This is a serious issue, but “1 in 8 did not receive a hot meal a day outside of school” is a bit weird. I probably didn’t get a hot meal a day outside of school, and I was hardly on the breadline.

This is despite child poverty officially falling: http://www.bbc.co.uk/news/uk-18436795

I think it’s disgusting that “The charity has been accused of using the issue of child poverty to politically attack the coalition.”

How dare they try to pin the blame on the government who have just been attacking the poor and cutting benefits since the moment they got into power, it can’t be their fault surely.

Besides, they’re not attacking the coalition, the coalition just realises that it’s their fault, this I’d suggest was a guilty reaction, if for a moment I believed any Tory felt bad about robbing the food from poor kids to throw a few more pence at big business.

Maybe this Brian Binley MP still has a soul and that’s why he’s feeling all offended.

Politics will come into the issue if children in this country are doing this as it has stated. Brian Binley needs to recognise this and recognise that it is happening on his party’s watch. He is in politics and says he is a supporter of Save The Children so should do an investigation himself and if true do something about it rather than worrying about if Save The Children is getting involved in politics because it is saying the opposite of his Government.

re Brian Binbag MP:

Yes, opposing the Conservative Party is always ‘political’, isn’t it?

@Duncan Stott- possibly the key remark in that report is that child poverty decreased “because the measure is based on median incomes which also went down”.

The figure also covers the year 2010-2011 so we don’t have any idea how badly children have fared since we have slipped back into recession this year.

Now I am 69, and can see that it was wrong then, as it is now, but it was exciting.Now my parents are both dead, and can’t see this, I can say that I stole food as a young teenager in the 1950′s, but it wasn’t poverty, it was for fun! I can probably see the same horrible little buggers such as I was doing the dame thing for the same reason

Japan has seen something similar but at the opposite end of the age axis. Nearly one fifth of all crime in Japan is committed by the over 60s, 80 percent of the total is shoplifting particularly for food.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=as80aWlHdA1M

Quote:
On 17 June 2009 it was revealed that Binley had claimed over £50,000 in expenses, renting a flat from his own company, BCC Marketing. Two months after beginning to rent the flat, expenses rules were changed to clarify that MPs could no longer rent properties from businesses in which they had an interest. Binley appealed to the Speaker of the House Michael Martin, whilst still claiming for the flat. Binley lost his appeal after two and a half years, during which time he still claimed for the flat in question. Binley has not had to repay the £57,000 he received while the Speaker deliberated.
Presumably this Brian Binley MP would be the same self serving piece of scum that features in the above story?

@ nellslad

Possibly, but then I suspect the horrible little buggers these days would prefer to steal iPods, or at least toys and sweets.

If the reports are right, something’s wrong. There’s no way that a first-world country should have children who feel they need to steal bread so their families can eat.

“the key remark in that report is that child poverty decreased “because the measure is based on median incomes which also went down”.”

Right. Now, as there’s a recession, it is lamented there is some sort of absolute child poverty, although relative poverty is declining.

When times are good, it is lamented that there is an increase in relative poverty, even if absolute child poverty is declining.

Crying wolf all the time. Which of course doesn’t mean that there aren’t poor and even deprived children; it’s just that ” ye have the poor with you always” and people care less and less as nothing is ever good enough for those who lament.

That wouldn’t be the same Justin Forsyth who was Gordon Brown’s Director of Strategic Communications would it??

Hey who knows; if children living in poverty are stealing bread, they might get lucky and be deported to Australia earning $2 an hour working for Gina Rinehart…

http://grist.org/news/worlds-richest-woman-would-prefer-to-pay-her-miners-2-an-hour/

Any thoughts on making Brian Binley MP pay for £50,000 worth of food (from his own bulging wallet) and making him distribute it soup kitchen style to the people he helped impoverish?

With details of expenses he fiddled written on posters everywhere around him, which he would then be forced to explain to said people. With the whole event televised!

@ 11 pjt

“Right. Now, as there’s a recession, it is lamented there is some sort of absolute child poverty, although relative poverty is declining.

When times are good, it is lamented that there is an increase in relative poverty, even if absolute child poverty is declining.”

Erm… yes.. that would be because both absolute and relative poverty are bad things. Absolute poverty is going to be more of an issue when inflation is high, unemployment is high, wages and benefits are falling, etc.; relative poverty is going to be more of an issue when the economy is doing OK, but you have a group of people being left behind.

