Category: action

Waiting for #defenduss…

So we’re waiting to know if the UCU’s higher education committee has decided to call off the action or not. It’s been a tense couple of weeks – the “EPF” came out with its super-extreme and deeply dodgy plans, the UCU rolled out, the universities threatened a variety of draconian punishments, and then they began to row back. Last Thursday, as the marking boycott went into force, negotiations were formally opened.

The problem is that a lot of people hate the boycott – this isn’t a season when it matters much, and as a result, only a few postgraduate students, often foreigners, are affected. Similarly, only a few academics are affected and have to take the burden of the action.

The UCU Left tendency sounds like it doesn’t want to negotiate in any case, but it’s worth pointing out that there are plenty of grassroots members who are both in favour of negotiations, and who think that a strike would be more effective in supporting the UCU delegation. Quite a few are concerned that they would get docked for some considerable time under the boycott, sapping their ability to support a strike that would come around anyway.

Also, the UCU leadership has been a bit hard to find, right down to the local level. It’s only since last Thursday that a modeller has been available to tell you how much you stand to lose. Legal advice as to the threats from the so-called Taff Vale club of college vice-chancellors was absent until somebody cracked on with their blog.

But that said, the action so far has boycotted them back to the negotiating table, which has got to be good (here’s a good reason.) Song for tonight, though:

If you don’t know which foot to dance on, you might try signing the petition against Bradford University’s boss, Brian Cantor, who has emerged as the most aggressive union-buster among’em. You could also sign the Surrey open letter and maybe even give.

a brief collection of the EPF’s lies on #uss

The sheer mendacity of the USS management, or rather, the Employers’ Pension Forum, has been breathtaking. The outrage ought to be greater. Dennis Leach of Warwick is doing a great job calling out the bullshit.

For example, the EPF’s Q&A document supposedly explaining changes to the scheme gave the increase in life expectancy since 1974 as 5.8 years a decade. The correct figure is between 1.3 and 2.3 depending on your assumptions.

When Leach blogged about it, they silently updated the document to memory-hole the claim.

The EPF claimed that “longevity” had dramatically increased since 2011. It hasn’t, and can anyone believe that a pension fund was unaware of an issue they’ve been whining about continuously since the 1990s?

They claimed that wages were rising at 4.4% annually in the sector. Chance, as they say, would be a fine thing. It was 2.7% over the last 20 years and actually negative since 2008.

At the same time, they claimed the economic crisis had a “detrimental impact on the value of USS’s assets”, but somehow this only happened after 2011, and as a result they need to sell all their equities. Well, maybe if you bought Greek government bonds that might be true. But USS achieved an 11% annual rate of return on its assets in the last five years. Some detriment! And these are presumably the investments the EPF wants to get rid of.

Having inflated wage growth when they wanted to inflate the cost of the scheme, they then lowballed it when they wanted to minimise the numbers of people who would lose their accrued benefits, as Oxford University’s pensions working group discovered. They had to be lying in at least one of those.

Inevitably the media is complicit. The Times managed to quote the figure of an £8bn deficit, itself dubious, as if it was £8bn recurring, every year.

I’m trying to get my head around the politics of this. There is a well-defined process by which changes to the USS are carried out. A Joint Negotiating Committee consisting of representatives from UUK and the UCU, plus a nice old boy from Scotland as chairman, works up a compromise proposal that is then submitted to the USS Trustee, and finally the Pensions Regulator.

But the new proposals didn’t come from the JNC, or indeed the USS management as such, and we know that several schools, notably Warwick, Oxford, and Cambridge, have disowned or at least severely criticised them. Instead they came from this EPF entity. Is this because the UUK side wanted to outsource its maximalist demand to someone else? Or is the EPF an actor in its own right?

Anyway, for day two, here’s a song.

#solidarity with the UCU: if you have a pension you want to read this

Why are a lot of professors going on strike? Or rather, on a marking boycott? The answer ought to worry anyone who is a member of a pension scheme, of any kind, in the UK.

