It's chaos out there ...

No, not the snow, but the government's approach to localism which one Conservative MP has described as deliberately chaotic (you can listen here - 7.14). There is a serious point here with which many urban economists would sympathise. Because people are different, with different preferences over public good provision and taxation it can be good to have different policies implemented in different places. This holds even if all places are otherwise identical. Add to the mix the fact that places may be different (say rural or urban), and there are many reasons why policy should vary.



The problem, of course, is that the British appear to be allergic to "postcode lotteries" - where outcomes differ across areas - and the hysterical reaction to Nick Boles' comments suggest that nothing much is changing there.

Localism and House Building

The localism bill has confirmed more power to local people to overrule planning decisions.

Back in August, I reflected on the fact that honest and direct debate about housing would convince most existing local residents that they should oppose new homes. The BBC has a nice example of how this might play out in practice.

High Speed 2 - no more consensus

In October this year, I wrote: "The case for spending £33bn on high speed rail is greatly exaggerated; the case is even less convincing in light of government spending cuts; yet all the main political parties are for it. Go figure ..."

One main political party is no longer so convinced by the project it appears. Better late than never, I suppose.

Building regulations

The coalition government has announced that it is scrapping new proposals that would have further tightened building regulations. I don't claim to be an expert on building regulations (they are complex - which is part of the problem CLG are trying to address) but I am fairly confident this is a sensible move.

Tight building regulations for new homes impose a regulatory tax which reduces the number of new homes built (although land prices and planning remain a more important barrier). These regulations are imposed so that new build should be of a better quality than existing stock (with respect to safety, living environment, carbon footprint etc). So, the flow of new housing stock is better quality as a result of building regulations. But the effect on the overall quality of UK housing depends on the flow relative to the stock. Unfortunately, in the UK we build very few new houses so the effect of these tight regulations is almost completely diluted by the state of the existing stock. The coalition government's move should help with the flow rate and providing that the increase in new build is sufficient to offset the marginal decrease in standards will improve the total impact of the regulations on new build. But none of this will have a very large impact - that requires action on the much bigger existing stock.

Rural Living Costs

The Commission for Rural Communities report on rural living costs has received wide coverage today. According to the report you need 10-20% more to afford a minimum standard of living in the countryside.

It's interesting to see where those differences come from. The report assumes that people (non-pensioners) in rural areas have to have at least one car (two if both people are working age). Because the stock of housing is different in rural areas a couple with two children, get a three bedroom semi-detached house (rather than terraced); while a single working age adult gets a two bedroom house (their urban equivalent gets a one bedroom flat). However, the fact that you get a bigger house doesn't enter in to the cost calculation, while the fact that it costs more to heat bigger houses does. Because these places have gardens, rural people need more money to look after those gardens. They also need wellies.

So, if I understand the report correctly, it costs more to have a car, heat a bigger house and look after a garden (including the need for appropriate footwear). For rural people all these things are considered requirements for the minimum standard of living, while for the urban poor they are not.

Not only do I find it odd not to compare like with like, but these kind of calculations also seem to imply there are no amenity values to these things which compensate for the costs. A useful thought experiment - how many urban poor would be willing to give up 10% of their income (around £1,400) to have a car, and a house with a garden? Of course, in reality, they can't do this because it would cost much more to have these things in urban places (particularly the house and garden). Of course, all of this ignores the fact that (some) rural areas deliver other amenity benefits that make people willing to buy expensive houses to benefit from them.

For these reasons, I don't see how these minimum income standards provide an accurate picture about differences in the quality of life between urban and rural poor, even though I am sure they will be interpreted as such.

Local Procurement for Local Authorities?

Someone suggests to me that Local Authorities are increasingly interested in local authority procurement as a way to create or sustain local jobs.

I hope that this isn't true, but worry that it might be. Let me put it bluntly: Local procurement is a pretty silly policy. One LA doing it might have some benefits but at the cost of higher procurement costs (if they could be lowering costs by procuring locally, why aren’t they already doing it?). If many LA's try it, how will that help? LA1 stops buying from firms in LA2 and vice-versa? That would appear to be a recipe for costs up with no obvious benefits (again, assuming that LAs are sourcing for their particular needs at lowest cost currently).

Tit-for-tat protectionism (may have) contributed to prolonging the great depression. With finances tight and the economy struggling, surely not a good moment to start encouraging protectionism at the LA level?

New Homes Bonus

The government has provided more details on the new homes bonus that local councils will get when they allow houses to be built.

I am certain that this is a step in the right direction in trying to counter the considerable disincentives LAs face in agreeing to new homes. It's hard, however, to be optimistic that it will lead to that much more house building. This will depend on whether the incentives are sufficient to offset the reduction in direct government expenditure and the moves to give local communities more say in decisions. On the latter the BBC reports: "Ministers say the number of new homes being built is at its lowest peacetime level for 85 years and it intends to overhaul the planning system to make it easier to get schemes off the ground and to give councils and communities the final say over where developments are sited." I continue to think that these two objectives largely contradictory.