Is absolute poverty worse than relative poverty? Yes. Is it an issue that the way we measure poverty is designed for the good times and obscures real problems in bad times? Very plausibly. Is there any sort of contradiction involved in opposing two different forms of poverty? No. (Children having to go without food = bad. Children having to go without things their peers take for granted – a holiday, a school trip, a bike, a bedroom of their own, etc. = also bad.)

@ 11 pjt

“nothing is ever good enough for those who lament”

You do realise that the two things are not mutually exclusive, right? Like, it’s possible to improve both forms of poverty at the same time?

Chaise @16: “Like, it’s possible to improve both forms of poverty at the same time?”

Umm, is it, consistently, in developed nations? Say, OECD countries over the past 20 years, in an even remotely consistent way?

Surely, in non-developed nations – where income distribution is generally very uneven and relatively poor people are also absolutely very poor – both kinds of poverty decrease: the whole country becomes richer and income distribution evens out.

But in developed nations, it seems that developement of Gini coefficients look particularly good (“good” being defined the closer you are to 0 the better you are) when there is economic hardship, recession. I wrote a blog post about this some weeks ago, not related to children’s well-being but share of employee compensation as a proportion of national income, which actually seems to follow a similar cycle.
http://ptaipale.blogspot.fi/2012/08/those-evil-capitalists-and-their-gains.html

In think absolute poverty in post-industrial nations is really bad, and should be fixed, although it also should be defined so that we understand what we’re talking about. However, I am quite sure that children stealing food is not a problem of absolute (income) poverty any more than income distribution. It is a problem of neglect and abuse by parents. The BBC Web page was very very terse and provided no background data whatsoever.

BTW in my country all children get a free meal at school (no “Free School Meal” programs or such things needed). This was established in rather different circumstances in 1940′s, but I consider it a very good thing. I find it strange that Britain’s schools don’t do it.

“Brian Binley”

What has happened here is that some journos have called around tory MPs for a comment. The entire cabinet and ministerial team are simply not stupid enough to attack a well known and popular charity, and thus chose to ignore the story. So eventually a journo gets hold of brian binley, who provides a quote as he is too stupid to understand that is people like him that are toxifying the tories again.

And in the meantime CJCJ thinks there is a big conspiracy because some of the staff at save the children used to work in government – for gordon brown no less. Here’s more gossip for you; one of their press officers in Cardiff used to work for Rhodri Morgan…..you’re through the looking glass now.

@ 17 pjt

I don’t see why it shouldn’t be possible. An economic model that rewarded people for spreading out success, rather than concentrating it on themselves, should be able to boost both metrics. So more co-operatives, basically.

Income disparity in first-world countries seems to be caused partly by runaway successes, individuals who are worth multiple millions. That’s fine. But then you have the other kind, where some kids get new £80 trainers every few months, and others get by in hand-me-downs. That’s where it becomes a problem – where people are missing out on “the norm” due to their socioeconomic circumstances.

I do think that it’s foolish to instantly get angry about income disparity without looking at the details. But we do have very poor people in Britain. I’m not sure where you get the idea that these kids are stealing due to parental negligence. Agreed that there’s not much to go on, but the police officer in question (who has personal experience of the people he’s talking about) thinks that they’re stealing for their families. I don’t see what evidence you’ve used to come to a different conclusion.

It is annoying that newspapers can flit between the two poverty definitions to maintain a near-constant narrative of This Country Going To The Dogs even when things are generally getting better. But we do need to worry about absolute poverty, and we do need to worry when our country starts to split into elites and peons. I think a sensible starting point is making a distinction between “relative poverty” and “income disparity”. I don’t know what, if any, official definitions of the terms exist.

“that these kids are stealing due to parental negligence”

And even if this was the case – isn’t children being so sufficiently neglected by their parents that they have to steal food a problem that we should be concerned about?

And i’d argue that this form of neglect isn’t exactly unrelated to poverty and economic circumstances either

Chaise: “An economic model that rewarded people for spreading out success, rather than concentrating it on themselves, should be able to boost both metrics. So more co-operatives, basically.”