To start with, we’ve got the USS, the pension fund for the universities as they were before 1992. All the other schools, the ex-polytechnics, are part of the Teachers’ Pension Scheme. Unfortunately you’ll just have to deal with the implicit snobbery. That said, the TPS has managed to look after its members better. We’ve also got UUK, Universities UK, the lobby for higher education in Britain, which is also acting as the representative of the management side. And of course we have the UCU, the biggest trade union in the sector, which represents the workers.

The USS has been one of the best pension funds in the UK for decades – don’t trust me, ask Dan Davies, who used to be its broker. Of course, people live longer, and gilt rates suck, and management doesn’t want to contribute more. In 2011, the final-salary fund was closed to new entrants, who instead joined a career-average version of the fund.

The distinction is especially important for academics. The typical career path is anything other than a linear progression through the ranks. Instead, many of them join late, spend years as underpaid graduate students, and with luck, rise as professors after their fifties. Like a trade, a long apprenticeship is required. The final salary system has the advantage that it respects the nature of the trade.

As with any system that requires a nice steady march through life, the career-average system values every pound contributed by a woman rather less, as she is more likely to join late or take a career break. The same goes for people who started as mature students, who are overwhelmingly working-class and more likely to be black than any other group of academics.

Since 2011, new entrants go into the career-average group. This happened because, like all pension schemes, USS needed more money. Now, though, USS wants to change the rules again.

If you were in before 2011, you’ve been told by the Employers’ Pensions Forum, roughly the UUK plus some USS people, that the money you put in isn’t there any more. More exactly, USS now says that the pension based on your final salary is only good up to a salary of £40,000, or perhaps £50,000. (They’ve since decided that it’s £50k, but I’ve kept this to reflect the vagueness around so much of these proposals.) If you have any entitlement beyond that, it gets revalued only by the consumer price index, the one that doesn’t include food, fuel, or housing. Your future contributions, which are of course very much welcome, will go into a new money-purchase fund. Employer contributions to same are of course going to be much less.

Let’s get this clear: USS members already paid for this stuff. They paid in the money, in exchange for a percentage of their final salary. USS and UUK propose to stick to the money, without going through any of the pain that society usually expects of people who refuse to pay their bills. If this goes through, as far as I can see, any fund can do something similar and just take your money.

USS can’t or won’t say if the cap is £40k or £50k. They can’t or won’t say who will run this new money purchase fund, or if you can choose who manages it. They can’t or won’t say what the level of the deficit in the fund is, just that it’s very terrible and the crisis demands action now. They can’twon’t – surely a useful new word – say how they valued it without being able to say what the number is.

They can’twon’t say what happens to members who paid more money into the fund as additional voluntary contributions (AVCs) or added years. What has happened to the money? They can’twon’t say how it happened that “longevity” managed to take them by surprise between 2011 and 2014. Do they get the newspapers? They can’twon’t say why it would be so great to sell the investments that did well, and buy more of the ones that were shit. Actually I know that one: it’s the rules. Dennis Leach at Warwick has a fine blog making the point.

One thing they canwill: bullying and bullshitting. A whole string of schools immediately threatened to sue individual strikers and to refuse to pay anyone who took part in the marking boycott, no matter what else they did. They were probably using helpful free union-busting advice from Pinsent Masons.

However, scratch a bully and you’ll find a coward. After this protest by York University, we get this climbdown.

And the universities do not seem to be adequately represented by UUK. Here is Warwick‘s response. Here’s Oxford’s. Here’s Cambridge’s. None of them seem convinced or happy.

In fact, the impression I get is that UUK are freelancing, or setting out a deliberately extreme negotiating position. So the UCU has every right to show them some teeth. Which makes it even more of a pity that you need to go to Mike Otsuka’s facebook page for anything like useful information, or responsive news. Treat this as an open thread on the strike.

And here’s a song.

Fixed in place

It’s time to review this post on the implementation of the Tories’ Health & Social Care Act in my local area. The news is, I think, good. The local rag:

The Haringey branch of national pressure group 38 Degrees is only the third in the country to get all its suggested amendments on buying health services written into the constitution of the Clinical Commissioning Group (CCG)…

Last month, 38 Degrees presented the CCG with a petition signed by more than 2,000 people backing its proposed amendments, which includes only using contractors or providers which are “good employers” and prohibit using companies which use improper tax avoidance and off-shore schemes.

