Cuts back

[First published on Municipal Journal blog, 26 November 2015]

Yesterday's Autumn Statement came at a challenging time for London. The capital's growing population is facing spiralling house prices, and putting pressure on infrastructure and services - from homelessness and social care to transport.

The Chancellor’s housing announcements took centre stage. The London Help-To-Buy scheme will raise the equity loan available for new homes from 20 to 40 per cent, reflecting the limited impact of the scheme in London to date. But the long-term impact on affordability is more questionable.  If the scheme does not stimulate extra supply it will merely inflate a house price bubble. 

The Chancellor also extended eligibility for shared ownership.  Applicants will no longer have to meet locally-set criteria of living or working in a particular area or profession, and the income cap will be raised to £90,000 in London. But as Centre for London’s recent report Fair to Middling observed, the model doesn’t work for everyone; social rent, affordable rent and other forms of low-cost housing are also an essential part of the mix.

We don’t yet know the detailed allocations for local government in London, but the cuts appear to have been a lot less severe than many feared.  The Chancellor boasted that cash expenditure by local authorities would be as high in 2019/20 as it is in 2015/16, but real terms spending will nonetheless fall by seven per cent over the four years, and will drop sharply over the next two years before recovering. 

It could have been a lot worse - many were forecasting real terms cuts of 30 per cent or more, but the continued squeeze will not be easy, especially coming on top of the five lean years that saw London boroughs' spending falling by around 28 per cent in real terms.  As Centre for London's analysis of the last round of cuts Running on Fumes showed, London boroughs have been resilient in coping with austerity to date.  Over the next four years, the quest for efficiency savings will continue, and front-line services are unlikely to escape unscathed.

But the headline figures mask a quiet revolution.  Revenue support from central government will fall from £11.5 billion to £5.4 billion over four years.  The balance will be made up by retained business rates and council tax, forecast to rise from £29 billion to £35 billion over the same period (the figures do not take account of plans for full business rate retention).  Many will welcome this devolution of fiscal responsibility, but questions of distribution and fairness will loom ever larger, as poorer boroughs, facing greater demands on services, struggle to grow their business tax base, and hesitate to impose permitted council tax rises to support social services. 

Major London capital projects receive a boost: funding for the 'Olympicopolis' cultural and educational complex in Stratford has been announced (again), and the Government will bring land at Old Oak Common under single control.  Further east, the extension of London Overground to Barking Riverside will enable higher quality development of one of London's longest-delayed sites, and investment in Ebbsfleet infrastructure should support the realisation of the new 'garden city' recommended by Centre for London.

One of the most dramatic changes is to Transport for London’s funding.  Alongside pledges of an £11 billion in capital investment, the revenue grant that makes up 6 per cent of TfL’s annual costs will be phased out, saving £700 million by 2019/20.  TfL will be expected to make up the shortfall through efficiency savings, through increasing fares (another blow to London's modest earners), or by generating revenue from the land it owns across London.  This land has long been eyed as a potential source of housing; with TfL’s budget under pressure, the incentive will be to maximise value.  Expect some fiery discussions about tenure mix and commercial value.

Bringing it all back home

[First published on CityMetric, 7 October 2010]

The pathway to local government devolution is rocky, with surprises waiting round every corner. Just when we had got used to the asymmetric "city deal" model, and to a deafening silence on fiscal devolution, the chancellor unveils another surprise – full devolution of business rates to local authorities.

This measure, recommended by the London Finance Commission in their 2013 report, is good news for London and other local authorities, a tentative first step away from the centralised funding model that came in with Council Tax. There are still details to follow, and there will doubtless be all sorts of devils lurking in them, but the starting point will be each local authority retaining all the business rates it collects, with a corresponding reduction in central government grants.

Grants will then be frozen, so any increase in business rates from local growth will be retained by the local authority; any reduction will hit budgets. This creates an incentive to promote business growth (though it would be hard to find a councillor who didn’t already want more businesses on his or her patch).

Councils will not have unfettered power to vary the level of business rates charged locally. They will be able to give discounts as an incentive to attract or retain businesses, but will only be allowed to increase the rate charged locally in limited circumstances (essentially, for infrastructure investment, in consultation with local businesses, and in places where there is an elected mayor – the approach that part-funded Crossrail).

Commentators have observed that, if London continues to grow faster than other UK cities, further measures will be needed to rebalance taxes between the regions (which risks undermining the incentives). But London also presents a microcosm of this challenge in itself, as a result of its pronounced split between central business districts and residential suburbs, many of which have significant proportions of poor people.

London has some of the biggest tax generators in the country but also some of the areas with biggest concentrations of need. If there was no equalisation in place, some London boroughs would be able to fund their services with huge surpluses to spare, while others would be among the most underfunded in the country. Research by Local Government Chronicle suggests that City of London, Westminster, Hillingdon, Camden, and Kensington and Chelsea would be the five best-funded councils in the country; Lewisham, Waltham Forest and Haringey would be among the worst-funded.

While the equalised starting point would level the playing field on day one, the mayor’s infrastructure plan suggests that growth will continue to be spread unevenly between boroughs, with central London gaining most ground. All other things being equal, therefore, outer London councils would gradually lose funding while inner London councils would gain.

Outer London councils might try to remedy this by aggressively cutting local business rates to attract more businesses. But even assuming it was successful, this "race to the bottom" would quickly create conflicts with the assumptions of the London Plan and Transport for London’s strategy, which assume a hierarchy of business districts.

The end point of this approach, making London into 33 self-sufficient local economies would not just go against decades of policy, but would fly in the face of London’s status as a world city. To paraphrase Engels, you cannot have capitalism in one borough.

Alternatively, and as suggested by the Finance Commission, London boroughs and the GLA will need to find a new way to allocate funding, so that the boroughs with most businesses share the proceeds of growth with the boroughs that house their workforce. The GLA and London boroughs have strengthened their ties in a number of ways already; perhaps fiscal devolution will push them to take their relationship a step further, and open a joint account.

