Housing wealth matters

Posted on September 30, 2019 by heathercameron25

With the widening gap between the richest and poorest across different measures of inequality, there is growing awareness that income is not the only factor that impacts living standards. This has led to increasing interest in the distribution of wealth. While wealth can take various forms, the most visible way households accrue and store substantial amounts of wealth is through property ownership.

Property wealth in Scotland has increased ten-fold over the last 50 years – driven primarily by rising house prices, but also by the increasing number of properties and transfer of public housing into the private sector. However, this wealth is not distributed equally. In its recent examination of the scale and distribution of housing wealth in Scotland over time, the Resolution Foundation highlighted the marked rise in housing wealth inequality over the last decade, which is now twice as high as income inequality.

Why?

The new report shows that the growing inequality in housing wealth is in large part due to the fact that while very few families in Scotland currently have no form of income, over one in three Scottish households hold no property wealth at all and those in the top income decile own around 30% of the country’s property wealth.

Additional property ownership has also increased in recent years, adding to the level of inequality. The biggest wealth gaps were found to be in Scotland’s largest cities – Aberdeen, Dundee, Edinburgh and Glasgow – where low rates of home ownership are coupled with ownership of multiple properties, concentrating housing wealth in fewer households’ hands.

In addition, the last decade has seen many people struggle to get a foot on the housing ladder and today’s young people hold less housing wealth than their predecessors. Location was also found to have an impact as house prices can differ greatly by local authority, although these variations have reduced in recent years.

As a result, levels of housing wealth inequality are now nearing the same levels as those in England and Wales, although rates of homeownership remain higher in Scotland than elsewhere in the UK.

With more people now having some form of income than ever before, it is perhaps reasonable to ask why housing wealth is so important.

The Foundation’s report highlights that owning property has value over and above general wealth effects in that it can also provide a secure home; a source of income; and greater financial security in later life. Indeed, the UK Collaborative Centre for Housing Evidence (CaCHE) and Policy Scotland’s evidence review, which complemented the Foundation’s analysis, also highlights why housing wealth matters, citing many economic, health and social impacts.

Why housing wealth matters

While it has been previously argued that housing wealth inequalities are of little significance in terms of macroeconomic impact and can therefore be disregarded, there is now a growing body of evidence suggesting that in fact these inequalities do matter. The evidence review notes that:

housing assets are of growing importance encouraging household spending and were implicated in the global financial crisis;
access to home ownership is increasingly reliant on parental property wealth with negative implications for social mobility;
housing wealth is cumulative: e.g. buy-to-let has increased dramatically in Scotland over the last 20 years, often facilitated by the re-mortgaging of existing property by owners;
rising house price and wealth effects reduces productivity growth; and
different rates of house price change create inequalities across UK regions.

This is not only the case in Scotland and across the UK; across Europe housing wealth inequality has been shown to exacerbate socio-economic differences by segregating households based on income levels.

In relation to health and wellbeing, housing wealth can be a double-edged sword. A rise in house prices can lead to increased physical health of owners but decreased physical and mental health of renters.

Of course, historically, housing wealth has been seen to contribute to reduced wealth inequalities due to increased home ownership, however, there is now also an emerging concern that high house prices and rents may impair labour supply and productivity.

Main elements of wealth inequality processes within the housing system (CaCHE, 2019)

It is clear that income is not the only important factor in inequalities. This is illustrated by recent figures on child poverty and in-work poverty, which show that despite recent record levels of employment, two thirds of children living in poverty come from working households and more than half the people living in relative poverty in 2017/18 (53%) lived in households where at least one adult was in paid employment.

The Resolution Foundation notes that while the scale and distribution of housing wealth has changed dramatically over the past 50 years, wealth taxation has not.

Indeed, it has been recently argued that policy is widening the housing wealth divide and that the local supply of housing needs to be realigned with local housing demand if this is to be rectified.

Way forward

The research suggests that a number of actions could be taken to address the growing housing wealth inequalities in Scotland:

Firstly, support for sustainable home ownership, especially for those on lower incomes or in the younger age bracket is highlighted as one obvious response, although it notes that policies such as Help to Buy risk stimulating demand to the point that house prices are driven up. As a result, it is suggested that policy action to lessen the demand for holding additional properties would be a more sensible strategy.
Second, it is argued that there is a strong case for substantial reform in the area of the property taxation to address the current mismatch between the value of housing wealth and taxation.
Third, it is suggested that the Scottish Government could give consideration as to how the benefits of holding housing wealth can be provided to those who are unlikely to ever be able to support home ownership, with more efficient taxing of housing wealth. In addition, the government could also build on their recent reforms which have provided tenants with greater security of tenure and more predictable rent increases, and look to provide more support to low-income families via further supplements to benefits.

