Thoughts from afar

The current crop of Conservatives are truly clueless. Like the Bourbons they have learnt nothing and forgotten nothing.

At its simplest capitalism is about the accumulation and protection of wealth, generation unto generation. Capitalism only triumphs to the extent that Jo Average has more to gain from the accumulation than the distribution of wealth.

In the UK it is all about property. Always has been, always will be. The genius of Thatcher was to democratise wealth accumulation through the sale of council houses, and liberalise the City, allowing great dollops of the population who never previously dreamed of owning their home to do so. And with it she shifted the dial 8to the right. Owner occupancy rose from 56% in 1980 to a peak of 71% as those with no or little wealth were given the means to gain it.

If not entirely reversed, the Thatcherite revolution has been much rolled back, with owner occupancy declining to 63% in 2016 (see the English Housing Survey for the detail). Among 26-34 year olds the decline was more dramatic, falling from 56% in 2006 to 38% in 2016. And perhaps not surprisingly with hindsight, as young people have stopped buying homes they have started to join Momentum.

Houses in particular in the South East require a king’s ransom for a deposit. Complicated of course by the sound of drawbridges rapidly being drawn up now that the wise and mighty have deemed the no-deposit mortgages and mega multiple loans they themselves used to get onto the housing market in the dawn of time are a threat to civilisation. Those without City jobs or wealthy parents rent, and rent and rent. And if you eternally rent without the security of tenure that comes as an owner occupier, I would imagine the wise words of St Jeremy strike a cord. Why should the wealth owners, the few who have benefitted from ten years of quantitative easing enjoy all the profits and massive increases in wealth as asset prices have been bid up? There was an argument that saving the bankers saved all. It becomes harder to stomach when the winners turn out to be the bankers and not all. And not surprisingly, in 2017, in a Britain that has never been wealthier, almost a hundred years to the day, we are back where it all started: And there we have it. On your Marx, get set GO.

The housing market certainly feels broken. But in many ways it has always felt broken; it is not the elephant in the room. No, that honour goes to student debt. It really doesn’t matter how you tinker with the housing market if yoof in all its educated glory just hasn’t got the readies. And so, (note bene) for English students tuition fees of £1000 in 1998 grew first to £3000 in 2007, and £9000 from 2012. Interest charged also changed in a similar way: any one who studied between 1998 and 2011 pay a very reasonable rate of Bank of England base rate plus 1%. And at that point the rate went up to the somewhat less palatable retail price index plus 3%. Had the change not been made the current interest rate would be 1.25% and not the current 6.5%. Umm. So let’s get this right. The universities are whacking up fees, the government is whacking up interest rates; lucky then that graduate salaries kept pace……except of course they didn’t. In 2006, average salaries for graduates aged 21-29 were £22,000. However, instead of the £66,0000 average salary implied had salaries marched lock-step to Call-me-Dave and Cry-Baby-Nick’s promised land, in 2016, they reached a slightly more modest £25,000 (UK Government statistics). Double umm squared. For what this suggests is that for the post 2012 cohorts, the decline in owner occupation has not even started.

For indeed, we have managed to create a society where we really can say that the wealthy enjoy their wealth on the backs of the workers, or if not all the workers at least those who had the foresight to go to university, pulling themselves down by their bootstraps as it were. And they are the clever ones. The only surprising thing is that the revolution took so long in coming.

The easiest way to think about it is that students on average are expected to pay a tax surcharge of 9% for thirty years as long as they earn at least £21000. Oh happy days. No job security, no zero deposit mortgages, no final salary pensions, etc. etc. etc. and only the right to fund your own education so that the country has the professionals to earn the money to pay the taxes to meet the obligations their elders have decided they must inherit. Essentially, the younger generation has been stiffed by the older. By any rational judgement, equity is lacking: we have created a new system of indebted servitude whereby students are expected to fund the system that benefits those much wealthier than they to maintain a quality of life they can no longer aspire to. In the words of the Dude: “this will not stand”.

But, how to restore balance to the universe? Perhaps a good way to start is to assess who would lose out if students decided higher education really wasn’t worth the toss and simply stopped participating? Clearly not the average student. More obviously the Holy Jezzer, but without doubt the NHS, schools, and most employers. And answer me this: if they clearly benefit why then should they not also pay at least in part and probably in large part? For if graduates do not command a premium over non graduates what indeed is the point?

As for the students’ obligations, the proof is in the pudding. If eduction is there to improve their lot, then why not simply attach the student debt to the student’s estate, now increased by the property they can afford to buy, recoverable in extremis against a the estate at death. Why would the State arbitrarily write the debt off? And as an incentive to pay earlier, at least treat loan repayments the same as pension contribution, as effectively that is what they are? As for the current interest rate, how any government has the balls to set it at a rate that will have compounded the debts to eternity before most students start repaying escapes at least me, economically, politically and morally. They should be very, very ashamed.

So then what are the Bourbons to do to avoid Madame Guillotine? A few simple changes should do it: a) interest rates pre 2011; b) an employer charge of £125 per month for all graduates to be set off against the outstanding loan balance; c) repayment of any outstanding amounts against the estate on death; d) no write off after 30 years; and, e) any actual repayments during the life time to be voluntary and treated in the same way as pension contributions.

And then, maybe then, students will be able to aspire to the life style their parents still enjoy or at least did enjoy until their overly educated offspring moved back in as they could no longer afford the rent.