How the Policy Exchange gets it wrong


Red Brick has commented before on the influence which the think tank Policy Exchange has on government policy, which prompted me to wonder if its reputation is deserved.  Certainly on economic policy it has come a cropper, since it confidently predicted in August 2010 that the necessarily heavy spending cuts and recession would be quickly followed by a ‘big boom’, in which growth through most of 2011 will be ‘the strongest seen in the UK since the 1980s’.  Probably not even George Osborne expected that to happen.

Also published in August 2010, its policy paper Making Housing Affordable was more cautious in its forecasts and notably gloomy in its analysis of social housing.  Perhaps it was more responsible than any other think tank paper of that time – although there was heavy competition from Localis – for promoting the view that social housing was an out-and-out failure, devoting page after page to making its dreary case.

However, it faced an inconvenient truth, which was that demand for this failed tenure was at an all-time high.  It tackled this by arguing that it is purely and simply high house prices that push up demand for social housing and therefore that waiting lists would cease to grow if prices were flat. So ‘stabilising house prices and supporting home-ownership will… eliminate(e) social housing waiting lists over time’ (p.42).

What has happened over the (admittedly short) period since then?  House prices in April 2011 (and again in December 2011) were the same or marginally below their level in Apr 2010 (based on the DCLG mix-adjusted index, DCLG live table 590).  So waiting lists should have stayed the same or fallen slightly.  In fact, waiting list numbers grew from 1.75m households (Apr 2010) to 1.83m (April 2011 – latest figures available).  Not a big rise, perhaps, but hardly evidence that waiting lists will ‘cease to grow’.

The report attached much of the blame for Britain’s poverty and unemployment to the social housing system, even arguing that Labour’s policy of promoting ‘mixed communities’ (which barely got off the ground) was creating unemployment and increasing poverty.  It is odd then, at a time when the size of the private rented sector is rapidly overtaking social housing, that unemployment is at a 17-year high. Policy Exchange likes to assert causal links between factors that just happen to grow or decline in step with each other, so will it now turn its attention to private renting as the culprit for people losing their jobs?

Policy Exchange was right about one thing, which is the overwhelming importance of boosting housing supply. Unfortunately the government acted on its prescriptions for achieving this, by cutting public sector investment in ‘expensive’ social housing and abolishing ‘all central targets and goals’ (p.84 of the report).  We all know what happened next, as output struggles to top even a miserly 100,000 homes per year.

In truth, the Policy Exchange’s prescriptions for housing were a mixed bag. For example, they recognised the disadvantaged position of first-time buyers and of low-income owners who get into difficulties.  Despite its political sympathies, the government’s actions on these issues have been – at best – lukewarm.  And while government has embraced the recommended spending cuts and moved towards a number of PE’s other recommendations (e.g. on social housing allocations and on rent levels), it has steered clear of some of the wilder ones. For example, it has yet to insist on stock transfer properties being ‘returned’ to the government – yes, all 1.2 million of them!

We can also be thankful that the Policy Exchange was strangely silent on council housing finance, and that the government has not felt it necessary to backtrack on the reforms now due on 1st April. These already look set to produce some modest levels of new investment, according to plans being announced by councils such asBirmingham, Southampton andPortsmouth.  Policy Exchange won’t like this, of course, as it will boost the dependency culture and lead to even more unemployment.

The writers of those reports by Policy Exchange, Localis and the like probably feel frustrated that the government has been unduly timid in taking up their calls for reform, and that the coalition’s first two years of housing policy change will have been a disappointment.  When viewing the devastating effects of coalition policy, with more promised as welfare benefit changes bite, we can only remind ourselves that it could have been even worse.

This entry was posted in Uncategorized. Bookmark the permalink.

3 Responses to How the Policy Exchange gets it wrong

  1. Pingback: Is this how to deliver a ‘One Nation’ housing policy? | Red Brick

  2. Pingback: Policy Exchange gets it wrong again | Red Brick

  3. Anonymous says:

    High house prices are down to Labour not controlling bank lending. Vince Cable warned parliament.

    Why build more social housing?. I have nothing but contempt for housing associations. They blight communities.

    I have suffered at the hands of Housing Association tenants. I have been broken into, had numberous breakins, ASB, furniture dumped on the front of my property. The police do nothing.

    I used to fell sorry, for people who lived in Tower Blocks, but I have lost all compassion, I just think they don’t deserved these homes.

    Now, I hear local council and housing associations are buying up private homes, to spread the misery.

    The riots, where a taste of the sort of people, I have had to put up with.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s