With the current system of council tax described as “highly regressive”, “inequitable” and “inefficient”, the research calls for much needed reform.

Both reports acknowledge that radical change is a political challenge but while the Resolution Foundation’s report states the case for action is clear, the evidence review advises caution, suggesting that a more equal housing system is a long-term aspiration rather than something practical and realisable in the short to medium term.

If you enjoyed reading this, you may also be interested in some of our previous posts on housing topics.

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Irish eyes aren’t smiling: how a change in policy on charges for water brought thousands onto the streets

Posted on March 22, 2016 by jamescarson2014

Image: William Murphy via Creative Commons

Domestic water charges might seem an unlikely issue to mobilise a nation. But in the Republic of Ireland, water charging has provoked mass protests not seen in the country for decades. The policy was instrumental in bringing down the last Irish government and may well be a deciding factor in the formation of the next. And although some elements in the story are unique to Ireland, the introduction of water charges has lessons for central and local government elsewhere.

A controversial policy

The roots of the problem lie in 2010, when Ireland had to accept an €85 billion loan from the International Monetary Fund after the collapse of almost all of the country’s big private financial institutions. One of the bailout conditions was a restructuring of the water sector and the introduction of domestic water charges before the end of 2013.

Since the formation of the Irish state, costs for water supply and treatment have been covered through the central taxation system and water charges on businesses. But in 2013, the government established a new water utility company – Irish Water – to take over the control of infrastructure and distribution from local authorities, and to collect water charges. The pricing model adopted by Irish Water was confusing, but indications were that the average annual cost per household would be between €278 and €584.

Irish Water’s first few months of operations were dogged by a series of controversies concerning data protection, bonus payments to staff and wasteful expenditure that undermined the new body’s credibility. At the same time, although the government said there were no plans to privatise Irish Water, opponents of the scheme expressed concern that the utility company could prove attractive to commercial buyers.

The public response

Coming on the back of four years of public sector cuts and additional taxes, the water charges were deeply unpopular. While some objected to the principle of paying for water, others felt they were being made to pay twice, both through taxation and the new charges.

Throughout 2014 and 2015, thousands of people took part in mass demonstrations in the biggest public backlash against government policy for many years. At one demonstration, the deputy prime minister’s car was surrounded by protesters for almost three hours. Smaller-scale, but no less heated protests prevented Irish Water workers from installing water meters. The rebellious mood was not confined to the streets. The first bills were sent out at the start of 2015, but by the summer it was clear that less than half of Irish Water customers had paid up.

A vote-losing policy

Water charging was a significant issue during last month’s Irish general election campaign. The coalition government defended the policy, while the main opposition parties called for water charges to be scrapped.

After an inconclusive election result, the future of water charging now hangs in the balance. The horse-trading between Ireland’s political parties means water charges will be up for discussion among politicians hoping to form a government.

But even if agreement on scrapping the charges is reached, proceeding from there may not be straightforward. Abolition could be in breach of the IMF loan conditions and could also lead to fines from the European Commission. At the same time, money still has to be found to maintain the country’s water supply, to repair Ireland’s decaying water infrastructure and to promote water conservation.

Lessons from across the Irish Sea

For some, the domestic water charges may appear to be an Irish stew of maladministration, miscommunication and recrimination. But the policy reform contains lessons that could reverberate beyond Ireland.

Concerns about who supplies water in the Republic of Ireland are echoed in the UK, where different models of water provision exist in England, Wales, Scotland and Northern Ireland. The debate over whether public or private ownership provides the better service shows no sign of abating, and the uproar in Ireland demonstrates that water can be an emotive and explosive issue.

The shambolic reform of Ireland’s water sector has provoked such enormous resentment that the new system may ultimately cost more than it raises. Earlier this month, an opinion poll found that only 22% of respondents intend to pay their next water bill.

The Irish water charges controversy is a reminder to policymakers everywhere that public confidence in a policy can make it or break it.

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The rising price of checking in: is there a case for visitor taxes, or will business fund tourism development?