Nice and all, but a bit fairtrade biscuits. The really good news flipped up on a Google alert a while back – it looks like the key Commissioning Support role, which provides the legal, administrative, IT, contract management, and other functional guts underpinning the CCGs, has stayed with NHS North-East London, aka the existing organisation.

In fact, looking at the list here, it seems to have kept all the CCGs on its patch on side. As a major concern is that the CSOs get outsourced to American companies who then arrange to give everything to their mates, this is an achievement.

Also, they have binned dreadful failco “Harmoni” from the out of hours GP service.

So, I’m classifying that as “under control, for now” and leaving the Google Alerts drone to watch it.

The Simple Plan: The Definitive Statement

OK, so this is the extended 12″ jacking tech-house hot wax remix of the piece at Liberal Conspiracy.

It’s October, 2013. As unseasonable snowfall turns the streets into a fairy wonderland and the transport system into a Pratchettesque mess, police are herding the last holdouts out of the Elthorne Estate in London, N19. Homeless shelters around the capital are brimming already. Elsewhere, thousands of families are facing up to a Christmas in seaside bed-and-breakfasts or semi-abandoned estates in semi-abandoned ex-industrial towns hundreds of miles away.

The occupations and demonstrations, although they made us all catch our breath, seized the headlines, and caused a whole lot of expense, trouble, and slippage, are over. It’s just not an option to go to jail with children on the breadline. In a few months’ time the courts will probably hold that Laurie Penny’s arrest under the Terrorism Act was flagrantly illegal, but by then the point will be academic.

Elsewhere, in the supposedly comfortable suburbs, more and more of the buy-to-let generation of landlords are staring at letters from their mortgage lenders demanding answers about their arrears. At a number of specialist finance houses, people are poring over increasingly grim spreadsheets, and the further you go towards the Bank of England, the greater the anxiety is becoming. Everyone is waiting for the trigger-event that will flip us into a second financial crisis.

This isn’t looking too pretty, is it? What’s up?

Over the 20th century, the UK made a political choice that we probably never articulated as such. That is, we decided that the huge expensive city in the lower right-hand corner of the map had to remain a proper city, rather than shipping out its working class to a concrete jungle on the M25 and giving over the centre to the role of a dead museum, sorry, an exciting retail and heritage offer for high-value tourism, and the City and the East to the banks. At the same time we decided that the outward sprawl had to stop, halting at the green belt. The solution, up to the 80s, was to make housing in the major cities into a public service. Since the 1980s and the key decision to sell the council properties accumulated up to then, the policy changed; instead of taking housing out of the market, we would instead subsidise it. As Tory minister Sir George Young said, housing benefit would take the strain.

Now, the strain will no longer be taken. Local housing allowance – it’s housing benefit but for people in private rentals – is to be drastically cut. Until now, the maximum rent LHA would pay was set at the 80th percentile of the distribution of rents in your area. (That is, the level at which 80% of rents are cheaper.) The Tories have now set it at the 30th.

Serious criticisms of this system tend to focus on the fact that it gives a lot of money to landlords. This is very true. Housing benefit (I’ll drop the technical distinction from here on) is paid to landlords, not to households. No claimant “receives thousands in housing benefit”. This has the effect that every landlord knows precisely how much the Government is willing to pay, and unsurprisingly, they tend to set their rents accordingly. The Tories, supposedly, hoped that rents would fall if they cut the rate.

There is only one problem. In the past, a typical landlord owned property outright, often property they had inherited. The buy-to-let era changed all that; now, they are much more likely to have bought the property with a mortgage. If the rent coming in falls below the payments on the mortgage, ruin is certain. Actually it’s worse than that, as the mortgage isn’t the only cost – they have to budget for maintenance and for voids, the periods between tenants.

Another important point is that the BTLers weren’t in it for income, but for capital gains. The tenants are there to pay the mortgage. Once the mortgage is paid, the property is yours, so your return on investment is the selling price divided by the deposit. It’s a classic example of leverage, which always juices the return by increasing risk. So, many of the BTLers didn’t stick at one property, but used more and more mortgages to swing a whole string of them with ever greater leverage. They can’t cut their rents without going bust.