Control - can London play the right devolution tune?

[Originally published on LSE Policy Blog and Democratic Audit UK]

The Government’s sporadic and asymmetric approach to devolution reminds me of a story about the pioneering Mancunian music producer Martin Hannett. When Joy Division first presented themselves at his studio in 1979, Hannett told them to start playing, and then retreated into a cupboard, shutting the door behind him. The bewildered band played on for a few minutes, before sending Ian Curtis, their singer, to knock on the cupboard door and ask Hannett what was going on.

“You just carry on playing,” Hannett replied. “I’m staying in this f*cking cupboard, till I hear something I f*cking like, then I’ll tell you.” The Mayor of London and the boroughs have been playing devolutionary tunes since the London Finance Commission was set up in 2012, but are still awaiting any signal of Government approval.

Some omens have been promising. Last November, on the eve of the London Conference, there was a major devolution announcement. New powers would be devolved – over housing, planning, skills, health and social care – to the Greater Manchester Combined Authority, headed by a directly-elected Mayor.

At the Conference the next day, discussions were animated: what did the ‘Devo Manc’ announcement mean, had London been left behind, how could the capital catch up with the vanguard of the Northern Powerhouse? On a panel that afternoon, Greg Clark MP, then Minister for State for Cities, said that London shouldn’t wait to be handed more powers on a plate, but should come forward with tangible proposals, as the Greater Manchester authorities had done and as other city-regions were doing, for our own ‘city deal’.

What has happened since then, or indeed since the London Finance Commission’s report was published in May 2013? On fiscal devolution – the power to set, vary and collect taxes – the London Finance Commission proposed devolution of the full range of property taxes (including stamp duty, capital gains tax, council tax and business rates), and the relaxation of borrowing controls.

The current priority for London government is full control of business rates, enabling local authorities to vary the regime to incentivise growth in particular areas and sectors. As Government has already legislated for local authorities to retain a share of business rate growth (50 per cent generally; less in central London and other areas seeing exceptional growth), you could argue that the principle has been conceded, though there is little sign of appetite for more comprehensive fiscal devolution – to London or other English cities – from Whitehall.

The experience of Manchester and other cities suggests that administrative devolution of other powers and budgets may be more fertile territory. The Greater London Authority and London’s 33 local authorities have been working together, through their ‘Congress of Leaders’, to develop proposals for devolution.

The emerging proposals are presented as part of a package of public service reform; that is to say, as necessary enablers for more efficient delivery of public services in London. They will be submitted to the Government’s spending review this month, in the hope that changes will be announced in the Autumn Statement. The proposals cover:

• devolution of budgets for employment support for long-term unemployed people;
• tailoring further education and skills provision to London’s needs;
• devolving budgets for business support, including for export promotion and SME growth;
• giving London government a lead responsibility for co-ordinating the criminal justice system;
• measures to improve co-ordination between health and social care, including new joint commissioning arrangements, borough-based allocation of budgets and devolution of capital budgets and assets; and
• more flexibility on housing, including on local authority borrowing powers and cross-boundary deployment of s106 payments.

The case for these measures is strong, not least given the resilience and adaptability that local authorities have demonstrated during the years of fiscal austerity. The Chancellor of the Exchequer has already indicated that he wants to devolve skills budgets to London, and to give the Mayor more economic development powers, and city devolution has a more powerful champion following Greg Clark’s promotion to Secretary of State for Communities and Local Government. But it’s hard to get a reading on the direction of government policy, not least as progress towards health devolution – the biggest prize for London in terms of potential for better joint working with social services – has been slow-paced in Manchester. The cupboard door remains closed.

And there are other factors that may slow progress for London in particular. The argument that London already has enough powers is relatively easily dealt with. As the London Finance Commission argued, devolution to London should be alongside, not at the expense of, devolution to other cities. If London can meet its own housing and skills needs, for example, it will put less pressure on other UK cities.

Politics may be a more serious obstacle, as London approaches an election year. The Government may want to see what sort of mayor London elects in May 2016, before doing an extensive deal on devolution (though this is not in any case likely to involve the Scottish-style devolution being proposed by Labour outsider Gareth Thomas).

But the biggest stumbling block for London devolution, apart from Whitehall’s innate inertia and reluctance to cede control, may be sheer complexity. The city deals announced to date have placed a premium on effective governance, with a directly elected mayor being superimposed on joint working arrangements in Manchester. London already has a directly elected mayor, of course. In fact it has five, including not only the Mayor of London, but also the mayors of Hackney, Lewisham, Newham and Tower Hamlets. In addition to these, there are 28 council leaders, and the City of London’s august structures. Scrutiny in the London Assembly, and in each borough, enriches this heady mix.

So London’s governance arrangements are significantly more complicated than the ‘first among equals’ mayoral model proposed in Manchester, and likely to be adoptedin other English city-regions, despite the new joint machinery proposed to oversee devolved services (while retaining several ‘sovereignty’ over existing services). There is also growing appetite for more powers from London’s sub-regional partnerships – a third tier of governance. South London Partnership has established a formal joint committee to lobby for and exercise more powers, and similar groupings in other parts of London are pushing for a stronger subregional dimension to devolution.

All of which may suggest that – 50 years after London’s boroughs were established and 15 years after the Mayor and Assembly were elected – London’s governance is beginning to show its age. The Greater London Authority has accrued significantly more powers than were originally envisaged, and more of these are direct (for example, on housing, land and planning) rather than strategic roles.
For their part, the boroughs strongly resisted the suggestions floated by Ken Livingstone for their merger into ‘superboroughs’. But an emerging voluntaristic subregional geography suggests that they see the need for something that sits between one metropolis and 33 sovereign subdivisions, recognising that skills, employment, housing and health are no respecters of administrative boundaries.