Posted on February 12, 2016 by jamescarson2014

Image by BKP (Own Work) via Creative Commons

Tourism has a big impact on the UK economy. Figures from the World Travel and Tourism Council show that:

The total contribution of travel and tourism to UK GDP was £187.7bn in 2014, and is forecast to rise to £263.9bn in 2025
In 2014 travel and tourism directly supported 5.7% of total UK employment
Visitor exports from the UK generated £27.4bn (5.6% of total exports) in 2014
Travel and tourism investment in 2014 was £13.0bn (4.2% of total investment).

However, tourism development comes at a price, and often the burden falls on local government. Museums and galleries require year-round maintenance; organising, policing and cleaning up after major events can generate significant costs, and spreading the word about an area’s attractions can be expensive. At the same time, responding to the environmental impacts of tourism – from waste management to traffic congestion – can put additional strains on local budgets that are already under pressure from austerity measures.

Which is why some councils have been revisiting the idea of taxing the tourist.

A case for local tourism taxes?

In some of the world’s major cities, accommodation taxes for overseas tourists have become commonplace:

Paris charges a city tax based on the grading of the hotel and the part of town it’s in
New York bases its hotel tax on a formula of a set amount based on the room value
Berlin levies a tax of 5% of the room rate, but has a business traveller exemption

In the UK, accommodation taxes have failed to gain widespread support. The 2007 Lyons Inquiry into the role, function and funding of English Local Government floated the idea of a local visitor tax to be levied by local authorities.

“… in some areas there may be a case for a tourist related tax, developed in partnership with local businesses and residents – possibly through an annual bed licensing scheme levied on operators, or alternatively by directly levying the tax on overnight visitors.”

Both the Labour government and the opposition parties made it clear that they would not be taking the Lyons recommendation any further.

However, the recession of 2008 and subsequent budgetary pressures on local government have forced local authorities to find additional sources of revenue to support tourism development.

In 2015, Camden Council was reported to be looking at adopting a £1-a-night bed tax, similar to charges used in Paris, Berlin and Barcelona. It was estimated that the additional charge could raise £5m a year which could be used for additional street cleaning in popular tourist areas.
Edinburgh City Council proposed the introduction of a tourist tax to help pay for major events, such as the city’s world-famous arts festivals and Hogmanay celebrations.

In 2013, the London Finance Commission suggested a tourism tax could have particular potential in London because of the size and needs of the capital’s leisure and tourism industry:

“If the city’s cultural, tourist and entertainment industry are to flourish, there is a powerful argument for a levy that could then be reinvested in marketing and urban realm improvements.”

The tourist sector’s view

The UK’s tourist industry is strongly against imposing additional charges on tourists, arguing that VAT and the air passenger levy already make the UK one of the most expensive tourist destinations in Europe.

Edinburgh’s proposed tourist tax provoked strong opposition from the industry. A spokesman for an alliance of 250 Scottish tourism businesses and organisations said:

“We are already contributing a huge amount to the economy. It is too easy to take a swipe at us. Scotland is already an expensive place to come and visit because of the value of the euro at present. A tourist tax would simply add further expense for the visitor coming here.”

Another way forward?

Although there is support in some local authorities for an accommodation tax on visitors, the powers to impose such taxes would require new legislation, which in the present political climate is unlikely.

An alternative route to finding additional funding may be found in the idea of Business Improvement Districts (BIDs). These are business-led partnerships which are created to improve the business environment of a commercial area through, for example, improvements to infrastructure and services, public safety, promotion and marketing. The Centre for London has suggested that the BIDs idea could be further developed to create Tourist BIDs, or T-BIDs. In the United States, T-BIDs have been credited with reshaping the tourism landscape and boosting visitor numbers by specifically funding tourism development.

In 2014, the UK’s first T-BID was established when six Highland Council wards voted to establish the Loch Ness and Inverness Tourism BID. Further T-BIDs have also been proposed in Birmingham and Torbay, and it appears that Edinburgh is now also thinking along these lines. The idea is not without its critics, and some businesses have expressed concern that it may amount to a “backdoor tourism tax.”

There are no quick fixes to the challenge of financing tourism development, but if the UK’s visitor economy is to continue growing, the public and private sectors need to continue exploring funding models that meet escalating demands.

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Further blog posts from The Knowledge Exchange on economic development:

Should the UK introduce a tax on sugar?

Posted on December 18, 2015 by staceydingwall

by Stacey Dingwall

Recent months have seen two enquiries to our Ask a Researcher service for evidence on sugar consumption in the UK. Namely: should this be taxed?

