Wednesday, Jun 02, 2010
We want our money back
Times online: This is the age of war between the generations
Now, 65 years later, the corresponding retirement revolution is about to shake up our society, economy and political institutions.
Posted by matt_the_hat @ 10:33 AM (1905 views) Add Comment
31 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. mark wadsworth said...
Yup, he's spot on for once. As ever, some of commenters just blame it all on single mothers.
And what is this nonsense about "We baby boomers paid for the roads and railways". No you didn't. The accumulated public sector debt is about five or ten times the cost of replacing all the roads and railways, and what about the tickets that people will buy in future or the fuel duty they will pay?
Cue Mr G...
reCaptcha: downturn instability
2. mr g said...
I'm here MW!
This article should provoke plenty of hate comments against us "boomers" so let's get the argument started.
From April 2010 you will only need 30 years NI contributions to qualify for a full state pension therefore, as I've paid in for 44 years, I should be eligible for a refund of 14 years contributions which will add up to a tidy sum.
3. tom101 said...
"Moreover, older people are more likely to vote." Young'uns can't b a***ed to vote so 'our' hard luck.
4. tenant super said...
Free bus passes in London to anyone over 60 is ridiculous. Everyone I know over 60 takes advantage of this, including my friend from 'old money' who lives in a 4 million pound home in St John's Wood.
That said, stirring up an intergerational war is not going to help anyone but there needs to be a pragmatic approach to dealing fairly with an aging population. This is not easy. For example, if you means-test care, like all means testing, it disincentivises people and makes them prone to disposing of assets over the years. Mr TS parents in Ireland are like this; every year his father gives him a few thousand Euro to ensure they remain below the savings threshold for free state care should either of them need it. Some kind of compulsory insurance is probably the way forward.
Another issue that needs addressing with people living longer is the under-occupation of elderly social housing tenants... almost half a million of them. My grandparents (and then my grandfather when she died) lived in a 3 bedroom council home with a big garden in a Surrey village for more than 40 years after their youngest son left home. Is this really right when families with children were living in Dickensian levels of overcrowding? Councils can only encourage not force people to move. What they need to do is build lots more elderly person's bungalows and flats with shared gardens, community halls and an extra bedroom for visitors and grant legal powers to move people from homes they are underoccupying by two bedrooms or more.
5. uncle tom said...
I'm a little miffed that a few years ago I caught up on some missed years NI contributions, and have now clocked up the requisite 30 - seems I should be entitled to stop paying now..
As for baby boomers being a twenty year phenomenon, I slightly disagree..
..I was born in 1960, and feel that in many ways those of my year, and the year or two before; just missed the boat.
..when we were looking to enter the property market in the eighties, prices were running away from us, and most of those who bust a gut to get on board then got crushed by the last crash. Meanwhile those who entered the market before 1983 were able to enter at sane income multiples, and unless they over-extended themselves subsequently; were able to cruise through the last crash.
As for AK's suggestions, denying the elderly a vote will never wash, and giving extra votes to parents is the sort of idea that emerges in places like New Zealand - but would never be kicked off here..!
I think people are much more reconciled to increases in retirement age than the likes of AK realise; but govt must not dither on this score, nor can the public services enjoy different rules. Increasing the retirement age by just one year has quite a substantial impact on the nations finances.
That people will have to retire at 70 or beyond is looking increasingly inevitable, so why should those who are currently in their fifties and sixties be able to retire sooner?
6. tenant super said...
Agree... also, commentators don't often mention that living longer is a good thing. The fact that the average life expectancy is increasing is often discussed as a problem. The problem is not that people live longer but that we are still living within an economic framework which evolved in the context of people retiring and then dying 5 - 10 years later aged 70. We should not forget that it is a good thing that I can expect to enjoy life for longer, my parents will be around to see their grandchildren graduate and all the other benefits of longevity.
7. mark wadsworth said...
TS, the only "legal power" that councils need is the power to charge market rents for social housing. It's like Land Value Tax for non-property owners.
8. tenant super said...
Actually, that's one UKIP policy I disagree with (social rent as a proportion of household salary up to market rent level).
