Thursday, 7 August 2008

"RIGHT TO BUY", STEALTH TAXES AND ASSET STRIPPING FROM LESS WELL OFF PEOPLE

All - all - of this instantly exploded into my head after reading just one number in the summary of Wigan council's annual accounts - 75%. That is the proportion of the nett take from all council house sales that the council is forced to pay to the Treasury.

And sorry folks - this is going to be long and possibly very dull - it's about numbers, politics, housing, laws, Conservative and Labour governments. It has several threads which I'm going to have to try to introduce in some sort of order and try - try - to mould into some sort of coherent story. I'm so enraged this is not going to be easy. If you decide to give it a miss, I wont blame you. But I had to spend most of the night writing it, so at least give it a try ...

First thing to note is that the Housing Revenue Account (HRA - remember that, I refer to it frequently) is ringfenced. There are no financial interactions between the HRA and the rest of the council. The ratepayers - Council Tax payers - do not pay the money used to subsidise council rents. Not. Not. Not. If the HRA wants something from some other part of the council, it has to pay. Indeed, in 2007-2008 the HRA paid £2,530,000 for services and facilities. This comes out of rents paid to the HRA by council tenants. It gets nothing for nothing. So please everyone, get rid of that idea that council rents are subsidised by ratepayers. They categorically are NOT. Council tenants get nothing from your local taxes. From general taxes then? Wait and see - it gets complicated.

In October 1980 Mrs Thatcher pushed through the "Right to Buy" legislation. This underwent major amendment in 1985, 1988, 1995 by Conservative governments, 1998 and 2005 by Mr. Blair's Labour government (with Mr. Brown as Chancellor). There have probably been more amendments, but these will do for now as I'm only trying to establish that both major parties have played with this legislation. I'll be back for another nibble at this later on.

Throughout this period, up until 1999 when I finally (I'm stubborn) admitted to myself that I saw through Mr Blair and his entire project, I was a member of the Labour party, and I can recall nothing but opposition within the party to this legislation. The main reason for opposition, as I recall, was that yes, this was selling off social housing stock, but also that councils were only to be allowed to use 25% of the nett take to build replacement housing. The other 75% was to be "set aside". The reason given - and the Labour party have stuck to this too, was that if the councils were allowed to use all the net take to build replacement housing, they would have to borrow money (don't ask me: we're trying to fathom the minds of politicians here) and the debt involved would be too much (I simplify enormously). But is this the whole story for that 75% of the take? Where, actually does this "set aside" money go? What was/is done with it? I don't know what specifically is done with it; I do know where it goes. And considering councils all over the country are decidedly NOT sitting on reserves of billions of pounds, I can at least guess what's generally done with it. Can't you? You will soon. And why was "Right to Buy" really instituted – and then maintained by the Labour party despite all its opposition to it?

In there is the dirty little secret of "The Right to Buy". And it has been from the start. For participating individuals the policy has been superb; almost everyone who's taken advantage of it has gained. The excuse for it has been empowering poorer people, and frankly, it has done that for those individuals (but has it for the country as a whole?) and that has been the Media take on it for 28 years. They've mentioned the 75% that's set aside but never really talked about it, explained it. But was that the REAL reason for it, and is that the real reason this government continued, and in at least one way intensified, the policy when it came to power in 1997 despite having opposed every bit of it right through the Conservative years?

Let me give you some much needed numbers.

I'm just talking about Wigan Council here, but do remember this is happening all over England, Wales, Ireland and Scotland at the same time. All councils with housing stock. The money numbers get quite staggering.

Residential property sales in Wigan.

In 2007-2008 "Right to Buy" legislation was used in the sale of:

4 x 1-bedroom houses
50 x 2-bedroom houses
128 x 3-bedroom houses
3 x 4-bedroom houses
11 x 1-bedroom flats
10 x 2-bedroom flats

That's 206 property sales in all. The council did not, of course, get full market value for those properties because of the discount rules (more later). None of this is to be blamed on the council: if a tenant meets the conditions legislated for, the council must sell, and must do so at the legislated discount. This piece is not hitting out at the council - the council has no choices in this - it has to sell at a loss.

Rent subsidy.

I have to go back to 2006/2007 first.