Sugar has become somewhat of a villain in the UK, with magazine articles, research and governments all telling us that we should be greatly reducing, or even eradicating completely, our consumption of added sugars in particular. The week beginning 30^th of November even saw the first National Sugar Awareness Week, part of a campaign to encourage the government to establish a sugar reduction programme in the UK. However, is a ‘sugar tax’ really necessary?

Sugar consumption: a public health issue?

According to the Royal Society for Public Health (RSPH), absolutely. Last month, they published a review of how to tackle obesity in the UK, which included the introduction of a sugar tax. The report notes that, according to the latest forecasts, half of all adults in the UK are expected to be classed as obese by 2050. Key to reversing this trend, it is argued, is to tackle issues around diet and nutrition among children, who are now spending double the amount of time per day in front of screens than children in 1995 (something that has been shown to increase cravings for food and drink, but not for nutritionally sound items). Alongside other developed nations, the UK is also seeing an ever increasing rate of consumption of high-sugar carbonated drinks.

While the RSPH recommends placing restrictions, or ending, the use of advertising and sponsorship by junk food and drinks companies around family and sporting events, it also argues that this is not enough to tackle the country’s obesity problem. The RSPH supports the introduction of a tax on sugary drinks of 20%, or 20p per litre. Their report highlights evidence which suggests that this could prevent or delay around 200,000 cases of obesity per year, and points to the experience of Mexico, who introduced a tax of 10% at the start of 2014. During that year, sales of sugary drinks declined by 6% overall, and by 9% among those living in the most deprived areas of the country (the demographic group most likely to be obese).

What does the government think?

After a delay, the UK government published Public Health England’s (PHE) review of the evidence for action with regards to sugar reduction in October. The report:

agrees that too much sugar is consumed in the UK
favours a reduction in advertising to children
recommends the introduction of a tax on full sugar soft drinks of 10-20%

This, combined with a range of other measures, it is argued, could save the NHS £500 million per year. The PHE recommendation was also supported by the House of Commons Health Committee, in their recently published Childhood obesity – brave and bold action report. Having heard evidence from parties including Sustain and Jamie Oliver, a key figure in the campaign for the introduction of a sugar tax, the Committee recommended that such a levy should be introduced at 20%, in order to achieve maximum impact.

The Prime Minister, however, is still not convinced, stating that he believes there are “more effective” ways of tackling obesity. The government is due to publish a strategy on childhood obesity in the New Year.

What does the evidence say?

A number of countries have implemented a form of taxation on sugar or saturated fats. These include:

a tax on saturated fats in Denmark
Finland’s tax on sweets, ice cream and soft drinks
Hungary’s public health product tax
France’s tax on sugar- and artificially-sweetened beverages

According to a review of using price policies such as these to promote healthier diets by the World Health Organization, food pricing policies are feasible, and can influence consumption and purchasing patterns as intended, with a significant impact on important dietary and health-related behaviour. Crucially, however, the same review notes a lack of formal evaluation in this area.

A report published earlier this year by the activist group Taxpayers’ Union of New Zealand, Fizzed out: why a sugar tax won’t curb obesity, questioned the validity of nutrition related taxes. Reviewing the experience of Mexico, they suggested that the reduction in consumption of sugary drinks following the introduction of an excise tax of one peso per litre in January 2014 had been overplayed.

It’s also the case that the Danish tax on saturated fats was repealed by the government after only one year. This was due to a number of economic impacts that quickly became apparent after the tax was implemented, and resulted in plans for similar taxes to be abandoned. In fact, fat consumption in Denmark has been on a downward trend for some time now, therefore no tax incentive was required. And according to the Danish minister of finance, “to tax food for public health reasons [is] misguided at best and may be counter‐productive at worst”.

Whether the UK Prime Minister will be swayed on this matter remains to be seen. It’s likely that a ‘sugar tax’ will continue to be deemed too politically sensitive to introduce, especially as one in five people continue to live below the poverty line.

Related reading
Child obesity: public health or child protection issue?

Our popular Ask-a-Researcher enquiry service is one aspect of the Idox Information Service, which we provide to members in organisations across the UK to keep them informed on the latest research and evidence on public and social policy issues. To find out more on how to become a member, get in touch.

