Coffee House

Ed Miliband’s price control pattern

1 May 2014

Ed Miliband has got the reaction he wanted to his speech on the private rented sector, which he used today to launch Labour’s local election campaign. Landlords and nasty right-wingers hate this latest stage in his ‘cost-of-living contract’.

The Residential Landlords Association said rent controls ‘would critically undermine investment in new homes to rent and are not needed’ and the National Landlords Association said ‘the proposal for a three-year default tenancy is unnecessary, poorly thought-through and likely to be completely unworkable’. On Coffee House, Policy Exchange’s Chris Walker says ‘rent controls are at best misguided and at worst could be counterproductive, longer-term’. Grant Shapps suggested that these were ‘Venezuelan-style rent controls’.

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Which is of course what Miliband wanted. He wants his announcement on longer-term tenancies for the private rented sector which will prevent ‘excessive rises’ in rent to follow the same pattern as his energy price freeze.

The pattern is this: Miliband identifies a genuine problem that frustrates many voters and which the government is making insufficient noise on. Miliband then announces a policy to tackle this which involves plenty of government action, possibly to an outlandish extent. The group this would hit, which is an unpopular group of fat cat energy bosses or heartless landlords, gets very cross. Right-wingers claim the Labour leader is having a 1970s socialist disco or trying to emulate the sort of chaps that lefties put on T-shirts. The polling shows the public like the policy. The government panics and announces a less significant (but possibly more workable) policy which reinforces that Miliband was right to highlight the problem in the first place.

The next stage, of course, in this pattern, could be that in 2015 Miliband then tries to implement all these policies and the nasty right-wingers and mean landlords/energy bosses are proven right. But that’s only if he’s won an election partly because the pattern above has worked out for him as a means of appealing to voters.

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  • paul rivers

    This is the most economically illiterate policy he has come out with. Other than the basic point on reducing supply, look at the detail. He talks about banning up front agent charges which can be ” up to £500″, so how do letting agents get paid for their intermediary role.. I guess through higher rents. Also other than exceptional cases, landlords don’t like loosing tenants after 6 months due to gaps in rental income on remarketing, arranging new agreements etc. By the way in my part of London rental prices are falling as tenants leave to buy property in cheaper areas.

  • Smithersjones2013

    But that’s only if he’s won an election partly because the pattern above
    has worked out for him as a means of appealing to voters.

    Poor Izzy really is convincing herself that Labour aren’t going to the win the election. She is going to be seriously disappointed. As the Yougov regional Euros polls confirmed London is becoming as detached from the reality of the rest of the country as Scotland. The Tories have no traction outside Westminster except with blue donkeys. In such circumstances they have little or no chance (beyond Salmond winning independence and immediately and effectively withdrawing all Scottish involvement in Westminster except as it relates to Scotland) to claw back sufficient support to build the lead necessary to win the next election.

  • IfItPleasethThee

    Divide the world into good and evil and then identify with good. It’s the Labour plan and the UKIP plan. Tweedledee and Tweedledum. (Not *****-******-*****-**, because that’s racist; Through The Looking Glass is still OK, isn’t it?).

  • Pitkapoika

    Miliband’s father really did a first rate indoctrination job on his lad. He is the middle aged epitome of a Militant (Mindless) Marxist, just the mind set that this country does not need.

  • Tony_E

    I can’t imagine that the government will act on price controls for the rental market. Interest rate rises will probably significantly press the the whole housing sector in late 2015, tinkering before the market has stabilised around a more sensible money supply policy would be premature.

    What might be likely to happen? Firstly when interest rates rise the affordability test will seriously restrict the amount of money in the housing market. Interest rates of around 2-3% would be low for long term trends, but a big shift for the current market. People will not be able to re-mortgage, and many of those will have to sell or face crippling loan costs. If there is still strong demand for property from those with assets then prices will not fall significantly.

    At this point, the cost difference between rental and ownership markets will begin to reduce as an average. Unless Miliband then expects to hold rental under the market value of ownership for a similar property over a long period of time, his rent controls will have little effect on actual cost.

  • saffrin

    Miliband’s promise on rent control is as worthless as his promise to freeze energy prices with both being totally out of his control.
    His rental promise is a) only for the private sector and b) based on property prices.
    Seeing as Miliband’s only promise that can be relied upon will increase demand for housing, we can all take it for granted rents, based on the property market, will continue to go up and up.

  • realfish

    Expect something on rail fares soon, despite the fact that it was Labour that introduced the rail fare escalator to ensure that users paid a great proportion of the cost of running the railway than the taxpayer .

    They will also try to link the cost of rail travel to privatisation (to kill two birds with one stone), when, in fact, since privatisation the cost of season tickets, adjusted for inflation, have on average, barely risen (and have in fact reduced in some cases).