London’s leaders and mayors have been galvanised by the potential for devolution to develop a powerful consensus for public service reform. As they play on, hoping that Government will hear a tune it likes, perhaps more radical thinking will be needed to secure the devolved powers that the capital needs.

Different drums

Michael Hann’s ‘top ten’ in the Guardian prompted me to re-listen to The Lemonheads’ cover of ‘Different Drum’.  With the giddying potency of cheap music, it transported me back to a surprisingly distant age. 

‘Different Drum’ was written by the Monkees’ Mike Nesmith, and was originally a hit in 1967 for Linda Rondstadt’s folk-rock band, the Stone Poneys.  The Lemonheads covered it in 1990, cloaking its chords in the same grunge-pop sensibility that they brought to ‘Mrs Robinson’ a couple of years later. 

The song is pretty archetypal 1960s fare, a belittling brush-off to a lover who wants to pin the free-spirited singer down, redeemed by a woozily beautiful chord progression.  Rondstadt's version is mildly subversive in that it is sung from a woman’s perspective, but the sentiments are all of their time.

But what struck me when I first heard The Lemonheads’ version, and what still resonates today, is the fact that singer Evan Dando didn’t try to flip the genders back.  Over squally guitars, he sings:

“Don’t get me wrong, it’s not that I’m knocking,

It’s just that I’m, I’m not in the market

For a boy who wants to love only me.”

It seems crazy to think how thrilling that sounded 25 years ago.  Yes, the (extremely handsome) Dando was rebuffing another man’s advances, but he was doing it gently, with slightly patronising affection not disgust.  What would now probably be twitter-ed out of court as borderline homophobic then felt like an incredible advance.

It may well be that legendary stoner Dando just couldn’t be bothered to switch genders, but his self-penned song, ‘Big Gay Heart’ (a slightly ham-fisted hand of friendship) suggests that he was trying to make a point, as was Kurt Cobain when he excoriated Nirvana’s homophobic and sexist fans, or sang “What else can I say, everyone is gay” on their last recorded track in 1993, as were Sonic Youth when they released ‘Androgynous Mind’ in 1994. 

It all feels absurdly marginal today, but these details seemed important then, like pin-pricks of light shining through the gloom.  Homosexuality may have been legal, but it felt furtive.  Society wasn’t networked as it is today, and gay pubs and clubs were faintly forbidding shuttered-off enclaves.  Even the Pet Shop Boys were theoretically straight, until Neil Tennant came out in 1994.

Many young gay people have always been lonely, and probably still are today, despite the establishment straining every sinew to be accommodating.  But it felt particularly alienating 25 years ago to be a provincial young gay man who wanted to be at ease with his sexuality, but couldn’t cope with the cultural baggage that seemed to come with it.  Before Rob Halford exposed the demented homoeroticism of metal culture (and before I discovered the long-closed Bell in King’s Cross), the choice looked plain: be gay and learn to love disco, or simulate straightness and stay indie.

Looking back, it’s clear that these were always false choices (in terms of music if not sexuality), but they felt fundamental at the time.  That’s why my memories of those small gestures of empathy from the godheads of grunge still have such force today, and why I spent long hours perusing the pages of Melody Maker to pick up gay overtones in lyrics, gay-friendly attitudes from musicians, anything to bring my worlds together.

Selling cities by the pound

Originally posted on Centre for London blog 26 June 2015

The Cole Commission on UK Exports has published its report at a time when the Government’s target of achieving £1 trillion in exports by 2020 seems as distant as ever, with export levels stalled at around half that value, and a widening trade gap.

The Commission, originally set up by the Labour Party, recommends some sensible streamlining, including a new cabinet committee and the merger of UK Trade and Investment and UK Export Finance, and also recommend a more locally tailored ‘one stop shop’ service for small businesses wanting to expand through exporting, delivered through chambers of commerce.

But they seem to miss a trick in ignoring the potential role for the UK’s cities. Indeed, the report hardly seems aware of the gradual programme of negotiated devolution overseen by this government and the coalition, nor of the active role being played by cities like Sheffield, Manchester, Leeds and London in pushing exports promotion at a metropolitan level.

These cities have been learning from the experience of their US competitors (and potential partners). Research by the Brookings Institution, as part of a join initiative with JPMorgan, identified that the 100 largest US cities accounted for 75 per cent of exports of goods and services, and that export growth accounted for 50 per cent of their output growth following the 2008 recession.

Centre for London worked with JPMorgan and Brookings to review London’s exports strategy (our report Trading Places was published in November), and convened a meeting with the UK’s ten core cities to discuss how cities could play a more active role, using city-to-city partnerships, sharing experience with US cities with the same economic profile, and working locally to create the business environment that international trade requires.

We found huge enthusiasm for more active engagement among city governments, but also some frustration. Statistics don’t allow the detailed breakdown of data (especially on service sector exports) that would allow cities to identify priorities, set targets and monitor performance. Performance targets for UKTI don’t reflect the diverse make up of different local economies. And the task of planning for export growth is not within the remits of local authorities or local enterprise partnerships.

With continuing austerity, the UK’s cities are facing huge challenges, but are also rediscovering the civic entrepreneurialism that created many of our great city centres, and which can recreate thriving economies. Cities will never supplant the international infrastructure of embassies and trade missions, but they should become partners, not just bystanders, as we seek to regain our eminence in global trade.

When the music's over

Originally posted on Londonist 24 June 2015

As the annual exodus to Glastonbury begins, recently-published research reminds us that live music is about a lot more than wellies and sun cream. Wish You Were Here, published by UK Music, shows that London generated more than £660m income from music tourism last year, supporting nearly 5,000 jobs. The UK leads the world in music exports, and London is the proving ground for many of the artists who will be shuttling round the international festival scene this summer.

