UK housebuilders counter Ed Miliband's land-hoarding claim

Plots are developed as soon as they have planning permission and 557% profit rise 'comes from very low base'

Britain's housebuilders have launched a scathing counter attack againstEd Miliband's claim that they are hoarding land for profit.

The industry said plots are built on as soon as planning permission is secured, and argued that the 557% increase in profits among the nation's four biggest housebuilders this year comes from a very low base following the financial crisis.

Pete Redfern, chief executive of Taylor Wimpey, said: "The industry is only just returning to the point where it is meeting its cost of capital following the most prolonged downturn in housing history.

"The comparison used for profitability is against a point where many in the industry were loss making, so a percentage improvement is rather meaningless."

Britain's chronic housing shortage is expected to push up prices by as much as 8% next year according to the property website Rightmove, unless a flood of new properties are built.

The biggest four developers by turnover – Barratt, Berkeley, Persimmon and Taylor Wimpey – have a collective land holding of almost 300,000 plots.

Miliband is accusing housebuilders of holding on to land to push up values, and claims some "stick-in-the-mud councils" are blocking development.

Redfern strongly rejected the Labour leader's accusation that housebuilders are hoarding land.

"We continue to start all sites as soon as possible once an implementable planning permission is received. Taylor Wimpey specifically and the industry as a whole have only a tiny percentage of sites that have a planning permission, where construction has not been started."

A spokesman for the Home Builders' Federation (HBF), the industry's trade body, said: "Developers don't land bank, all the evidence is there. As soon as developers get a planning permission they want to start on site. Developers are not land hoarders."

One major housebuilder said companies in the sector would be perceived as hugely risky and lose investment if they did not have sufficiently long land bank holdings of typically more than four years.

The HBF said the industry would work with Michael Lyons, the chair of Labour's new independent commission on housing, to improve understanding of the issues.

"We are looking to work with the Lyons Commission to help them understand the complexity of housing delivery going forward."

Lyons said the country needed to build more than 200,000 homes a year by 2020 if demand was to be met and the backlog of under-supply addressed.

Shares in the sector were down on Monday morning, with Persimmon shares 1.7% lower, Barratt down 0.9% and Taylor Wimpey off 0.2%.

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British wage-earners have taken £5,000 pay cut in five years, figures show

Government figures will fuel debate about living standards before 2015 general election

Britain's wage-earners have taken a £5,000 pay cut in the past five years, according to government figures, suggesting ministers will struggle to engender a feelgood factor before the 2015 general election.

The figures published by the Office for National Statistics show wages and salaries for the middle fifth of non-retired households fell from £33,100 in 2007-08 to £28,300 in 2011-12. Over the same period original income, which is the income households get from employment and investments, fell from £37,900 to £32,600, while cash benefits rose from £3,100 to £4,600.

The figures will fuel the debate about living standards before the general election, and about whether the government has done enough to protect the typical wage-earner.

The figures confirm that the earnings squeeze pre-dates the 2007 recession, appearing to endorse Ed Miliband's claim that the link between wages and growth has been broken, one of his chief justifications for his willingness to intervene in the market. The report says: "While GDP per person continued to grow at similar rates between 2004-5 and 2007-8, growth of median household income slowed to a fifth of its previous rate in the years immediately before the start of the economic downturn."

The Treasury will be fervently hoping that it will be able to show the link has been restored in 2014, either because economic growth is so strong or because it has taken steps to make work pay with its welfare reforms.

But the figures also show that despite the big rise in personal allowances due to budget decisions by the Liberal Democrats and the Conservatives, median household income for the overall population has fallen by 3.8%, after adjusting for inflation, since the start of the downturn.

However, while the median income for non-retired households fell by 6.4% between 2007-08 and 2011-12, the median income for retired households grew by 5.1%.

Between 2007-08 and 2011-12, average income from employment and investments for the middle fifth of non-retired households fell from £37,900 to £32,600.

Cash benefits for the middle fifth of non-retired households rose from £3,100 to £4,600 between 2007-08 and 2011-12. As a result, the average proportion of gross income coming from cash benefits increased from 7.6% to 12.3% for this group.

Average direct taxes paid by the middle fifth of non-retired households have fallen from £8,700 in 2007-08 to £6,800 in 2011-12. As a percentage of gross income, this is equivalent to a fall from 21.1% to 18.3%.