    Miliband is shamelessly cynically and opportunistically asking people if they are better off? Of course not, we wouldn’t be would we? given the size of their economic disaster. What is beyond doubt is that we certainly won’t be if he gets the keys to Number 10.

    • Johnnywas

      Season tickets have barely risen? Are you insane? My ticket has gone up by about 30% in the last five years.

      • realfish

        Since privatisation season tickets have barely risen, some have gone down, (adjusted for inflation). Since Labour introduced the above inflation fares escalator (RPI + 1%) fares have outpaced inflation since 2003. The Tories did briefly raise the escalator to RPI +3 but have now removed it.

        • Johnnywas

          My annual season ticket five years ago was £7200. It will be next January just under £10k. If you think that’s ‘barely risen’ I repeat you’re insane. Or have enough money that a rise of nearly 3 grand in 5 years means very little.

          And that price is for a standard class annual season ticket between Bath and London in case anybody thinks I’m making up the prices.

  • PT

    “Residential Landlords Association said rent controls would make it more difficult for affluent baby boomers to snap up starter properties and rent them out to poorer younger workers”.

    • saffrin

      Vote UKIP then PT. With all other parties intent on keeping the immigration door wide open, “the young” as you call them, can only compete with an ever increasing population for space as well as jobs whether we have the space or jobs.
      Then the young can of course always take advantage of the free movement of people and move to Bulgaria, Rumania, Spain or any other EU member state not needing any more people.

      • Jack

        The problem is not that the population is increasing, per se, but that it is ageing. Supporting the swelling numbers of retired folk will lay heavy on the young of this country, and the more outside help you can attract, the better for your descendants. The alternatives are to raise the retirement age or to raise taxes – neither of which are likely to win votes.

        • saffrin

          If this country needs more people to pay for OAP’s pensions, explain the army of unemployed successive UK Governments have willingly fostered?

  • you_kid

    Surely the UKIP apostles will be all over this one.
    Oh hang on … do they have a policy for things that really matter? Any policy?

    • Wessex Man

      Just like Lab, Tory and Lib/Dem manifeatos for 2015 IT HASN’T BEEN WRITTEN YET!

      • Des Demona

        For ”written” read ”bought off the shelf”

        • Inverted Meniscus

          I am no UKIP supporter but that is two more policies than Labour.

          • Des Demona

            Strange. I thought this article was discussing a Labour policy?
            Oh hang on. That was an attempt at humour?

            Ahhhh weren’t you the one who claimed on another thread that I’d said I was a teacher. I asked for evidence. Still waiting.

            • Inverted Meniscus

              It isn’t a policy it is just a piece of dishonest, ill considered populism with no roots in reality or practicality.

              • Des Demona

                Coming from someone who makes things up, should I really take that opinion seriously?

                • Inverted Meniscus

                  Up to you old boy. I never take anything said by leftists seriously. I mean, these idiots actually believe that they understand ‘money’. Hilarious.

                • Des Demona

                  Still waiting.

                • Fergus Pickering

                  All right love. You are not a teacher. What are you?

                • Inverted Meniscus

                  A Leftist Troll.

                • Fergus Pickering

                  Is that your profession? Who pays you?.

                • Inverted Meniscus

                  Me leftist!!! I think you should direct that question To Des Demona. I have to go for a lie down now to recover from the horror of being called a leftist.

                • Fergus Pickering

                  Sorry if I addressed my post tothe wrong chap. But the viceroy’s gin regularly calls me a leftist for reasons best known to himself.

                • Inverted Meniscus

                  No problem. It did give me a bad turn however but I took some aspirin and am recovering slowly.

  • swatnan

    Shows that the Opposition is working! and the lame excuse of a Govt isn’t. All Dave can do is play catch up.

    • First L

      Last time Miliband opened his mouth on Energy, my bill went up £100. Last time Osborne opened his mouth on Energy, my bill went down £50.

      Your statement is beyond ridiculous.

      • swatnan

        Some Energy Companies were shamed into freezing their prices. Also Ed forced consumers to switch companies, as you should have done.

        • Holly

          Shouldn’t that read…
          Some energy companies lowered their prices, after the government removed some of the ‘green’ subsidies.
          Ed ‘forced’ consumers to switch companies????/
          How did he manage that…
          If he tried to FORCE me to do anything I twang his fricking elastic face off!
          The man is a complete nut-job with only a wrecking ball for company.

          • Inverted Meniscus

            Yes it should Holly but don’t expect that purblind leftist idiot to acknowledge anything so inconvenient as the truth.

        • Inverted Meniscus

          Yes you idiot they froze prices after introducing increases in the region of 13%.

        • First L

          The companies that froze their prices did so after putting them up.

          I did switch companies. I’m still paying more thanks to Ed.