In that year, rent subsidy paid to the HRA by the Treasury (technically, The Secretary of State for the Dept. of Communities and Local Govt., and the Office of the Deputy Prime Minister is mixed in there somewhere - but whatever - the Treasury, which was then and still is now Mr. Brown's empire). was:

£6,647,000 (roughly 11% of the total rent income to the HRA, and in addition to the rent take)

Fast-Forward to the year 2007/2008 and the rent subsidy to the HRA was:

£4,806,000. (a drop to roughly 8% of the total rent income to the HRA, in addition to the rent take).

So from one year to the next, the subsidy dropped by £1,841,000

In 2006/2007 the total rent take was £59,778.000.
In 2007/2008 the total rent take was £63,529,000

So the rent take rose by £3,751,000 while subsidy dropped by £1,841,000. And there are 205 fewer council homes in that second year - they've been sold. Properties go down, total rent goes up. What's going on here? Subsidies drop by a sum way out of proportion to the drop in number of properties due to sales. And what's going on here? At the least it means that rents have risen by more than they would otherwise have needed to. An extra rise in living costs for the poor. What is going on? Does the subsidy drop year by year every year? Have to wait until next year to see.

Bit more to look at first before we can see what's going on. Mrs Thatcher's government, whatever you thought of it, was clever. Mr. Blair's, now Mr Brown's government, whatever you think of it, is cleverer. They are decidedly not incompetent. The problem is with us - we think they're doing one set of things that governments should do, but just not this incompetently, when they are actually following an entirely different agenda and we don’t even notice. Very clever.

Nett take on housing sales in 2007/2008 (numbers rounded to nearest thousand)

The nett take after all costs, including discounts, are deducted was £10,257,000
The amount the HRA was permitted to keep of this money was £1,651,000

So where did the missing £7,693,000 go?
It went to the same place as the subsidy came from and via the same route - Treasury via the ODPM. The HRA didn't get to keep it in an account, as set aside, but earning interest for the HRA. It went to the Treasury. Just starting to all pull together isn't it.

Subsidy to Wigan HRA: £4,806,000
Payment to the Treasury from Wigan: £7,693,000
Total funds transfer: £2,887,000 FROM WIGAN HRA TO THE TREASURY.
Who’s being subsidised by who?

Now then, you might think that's a lot of jiggery pokery for a relatively small sum. Here I'm going to have to make an assumption or two - reasonable ones: the only council I have data for is Wigan, so I'm going to assume that Wigan is exactly the average council nationwide i.e. everything that happens to Wigan happens to all councils, and everything Wigan does all councils do, in respect of this housing business. If I had more data from more councils I could refine; but I don't so I'm going with what I've got and accept that my eventual numbers will be out, but probably by not an enormous amount. Some councils are bigger, some smaller, some have more council housing, some fewer, some take more money, some less, some send more to the treasury, some less. So I assume we are average i.e. for calculation's sake, every council produces exactly the same numbers we do. How many councils?

There are exactly 472 District, Borough, County and City councils, and Unitary Authorities. Assume the same house sales, on average, for each. Assume the same amount paid to the Treasury by each. What number are we looking at?

472 x £7,693,000 = £3,631,096,000.

Over three and a half billion pounds. Now that's a tidy little take. From council house sales nationwide, supposedly to empower the "working man" (and to be fair, individually it does for those who participate) the Treasury gains £3,631,096,000.

So, far from the treasury subsidising council tenant rents by, nationwide (Wigan as average):

472 x £4,806,000 = £2,268,432,000,

it turns out that council tenants (and council HRAs) have subsidised the Treasury and central government by:

£3,631,096,000 - £2,268,432,000 = £1,362,664,000.


That's money available towards hundreds of thousands of non-productive nanny-state and admin. jobs to micro-police us; in the building of a voting clientele; in addition to funding mass immigration, so building another voting clientele. Also used towards tax cuts for wealthy and generally well-off people. One thinks of the tax status of non-doms. All very nice for not only building a voting clientele, but also for massive donations to the party from those wealthy people and businesses that benefit from this. All coming to an end now, of course. Why? - Later.

Oh ... and illegal wars of aggression, gifts - sorry - "Aid" - to corrupt friends abroad - never really ends does it, with this government.