I’m not sure I understand what you mean. Something that rewards people by giving people money which they cannot keep (because otherwise they’d be “concentrating it on themselves”) or rewarding people with something else than money, like ????? ????????????????? ????? medals?

As to co-operatives, I like the idea in principle but I am suspicious of the practicals because of history. In my country, the major recession in 1990′s was in large part due to a banking crisis caused by co-operative banks. And same is true today in Spain with the cajas.

I need something better than “this time it will work, sure, trust me”.

Oops. LC seems to happily accept Cyrillic characters in edit box but then replace them by ???s when displaying the comment. I was referring to Geroi Sotsialistitseskogo Truda decorations, or whatever you’d translitterate them.

Planeshift: “And even if this was the case – isn’t children being so sufficiently neglected by their parents that they have to steal food a problem that we should be concerned about?

And i’d argue that this form of neglect isn’t exactly unrelated to poverty and economic circumstances either”

Surely we should be concerned. Surely it is related. “Related”, however is different from “caused by”. Particularly, that children in poor families are often neglected does not mean that by giving more money to the families the problem would be significantly diminished. It may even make it worse. Generally, all generalisations are wrong, but it looks to me that both monetary poverty and child neglect are result from other root causes.

The old story about ice cream sales causing a lot of drownings, statistics prove.

@ 21 pjt

“I’m not sure I understand what you mean. Something that rewards people by giving people money which they cannot keep (because otherwise they’d be “concentrating it on themselves”) or rewarding people with something else than money”

You’re right, that was badly phrased. I meant a business environment in which things like co-operatives find it easier to thrive. How to go about setting that up, I’m less sure. Historically it’s been more of a social thing.

“As to co-operatives, I like the idea in principle but I am suspicious of the practicals because of history. In my country, the major recession in 1990?s was in large part due to a banking crisis caused by co-operative banks. And same is true today in Spain with the cajas.”

Well, I’m hardly going to have to search far to find examples of what non-co-operative banks can do to, say, the entire Western economy. But if you want an example of co-ops doing some real good, what about mortgages? Used to be building societies ran these, with the result that young couples (mainly) could afford to get their foot on the property ladder with a decent home. Now banks have taken over the act and concentrated on getting as much money as possible off each customer, with the result that you probably get the same place you’d have been able to buy if mortgages never existed, only it costs 10 times as much and puts you in debt for a couple of decades. If you’re trying to maximise the value of each mortgage, prices just rise to match. Property developers benefit, banks laugh all the way to the, um, bank, and consumers get shafted.

“I need something better than “this time it will work, sure, trust me”.”

That’s fair. I don’t have an fleshed-out alternative economic model to propose. I’m just saying that, in principle, there’s no reason why absolute and relative poverty shouldn’t improve simultaneously in a first-world country.

Building Societies aren’t necessarily cheaper than banks, and affordability has been affected by rather more than mortgage costs. In fact, intense competition keeps mortgages lower than they used to be.

My own local society has consistently won the whatever it is award for the lowest management cost per pound, but there was only one brief occasion when it made sense to have my mortgage with them.

Of more concern is the Masters of the Universe attitude (let’s not forget it was bad mortgages that broke the dam).

A house purchase is an important business transaction, but banks must remember that they only have a minor, unsexy role.

The buyer and seller are the wealth creators, and carry the risk and the stress. Individual bankers are more or less irrelevant. We don’t go to a particular bank, due to their amazing staff. The bank’s job is to make some standard, formulaic and often tedious checks, and get the paperwork done on time. You don’t need Masters of the Universe for that (especially wannabees who panic at the first sign of a downturn. Would Batman do that?)

Slicing and Dicing mortgage debt could have worked well with the right attitude. It’s just insurance really, and boringly sensible. Normal people don’t break out the Bolly after arranging insurance, and neither should our bankers. Normal people will also ensure that they have a record of what they’ve just done. They may even have a reliable filing system of some sort. I bet Captain Mainwaring did too*.

* My local society uses a combination of biros (of more than one colour), and an MS-DOS system for logging transactions. And why not? It’s only numbers.

@24

I ‘d be interested to know what constitutes a first world economy. Whatever it is, it doesnt seem to involve income disparity.

Surely one of the biggest problems in creating an alternative economy is overiding Capitalisms natural tendency to centralise and concentrate wealth. Given that Capitalism is now global I wonder how the necessarily partial/regional intervention of co-ops could work.