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Debating the cost of alcohol to society

Posted on October 28, 2015 by jamescarson2014

Image by Quinn Dombrowski via Creative Commons

“Society is paying the costs – alcohol-related harm is now estimated to cost society £21 billion annually.”

So said David Cameron, launching the UK government’s alcohol strategy in 2012.

The prime minister was echoing the widely held view that alcohol is a financial burden on taxpayers. The British Medical Association has put the costs of alcohol harm in Northern Ireland and Wales at £680m and £1bn respectively, while the Scottish Government believes the annual cost of excessive alcohol consumption to be £3.6bn (equivalent to £900 for every adult in Scotland).

An alternative view

But now the popular view of alcohol as a drain on taxpayers has been challenged. A new report from the Institute of Economic Affairs (IEA) claims that the net cost of alcohol to the state is minus £6.5 billion.

The report found that the direct costs of alcohol use to the government in England – including NHS, police, criminal justice and welfare costs – amount to just under £4 billion each year, whilst revenues from alcohol taxes amount to over £10 billion. And it claims that even if the government halved all forms of alcohol duty, it would still receive more money in tax than it spends dealing with alcohol-related problems.

Commenting on the findings, the report’s author, Christopher Snowden said it was time to stop regarding drinkers as a burden on taxpayers:

“Forty per cent of the EU’s entire alcohol tax bill is paid by drinkers in Britain and, as this new research shows, teetotallers in England are being subsidised by drinkers to the tune of at least six and a half billion pounds a year.”

The report received a hostile reception from Alcohol Concern. Deputy chief executive Emily Robinson told the Daily Telegraph:

“Non-drinkers suffer the consequences of alcohol related problems every day; whether that’s from drink driving accidents, being the victim of crime or anti-social behaviour, family breakdown, waiting in Accident and Emergency departments for their turn, even through to the costs of street cleaning town centres after a Friday night.

She went on to argue that policies, such as minimum unit pricing (MUP), were needed to tackle the harm caused by alcohol.

A setback for minimum unit pricing?

The IEA report appeared on the same day that the European Court of Justice (ECJ) advocate general advised that the Scottish Government’s policy on MUP breached EU competition and free trade laws.

The proposal to introduce minimum retail pricing for alcohol appeared in the Scottish Government’s 2009 alcohol framework, and in 2012 the Alcohol (Minimum Pricing) (Scotland) Act 2 paved the way for the introduction of a minimum price of 50p per unit. The policy was challenged by the drinks industry, which believes that there are more effective ways of tackling harmful drinking.

While the advocate general’s advice may influence the ECJ’s final decision, The Scottish Government is standing by its policy. “While we must await the final outcome of this legal process,” said Scotland’s First Minister, Nicola Sturgeon, “the Scottish Government remains certain that minimum unit pricing is the right measure for Scotland to reduce the harm that cheap, high-strength alcohol causes our communities.”

The devolved administrations in Wales and Northern Ireland have set out plans to introduce their own MUP legislation. In England, the 2012 alcohol strategy included a commitment to introduce an MUP for alcohol. However, in 2013 the coalition government decided not to proceed with this, and instead to impose a ban on the sale of alcohol below cost price.

Last year, a report from Sheffield University suggested that below cost price policy would have small effects on consumption and health harm, while an MUP set at a level between 40p and 50p per unit, was estimated to have an approximately 40-50 times greater effect. The research appears to support evidence from Canada, the first country in the world to introduce MUP, indicating that MUP could bring significant health benefits.

With the IEA report introducing a provocative new perspective, and the final judgement on MUP awaited, it’s unlikely that ‘last orders’ will be called any time soon in the debate on alcohol’s impact on society.

Enjoyed this article? Read our recent blog posts on the night-time economy and on ten years of the Licensing Act.

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The UK digital economy: how can the government support digital businesses?

Posted on October 9, 2015 by stevenmcginty

Photo: Public Domain Pictures via Creative Commons

By Steven McGinty

Last month, the House of Commons Business, Innovation and Skills (BIS) Committee launched an inquiry into the UK’s digital economy. Iain Wright MP, the Chair of the Committee, explained that:

“Digital technology is rapidly changing the economic landscape in which firms operate. Nothing short of a digital and tech revolution is taking place, with new entrepreneurs and business models emerging and existing businesses having to adapt quickly to keep pace.”

The inquiry will focus on three areas:

Government actions affecting businesses in the digital economy;
how to maximise the opportunities and overcome challenges in the sector;
how the sector can contribute to improving national productivity.