If the tenants can’t pay, they will get the stick. Councils are actively planning to rehouse mass numbers of people outside London. London Councils, the boroughs’ umbrella organisation, reckons 133,000 households are hit. The Department for Work and Pensions estimates that over 100,000 more people will be “accepted” as homeless, and therefore the legal responsibility of someone to rehouse. This presumably includes their estimate of how many more of the homeless they can turn away. Shipped off to Stoke, south Wales, or Margate, they will be badgered to find jobs in some of the UK’s highest unemployment areas. Some of the UK’s most underfunded councils will have to provide for them, somehow. The worst of it is that the 30th percentile cap hits families first.

Of course, faced with this prospect, people will try to survive somehow. On the tenants’ side, some of them will try to disappear in the black economy and tolerate back-garden sheds, friends of friends’ sofas, or perhaps squat in repossessed property rather than be shipped away from their jobs. (Yes, their jobs; housing benefit is mostly paid to people in work. Surely I don’t need to say this.) On the landlords’ side, they will tell themselves that of course they can find new tenants. They will juggle financing between properties, personal loans, their credit cards, etc. But they will eventually fail. When they go bust, their lenders are going to repossess property that is worth much less than it is on their books for.

Most BTL financing didn’t come from the high-street clearing banks, but from specialist finance companies. The danger here is that “specialist finance” is a lot like “shadow banking” – companies that aren’t banks, and therefore escape from bank regulation, but don’t have access to the central bank in an emergency, but do provide services that amount to banking. This is notoriously dangerous. In many ways, the great financial crisis was a shadow-banking crisis on the grand scale. Many people expected the specialist lenders to crash in 2007-2008, but they survived – possibly because housing benefit was keeping the landlords they funded afloat. We don’t really know how shaky the specialists might be, and we don’t really know how the shadow banks and the real banks are linked. In 1974, the end of a bubble in London property funded by shadow banks led to a run on the shadow banks, which the authorities of the day hoped were separate from the real banks. They weren’t, and the Midland Bank came dangerously close to the edge.

So, our friends in the Conservative Party have come up with a policy that is likely to deliver an honest-to-goodness humanitarian disaster right here in London, and that also risks bringing about a second run on the banks, while bankrupting thousands of middle-class Kirstie Allsopp Kommandos, and leaving the city littered with repossessed crackhouses. She’s a beauty. The only bit of it that might work as desired is the Shirley Porter element; fewer Labour voters in London.

But there is a solution. Under Eric Pickles’ Localism Bill, councils get to keep their income from rent rather than giving it to the Government. So, let’s buy the houses, quick. I propose that the London Labour councils, and indeed any others who want to join, launch a jointly-owned company to buy up the BTLers’ property and to manage it as social housing. We could organise this via London Councils itself, as it is now Labour-controlled.

How much is that again?

The rents paid under housing benefit are worked out by the Valuation Office Agency, and for their Inner North London Broad Rental Market Area, the 30th percentile for three-bedroom properties is £340 a week. I don’t have data about the distribution of bedroom requirements, but it makes sense to assume that the bigger properties are the problem. This level is roughly the same around the inner ring of London councils. George Osborne has decided that the rate will be held to a 1% increase to 2015 and to the CPI inflation rate beyond that. There are 52 weeks in a year, 133,000 households claiming, so that estimates the flow of housing benefit into rents for the people involved at £2.3bn a year. That’s quite a lot of money. There’s also a £2bn “affordable housing” fund controlled by Boris Johnson we might bid for.

Councils can borrow money from the Government at a 2.8% interest rate, being the rate the Government can borrow for 10 years plus 1%. At 2.5% for 10 years, the stream of housing benefit for the people the Tories are targeting would be enough to pay off a £22bn bond issue. I’m going to set aside a billion as an allowance for maintenance and improvements – I’m really not sure how to model that, so there’s a fudge factor.

2.5%, not to speak of 2.8%, isn’t actually all that good. There is an enormous demand for safe assets that actually pay a coupon at the moment. Some councils, therefore, have decided to issue bonds on the open market instead. So have housing associations, as the Financial Times makes clear.

The appetite among long-term investors, such as pension funds and insurers, for debt secured by large portfolios of social housing has grown during the past year. Low government bond yields and the relative stability of social housing rental income, much of which is underpinned by government benefits, have made the sector increasingly attractive to risk-averse investors.