@25

‘Slicing and Dicing mortgage debt could have worked well with the right attitude’

What do you mean by this?

Interesting to see a biblical moral dilema presented in modern day terms on a blog-site.

Is it wrong to steal bread to feed one’s family?

Most sane people would say no. We’d all do it. But we struggle to fathom how we have let things get so bad and are not willing to face the shame of such a sickeningly corrupt society that we are unambiguously all to blame for.

So instead we throw mud at charities have ludicrous ideological debates instead of doing anything.

Jesus would weep.

@ 26 MoCO

“I ‘d be interested to know what constitutes a first world economy. Whatever it is, it doesnt seem to involve income disparity.”

Good point. I imagine pjt is talking about GDP. But this is rather indicative of our perception of what makes a country “successful”, now you mention it.

“Surely one of the biggest problems in creating an alternative economy is overiding Capitalisms natural tendency to centralise and concentrate wealth. Given that Capitalism is now global I wonder how the necessarily partial/regional intervention of co-ops could work.”

Absolutely. I see two possible ways:

1) Regulation. Seems unlikely.

2) Social change. Co-ops react to the shoddy goods, aggressive sales approaches and crap treatment of staff in the general market by setting themselves up as competitors that respect their products, their customers and their staff. People decide they’d rather pay a bit more for a good product and a clean conscience. John Lewis is an existing example, although I don’t think they’d all have to be so far into the luxury end.

Obviously type 2 will only get you so far. There’ll always be a market for the cheapest product possible, whatever the method. I mean, people still buy battery chicken.

Chaise @24: “Well, I’m hardly going to have to search far to find examples of what non-co-operative banks can do to, say, the entire Western economy.”

Many of the examples are nonsense or misrepresented, though. It’s fashionable to blame commercial banks for the failures of investment banks, for instance. (Though surprisingly to myself, the more diversified financial warehouses post Gramm-Leach-Bliley act have actually survived better, which leaves me in doubt whether Clinton’s signing of this law was a mistake or not.)

“Used to be building societies ran these, with the result that young couples (mainly) could afford to get their foot on the property ladder with a decent home. Now banks have taken over the act”

How come? Not knowing the British landscape so well in this respect, if the building societies were providing better value, how were the banks able to push them out?

(Up here in utopian socialistic North, it’s been banks that have been funding mortgages all the time – just that the co-operative banks mostly went belly up 1990′s, some of them under the leadership of spectacularly partisan Leftist politicians who were outright crooks. We also do have a thing which I think is equivalent to British building societies, but it has a truly negligible market share and a total of 21 employees).

@29 Chaise: “2) Social change. Co-ops react to the shoddy goods, aggressive sales approaches and crap treatment of staff in the general market by setting themselves up as competitors that respect their products, their customers and their staff”

Again, up where I live, retail sales (groceries and household stuff) has become practically a duopoly, with two chains having 75 % market share. One chain is formed by private retail sellers. The other is co-operatives where many many people (including myself) are owners. Neither is better than the other, prices are the same, the goods are the same, the treatment of employees is the same. But the co-op chain is winning the exploitation race because of better political connections. Together the two chains manage to push prices up.

The problem with co-operatives is that when they become huge – or actually any size that is nowadays big enough to be competitive – the control disappears. They’re no longer run by the people for the people; the boards of these co-ops have the same politicians as we have in city councils and main political parties. They may be politicians of the leftist parties but it does not make them any better.

@ 30 pjt

“Many of the examples are nonsense or misrepresented, though. It’s fashionable to blame commercial banks for the failures of investment banks, for instance.”

Sure, but some of them are true. Having a go at Barclays is unreasonable (it sorted itself out), but what about RBS or Northern Rock?

And it’s not just the financial crisis. Look at all the woes caused by irresponsible credit card lending by greedy FS companies that I suspect include banks.

“How come? Not knowing the British landscape so well in this respect, if the building societies were providing better value, how were the banks able to push them out?”

I’m not an expert on the fall of the building societies either. My guess is that capitalism beats responsibility in the short-term without sufficient regulation. By the time the whole thing goes belly-up (or causes huge social problems, like the obscenely expensive housing we have in the UK), the responsible firms have already been killed off or bought out by the greedy ones (or have discovered some greed within themselves and converted their businesses).