Firstly because it is a means-test and therefore disincentivises self-advancement. Secondly, it encourages the concealement of a second adult in a property and any tax or charges should be independent of private living arrangements so that no snooping is required. Thirdly, social rents are probably around what market rents should be ... why set social rent at a level which is at a distorted high level thanks to LHA and other interventions? Have lots of social housing and this would bring down market rents and make rental investments less attractive. Fourthly, people who have persistent health/ disability problems in social housing (and are often inelibible for mortgages) often work in temporary/ contract work or only have employment during spells when they are well. Better to let them save money by having a low rent when they're earning to cover spells of illness when they are not.
9. matt_the_hat said...
2. mr g - when the deficit you have indulged on and your care in retirement i paid off then feel free to ask for a refund, otherwise don't expect me to pay for your largess. All roads (problems) lead to this generation!
10. tenant super said...
and fifthly, those who earn salaries which mean they pay market rent will move into private housing. The estates will become ghettoes for the most deprived. Children will have few classmates whose parents encourage them to better things, the stigma of social housing will worsen and social mobility decrease.
11. mark wadsworth said...
TS, I agree with your five bullet points as a better very long term strategy.
UKIP's policy of setting social rents* at 20% of a tenant's wages was not so much "the perfect answer to everything" but was merely a vast improvement on the existing system, where the rent/C Tax net of housing benefit averages out at about 20% to 25% of earned income but there is all sorts of weird means-testing going on at the lower end which makes it pointless taking on a low-paid or part-time or temporary job, and at the upper end there is no motive for 'the better off poor' to ever move out (they'd rather sub-let, of course).
Councils would of course be allowed to choose a lower or higher rate or set a cap, so that nobody ended up paying more than 'market rate' (whatever that is).
* i.e. headline rents, council tax, housing benefit and council tax benefit in their current form would simply be scrapped for social tenants. They just get given a slightly different PAYE code and then make their own way.
12. karlos said...
Nice to see that A'hole Kaletsky has sensible views on some things....
ReCaptcha: Director mewed
13. tenant super said...
In London, for 20% gross wage deduction to equal a private rent on a one bedroom flat, a person would need to earn £52k and those in family size social homes would probably never earn enough to be better off moving into the private sector. Then of course there is no stability in the private sector. Dealing with a minority of 'better off poor' would largely be outside the South East. But wouldn't these be the people you want to stick around as they are the ones likely to join the TRA and neighbourhood watch and raise standards in the local schools?
There is more justification in this approach due to the benefit trap at the lower end. So simply set your 20% tenant(s) rent (that is the named tenant not any other household members to avert a couple penalty) with a cap at current social rent levels (perhaps increasing them slightly).
14. mark wadsworth said...
TS, that's the beauty of the proposal. A lot of thought went in to this, and I road tested it with a local Labour councillor who thought it was pretty cool (I didn't tell her the provenance of the idea)
If the home is suitable for e.g. two adults, then they are given a choice:
a) Cough up the headline rent (as decided by the council, not up to me to decide), or
b) There's no set rent, but each gets given a PAYE code asking for an extra 20% to be deducted (a so-called K-code). If they have patchy earnings, they pay nothing when they are not earning and something when they are. No need for form filling, means testing etc.
Of course, if both are working on a half way decent wage they might opt for (a) else they opt for (b). As a more or less fiscally neutral proposal that will cut down on HB fraud, means testing, admin and bureaucracy, I don't think you can beat it. If one adult moves out, then he or she will ask for his or her PAYE code to be changed, and this alerts the council to the fact that the flat is now "too big" for its occuants and the remaining adult plus baggage gets shuffled into something smaller.
15. tenant super said...
A flat with two bedrooms is considered the right size for a couple or a single person with one or two kids of the same gender sharing. So if the boyfriend moves out, the flat is not considered underoccupied. There are very few one bedroom flats with a single bedroom and not that many studios either so most are considered the correct size for either one adult or two adults 'living together as husband and wife'. You will still have boyfriends registering their PAYE at another address (a relative in private housing) whilst living with the girlfriend who is only paying rent on her earnings, not his. Since each couple are allocated the same space as a singleton (i.e. one bedroom) this is unavoidable.
This is what I never got with this part of the UKIP manifesto... they set up a great citizen income type system where everyone gets the BCB regardless of who they're shacked up with, which means no one has to lie about their living arrangements because it is irrelevant to entitlement... only to go and re-introduce the problem for social housing tenants.