Housing Revenue Accounts across the country (and thereby council tenants) are not being subsidised by the Treasury - they are paying into the Treasury by that above amount. And the councils are getting asset stripped of their housing stock to do it. Inadvertently by the buying tenants, but knowingly by the Treasury.

But the Treasury's gained more than this hasn't it! Reduced rent subsidies compared to the year before, by the jiggery pokery of Treasury methods of accounting can be made to read like gains and then spent! The money isn't spent as subsidies, so it can be spent on other things.

Taking Wigan as average again, and there being 472 councils as above, the Treasury has cut rent subsidies to the working man by:

£1,841,000 x 472 = £868,952,000.

Therefore total spending-potential gain from reducing subsidies, asset stripping local authorities and the working man of their social housing stock, to be used for the above mentioned alternate spending - and more - purposes:

£2,231,616,000.

Or the best part of two and a quarter billion pounds at the expense of, essentially, the poorest people in the land, for the benefit of the comfortable and rich. Now that is really expert stealth taxing - and the media says not a word. None of the media, anywhere. And that's just one year. This game has been going on for 28 years.

Now my figures may not be spot on; Wigan may not be an exactly average council; some of my calculations may be a little out; and maybe one or two things I've done are no better than the Treasury methods of doing things. But I am definitely at least in the right ball park.

Now then: Mrs. Thatcher, the then asset stripper extraordinaire started this off, but the new Labour – Labour, note - government of 1997 actually intensified it! A LABOUR government? How? And why?

I mentioned at the beginning that there have been several amendments to the original Right to Buy Act. Mrs Thatcher made various amendments. Fair enough - we expect Conservatives to rip off the lower classes – it’s what they are for (both the conservatives and the lower classes). But what did Mr. Blair's and Mr. Brown's so-called Labour party do to itensify that rip-off?

Well, whatever the drawbacks of the asset stripping of the public housing stock, at least with the Conservatives the individual purchasers did make huge gains, with cost discounts nationwide uniformly going as high as a cash value of £50,000 . Sure there was a large 75% take for the Treasury, but at least the buyers did well.

Certainly better than they do these days.

In 1998 the Labour party claimed that uniform nationwide discounts of up to £50,000 was a cost to the public of £400,000,000 a year too much and that this money could be used to build additional housing (yeah, sure). So naturally enough, it being a LABOUR government, they lowered the cash limits for discounts, regardless of the percentage discount tenant purchasers were entitled to. Instead of a discount limit of £50,000 nationwide it became, for example, a limit of £38,000 discount in London, £22,000 in the North East, £26,000 in the West Midlands and £24,000 in Wales. The effect of this is to increase the purchase prices for Right to Buy purchasers – on top of the higher current valuations due to rampant house-price inflation. So: higher prices but lower cash limits to the discounts. Very nice I'm sure. For someone anyway. Just not the purchasing tenants - supposedly the very kind of people that the Labour party was originally created to benefit. This might have been a good thing if a house-building boom had ensued. Well, all you people out there involved in the building trade - has there been a boom in building social housing? I think not.

But again, what was REALLY going on there? We know Mrs. Thatcher was a pure asset stripper. But Misters Blair and Brown have been even keener asset strippers - nailed down or not, they've sold it to finance the increases in voting clientele and other illicit purposes - but Mr. Brown also has a well-deserved reputation as a stealth taxer extraordinaire. What was the result of reducing the cash limits on discounts? That's right: higher purchase prices, on top of already inflated prices - and the Treasury gets 75% of the nett take from sales of council houses .... Bingo! More money for the treasury. Stealth tax. Note that the media doesn't talk about this. Oh sure, the media whinges regularly about stealth taxes - but those stealth taxes that effect their own kind of people - generally the comfortable classes. They have never mentioned these stealth taxes that are being levied on the poorer people, for example the council tenants. The asset stripping of council social housing ... to the general benefit of, well, their own kind of people. Comfortable people.

I doubt if the media even notices.


And given that the new Labour government in 1997 didn't end the Right to Buy, so to maintain a higher level of public housing stock, and so more tenancy availability and less need to enter the housing market, why didn't that governemnt at least allow councils to keep 100% of the sale price to build as much replacement housing as possible for maintaining the rental stock (and less need to enter that housing market)? Councils are allowed to keep 25% of the nett take and can use this for building. However, without massive borrowing, at best they could build one house for every four sold. As building costs have risen in line with all other prices in recent years, the ratio of house numbers possible to build compared to those sold is actually far far worse than this 1:4 - perhaps even as bad as 1:10. And that pyramid selling scheme known as the housing market really does need a continuous stream of new suckers coming in at the bottom ...