Having a tempting product isn’t the same as running a responsible business. Ask any smack dealer. The effect on house prices doesn’t influence your decision when you’re choosing between two mortgages. The problem with mortgages in the UK is that they’ve been sold on the basis of “let’s get all of this couple’s savings down on deposit and encourage them to borrow as much money from us as possible”, rather than “let’s give this couple what they need to get their first house”.

…So, one answer to the mortgage problem might be state-run mortgages. Reasonable interest rates and non-predatory payment plans, but cut-offs based on what people need. Help make sure everyone can have a home, rather than encourage people to take on half a lifetime’s debt to get their dream home at 25.

Chaise, house prices are too high, have been for years and this has slowly resulted in an absolute car crash.
Mortgage rates are currently as low as they can be, and haven’t been high for a very long time.
Even if the state offered mortgages at no interest cost all, houses would still be unaffordable for most.
In short, too few houses.

“Too much debt” is true, but this required collusion between incautious borrowers and incautious lenders. Such as, borrowing to spend on “stuff” when your house price goes up.

What happened with Building Societies, btw, was that many of them took advantage of being able to de-mutualise. The members then voted on whether to sell (usually yes, as this resulted in attractive payments. (A “member” being any saver or borrower).

@32: “Having a go at Barclays is unreasonable (it sorted itself out), but what about RBS or Northern Rock?”

Right, but how often do you see placards and hear slogans attacking “bankers” in general, and how often specific messages about RBS and Northern Rock? I don’t live in Britain, but if the newspapers give any kind of realistic picture, the hate speech is very much against all bankers of any kind.

I’m still not any more convinced that co-ops would be any better than normal commercial banks. Over here, the problems were specifically caused by co-ops; the state take-over of them involved some substantial losses, whereas the simultaneous rather draconian activities were applied to commercial privately owned banks, and the state actually ended up making a profit.

Chaise @29: ““I ‘d be interested to know what constitutes a first world economy. Whatever it is, it doesnt seem to involve income disparity.”

Good point. I imagine pjt is talking about GDP. ”

Actually, it was you who brought “first-world” to this discussion, not me, though of course you could blame me for not insisting to question “how can we discuss child poverty in first world countries without first defining what we mean by first world country”.

Originally First World meant Western wealthy capitalistic democracies more or less aligned with the USA. The Second World no longer is. The Third World certainly exists, though it changes (think of China for example). I think GDP and HDI are relevant indices but not the only criteria.

It’s actually an interesting point to debate how we understand the First World these days. I’m inclined to think of it in historical terms: something like “participant in the Kennedy round of GATT” isn’t too far off the mark, simply because the thing was signed so close to the date when I was born.

@ 34 Jack C

“Chaise, house prices are too high, have been for years and this has slowly resulted in an absolute car crash.
Mortgage rates are currently as low as they can be, and haven’t been high for a very long time.
Even if the state offered mortgages at no interest cost all, houses would still be unaffordable for most.
In short, too few houses.”

Agreed. We need more housing. But lower-rate mortgages with lower LTVs would help, too. It would start to redefine what was “reasonable” for a first home.

“Too much debt” is true, but this required collusion between incautious borrowers and incautious lenders. Such as, borrowing to spend on “stuff” when your house price goes up.”

Sure. Problem is, the incautious borrowers didn’t just mess up their own finances. They messed up the market in the process.

“What happened with Building Societies, btw, was that many of them took advantage of being able to de-mutualise. The members then voted on whether to sell (usually yes, as this resulted in attractive payments. (A “member” being any saver or borrower).”

Yeah, I know. My brother got a small payoff when Woolwich did this. Money, dear boy!

@ pjt

“Right, but how often do you see placards and hear slogans attacking “bankers” in general, and how often specific messages about RBS and Northern Rock? I don’t live in Britain, but if the newspapers give any kind of realistic picture, the hate speech is very much against all bankers of any kind.”

I totally agree. The usual brush-tarring and scapegoating has been going on.

“I’m still not any more convinced that co-ops would be any better than normal commercial banks. Over here, the problems were specifically caused by co-ops”

Maybe so, but you’ve said that there were specific cultural problems with co-ops where you are.