16. tenant super said...
btw... if you were the brains behind it, forgive my criticism but I always think of that bit in Adrian Mole where his pregnant single mother gets a visitor from the benefits officer who asks whose size 10 shoes they are under the sofa! No system should require any official to go metaphorically rifling through knickers drawers or getting neighbours to spy to determine where people are living as this is an entirely private matter.
17. mark wadsworth said...
TS, of course there will be a bit of fiddling going on at the edges, but how else are you going to do it?
Your five points are all well and good, but what about people with low or fluctuating incomes?
As to the "boyfriend" living there but not paying rent, so what? That does not represent a "cost" to society and is in fact more efficient use of available housing. Under UKIP's proposals he wouldn't be able to claim Housing Benefit for his registered address elsewhere because we'd, er, scrap Housing Benefit as a separate benefit - there is still implied "Housing Benefit" i.e. discount on rent for actual social tenants because they can choose the "pay what you can afford" option if they don't think they can pay the headline rent.
18. tenant super said...
My system would deduct the additional 20% tax from the named tenant only ... for those who sign up as joint tenants, halve the rate (2 persons pay 10% each, then there is no couple penalty and as a side effect, this might actually create a couple premium for people on unequal salaries and encourage people to stay together). As you say, having the boyfriend move in has no additional cost to society so he shouldn't have to pay an additional 'rent'.
The headline rent idea is fine but it needs to be set at fair rent (say, equivalent to mortgage payments for a mortgage at 3.5x local average salary as this is what a house should cost). There is no justification in charging inflated rent just because so many poor saps are being screwed by private landlords and we should all suffer together! The fair headline rent would probably be calculated at not much more than current social rents anyway.
19. mark wadsworth said...
TS, the 10/10 idea is another variation (might be better, might be worse than mine, I'd have to think that through), I have no opinion on what headline rent "should" be*. Each council can do what it wants, really. I don't think there is a right or wrong answer. The main thing was to simplify the system and reduce the marginal withdrawal rate/poverty trap etc.
* As a Georgist, I think social rents should be a lot less than a corresponding mortgage, because it's the same as paying full market rent and getting a Citizen's Dividend as a rebate, plus as a tenant, you don't get "capital growth". Most homeowners hope to make £5,000 or £10,000 capital gain every year, so why shouldn't social tenants get a £5,000 or £10,000 discount instead?
20. mr g said...
@MTH
I've paid my share therefore I'll have no qualms about claiming my state pension and as for the winter fuel allowance, free prescriptions, free eye tests etc, wonderful!
Then top that with a refund of 14 years NI contributions, things were never brighter, life's good!
All said with irony to wind up the boomer haters.
21. tenant super said...
You're right that social rents should be less than a corresponding mortgage. I suggested 3.5 x average local salary mortgage for an 3 bed council house average house because I know that this would either maintain or drastically reduce social rents in most parts of London. Around where I am, a 2 bed housing association flat is £110 pw and a 3 bed £150 . Council rents are generally slightly lower at about £95 for a one bed to £120 for a 3 bedroom. A three bedroom is therefore about £520 - £650 per month. 3.5 x local salary (80K) for a 25 year repayment at 5% is £473 per month. So £473 would be the cap or headline rent.
Social rents are actually very high in London and the South East in relation to the median income. That's why welfare dependency is endemic in some areas... the higher the rent, the more housing allowance, the bigger the benefit trap. Even in Kensington and Chelsea, the country's wealthiest borough; though household mean salary is over 100K, the median salary is about 30K (30% of households earn less than 20K) putting the headline rent for an average property at £620.
The problem with letting each council decide what it wants to do is that councils like Hammersmith who do not want labour-voting tenants in their area will use this as an instrument for gentrification and set the headline rent at a very high level. Labour councils will set it far lower causing poor boroughs to become poorer and rich boroughs to become richer and causing further ghettoisation. Setting a headline rent in relation to median local incomes seems pretty sensible to me.
I don't really approve of state subsidy in housing or any other area but until planning laws are liberalised and the home-ownerist distortions are eliminated, I see it as compensation (albeit only for some people) for the injustice of the system designed to make housing unnaturally expensive. This is as you say far from an ideal but improves the current status quo by reducing the benefit trap.