Why wouldn't a LABOUR government do this for the benefit of it's traditional client electorate? Well, there's the stealth tax component, of course, but also the rise in house prices we've seen over the past few years. If councils could build more houses for rent at reasonable rents, then there would be less demand to buy into the housing market - price rises would moderate. Again, apart from the loss of the 75% from Right to Buy sales, the smaller increases in house prices would lead to lower stamp duties etc, and also, to less equity withdrawal, so less improvements in the feelgood factor - i.e. people wouldn't feel they were doing so well, so may not vote Labour, there'd be less spending, so less tax taken. So less money to spread in giveaways to comfortable people, less to spend recruiting for the nanny state, less to fund immigration … Can you see the economic circles this all goes in?

And where has it led us? An economy almost entirely dependent on house price rises (and financial speculation in the City casino), and apparent, not real, wealth based on a house price bubble. Now the bubble's bursting. And we are in for an economic depression that is going to make the 1930s look like a Buckingham Palace garden party. Got nothing much to sell now - it's already been sold. And virtually no manufacturing industry to perhaps sell things abroad, ruined agriculture and fisheries so any spare money we do manage to put together will have to be used to import food. There’s been virtually no real investment in energy and it gets cold here in Winter …

It's all part and parcel of the asset strip that started in 1979 and didn't stop with the advent of Misters Blair and Brown and their LABOUR government, but intensified. The asset strip has created the illusion of wealth and a healthy economy. But it has only been an illusion. Now we are going to have to pay for it as reality bites. This here isn't the whole story, but it's a part of it - just another component of the asset strip - part of the bit about asset stripping and stealth taxing the poor on behalf of the comfortable. A Labour government? Really? Extracting from the poor to give to the rich. I wont go into the withdrawal of the 10p tax rate eh?

I wish you all good luck. We are all going to need some of that. That includes a great many of what I’ve here called the comfortable. Very few will escape unscathed. But then - you voted for it.

If you want to read a related story in government weasel-words, without the asset stripping and stealth tax interpretation, go here:

http://tinyurl.com/6jtta9

only now as you read it, you'll have those things in mind and recognise it everywhere you read.

I have separate hard copies of the council accounts department summaries of the numbers for Wigan. Will provide copies to anyone requesting them.

I have tried to make this a coherent and readable account. There are so many threads to pull together, so many numbers - and I am so enraged to the point of incoherence at the whole business, that it has been difficult. I hope it all makes sense.

Thank you for persevering.

3 comments:

Anti-gag said...
This comment has been removed by the author.
Anti-gag said...

For a posting of this length you need to make the post on the main page an abstract, then link to the main article after you've got the reader hooked.

Also in that main body try some of the tricks that mass media use: Blocked and highlighted quotes etc. Check out any two page articles in the Daily mail to see what I mean.

All that being said this is well on the way to being one of the best local blogs we have, simply because it deals with local news and local concerns.

From
Chris Hill
(Lancaster)

Sir Henry Morgan said...

And how would I do that - there is no link to this article. Almost everything I used to write it is hard copy from the council, and inside my head.

I tried highlighting, bolding, para titles - wouldn't publish - came out as 'HTML errors' - and I don't understand that stuff. It's only simple once you know. I don't.

My knowledge of blogger is as basic as can be. Can tell you anything you want to know about the technicalities of miltary aircraft - stuff that would leave most people baffled ... because I know that stuff. (you'd have to know enough to know what sensible questions to ask though - as with everything. Which about sums up my computer knowledge - it's rare I know what questions to ask) But computers and programs? Might as well be trying to decipher classical Greek. Considering I never even pressed a keyboard key until a little over two years ago, I don't think I do too bad, and I'm mostly self-taught - can get by with word processors (Word and Open Office), and can passably use Spreadsheets for the purposes I need, and am reasonably knowledgable about what's available within my computer for routine maintenance - but beyond that, very little. I don't think I'm much different from most people.

We need to organise party lessons in basic computer use. Anyone?

yaz