Looking over a longer period between 1977 and 2011-12, the middle fifth of households saw an increase in unequivalised gross income from £18,500 to £30,100, after taking inflation into account.

The report confirms the extent to which the reforms have hit middle incomes, but also the way in which the retired have been relatively immunised, confirming there is an issue of inter-generational fairness to be addressed. The retired median household income is still much lower in absolute terms than non-retired income.

The Treasury countered the figures with its own report showing wage growth had followed GDP growth in the previous two recessions. It says that although wages have shrunk, this disguises the extent to which workers have been subsidised by higher company pension contributions or higher national insurance contributions.

The Resolution Foundation, a thinktank that specialises in this policy field, said: "It is striking that there was a pronounced slowing in the growth of median household incomes even before the years of economic downturn. It confirms that between 2004 and 2008 income growth slowed to a fifth of its previous rate, even as GDP growth kept up a consistent pace. This underlines Resolution Foundation work highlighting the major slowdown in wages and incomes that occurred well before the great recession.

"The figures also reveal a dramatic generational difference – with the incomes of working-age households falling by more than 6% since 2008 while those of retired households have continued to rise. The pre-crisis slowdown is likely to have been even starker if we looked only at working-age households."

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Ofgem not a 'toothless tiger' in fight against rising energy prices, insists boss

Andrew Wright tells MPs he agrees with consumers who think the retail energy market is not working well

Ofgem boss Andrew Wright says he understands public anger at rising energy prices but has denied his organisation is guilty of "feeble regulation".

Wright acknowledged "deep distrust" of the big six energy companies – British Gas, npower, SSE, Scottish Power, E.ON and EDF – as some customers face price rises of more than 10% as winter kicks in.

Addressing MPs on the Commons energy and climate change committee, Wright said rising prices, years of aggressive doorstep selling, confusing tariffs and complexity when consumers wanted to switch providers had all created negative perceptions of the industry.

"I completely understand why people feel frustrated and angry about rising energy bills. Prices have more than doubled over the last 10 years at a time when incomes have been squeezed, and consumers are not convinced that price increases that they see are either fair or justified," he said.

"Consumers have a perception that the market is not working well and that's something that we agree with. We think the retail market is not working as well as it should do."

When asked whether Ofgem was a "toothless tiger", failing to address rising prices and accusations of unfair profit taking among companies, he said it was acting within its statutory regulatory framework and rejected the idea he was supportive of the rises.

"I never said it was OK. I have not said this level of profit is right or acceptable. If companies imply we think 5% is right, we've never said that."

He said that politicians were right to debate the issue of rising energy price rises but when questioned about Labour leader Ed Miliband's promise to freeze prices he did not appear to be enthusiastic.

"The sort of things we would consider are, does it have an adverse impact on consumers and on the investment that's needed?

"It is obviously necessary to allow companies to recover the revenues that they need to be able to run their businesses effectively. They should have no guarantee of profits but an efficient business serving customers should be able to recover the costs that they incur. So any arrangement that doesn't allow them to do that potentially puts at risk investment in the industry."

His comments came a day after Ofgem published a report which found that profits per customer rose by 77% last year, from £30 to £53, driven by higher prices and increased demand for heating during last year's cold weather.

The average profit margin for supplying energy to households in 2012 was 4.3%, up from 2.8% in 2011, with total profits from supplying energy to households and businesses rising from £1.25bn to £1.6bn last year.

Article Source : http://www.guardian.co.uk
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UK growth? Make London independent to mend the north-south divide

The south may be recovering, but the north shows Ed Miliband's aspiration for One Nation Britain is far off from reality 

Go to Preston and tell them that Britain is booming and the notion will be greeted with a hollow laugh. Tell the folks in Hull that the housing market has caught fire and they will assume you have taken leave of your senses. Mention in Rochdale that a corner has been turned and you are likely to be run out of town.

Ed Miliband's big idea at last year's Labour conference was One Nation Britain. This is a nice as an aspiration but bears no relation to the country we actually inhabit.

The latest growth figures are a classic example of Disraeli's dictum that there are three sorts of falsehoods: lies, damned lies and statistics. Sure, if you take the UK as a whole it is true that growth has returned. National output is expanding by 3% a year, slightly above its long-term trend.