But, as London grows, are we choking the ecosystem that gave the sector such strength? Pressure is mounting on venues across the capital. The Astoria was lost to Crossrail, Soho’s 12 Bar Club and Madame JoJo’s to redevelopment, the Bull and Gate to a gastropub, the Foundry in Shoreditch to a chic hotel, the Luminaire in Kilburn to high spec apartments. Other venues, like the Royal Vauxhall Tavern, remain under threat.

But development pressure is not the only challenge. The Night Time Industries Association, which represents gig venues, bars and clubs, this week launched a report arguing that the licensing regime is anachronistic, or even atavistic, holding on to outdated myths about binge-drinking and alcohol-fuelled crime, and viewing the night time economy as a risk to be regulated, not as a source of creativity, income generation and global soft power. Madam JoJo’s, for example, was shut down after a violent incident (though its demolition was already planned by the freeholder).

Is there space, NTIA asks, for a more constructive dialogue between venue owners, the police and licensing authorities, rather than the current battle against the night? Who should be responsible for managing the behaviour of revellers once they have left bars and clubs? Should licensing look at benefits as well as risks? How does the liberalisation of a 24-hour tube link to a clampdown on late licences? Does London really want to be a 24-hour city?

The issues that NTIA is grappling with reflect our uneasy and Janus-faced attitude towards the transformation of our city. We revel in the late-night opening and myriad clubs that are available to us when we are in our 20s, but then tut at the vomit-stained pavements and late night racket that they generate as we get older. We move in for the night life, but we stay for the peace and quiet.

This tension came to a head in the long battle between ‘megaclub’ Ministry of Sound in Elephant and Castle and a developer working on an adjacent site. MoS opposed the planning application, as it expected new residents to object immediately to noise levels, and force the nightclub to turn it down or simply shut down. The development will now go ahead following agreement of additional sound-proofing for the flats and acknowledgement by all parties that current sound levels can continue. But clubs are also going or gone in Vauxhall, at Farringdon, at Kings Cross — in all the once-marginal and permissive locations where hip clubland credentials sowed the seeds of sanitisation.

To be fair, there’s always been some churn in London venues, and middle-aged men like me need to be cautious about rosy-tinted nostalgia for their old haunts. Some of the venues I remember fondly were decidedly grotty, fully meriting their designation as the ‘toilet circuit’ (Kilburn’s Luminaire, which had an eccentric policy of treating punters like human beings, was an honourable exception).

And London’s nightlife is of course finding new hotpots – from Dalston, to Stratford, to New Cross.  But the loss of small music venues from inner city streets, and of clubs from its fringes, could be seen as faint warning signals that London is losing something — the diversity that makes a world city, the grit that creates pearls, the rich soil that supports shoots of creativity.

The bridge and the troubled waters

Originally posted on Public Finance 8 June 2015

The European public procurement directives will probably be quite low on David Cameron’s to-do list as he shuttles to Brussels to renegotiate the UK’s EU membership. But the increasingly irate debates over the Mayor of London’s proposed Garden Bridge are an object lesson in the problems these can cause when political initiative rubs up against technocratic process.

The directives require all public spending over specific levels to be openly tendered, including through the Official Journal of the EU (the 'OJEU' that gives the regulations their name). These are intended to ensure transparency and a level playing field across the bloc, but the complexity and length of time taken (OJEU procurements can take six months or longer) have a number of perverse consequences (and there are persistent mutterings that other countries don’t seem to take them quite as seriously as ‘we’ do).

Complying with the regulations involves delay and paperwork, so ‘going over the OJEU threshold’ is something that all public servants try to avoid. One strategy is to try to break down contracts to keep them under the limit. Another is to rely on opaque ‘call off contracts’ or ‘panel arrangements’ where a small number of (usually large) suppliers are assembled on to a panel, among whom individual commissions are divvied up. This creates a closed shop for the period of the panel, and combines with the complexity of the procurement process and a cautious approach to scoring financial risk, to exclude the local small businesses that many politicians have pledged to support.

The problem becomes acute when it comes to big ideas like the Garden Bridge, rather than more run-of-the-mill projects. The theory is that an elected authority carefully develops strategies and policies, and prepares budgets and tender documentation for the projects identified. Following exhaustive planning, consultation and procurement processes, these are commissioned and delivered.

But anyone who has worked in public administration knows, life isn’t quite like that. The man from the ministry (or the Mayor’s office) no longer has a monopoly on wisdom, and probably never did.  Ideas emerge from civil society, from private initiative, from every angle. Politicians grab good ones, and their teams currently have to twist themselves into knots trying to create the process that will lead to the right answer.

The Garden Bridge row is a case in point. Whatever you think of the proposal, recent revelations in the Observer tell a typical story. Joanna Lumley, designer Thomas Heatherwick and others approached the Mayor of London with an idea, Boris liked it, and that idea is now being pushed forward. Between these two points, there was a process that can perhaps most politely be described as ‘messy’ whereby there was a competition, which the Lumley-Heatherwick proposal won. Cue understandable anger from other, disappointed, architects, and negative coverage that the project does not need right now.

But the alternative would have been just as problematic. Other people have proposed garden bridges in London from time to time, but would the Heatherwick design team have put so much work into developing and promoting their proposal if there was a good chance that someone else would have ended up getting the commission?

Open and transparent procurement is an important defence against corruption, kickbacks and simple waste, but the European regulations set technocratic process against political accountability.  Mayors and other politicians will be approached with bright ideas from time to time. Surely they should have political space to judge how bright these are, and to implement them, subject to safeguards and controls – not least, the electorate’s ability to eject politicians who pursue vanity projects?

Rather than going through cosmetic competitions, perhaps the elected leaders of public authorities should be allowed to sign a statement formally exempting a project from open procurement, and setting out their reasons (a similar process is followed for some Freedom of Information exemptions). These exemptions would be published and would be intently scrutinised, by the press and opposition politicians, so political leaders would be reluctant to sign them unless they felt they had a really strong case – a unique idea, a genuine emergency, an economic justification for keeping a contract locally. This certification process could be accompanied by internal or external review of value for money.