The BIS Committee is asking for submissions from those involved in the digital economy, including digital businesses and companies hoping to benefit from technology.

Why should the government support the digital economy?

Innovate UK expect that, by 2015, the UK digital economy will account for 10% of GDP. Tech City UK report that the sector employs 1.5 million people (about 7.5% of the total workforce); although this is expected to increase by 5.4% by 2020. In 2013-2014, 15% of all the companies formed were digital businesses. Most were based outside of London (74%) and nearly all were SMEs (98%). The majority (90%) of digital companies expect revenues to grow within the next year.

Technology clusters

Technology clusters play an important role in the UK’s digital economy. There are 21 clusters across the UK, with expertise ranging from software development to marketing and advertising. The majority of digital businesses consider themselves part of a cluster (65%). Bournemouth has the fastest growing digital cluster, with a 212% increase in the number of companies formed since 2010. Its specialism is digital marketing and advertising.

This growth suggests specific focus should be given to technology clusters. Tech City UK found that a third of digital companies highlighted access to funding as a challenge, particularly outside of London and the South East. One suggestion offered by Tech City UK is that businesses need to take advantage of European funding where possible.

Other forms of support could include: providing fast and accessible broadband; access to a pool of skilled employees; suitable workspace, particularly in the South East; and business and mentoring advice.

Digital Economy Strategy 2015-2018

At the beginning of the year, Innovate UK set out a strategy to support UK businesses in getting the most out of digital technology. It sets out five main objectives:

Encouraging digital innovators
Focusing on the user
Equipping the digital innovator
Growing infrastructure, platforms and ecosystems
Ensuring sustainability.

Within the strategy, actions are put forward for how these goals will be achieved. For instance, to ensure sustainability, Innovate UK would work closely with UK research councils to encourage cross-disciplinary academic collaboration and help connect it to real-world business needs. If even some progress is made with each of these objectives it would be hugely beneficial for the UK digital economy.

Innovation centres – the Digital Catapult

The Digital Catapult is a national centre that aims to accelerate the UK’s best digital ideas to the marketplace, in order to create new products, services and jobs. It was established in 2014 by Innovate UK and is based in the Knowledge Quarter in Kings Cross. There are also three local centres in the North East and Tees Valley (NETV), Brighton, and Yorkshire.

The Digital Catapult centres focus on the challenges associated with: closed organisational data; personal data; creative content; and the internet of things (IoT). The centres are involved in a number of projects, including IoTUK, which has been launched as part of a £40 million government investment in the internet of things (the use of networks to allow the exchange and collection of data from everyday objects, such as fridges). The programme aims to increase the adoption of high quality IoT technologies and services throughout business and the public sector.

Regina Moran, CEO at Fujitsu UK&I, notes that:

“The IoT has the potential to turn ideas in a hyper-connected world into fully realised digital services but it has challenges ahead and it’s encouraging to see the Government investing in its development.”

Regulation

The Prime Minister, David Cameron, has managed to convince the European Commission (EC) to review the VAT regime for tech start-ups, arguing that it punished British entrepreneurs. The regime, which was implemented in January, forced companies to pay tax in every country they traded in rather than their headquarters. It also eliminated a £81,000 threshold for which companies have to register for VAT duty.

However, the Commission has recognised that this was adversely affecting small businesses. Therefore, measures such as the reintroduction of the VAT threshold and a single registration scheme for cross-border taxes, will be included in the Commission’s consultation.

The UK government’s approach shows a commitment to providing a competitive business environment and a single European market in digital services. It’s likely that most digital businesses would support the government’s approach.

Concluding remarks

The upcoming BIS Committee inquiry will provide an opportunity to reflect on the government’s approach so far. Although evidence confirms that the digital economy has been growing, there may be areas that the UK is failing to capitalise on. In a highly competitive globalised economy, it’s important that the UK exploits any strategic advantage, ensuring that innovative ideas are brought to the market quickly.

The inquiry will also provide an opportunity for a dialogue between the government and the private sector. This increased collaboration can only be good news for the UK’s digital businesses.

Here at Idox, we take an active interest in the future of the digital economy and eagerly await the Committee’s findings.

Follow us on Twitter to see what developments in public and social policy are interesting our research team.

