9. The Scottish Government should review the funding requirements for the 2030 milestone for delivering a step change in the provision of energy efficient homes. Regulations requiring owners to insulate their homes should play a part in achieving the necessary improvements in insulation standards.
10. The Scottish Government should establish an independent advisory body, chaired by the minister, to annually review housing system outcomes and performance reporting to the Parliament against wellbeing objectives (and linked directly and centrally to the Scottish Government’s national outcomes framework).

There has been a bit of a media blitz today but the real test will be how this work influences and challenges government in the months to come. The Cabinet Secretary was encouraging about supply and thinking systemically about housing. But we will see.

Personally, I have greatly enjoyed this process over the last two years, especially meeting and working with such interesting people. It has required a different set of techniques and challenges to what I am used to in the traditional research project environment. On the other hand, it is this kind of input that is increasingly what I do as part of What Works Scotland and also within the knowledge exchange world of Policy Scotland. So, all in all, it has been a good time to be involved in such an undertaking.