But the country-wide average disguises considerable regional disparities, which are reflected in Britain's political make-up. Areas where the Conservatives are strong tend to have above-average prosperity; areas where Labour is strong tend to be poorer than the average. Marginal seats are clustered in those areas where the two nations collide.

House prices are one example of how regional economic performance varies. The Office for National Statistics said last week that property was 3.3% dearer in July 2013 than it had been a year earlier. But strip out London, where the cost of a home increased by almost 10%, and the south-east, and in the rest of the country prices were up by just 0.8%. That's below inflation, meaning that property prices are falling in real terms. In Scotland and Northern Ireland they are falling in absolute terms.

Now look at the regional breakdown for workless households, where the five areas with the worst record are all former industrial powerhouses lying north of a line drawn from the Severn estuary to the Wash: Glasgow, Liverpool, Hull, Birmingham and Wolverhampton. For the UK as a whole, 18% of households do not have anyone in work; in the unemployment blackspots it ranges from 27% to 30%.

At the other end of the scale, the areas with the fewest workless households are all in the south of England. Hampshire has the lowest percentage, at 10.6%, followed by North Northamptonshire (11.2%), Buckinghamshire (11.3%), West Sussex (11.3%) and Surrey (11.4%).

The north-south divide is not new. Far from it. There has been a prosperity gap for at least a century, ever since the industries that were at the forefront of the first industrial revolution went into decline. But the disparity between a thriving London and the rest has never been greater.

On past form, there will be a ripple effect from the south-east and there are tentative signs that this may be happening. But it is early days and, understandably, there is concern in the rest of the UK when it is mooted that economic policy needs to be tightened to tackle a problem that is chronic and heavily localised.

This is well illustrated in an article by Paul Ormerod published in Applied Economics Letters. Ormerod drills down into the UK labour market to see what has been happening to unemployment at the local authority level.

He notes that most labour market economists have seen the cure for unemployment as a good dose of "flexibility".

According to this approach, joblessness will only persist over time due to "rigidities" in the labour market. Remove the rigidities – such as over-generous welfare systems, employment security provisions, working time regulations, national pay bargaining – and the price of employing workers will adjust (ie reduce) to a level that will ensure that everybody who wants to work can find a job.

Unemployment blackspots

That's the theory. Ormerod tests it by looking at what has happened to unemployment over time. If greater labour market flexibility is the answer, then local authority areas with high levels of unemployment 20 years ago should have witnessed an improvement. But Ormerod finds no such correlations.

Those parts of the country that had relatively high levels of unemployment in 1990 still had them in 2010, even though the rates of joblessness went up or down according to whether the national economy was booming or struggling. "The striking feature of the results is the strength of persistence over time in patterns of relative unemployment at local level," Ormerod said.

Those who say flexibility is the answer may counter that the problem with Britain is that the labour market is still not flexible enough, and that only by making the UK more like the US can the problem of persistent unemployment be tackled. The only difficulty with this argument is that high levels of unemployment persist in America as well, although the correlation is not quite so strong as it is in Britain. This, though, may have more to do with the willingness and the ability of Americans to move than it does with the flexibility of the labour market.

Ormerod concludes: "The labour market flexibility of the theorists, beloved by policymakers, appears to be at odds with reality. This is especially the case in the UK, where relative unemployment levels persist very strongly over long periods of time. The findings certainly call into question the efficacy of policies that were designed to increase flexibility and to improve the relative performance of regions."

The cross-party support for a new high-speed rail link to the Midlands and the north is one attempt to find new ways to tackle the two nations problem. Supporters of HS2 say the cost will be worth it because the new line will lead to higher investment, increased rates of business creation and enhanced spending power in the northern regions.

Another solution to the north-south divide would be for London, rather than Scotland, to get its independence. Although Britain is not part of the single currency, London is Europe's unrivalled financial capital. From the dealing floors of Canary Wharf in the east to the hedge-fund cluster in Mayfair to the west, London is where the action is. Upmarket estate agents can tell where the world's latest troublespot is by the source of the foreign cash buying up properties in Belgravia and south Kensington: currently, it is Syria.

Were the government to publish regional trade figures, they would show that London runs a current account surplus with the rest of the UK, offset by capital transfers from the rich south to the poorer north. As an independent city state, London would have a higher exchange rate and higher borrowing costs. The rest of the country would, by contrast, get a competitive boost.

The reality is that London is a separate country. Perhaps we should make it official.

Article Source : http://www.guardian.co.uk

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