“Actually, it was you who brought “first-world” to this discussion, not me, though of course you could blame me for not insisting to question “how can we discuss child poverty in first world countries without first defining what we mean by first world country”.”

I was using it interchangeably with your “developed nations”. But does it matter? It’s hardly like it was a bad idea to bring the concept to the table.

“Originally First World meant Western wealthy capitalistic democracies more or less aligned with the USA. The Second World no longer is. The Third World certainly exists, though it changes (think of China for example). I think GDP and HDI are relevant indices but not the only criteria.

It’s actually an interesting point to debate how we understand the First World these days. I’m inclined to think of it in historical terms: something like “participant in the Kennedy round of GATT” isn’t too far off the mark, simply because the thing was signed so close to the date when I was born.”

There’s ambiguity, then. I’ve always thought of “first-world” to mean anything that isn’t third-world or developing. I think that’s become fairly common since “second world” stopped being relevant. Hence me using it to mean “developed nations” – I hadn’t even noticed I’d made the switch.

Chaise: “Agreed. We need more housing. But lower-rate mortgages with lower LTVs would help, too. It would start to redefine what was “reasonable” for a first home”.

A lower LTV means that the borrower has to find the difference from somewhere else. Savings would be best, obviously, but that’s not always easy (especially with rents the way they are).

The key point is that lower-rate mortgages are not currently the issue. They have never been as low as they are now. Further, they have no bearing on standard lending practice (income x a multiple to give a maximum loan size).

The commonly-quoted figure is that we are 1 million homes short of where we should be, given recent changes and previous trends (the obvious being smaller households and immigration).

As for reasonable, I would say something along the lines of a couple working full-time on not far off the minimum wage. (For a small flat anyway). The rent people are having to pay is seriously high anyway.

@ 39 Jack C

The whole point of the lower LTVs and the lower rates is that they go hand-in-hand. The idea isn’t that people try to find more money to put down on the property, it’s that they take a cheaper property rather than over-reaching and getting in trouble (“It’s just us two, but let’s get a three-bed house in an upmarket part of town because we might want kids one day…”). Although encouraging people to save for another year or two wouldn’t hurt. The only reason for the lower rates is to make these mortgages attractive compared to those on the market.

Hopefully, after a while this would start to reduce house prices, because the average first-time buyer (probably the people most likely to take out a dangerous mortgages) would be spending less.

Chaise @40: ” the average first-time buyer (probably the people most likely to take out a dangerous mortgages)”

BTW, again just to compare experiences, the most dangerous mortgages here that brought down many people – as well as many of the small mutual or co-op banks – were mortgages to second- or third-time buyers. Specifically, the problem being that people expected house prices to keep rising, so they took a new mortgage and bought a new home before selling the previous one. Then prices stopped rising, everyone waited a bit, the bubble burst, prices collapsed, and suddenly many people had two homes, two mortgages, and negative equity. Lots of misery followed.

Should we blame those who were greedy enough to get caught here? To some extent, but their guilt was not much bigger than that of many others who sold in time and made handsome gains.

@ 41 pjt

Hmm. I’m not sure what to do RE second- and third-time buyers. The scheme I’m thinking of wouldn’t really work if you extended it to them. The whole idea is that it’s a “get affordable housing cheaply and safely” system, not an attempt to see the state corner the entire mortgage market.

Excuse me if my posts seem abrupt, but I’ve been whinging about this for over 10 years.

The sad fact is, “first-time buyers” no longer exist in any meaningful way (for example, I know an independent broker who last arranged a first-time mortgage three years ago).

Lower LTV’s will always = lower rates, as the risk is lower. However, even high LTV loans are cheaper than they used to be (per pound that is).

Worse, there is a correlation between low rates, and higher house prices (as is entirely logical). Low rates will also mean lower rates on savings.

Even worse! Although house sales are low, and the economy is weak, house prices remain high. This, in my area at least, is because prices are supported by buy-to-let. It is still possible (if you have a decent income, and some collateral), to make a return on buy-to-let. Nothing sinister, but 5-7%, something like that, and better than most things.
So we have a situation where few houses are sold, but where other factors prop up the price.
We are left with this dreadful scenario: the masses (and I mean including the younger generation from most backgrounds) are paying huge rents to pay another’s huge mortgage. At the end of the loan, the renters will still be renting, but will have bought someone else a house.