Enjoy this article? Read our other recent blogs relating to the digital economy:

IDOX Plc announced on 8 October 2015 that it had acquired the UK trading arm of Reading Room Ltd. Reading Room, founded in 1996, is a digital consultancy business with a focus on delivering websites and digital services that enable its customers to make critical shifts into digital business and client engagement. It has an international reputation for its award winning and innovative approaches to strategic consultancy, design, and technical delivery.

Discarding bag habits: England joins Scotland, Wales and Northern Ireland in charging for carrier bags

Posted on September 2, 2015 by jamescarson2014

Image by Trosmisiek via Creative Commons

By James Carson

Plastic carrier bags have been part of Britain’s retail landscape since their introduction by supermarkets in the 1970s. Dispensed freely and liberally, the bags were originally made of polythene before evolving to the high density polyethylene (HDPE) bags most commonly in use today.

For decades, the plastics industry has been fighting off environmental campaigners’ claims that single-use bags are damaging to the environment and create a significant litter problem. But there have been increasing signs that the carrier bag’s days are numbered.

In 2002, the Republic of Ireland became the first country in Europe to introduce a tax on single-use carrier bags
In 2007, Italy banned the distribution of non-biodegradable plastic bags
In 2014, California became the first US state to prohibit stores from providing single-use plastic bags – subject to a 2016 referendum.

Next month, charges for carrier bags are being introduced in England. The 5p charge will come into force on 5 October, bringing England into line with the rest of the United Kingdom.

Wales

Wales was the first part of the UK to introduce charges for carrier bags, in 2011. The charge is part of the Welsh Government’s strategy to minimise the proportion of waste going to landfill to 5% by 2025, and eliminating it altogether by 2050.

An evaluation of the impacts of the charge on behaviour and attitudes of consumers found that it had helped to increase own bag use in Wales (from 61% to 82%) and was supported by a majority of the Welsh population. However, no evidence was found that the carrier bag charge led to behavioural spill-over to other waste-related behaviours.

Northern Ireland

The levy on single-use carrier bags was introduced in Northern Ireland in 2013. The charge has been a success story, with a 42.6% annual reduction in 2014 following a previous drop of 71%, after the carrier bag charge was introduced.

In 2013/14, £3.4m of the proceeds from the levy were spent on more than 250 projects delivered by the Northern Ireland Environment Link (NIEL) Challenge Fund, Natural Heritage grants, Sustainability Innovation Fund and Local Clean-Up Support projects.

Scotland

The Single Use Carrier Bags Charge (Scotland) Regulations came into force in October 2014. Before that, Scotland used more than 800 million new single-use carrier bags every year – the highest usage in the UK. Figures published this summer, however, showed that the number of plastic bags provided by supermarkets in Scotland fell by 147 million last year, despite the charge only being in place for the last 11 weeks of 2014.

Scotland’s environment minister, Richard Lochhead, hailed the results as “astounding”, and said the charge was driving behaviour change to tackle litter and reduce waste. Time will tell whether this impressive start can be maintained. After an initial fall in carrier bag usage during the first year of charging in 2011-12, Wales saw a 5.2% increase in usage during 2014.

England

From October, large shops in England will be required to charge 5p for all single-use plastic carrier bags. In 2013, the number of single-use bags from English supermarkets rose from 7.4 billion to just over 7.6 billion. It’s hoped that the forthcoming charge will be instrumental in cutting carbon emissions, and reducing litter.

However, the House of Commons Environmental Audit Committee (EAC) has described the English regulations as “a complete mess” The MPs are especially unhappy at the exemptions for smaller retailers, and exclusion of biodegradable bags.

Only retailers with 250 or more full-time employees will have to levy the 5p charge for carrier bags, but trade bodies for smaller retailers say their members want to participate and claim that the exemption will distort competition and cause confusion.

The EAC believes that leaving biodegradable bags out of the scheme could harm the environment by causing litter and damage to wildlife.

Follow us on Twitter to see what developments in public and social policy are interesting our research team.

The Idox Information Service can give you access to a wealth of further information on the environment and waste management; to find out more on how to become a member, contact us.

Grey men dreaming of vibrant cities?

Posted on February 16, 2015 by morwenj

Image by Neil Howard under Creative Commons

Image of MediaCity, Manchester by Neil Howard under Creative Commons

By Morwen Johnson

They control combined budgets of over £10bn, deliver 24.4% of the combined economic output of England, Scotland and Wales, and are home to over 21 million people. What are they? The Core Cities of the UK – and as pre-election lobbying ramps up a gear they are at the forefront of the devolution debate.