The Garden Bridge has been criticised as a vanity project and rouses strong opinions on all sides, but our cities would be poorer if politicians were unable to grab hold of big ideas and help to make them happen. Reforming EU procurement legislation could save an enormous amount of ducking, weaving and bad faith, and allow politicians to decide and be held accountable for how public money is spent.

The drugs don't work

Originally posted in Guardian Housing Network, 15 May 2015

Housing was a far bigger issue in the 2015 general election manifestos than in 2010, and generated some of the campaign’s most controversial policy proposals. This reflects a growing public sense of crisis, and the combination of rising prices and slow construction that is particularly toxic in London, where the average house cost 11 times average earnings in 2014 (compared to seven times nationwide).

It is no surprise then that polling by Ipsos Mori shows that 28% of Londoners see housing as a top issue facing Britain today, compared with 13% nationwide. Housing is also not such a big issue for Conservative voters, and London is an increasingly Labour city, so will it remain high on the to-do list – and how will policies affect London?

The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers, to establish help-to-buy Isa savings accounts and to give housing association tenants the right to buy their homes. But London’s house and land prices are so high these policies will have least impact on the housing crisis in the city where it is most acute.

Help-to-buy take up has been much lower in London to date, and the new help-to-buy Isa has a maximum savings limit of £12,000, which will make only a small dent in affordability when London first-time buyer deposits are as high as £50,000.

The extension of right to buy could cost London the most, while benefitting it least. The National Housing Federation estimates that only 15% of London housing association tenants would be able to afford to buy their property, compared with 35% in northern England. But these discounted sales will be cross-subsidised by sales of the most expensive council houses, which will raise most cash in London (though high replacement costs will reduce the amount raised).

Whether boosting demand will boost supply is much debated, but the manifesto made some proposals about supply too. Measures to encourage use of brownfield and public sector land will be important in London, though much brownfield land in London is already allocated. Building on the green belt seems to be prohibited, while new garden cities will only be built where these are “locally led” (which probably rules them out in much of south-east England).

The impact of these measures may be limited in London, and parliamentary time dominated by other issues, but the coming state of constitutional flux offers an opportunity. Thanks to fixed-term parliaments, we know which party will be in government in early 2020. But we are a lot foggier about what they will be governing: a United Kingdom standing apart from its European neighbours; a loose federation of resurgent nation states; or an uneasy and asymmetric patchwork of provinces?

If all this is on the table, then housing in London must be. If the national prescription doesn’t work in London, then the next mayor should make the case for something that does; not for special treatment, but for more powers, resources and flexibility – to build more, better and faster.

London boroughs are starting to build again, and should be less restricted in borrowing against future revenue streams (including rent). The mayor should be able to establish more housing zones and development corporations to build homes using public land.

There is also a case to be made for pooling developers’ affordable housing payments across London to support a London-wide programme for affordable housing. The next mayor may also want to encourage higher densities in outer London, or push to look again at London’s green belt, and ask where releasing land (perhaps under public sector control) might provide more housing and more enjoyable green space.

Many of these solutions are highly interventionist and some would be controversial but it is hard to build the housing needed in a city like London without putting some noses out of joint. Mayors can do that. The political complexion of the incumbent should not make a difference; whatever the capital’s voting patterns, its housing crisis cannot be allowed to strangle growth.

Candidates for mayor in 2016 will vie to demonstrate that they understand the urgency of the crisis, and are committed to action. Housing could be the big issue in the next mayoral campaign; it is in everyone’s interest for the winner to be given the powers and resources to deliver on their promises.

No direction home

Originally posted on Centre for London's blog 27 April 2015

Londoners worry differently. We are less concerned about immigration and the NHS than other Brits, but much more anxious about housing – in 2014, 28 per cent of Londoners cited housing as one of the most important issues facing the country, versus 13 per cent across Great Britain (Ipsos MORI Issues Index, 2014 aggregated data).

The symptoms of the housing crisis are more pronounced in London, too. The average house price is seven times the average salary across England, but 11 times the average salary in London. Prices rose by 28 per cent across England between late 2008 and late 2014, but by 53 per cent in London (60 per cent in inner London).

This divergence is hurting the rest of the country as well as London: at a recent Centre for London event, former mayoral candidate Steve Norris described high housing prices as “both a fortress and a cage” preventing mobility between London and the rest of the UK, and undermining productivity.

So it looks like good news that the main party manifestos are making commitments on housing. But the specific symptoms and scale of London’s housing crisis call for specific solutions; many of the policies being touted are likely to have least impact in the Capital, where the housing crisis is most acute. The manifestos are missing the mark.

For example, whatever its much-debated merits as policy, the Conservatives’ proposal to extend right-to-buy to housing association tenants will have least impact in London, where the National Housing Federation estimates that only 15 per cent of tenants would be able to afford to buy their property (even with a discount), as opposed to 35 per cent in Northern England. Similarly, Help-to-Buy ISAs’ maximum savings of £12,000 will only make a small dent in affordability in a city where first time buyer deposits are as high as £50,000. And high land prices may make London the least economic location for 200,000 discounted starter homes.

Labour’s plans for new garden cities could relieve pressure on London, if implemented, though a commitment to working through consensus will make it hard to find sites in South East England. A preference for local first time buyers seems parochially mismatched to London’s churning population; born-and-bred Londoners do struggle to afford somewhere to live, but so do the thousands of young people who come to London every year and fuel the Capital’s economy. Meanwhile, the Mansion Tax would affect more than 100,000 householders in London, many of whom are not particularly high earners, or ‘mansion-dwellers’ by any normal definition.

To be fair, other policies will have more of an impact: the Conservatives commitment to fund brownfield land development, as prefigured by the London Land Commission announced in the budget, could favour the capital. Labour’s commitment to rent controls will be controversial with landlords, but could make a real difference to private sector renters (who comprise 24 per cent of London households, against 15 per cent in England and Wales), and powers to intervene against land-banking speculators could ginger up housing supply (London has 216,000 homes with planning permission in the ‘pipeline’).