          • swatnan

            Its an excellent point. Despite what I said earlier, I’ve never really been convinced about swopping and changing companies. In fact I’ve never been convinced with privatisation of the utilities, Energy included. They told us that Privatisation would bring costs down! Rubbish. its all cosmetic and slieght of hand. I’ve stuck with British Gas/Centrica. Whatever was the point in changing? What you ‘gain’ on the swings you lose on the roundabouts. Are people so thick as to think that changing will bring costs down? No. The only solution is to bring them back into Public Ownership and Regulate that Enterprise rigourously; and if the CEO and staff aren’t up to running a State Enterprise efficiently,sack them. Bring Utilities and Rail back into State Ownership.

  • George_Arseborne

    When you watch Shapps commenting on any Milliban`s innovations, you just realised that the Tories are just Robbots infatuated with Graphs that have figures. The electorate care less whether you call it venezuelan style of ruling Grants, try to be constructive when challenging stuff rather than dismissive when you completely lack any sense of argument. What a pity?

    • Redrose82

      Did you go to the same school as John Prescott by any chance? You have a very similar aptitude for mangling the English language.

    • Inverted Meniscus

      Just be glad the Spectator does not run an ‘imbecile of the year award’ you would win without trying.

  • Rhoda Klapp8

    Who’s worse, the evil private landlord who will rent you a place, or the council who haven’t got any places to let? All you need to decide a fair market rent is a market.

  • ohforheavensake

    And there are rent controls in Germany, France, Ireland, much of the US, Switzerland, etc. And they seem to work.

    • Jack

      And they do, without doubt. The inefficient and short-term-thinking landlords leave the market, but the market is no less efficient for that. This noise from market fundamentalists is always loudest whenever some regulation is suggested – perhaps you’ll remember the hysteria over the introduction of the minimum wage. Did capitalism die? No – just the ambitions of a few wannabe capitalists.
      Capitalism would have died long ago if it hadn’t had the benefit of regulation, and the net effect is that intelligently regulated market economies prosper while free-for-alls fail. To cite an example from living memory, Somalia was freed from the dead hand of the state from 1991 to quite recently, yet market fundamentalists failed to flock there; neither capital nor its propagandists took that opportunity, perhaps not so irrationally. Meanwhile, Sweden prospered. In the end, you know you’re glad Nanny’s there.

      • Andrew Smith

        The German system is quite similar to Millipede’s proposals with one exception: the landlord can increase the rent if he makes a significant investment in the property, ie. new kitchen, bathroom, heating and structural work to the house. This prevents the disappearance of investment from the market; something that the new proposals don’t seem to include (unless I’m wrong). The problem I have with all these market control policies is not the social aspect to them, but the hatred of any form of capitalist. Without people with money to invest, the country would be quite shabby and poor.

        • Jack

          Market control is not as tough on capitalists as healthy markets, which wipe out inefficiently run or poorly conceived businesses ruthlessly. Recent years have produced many examples of unhealthy markets, though: These days, bonuses are awarded for loss-making.

      • Inverted Meniscus

        Perhaps there are one or two other fundamentals that make Sweden more attractive than Somalia such as defined property rights (capitalism), enforceable contracts (capitalism), no civil war or other internal conflicts, a properly developed legal system etc etc. Oh and my favourite, with profit schools.

        • Jack

          Absolutely: meaningful property rights and enforceable contracts are products of the rule of law, i.e., regulation writ large, which capitalism crucially depends on but which it cannot itself produce.

  • Peter Stroud

    Price control, rent control and pay control: all good old Labour policies. Now Miliband minor is reinventing them. He knows nothing of the history of politics, or politicians: he seems not to have known, for example, that Disraeli was originally Jewish. Clearly he has not bothered to read up on the histories of the old Labour governments. Had he have done so he would have learned that over active control from the centre stifles growth. He has no real ideas, so relies on the politics of envy and hatred. The man is a third rate politician: how was he ever elected?

    • First L

      Elected by third rate politicians and third rate Union barons.

    • Inverted Meniscus

      Perfect analysis until you paid him the compliment of being third rate. This preposterous, unprincipled union poodle could not even aspire to being as good as third rate.

    • ButcombeMan

      telemachus is away

      • Inverted Meniscus

        …with the fairies.

  • RavenRandom

    Yes typical 70s prices and incomes policies. In essence a variation of Labour’s “Here’s some free stuff” (at other people’s expense, but they’re evil anyway). Never mind that we’ve done this all before, and we know for a fact market distortion leads to misallocation and disaster… “Here’s free stuff and they’re bad guys” is enough for an us versus them divisive third rate chancer like Miliband.

    • Blindsideflanker

      Yes Labour’s solution is back to the future of prices and incomes policy. Miliband is so devoid of originality his economic policy isn’t Milibandism but Michael Footism.

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