The demand is reflected in cheap cost of capital enjoyed by housing associations. The £42m bond issued by Places for People in January will, for example, pay interest of just 1 per cent for 10 years.

One per cent! In real terms, they’re actually paying us to keep their money.

Depending on who you ask, and using the Boris fund, this is worth between 77,000 and 139,000 properties, depending on how good a deal you could make. So, our buying vehicle issues 2.5% 10-year covered bonds, buys the properties, and hands them to the local housing department to manage. The tenants stay in them, and the housing benefit is paid to the vehicle, which uses it to pay off the interest and principal on the bonds. As the bonds are paid off, the rents could fall towards social levels. The BTLers get to make a relatively dignified exit, and the hit to the financial system is at least reduced.

And the plan could be scaled up. The annual housing benefit flow is about £23bn, so the Londoners targeted by Eric Pickles make up about 10% of the national bill, which reassures me about my calculations. Imagine the possibilities of doing something similar with the lot.

One problem I see is that the quality of a lot of the new-builds from the boom era is poor, and apparently some housing associations up North have refused properties they have been offered. To this, I would say that this is an emergency, and I have made some provision for the problem. Further, most of the new building was up North, rather than in London, and I suspect that a surprising proportion of houses acquired by the vehicle might turn out to be ex-local authority flats sold under right to buy.

This isn’t a new idea. In the 1970s, a lot of rental property was bought up by London Labour councils’ housing departments and they’ve still got more of it than you might think. When I lived across the street from the Elthorne, about half the buildings were actually council-owned, something that only became clear when the Decent Homes programme sent the builders round.

So, let’s buy the houses, quick. We have, depending on who you ask, between three and nine months before the bomb goes off, although it’s not at all beyond the bounds of possibility that the whole thing will be put off. It has been once before. But I think it is much better to turn up at the crisis with a solution than it is to expect people with children to fight the bailiffs.

house music all night long.

The Daily Mirror mocks Lord Freud’s overhoused condition and quotes Owen Jones:

We’re told this is about bringing down the £21billion housing benefit bill. But we’d save much more if we stopped using housing benefit to line the pockets of private landlords charging absurd rents.

Building homes would create jobs, and if we brought rents under control, we could bring down the housing benefit bill.

But we can hop ahead here. A housebuilding program would be worth having, but it can’t possibly happen for years. If it’s a question of whether properties rented to LHA claimants should be financed with BTL mortgages or by local authorities, it’s a nobrainer. Even putting up with the cuts, we could buy out the landlords under the Simple Plan.

Watch this space, as a guest post is currently with them.

(Remember Dan Kahneman; repetition, repetition, repetition.)

Anthony Hilton joins the Simple Plan!

The Indy‘s City editor (and he is very much a City editor, none of that “business” page nonsense) Anthony Hilton has joined the clamour for the simple plan to save the world!

Some of the larger associations are tapping into the aforesaid retail bond market, with Raglan, for example, raising £50m in September with an issue bought in its entirety by the Pensions Corporation, a pensions providing insurance company. But it is not enough. What we really need is for local authorities like Manchester, Leeds and Nottingham to float housing bonds in a similar way, but for much larger sums. They could then channel those millions into the thousands of housing associations which are too small to raise funds on their own account.

This does not happen because the Treasury – and hence George Osborne – does not want local government to be financially independent.

He’s thinking in terms of new build, housing associations, and the North, whereas I’m thinking in terms of buying up the BTL inventory, councils, and London. New build can’t possibly happen in time to save us, and the problem is concentrated in London. But I don’t see any disagreement of principle here.

The LSE Policy blog points out that George Osborne took the opportunity, during his “Hunker in the Bunker” mini-budget, to make things worse. They also provide a lot of useful detail if you’re trying to model the flow of Local Housing Allowance to landlords in London. If Osborne gets his way, the LHA rate will be held to a maximum 1% annual increase out to 2015 and to the CPI inflation rate thereafter. I had assumed zero growth in it, so I was pleased to be able to update the Simple Plan with some more data.