This matters. Home ownership is the single easiest way for “ordinary” people to build wealth. The % of home ownership is now in decline. Take it to its logical conclusion, and we will have a small number of property barons, and an army of worker ants. This is true regression.

And before anyone says f-ing Tories, or f-ing Labour, I have not heard either party (or any party) even acknowledge that there might be an issue.

I shall now have a cup of tea.

Chaise: “The whole idea is that it’s a “get affordable housing cheaply and safely” system, not an attempt to see the state corner the entire mortgage market.”

Sound OK, though a number of people seem to be loud about really having the state corner the mortgage market. Myself, I have quite strong doubts about the state being the best manager for industry or financial markets (I do trust the state with education and a part of the infrastructure, for instance).

Over here, we had a system of saving/reward accounts, sponsored by the state in co-operation with the banks, specifically for first-time buyers. I bought my first own home with that system. And we still have the system, but it has become irrelevant as the euro brought interest rates down and credit market was liberated.

(Nowadays the so-called progressives, e.g. Greens, seem most intent on finding ways to discourage home ownership, affordable or not – by bringing in things such as taxing imputed rent income (i.e. if you own your home, you should pay tax because you don’t pay rent which would give taxable capital gains to the landlord).)

@ Jack C

“The sad fact is, “first-time buyers” no longer exist in any meaningful way (for example, I know an independent broker who last arranged a first-time mortgage three years ago).”

I’m sorry, but that doesn’t make sense. Unless once you buy a house, you’ve always owned a house… I’m sure first-time buyers are a smaller portion of the market than they used to be, but they must still be around.

In the case of your broker friend, that’s probably the short-term result of the credit crunch seeing FTBs dismissed as too risky, plus a healthy whack of anecdote.

“Worse, there is a correlation between low rates, and higher house prices (as is entirely logical). Low rates will also mean lower rates on savings.”

What happens if you have low rates on an account that’s easier to get and less dangerous should you be unable to make repayments, but those low rates are solely available for cheaper properties?

@ 44 pjt

“Sound OK, though a number of people seem to be loud about really having the state corner the mortgage market.”

I’m not sure why, but that idea triggers my It’ll Go Horribly Wrong instincts.

“Over here, we had a system of saving/reward accounts, sponsored by the state in co-operation with the banks, specifically for first-time buyers.”

Not too bad, but it probably encourages people to over-reach (more deposit, bigger loan). That’s chiefly what I want to discourage.

“Nowadays the so-called progressives, e.g. Greens, seem most intent on finding ways to discourage home ownership, affordable or not – by bringing in things such as taxing imputed rent income (i.e. if you own your home, you should pay tax because you don’t pay rent which would give taxable capital gains to the landlord).”

Seems weird. Haven’t you already paid your taxes when you bought the house?

“In the case of your broker friend, that’s probably the short-term result of the credit crunch seeing FTBs dismissed as too risky, plus a healthy whack of anecdote”.

He’s a smallish broker, and FTB’s are no longer worth seeking (for him). The crunch made it harder (no 100% mortgages), but the rot started years before that. Meanwhile the proportion of FTB’s has plumbed depths, children stay at home longer and longer, etc.

Meanwhile, I can buy-to-let your place, and you can pay, a) the mortgage, b) a tickle on top for me, and, c) the difference between a normal mortgage, and the extra cost of buy-to-let. I’ll try not to be too snarky when you want a tap fixed.

@ Jack C

I understand what you are saying about home ownership, but unfortunately you do not ruly own your home until the mortgage is paid off. In the mean time, let’s say the industry you are employed goes elsewhere within the 25 or even 50 years (because of inflated house prices) it takes to pay off that mortgage. You are tied to that area. What if there was a better job elsewhere, but you are unable to move?

Paying rent needn’t be the dead money it is portrayed to be in the home owning jargon, it also allows you to move easily. The fact that housing costs are hyperinflated is a different argument, and worrisome for us all, including renters! (I am not talking about a rentier class there either)

Dissident,
Actually, no, not really.

a) An owner owns the house, but the lender can foreclose under certain circumstances. The lender can’t gain access to the house, or share in any profit.

b) Rental terms are pretty long from my experience. In a settled market, you should be able to sell as quickly as you can get out of renting (all dependent on timing of course).

c) Paying rent really is dead money.