22. ianbe said...
58? Anatole Kaletsky is only 58? I always had him down for at least 70.
Poor sod.
As far as the article goes I actually find myself in broad agreement with the silly old man for once.
23. mark wadsworth said...
TS, good maths. What you also have to throw into the mix is that, since 1935, social rents nationwide have ben pooled and then redistributed by Whitehall. John Healy proposed that local councils be allowed to keep their own rents and get on with it, which would be much better (only Labour got voted out a few weeks later) - but yes, there might be a problem with Hammersmith upping the rents, so maybe for London we could pool rents across London or something, so that poorer areas would benefit if Hammersmith upped their rents?
To be fair, there's no reason why Hammersmith shouldn't increase their rents, provided that the proceeds are used to build more social housing a bit further out.
24. braindeed said...
Kaletsky is right - young people have to organise. The old gits will not give up a penny you don't snatch from their steely grasps.
Left and right, rich and poor, they're all old, and deserving, worked hard, etc etc etc etc etc, a big grey immovable blob.....get organised. I’m heading that way myself -but I still think that the lies perpetrated by the actuaries and politicians of yesteryear is criminal.
25. tenant super said...
RE Hammersmith rents ...I've heard this argument before and it isn't straightforward. Apart from the discussion about disrupting the education of children (so this could only really be implemented for tenants without children in local schools), there are practical problems. I am not sure this country is quite ready for that kind of residential segregation and shipping lower income people en masse into the suburbs can cause massive tensions, particularly if those moved are largely ethnic minorities and are moved into traditionally white districts. Multiculturalism only works if it evolves slowly and naturally. Also, housing shortage is acute everywhere so how will locals react when none of the new social housing in the suburbs is allocated to them but goes to newcomers?
The newcomers may be competing for local jobs which are limited and put burdens on infrastructure. Other inner London boroughs are not going to let Hammersmith build social housing to move their tenants into. They want it for their own waiting lists. Dump people in Newham and travel costs from zone 6 makes commuting to Central London for a low wage prohibitive. So who will clean the hospitals and collect the bins in Central London if you have moved social tenants beyond affordable commuting distance and abolished LHA?
26. mark wadsworth said...
TS, sure, some things have to be done gradually - rent increases can be announced years in advance etc. As to commuting costs, employers in Central London will just have to increase cleaners' wages a bit to compensate.
But I was trying to defend UKIP's policy of allowing people to choose to pay over 20% of their income in social rent via the PAYE system (so it automatically gets adjusted down when they're not earning and up again when they are), as a straight swap for asking them to pay full rent and full council tax and then making them claim housing benefit and council tax benefit.
27. tenant super said...
I agree this a good thing in principle and worth defending but as I understood it from the UKIP manifesto, this wasn't a choice. It also explicitly states 'household gross income' which make it unpalatable for the reasons of living arrangement privacy I mentioned. For most tenants, especially in the South East, the 20% rate for a single adult worker represents a substantial reduction on the 'subsidised' rent plus council tax they currently pay, so if it were a choice, probably 90% would make the switch to this system. It also carries the benefits of reducing the benefit trap and all the other plusses you mention.
The idea in principle is sensible but needs tweaking. Firstly it doesn't mention what the flat percentage is. If 20% represents a substantial reduction on current rent even for those on above average incomes, then I suspect it will be set higher, as part of this, I am sure, is to deprive the better-off poor of a perceived unfair advantage, whereas the reality is that they pay fair rent and the private renters are being shafted. If one group of people (private renters) pay unfair levels of housing costs, the solution is not to make housing costs unfair for everybody as Hammersmith propose.
The manifesto needs to:
- State what the percentage will be (any more than 20% could only be justified by 'we should all be shafted the same' philosophy and is not a good policy)
- State that there will be an alternative option to pay a headline rent based on local incomes
- State that this is based on the income of the named tenant regardless of household composition or a split percentage for joint tenants.
Then it will be a great policy and I'd vote for you!
28. mark wadsworth said...
TS, what we said was:
UKIP therefore recommends that social rents be set at a single inclusive figure (rent plus Council Tax, net of notional Council Tax and Housing Benefit) calculated at around 20 per cent of each household’s gross income: This would ease the poverty trap for the most needy; social tenants on very low incomes would keep 49p for every £1 earned (assuming a flat tax rate of 31%) rather than 4.5p as at present.