Party manifestos are national documents, so maybe we should not expect them to be tailored to the specifics of an asymmetric housing crisis. And they are defensive as well as aspirational, seeking to offer pledges and commitments that will appeal to the majority, without opening up a flank that the other side can attack. But if London’s growth continues to outstrip expectations, how will the city find space for the ten million people forecast to live here by 2030? This is a highly-charged debate, on which the manifestos are silent: should we pursue more housing estate redevelopment, more council-led building to supplement housebuilders’ limited capacity, higher densities in suburban locations, remodeling the Green Belt, allowing more commercial-to-residential conversion?

Each of these ideas has its advocates, but each also has bitter opponents; losers as well as winners. The discussion may be as controversial in London as it is nationwide, but it will be harder for mayoral candidates to duck an issue that is so important to Londoners. Whether government lets them make a difference is a different matter, and the omens are not promising. Amidst all the talk of city deals and devolution, the modest proposal made last year in the Inspector’s report on the London Plan, that London should begin to think more radically about where it could accommodate new housing, was firmly slapped down by planning minister Brandon Lewis: Green Belt was sacrosanct, and there would be no going back to regional planning.

Nonetheless, perhaps the candidates standing for election as London’s next Mayor in a year’s time will feel the urgency of the crisis, claim the mandate, and demand the powers and resources to do something about it. And maybe, just maybe, the next government will listen.

Come bouncing back

Originally published on CityMetric 13 February 2015

Boris Johnson will be banging the drum for the capital with his accustomed panache as he visits Boston and New York this week. That’s not surprising: London has a great story to tell.
But, while we are quick to celebrate London’s gravity-defying recovery from the last recession, we still do not fully understand it. At an LSE London lecture last week, Professor of Human Geography Ian Gordon sought to redress the balance by asking why the capital did not just survive the 2007 financial crash; in its wake, it actually thrived.

It’s a multi-billion dollar question, not least because London looked pretty vulnerable as the crisis unfolded. Unlike previous recessions, which had hit the Midlands and north harder, the early 1990s recession had its greatest impact in London, reflecting a shift from manufacturing to “speculation” (broadly-defined, to include housing and stock markets as well as knowledge-intensive activity).

A lot of people (including Gordon, and me) expected the years after 2007 to be a re-run, or worse. Instead, between 2007 and 2013, employment in five central London boroughs rose by 23 per cent, a faster annual growth rate than in the period running up to the crash, though unemployment rose across London, and job number recovery rates in the rest of the capital remained at much the same level as the rest of the UK.

Gordon reflected on whether there were structural features of London's economy that helped it survive. He also asked whether there were policy biases in terms of public and private investment and cutbacks, and whether the programmes of economic intervention (bail-outs, guarantees and quantitative easing) had features that favoured London.

The first two factors certainly contributed something. Structurally, the devaluation of the pound by 25 per cent between 2007 and 2009 could have helped tourism and investment (more on this below). What’s more, businesses fought to retain skilled workers , who are disproportionately located in London. And London’s economy was well-equipped to continue to supply luxury goods to rich individuals whose wealth was relatively unaffected by financial vicissitudes (the “plutonomy model”, named after the CitiGroup reports of the mid-2000s).

There were also policy biases towards London. The 2012 Olympics and Crossrail were big capital projects sponsored by government, which boosted the ability of London construction services firms to sell their skills overseas. There is some evidence that firms headquartered in London were quicker to lay off branch office than head office personnel, too.

But these factors shrink in significance, Gordon argued, compared to the sheer weight of financial intervention. He cited Andrew Haldane of the Bank of England in valuing the guarantees given to banks as equivalent to a subsidy of £100bn in 2009 alone (through their reductions in the cost of borrowing).

Meanwhile, quantitative easing was designed to divert nervous money away from safe bonds into more risky and productive investments – but, coupled with low interest rates, it encouraged a surge in equity prices. (Some went to emerging markets in search of even higher returns.) The FTSE 100 index rose from a low of less than 4,000 in 2009 to nearly 7,000 today – around the level of its 2008 high – delivering great returns for many investors.

But the job growth in the five boroughs studied (City of London, Westminster, Islington, Tower Hamlets and Hackney) was not restricted to financial services. It was also in property, real estate and engineering, tourism, hotels and restaurants, public services, and creative and digital businesses.

Some of the growth in professional property and engineering activity can be attributed to the big capital projects, and the confidence that London’s 2012 success created. Growth in creative and digital businesses includes not only Tech City (about which Gordon was sceptical), but also IT support to increasingly tech-driven financial services. Finally, a buoyant stock market does much to help the higher end of the restaurant business: witness the profusion of £100 per head openings around the hedge-y hotspots of Mayfair.

Going beyond Gordon’s careful analysis, it’s also worth asking what part London’s booming property market played. The devaluation of the pound did little to boost tourism in the short term (visitor numbers did not return to their 2007 levels until 2012); but it did make London a safe haven for overseas investment.

Much of this investment went into property, and particularly the prime central London market, where 60 per cent of purchases by value were by overseas buyers in 2007-11. And after a brief slowdown in 2008, prices recovered fast, rising by 45 per cent across central London by 2013.

But, unlike prices, transaction volumes remained stubbornly low; they fell by about 40 per cent in 2007, and have remained pretty low ever since. In other words, buyers' money was flooding in, but sellers weren't responding; the market has failed to regain its pre-crash liquidity.

Investors wanting to increase their exposure, or to invest gains made in the stock market, had limited options for new purchases. So many chose to extend or dig down, creating catacombs of wealth in London’s most desirable streets – and contributing to the growth in employment in construction, engineering and allied trades.