In my own (not unusual case), I’m very free to move. If I had only one week to move, I could sell, covering the mortgage, first class travel, and an expensive hotel for say the first three months in about 5 minutes. Or, I’d just rent it out and rent somewhere else.

Chaise @46:
“Not too bad, but it probably encourages people to over-reach (more deposit, bigger loan). That’s chiefly what I want to discourage.”

Umm, in principle yes, but the rewards we had here were not that big. What is actually a much worse incentive to over-reach is taxation at the point of change of ownership of a property (I believe in Britain this is called stamp duty; our name used to be the same but it is now called “asset transfer tax” as no physical stamps are used at this age). If you have to pay 4 % of the price of the house in tax (as we do here), you don’t want to do it too often. (For condo apartments, it’s just 1.6 % here but even that, together with agent fees which many people think they need to pay, discourages changing the place to live too often.)

“Haven’t you already paid your taxes when you bought the house?”

Yes, one would really think so.

@ 47 Jack C

“He’s a smallish broker, and FTB’s are no longer worth seeking (for him). The crunch made it harder (no 100% mortgages), but the rot started years before that. Meanwhile the proportion of FTB’s has plumbed depths, children stay at home longer and longer, etc.”

Like I say, I’m sure they’re less prevalent in the market (I’d expect the ratio of FTBs to rise and fall with general prosperity, access to debt, and confidence), but obviously they still exist.

And yeah, I’m aware of the problems with BTL.

@ 50 pjt

A fair point about tax, but I think you’ve fallen into a false dichotomy here. If you can get a much better-value, safer loan, that incentivises you to take that loan instead of an alternative. And if that loan is only designed to help people get modest homes, you can’t go and buy a house that you’d like to be living in in 30 years but that is too much for your pockets to currently bear.

Yeah, some people would go for the pricier loan to avoid the tax in an attempt to be long-sighted, and in some cases this will be the smart move, but the proposals would at least help, both by helping FTBs get on the ladder, and on encouraging the industry to move towards affordable homes.

Chaise: “If you can get a much better-value, safer loan, that incentivises you to take that loan instead of an alternative.”

Umm, how are the loans offered by housing associations (etc) “safer” than loans offered by commercial banks? Genuine question, as I don’t understand. At least here there’s no difference. What does “safety” of a loan mean? That the terms and conditions cannot change on the way? Over here such things are covered by contract and consumer law so that such unilateral changes are not easy to do. (A much bigger risk is political – laws can change more easily as the politicians meddle with the markets, and the (supposedly) unintended consequences often surprise them.)

Also as to the “better value”, also there you must have something different from what we have here. I had my first housing loan (the one with savings rewards by the state before granting loan) with a mutual bank, but moved on to a commercial bank when they offered a considerably lower interest margin.

The mutual bank itself was nice of course – it was a small local bank where I knew all the ladies behind the counter, and when I called them, I could ask them to do transfers for me without further authentication because they recognized my voice. But it was just too expensive when compared to a commercial bank, when looking at interest rates. That comes from efficiency and competition.

The reference rates were the same, i.e. nowadays EURIBOR, but mutual wanted 2 % on top of that, the commercial bank 0.5 % – a significant difference whether I pay 1.25 % per annum or 2.75 % per annum.

@ 53 pjt

You seem to be stuck on your existing local institutions. Don’t assume I’m proposing to bring in whatever scheme you have where you live; actually read what I’ve said. I have answered these questions already.

To recap: these state mortgages would have less predatory policies when customers found themselves unable to pay, and would deliberately offer lower rates than banks would provide for the same mortgage.

So Chaise, how does it work?

“To recap: these state mortgages would have less predatory policies when customers found themselves unable to pay, and would deliberately offer lower rates than banks would provide for the same mortgage.”

I take that “less predatory” means that they would more willingly accept losses from defaults and not pursue foreclosures. And offering lower rates would mean less income to the bank from the interests.

So how does this work? With state subsidies?

If subsidies are not needed, then I don’t see any problem at all. Just do it. Nothing stops from mutuals etc from giving out these better loans.

But if we expect that the state sets up a bank to do this and pour in money taxed from others… not a good idea, at least you have to be very careful.

(I keep discussing this even if I am not British, because often bad ideas are copied from one European country to another, before it is so obvious that they were bad ideas.)