It would also encourage households on higher incomes to move into the private rented sector or owner-occupation, as above a certain level of income, the social rent they are paying would be higher than a comparable rent in the private sector or the cost of a
repayment mortgage. This may seem unfair, but it is exactly these households who will benefit most from UKIP’s proposal to double the tax-free personal allowance, so taking the two measures together, very few households will lose out.
Of course, local councils should be allowed to set a higher or lower percentage, and be democratically answerable for their decision. A lower rate would flatten the poverty trap even further, but receipts would drop and the ‘better off poor’ would be less motivated to move out and vice versa. Local councils would also be allowed to set upper or lower limits on the rents they charge.
At present, there is little motivation for councils to maximise their rental income, as rents are ‘ring-fenced’ but Housing Benefit and Council Tax Benefit are borne by central rather than local government. UKIP would allow local councils to retain all social rents, thus giving them every incentive to ensure that as many of their tenants are in work as possible...
So we didn't actually mention a cap. I will try and get that in the version for the next election, which of course we won't win either.
As to splitting the percentage, this is actually unnecessary if you can choose to pay a fixed rent instead. Even that has drawbacks - people would opt for "fixed rent" when they are working and "variable rent" when they aren't... Hmm.
29. mark wadsworth said...
Actually, having re-read that, we did say Councils could set a cap. Not daft you know.
30. tenant super said...
Thanks for the heads up... I must have read the abbreviated version! The policy is actually very good as only a tiny minority of tenants would earn so much they're better off moving out (Frank Dobson and Baroness Uddin he he he...). On a three bedroom London property, at 20% income you would have to earn about £75K before the private sector is cheaper. On a one bedroom London property, at 20% income you would have to earn about £50K before the private sector is cheaper. In London, most working people are still better off paying 20% so I don't think the majority would switch to fixed rent when in work. I don't really know the maths for other regions. For a single person on £30k in a one-bed council flat in Southwark, they currently pay about £550 per month plus £85 council tax (£635) but under the new system would pay £500 in total.
You say you won't win the next election but minor parties, still add value to discussions. Even some of the Monster Raving Looney policies like passports for pets have become reality. Policy makers in other parties will read rationale and reasonings in other party manifestos so it is still worth improving the policy.
Obviously, the major remaining flaw is a strong disincentive to declare cohabitation. If the headline rent is set at current levels, if the boyfriend moves in, and he earns £30K also, the headline rent £635 is cheaper than 20% for two ...ie £1000 but higher than the £500 paid when the girly lived alone. This is a couple penalty of £135. OK, most UK hotel rooms charge different rates for the same room if occupied by one or two people and it is not much to ask for him to pay half of £625 rent and the £135 is far, far less than he would pay for a room or flat elsewhere but I am sure he isn't going to be in a hurry to tell the taxman. Then you have all the prying and prosecution that goes with that which is what I can't stomach. Split the percentage and the problem is lessened as the girlfriend will insist he declares so her percentage is reduced.
If he already lives in his own social housing flat and 20% joint income is still below headline rent he might also question why bother moving in with my girlfriend and child when we would pay the same rent for one flat as we currently do for two? May as well keep my place for extra storage, the luxury of a second home or for one of the kids when they grow up.
Also with adult children living at home, is it really right that students working in their summer holiday have to give 20% in tax for the council home they've lived in all their life and their parents are still paying rent for?
The massive drawback with my suggestion is that couples will deliberately stay apart while applying for housing so only the lower earner signs up as the tenant. However, the higher earner has to sacrifice all his tenancy rights, rights of succession in the event of death, re-housing rights in relationship breakdown, so it is a flaw I can stomach.
Since everything is currently means-tested on household income (tax credits etc.), should a mainstream party adopt this policy, it is neither here nor there to add yet another element to the couple penalty.
But for UKIP themselves who lambast rules that lead to 200k "covertly cohabiting" couples and who espouse the fact that their BCB being independent of household composition and the income of other household members represents the true end to the couple penalty, it seems strange to set rent on the basis of household income.
31. Theemperorhasnoclothes said...
Recaptcha: Nobody Slogging
That's all I wanna say.