Anthony Hilton: The 1930s example can build confidence and give a foundation for recovery
Saturday 03 March 2012
I have never quite understood why it makes sense for government to pay people to sit at home drawing unemployment benefit, doing nothing and going into decline, when they could be earning a decent wage, keeping their self-respect and building homes.
It is doubly mystifying because there is an increasing hint of desperation visible in government as it thrashes around for a growth strategy and announces initiative after initiative designed to persuade companies to invest, innovate and grow. Why does it not simply boost housebuilding?
Nothing puts bread on the table faster than construction. A stimulus directed at housebuilding delivers several times that amount of value because so much of every pound spent stays within these shores. There is no imported component other than timber, the labour is obviously here already, and the results come through fast because housing projects need very little lead time.
The demand for housing and the infrastructure to build it are also already in place. We still have a huge homeless problem, but are building less than half the number of homes we need. Across the country there are hundreds of housing associations gagging to build homes but unable to do so because they have not got the money. Before Osborne's austerity drive, they used to get the bulk of what they needed from government in long-term loans and grants. That was cut off but it would be the simplest of matters to turn that tap on again. Indeed government could make a virtue of it by producing a national housing bond, with a yield and duration tailored to the investment needs of the pension funds. This would mobilise their money, which could be used to kick-start the social housing programme.
To suggest we cannot afford it is risible. A social housing programme would help cut the public-sector deficit by taking people off benefits and putting them into work. If properly targeted it takes families off housing benefit and puts them into homes. It helps the National Health Service by taking people off Prozac and giving them hope. It is also one of the unsung benefits of social housing that it builds communities in best Big Society fashion. They deliver significant reductions in crime and its associated social problems. We can only not afford it because we don't do the sums properly.
It is fashionable for people say with a suitable touch of melodrama that this economic downturn is like the 1930s ... to which, in this context at least, one might almost say "if only". The mere mention of those Depression years gives us the shivers, but I heard this week of a soon-to-be-published paper by George Trefgarne for the Centre of Policy Studies, which suggests it's time for a rethink. While the early years of the decade were dire, particularly in the industrial north, from 1932 onwards the economy actually grew at over 3 per cent a year, and the crucial point for today is that this recovery was in large part driven by housebuilding. You see the evidence today in those miles of suburban 1930s homes in Finchley, in Edgware and in most large towns across the country. Why does government not learn from history?
It is nothing to do with housing, but there is another little-appreciated fact about the 1930s. It was a great time to own shares once the market had weathered the shock of the 1929 Wall Street Crash. In the five years after 1932, London prices doubled.
Meeting Eastern challenge
Down in Canary Wharf on Thursday the law firm Clifford Chance played host to a conference organised by the think-tank Reform to mark its 10th anniversary. Its theme, predictably but appropriately, was The next 10 years. Along with phone hacking and football hooliganism Britain can claim to lead the world in think-tanks. There are dozens of them and the intensity with which policy is discussed seems often to be exceeded only by our inability to turn any of their good ideas into meaningful action.
But that said, Reform does have a distinct niche. As one of its advisory board, the Labour MP Frank Field, said it has been instrumental in moving the debate about public services from inputs to outcomes. More than any other body it has challenged the belief that all the problems can be solved by throwing more money at them. And in so doing it has changed how politics works. The question now is what to do for an encore given the way the world is changing as a result of the tectonic shift in economic power from West to East. The average baby born in Britain today has an income 40 times greater than that of the average child born in India, but if the current growth differential between the two countries were to continue, by the time both are 25 their incomes would be equal. By the time they are 50 the Brit will be far behind.
It won't work out like that because the Indian growth rate will surely slow down as the country becomes bigger and more prosperous and ours will pick up, but there is no mistaking the direction of travel. Take your holidays now in Brazil, India, China and Indonesia because we will be relatively too poor to afford them by the time the kids have grown up.
So the question for the next decade in a nutshell is what does Britain do to stay in the global economic game? What skills, what education, what jobs, what products will help us pay our way in this Brave New World? Getting politicians and, even more important, getting the public to face up to that question, let alone come up with the answers, is likely to prove a whole lot tougher than getting them to change their thinking about public services.
Lesson from St James's
Spencer House on Tuesday evening played host to a party to celebrate the 20th anniversary of St James's Place, the wealth management group founded by Sir Mark Weinberg. There was certainly something to celebrate. The business manages some £30bn of client funds, and is itself capitalised at £1.8bn, making it the 126th-largest business on the stock exchange.
Less appreciated is that it has a charitable arm, the St James's Place foundation, to which 80 per cent of employees contribute on a regular basis with their funds matched by contributions from the company. It has channelled more than £20m into more than 1000 charities with more than £3m being handed over last year. It is not alone in this of course but at a time when anti-business sentiment is rising it is worth flagging up the fact that there is a huge amount of unsung charitable work done by companies, much of it unappreciated by the public at large.
The other message is this success story would never have happened if the founders had allowed themselves to be put off from launching by the state of the economy. The firm opened its doors in January 1992 in the darkest days of the recession under John Major. Indeed, according to current chief executive David Bellamy, the headline in the Financial Times on the day they opened for business was "Recession much worse than feared says Major". The headline on 3 January of this year was not much better, he notes.
So the real lesson for budding entrepreneurs of today is if you have a good idea just go for it. Don't wait for the economy to pick up because you will be waiting for ever.
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