So, the recovery in London’s economy, or at least in job numbers, has been focused on a very small area of the city. Perhaps more significantly, it could be seen as based on the wealth of a fairly small section of the population, and their spending habits, from underground cinemas to Michelin-starred restaurants.

This influx and expansion of wealth in central London may or may not be a good thing in itself – it has generated employment for a lot of Londoners, but its impact on property prices and the cost of living has stretched far beyond central London. And we shouldn’t become complacent about what it means for the future.

Gordon suggests that, just as this unique set of circumstances cushioned London in the downturn, they are also amplifying a speculative upswing. Central London may not have escaped the recession by means of our extraordinary civic virtue and vigour, by the discovery of some magic formula that has “abolished boom and bust” (remember that?).

Rather, he suggests, it may have prospered through a happy co-incidence of circumstances that has papered over the cracks. A change in interest rates, or exchange rates, or a crash in property prices could also have amplified impacts – equally and oppositely.

How London’s economy will fare longer term is a matter for crystal ball-gazing, not secure prediction. But we owe it to ourselves to reflect more rationally and systematically on whether London has achieved such apparently gravity-defying success through luck or good judgement. Those answers may be helpful if – when – the tables turn.

City sickness?

Originally published on CityMetric on 19 January 2015

The Centre for Cities’ City Outlook 2015, out today, tells a story of continuing success for the capital. Since the mid-1990s, the capital’s population and economy have been growing in tandem, and the city quickly regained the economic ground lost in the early 2000s and in the last recession.

Over the past ten years, in fact, London’s population has grown by 1.1m. The number of private sector jobs in the city have risen by 650,000, and the number of businesses by 115,000. The growth in population is greater in absolute terms, but the economic indicators are rising more quickly. London’s economy is growing faster than its population.

The sector that grew fastest, accounting for one third of London’s net new jobs over the past decade, was “professional, scientific & technical activities” – a sector which includes professions such as law, engineering, architectural design and accountancy, as well as management consultancy, advertising, and research & development. London’s economy is increasingly dominated by knowledge-intensive, highly-skilled businesses.

Growth in these sectors is the holy grail of economic development, and something to be celebrated – but it presents challenges, too. Firstly, like other UK cities, London has stubbornly persistent levels of unemployment – the claimant count increased by 40,000 (around 25 per cent) over the decade, despite the growth in job numbers. The jobs being created are not in the sectors that are easily accessible to people with low skills levels. At the same time, entrepreneurs in London’s growth sectors are complaining that finding people with the right specialist and generic skills is one of the biggest problems they face in seeking to grow their businesses.

London also faces a growing affordability crisis, particularly in housing costs. Demand for new housing has outstripped supply by a factor of three: in the decade when London’s population grew by more than a million, its housing stock grew by less than 300,000. Combined with the popularity of property – even unoccupied property – as an asset for investment, this has fuelled spiralling house prices, with the average house costing more than 30 times the average wage in super-prime central London boroughs.

This affordability crisis is pushing many Londoners on modest incomes, including people in entry-level jobs in London’s growth sectors, out of the inner city to places where property costs may be cheaper. But high transport costs still inflict a heavy toll. The Centre for London’s report Hollow Promise called these people, earning less than average but above the benefits threshold, ENDIeS: people who are employed but with no disposal income or savings.

There is also evidence that some are moving even further afield than London’s suburbs: commuting from outside London grew by about ten per cent between 2001 and 2011, and recent reports showed that young Londoners are moving away from the capital in record numbers. In 2012-13, indeed, there was a net outflow of 22,000 30-something workers. This is leading to resurgent populations and job markets; but is also putting pressure on housing in other southern cities like Oxford, Cambridge and Brighton. These are seeing London-esque gaps between house prices and earnings, in part as a result of local wages lagging behind the house prices that London commuters can pay.

Taken together, housing affordability and skills are two of the capital’s biggest challenges, as reflected in business group London First’s recent London 2036: an agenda for jobs and growth report. Unless we build more housing and other infrastructure, and invest in our skills base, London’s long-term position as one of the pre-eminent world cities could be threatened.

Does this matter? For better or worse, London’s success over the last decade has been built on its appeal as the destination for skilled workers, from the UK and beyond. This has resulted in a skewed economy, for sure. The distribution of resources, talent and infrastructure has been meant a north/south (or, more accurately, an SE/rest of UK) divide.

But a more balanced economy could also be a less prosperous one. Talent has been concentrated in London, a pre-eminent global city; the alternative is not that we have multiple global cities, but that we have none, and that a big chunk of the business coming into the UK disappears.

Knowledge intensive businesses are not sentimental or nationalistic; with the right infrastructure in place, they can easily sell their services across borders. What they depend on above all is a highly skilled workforce; they will operate from whichever cities can offer them this workforce at competitive rates.

London offers not only the critical mass of high-skilled workers, but the infrastructure and the cultural energy which attracts the biggest, and most lucrative, international employers. Over the last ten years it has become increasingly important to the country’s economy. But if London continues to become unaffordable to everyone but the richest and the luckiest, it will lose the skills that have supported its growth, and growth across the UK.

Some firms may follow the talent to Birmingham or Bristol, and many would welcome that type of rebalancing within the UK economy. But a large number of firms would move to Berlin or Barcelona – and we will all lose out.

The UK’s regions may have lost out from internal migration, but they shouldn’t necessarily welcome the tide turning against the capital. Economically, at least, the affordability crisis in London could become a big problem for all of us.

Are we not Devo?

[Originally posted on Centre for London blog on 18 March 2015 - I realise I should have been cross-posting, not least to keep a record.]

A devolutionary ‘city deal’ was announced in the budget this morning for West Yorkshire, adding to those already in place for Glasgow, Sheffield and Greater Manchester. More are promised, for Cardiff, Aberdeen, Inverness and Cambridge. But like kids covetously eyeing each other’s toys, the other cities are asking, ‘How do we get what Manchester has?’