Updating it, I get a NPV of £22.19bn and therefore between 77,000 properties @£300k and 139,140 @Daniel Davies’ £166k, which I still struggle to imagine. Even coming up to £200k, though, still gets you 107,000 homes. On the other hand, the plan is quite insensitive to interest rates – at D^2’s pricing, even up at 3.36% you’d get enough stock to house the 133,000 LHA refugee households. Just getting rid of Gideon would add 2,200.

I had a twitterfest with Owen Hatherley and Rentergirl about this, but I really can’t get excited about how crappy a lot of the BTL new builds were in the light of the looming emergency. Anyway, the great bulk of the BTL new building was in the North, and a lot of the stock I envisage acquiring will be either conversions or else…you guessed it…ex-council.

Threats I worry about: the cost of management, which to be frank I have really no idea about, and the possibility that Osborne goes for broke between here and 2015 and abolishes housing benefit entirely.

Anyway, here’s Mr. Harriet Harman arguing for rent controls. It’s a start.

Barnet, Camden, Enfield, Haringey, Islington CCGs: Applications Open Now

OK. So you want to be part of Total Defence of the NHS. You want to join the 10,000. To be the first of the few. If you’re in any of the London boroughs in the title, here’s your chance. You have until the 15th July, Saturday, to apply on this web page.

There’s a gaggle of documentation to read, which I’m getting through now. Here’s a first and amazingly important point. Each one of those CCGs needs a lay member to act as Chair of the Audit Committee. This is probably the most important public appointment accessible to you, and it is especially accessible to anybody with accounting or financial experience. If you want leverage against privatisation, this is the place to stick your crowbar.

It’s a job in itself; all of them are. But they’ll even pay you. Time to take hilltops and create facts on the ground.

Netroots UK catchup

Other stuff from Netroots UK.

Having chugged through my official Brown Bag Lunch (which actually included Ribena, in a disturbingly infantilising touch), I went to the open space group on the Leveson inquiry. This ended up merging with the one on the LIBOR scandal. I was able to contribute by knowing how the LIBOR panel was meant to work, although we couldn’t get away from the point that separating investment and retail/commercial banking wouldn’t have helped because BarCap was big enough in its own right to be on the panel.

One point which everyone thought would resonate was that the scandal represented an attack on an institution that had relied on its members’ fair dealing. Exactly what to do with it, though, was harder. Could this support the Co-operative’s claim to buy the branches demerged out of Lloyds? Or a Leveson inquiry, but with banks? Of course there have already been inquiries, but then, the original ideal type of this kind of inquiry, the Pecora Committee, wasn’t the first inquiry or even the second into Wall Street in the 1920s.

What else? I went to one of the more tech-centric workshops, run by Blue State Digital. This was pretty good; I liked the point that Facebook advertising was usually a “hopeless waste of £2.50”, but it did have its uses. Those weren’t anything Facebook would want, though. Specifically, the ad-targeting tool lets you get a quick estimate of the size of a potential audience – input the demographics, locations, and search strings you’re interested in, and it spits out an estimate of your audience.

The other one was using it to bait your enemies. If you had a reasonable amount of information, you could place an ad that your target would have to read every time they logged in. This amused me more than a little.

Everyone, but everyone, loves ScraperWiki.

What else? WhoFundsYou scored thinktanks by the degree to which they are forthcoming about their funding. Astonishingly enough, Respublica, the “Not the Other” TaxPayers’ Alliance, and the Adam Smith Institute (no less) got an E. The very, very serious Centre for Policy Studies and Institute for Economic Affairs, and the somewhat less serious but certainly influential Policy Exchange and Centre for Social Justice got a D. You could have mistaken the score-card for a left-right political spectrum, as IPPR, Progress, Resolution Foundation, NEF, SMF, and Compass all got As, while Demos, Reform, the Fabians, and Policy Network got Bs. CentreForum was, superbly, right in the centre with Civitas and the Smith Institute.

It is telling that the distinction between wanktanks like Respublica and TPA and the Very, Very Serious ASI disappears on this scale.

Owen Jones has a lot of good laugh lines. The BSD people are good but self-satisfied. Clifford Singer is funny. I really regret missing the workshop on shooting better video on smartphones as I have zero video skills (even if their live demo was the traditional fiasco). You can’t hear anyone speaking anywhere in Congress House without using a loud hailer.