Manchester (or rather the Greater Manchester Combined Authority, which will comprise the leaders of the ten Greater Manchester councils, plus a directly-elected mayor) is setting the standard. It will have devolved powers over transport, housing, policing and crime, skills, international promotion and – following a surprise announcement last month – NHS spending. The Chancellor’s budget added full retention of growth in business rates (other cities get 50 per cent). Other cities deals announced so far have been far more modest in scope, covering skills, specified infrastructure schemes, business support and some international promotion coordination.

And London is lagging too. The Chancellor’s speech alluded to announcements about devolved funding for skills, more planning powers and a London Land Commission, all of which were made last month when the Mayor and Chancellor launched their Long Term Economic Plan for London. But neither the Greater London Authority nor the boroughs have any control over London’s health service.

To be fair, taking on the NHS in London (which employs 200,000 people, more than the construction industry) could be seen as a poisoned chalice (eve a hospital pass), as institutions (most recently Barts Health NHS Trust) teeter on the brink of failure. But the failure to join up health and social care has become one of the NHS’ big problems, with old people whose care has been neglected ending up in A&E, and hospital beds occupied by patients who are ready for discharge, but can’t access social care services to enable them to leave. The short-term incentives are to dump costs between local government and the NHS, but both parties have an interest in tackling a problem that is leading to unnecessary suffering and huge wastes of money. This may mean some tough choices, but the past few years have certainly given London local government the experience it will need in taking tough choices.

So why can’t London look after its own health services? Other cities have been told that they can’t go ‘The Full Manc’ unless they accept a directly-elected Mayor rather the relying on a congress of council leaders (thereby opening a new front in the war of attrition over elected mayors that has been running for the best part of 20 years). But London has plenty of mayors: Boris Johnson as Mayor of (Greater) London, as well as mayors Bullock, Pipe and Wales of Lewisham, Hackney and Newham respectively.

Perhaps the two-tier local government system makes London too complex? London certainly is complicated, sometimes Byzantine, though the Greater London Authority and London councils are working quietly behind the scenes, including on a shared bid for further devolution. And in any case, the governance arrangements proposed for Manchester, which include a Greater Manchester Strategic Health and Social Care Partnership Board, and a Greater Manchester Joint Commissioning Board comprising NHS England, clinical commissioning groups and boroughs, are hardly straightforward.

Perhaps the real problem is one of government, not governance. Perhaps, as they look over the River at St Thomas’s Hospital, MPs consider that handing over the NHS in the capital to London’s elected leaders is a step too far, as is the case with the Met Police. Perhaps, as in Washington DC, some capital city services are seen as too important for local accountability.

This fear of letting go should not be determining public policy in London. But if it is, Londoners may start to wonder whether the presence of Parliament and Government is a boon to the capital, or a millstone.

Socrates and Charlie Hebdo

Culture Secretary Sajid Javid got shot down in twitter-flames this week for referring to Socrates' writings, when defending freedom of speech following the Charlie Hebdo massacre.  The thing is, as any classically-educated fule kno, that Socrates didn't write anything; that was Plato.  Cue lots of sneering. 

Well, fair enough, though the two philosophers are more or less identical for all practical purposes: Plato didn't write anything but dialogues in which Socrates was the speaker, and Socrates' philosophy is only recorded in Plato's writings.

More interesting, to me anyway, was the thought that even if Socrates was executed by the Athenians for his atheistic opinions, and his 'corruption of the young', he was far from being a believer in democracy and free expression (indeed, his association with shady oligarchs may have been one of the factors that led to his downfall).

For example, Socrates would almost certainly have banned Charlie Hebdo.  In his discussion of the just city, The Republic, Socrates presents it as one governed by a paternalistic 'guardian-class' of warrior philosophers.  Later in the book, Socrates expounds his theory of ideals (sometimes 'forms', but I think 'ideals' is less confusing).  Put very simply, everything that we see in the universe takes its identity from its imitation of, or resemblance to, a metaphysical ideal.  A table is a table in as much as it resembles the ideal Table; something is good in that it resembles the ideal Good.

This theory explains why, controversially, Socrates exiles poets (and depending on your reading, other artists) from his Republic.  Their art is an act of mimesis, imitation, but worse than that - it is an imitation of an imitation.  My depiction of a table is a poor copy of a poor copy of the ideal Table.  Socrates also suggests that art, particularly effective art, inflames the passions, and is therefore inappropriate material for his serene and ascetic guardians.  Anyhow, one way or another, the artists have to go, and certainly the publishers of satirical magazines would have had to go with them.

Socrates' conclusion troubled Victorian admirers (who had been happily going along with the rule by warrior philosophers up to that point), and it worried his interlocutors too; Socrates admits uneasiness with his conclusion, and challenges them to find counter-arguments.

I was reminded of this stipulation when listening to a man being interviewed about the prohibtion on images of the Prophet Muhammed last week.  Generally, this prohibiton is understood in terms of the strictures against idolatry found in the Old Testament - we shouldn't confuse workshipping a God with worshipping an (imperfect) image (like the Golden Calf or the Fish-tailed God Dagon, whose followers are so enthusiastically smitten in the Bible).

The interviewee went further, explaining the prohibition in strikingly Platonic (or Socratic) terms: Muhammed was such an excellent, virtuous and handsome man, indeed the ideal Man, that any attempt to portray him is bound to fall short of the reality, and will therefore represent a slander on him.  Plato (or Socrates) could hardly have put it better himself.

To be honest, I'm not sure what this shows.  Perhaps it is a) that if you throw enough classical education at people, some is bound to stick (however imperfectly) even 25 years later; b) that if you follow any metaphysical theory far enough, logic will lead you down some curious cul-de-sacs; c) that those who die because of expressing their views are not necessarily liberals; and d) that irrational prohibitions are not the exclusive preserve of the abrahamic religions, but can be found in 'rational' Greek philosophy too.