Last week I attended the Core Cities Devolution Summit. This event, hosted in Glasgow, marked the launch of a modern charter for local freedom. It also gave those interested in the current cities agenda a chance to hear from the city leaders on the potential benefits of reform.

I won’t summarise the charter, or the main recommendations of a new report from ResPublica which argues for the fullest possible devolution of public spending and tax raising powers to the UK’s largest cities and city regions. Instead, here are a few reflections on the day.

Bespoke devolution

The hype over Manchester’s recent devolution agreement with the Treasury shouldn’t distract from the fact that devolution is not a one-size-fits-all model. The idea isn’t to try and mimic Manchester’s journey – what’s on the cards is an approach that takes account of local circumstances.

I’m not sure that the end result of this – potentially radically different priorities in revenue generation, service delivery and spending between neighbouring metropolitan areas – is being communicated in a transparent way. Ben Page from IpsosMori shared some interesting survey results which suggest that public opinion also lags behind the political agenda:

Leadership not bureaucracy

Mention devolution and one of the immediate responses of naysayers is to complain it’s just yet another layer of governance – more costs, more staff, more vested interests. This was raised during Q&A and the panel responded by saying that what they are proposing doesn’t require massive reorganisation – it’s about effective leadership. The same pots of money are used but funds can be accessed in different ways for different purposes.

This was only half-convincing. Repeated reference to place-based decision-making (breaking down functional /organisational silos to ensure services are focused on outcomes and those residents with complex needs) didn’t really explain how you build the trust and political capacity that’s needed to roll out transformation across multiple agencies/workforces at the same speed and scale.

Equalities

Presenting a different perspective on the day was Professor Lesley Sawers, who highlighted the risks of unintended consequences from devolution in terms of social justice and inequalities. She argued that so far localism has led to an approach to investment that has not been particularly effective in tackling equalities issues.

Cities should be great agents of social reform but the rhetoric around growth has a tendency to focus on infrastructure and macroeconomics – ignoring social challenges such as skills, poverty and under-achievement. And it may seem an easy point to score, but running an event with only 3 female speakers out of 25, didn’t really send a great message to observers. Don’t even mention the lack of ethnic diversity on the platform.

What now?

The devolution agenda may be the ‘only show in town’ but whether the core cities can take advantage of this to benefit and engage their own populations remains to be seen.

The Idox Information Service has a wealth of research reports, articles and case studies on governance and city regions. Members receive regular briefings as well as access to our Ask a Researcher enquiry service.

Who pays for parks? Are ‘green benefit districts’ the answer?

Posted on February 10, 2015 by jamescarson2014

Southwark Park, London. Photograph: Mike Faherty. Licensed for reuse under a Creative Commons License

The benefits of urban parks are well told. Quite apart from their environmental impact, green spaces really do make a difference to our quality of life: from health to housing, community cohesion to crime prevention, city parks generate spin-offs extending far beyond their green acres.

They also cost money. Even before the economic crisis of 2008, the Commission for Architecture and the Built Environment was highlighting the challenges of maintaining urban parkland:

“We risk a never-ending cycle of large areas of poor quality urban green space that are restored with public money, then decline, then need more public investment to restore them to a good standard.”

In the age of austerity, those challenges have intensified: between 2010/11 and 2012/13 local authority spending on open spaces in England was cut by an average of 10.5%. Now, more than ever, local authorities have to think more imaginatively about sources of revenue and capital funding for urban green spaces.

Last summer, the Policy Exchange think tank came up with some ideas for attracting more money to maintain urban parks. These included:

extending the Gift Aid scheme to community civic improvement groups;
requiring new green spaces to include a long term funding plan;
allowing communities and local authorities to apply for funding to employ park keepers in those spaces identified as crime hotspots.

The report also encouraged the idea of green benefit districts. Also known as park improvement districts, these are urban parks, gardens, and green spaces whose upkeep is funded in part by a tax on nearby residents.

It’s an approach that echoes the concept of business improvement districts, defined areas where participating businesses pay a levy for security, landscaping and other improvements to their trading environment.

Some communities in San Francisco are already exploring the idea, teaming up with housing developers to establish a green benefit district that aims to protect and enhance 25 small parks, community gardens and ad hoc recreation spaces.

In the UK, green benefit districts might prove to be a harder sell. Many people feel that they are already contributing quite enough for the maintenance of parks through the council tax, and the Policy Exchange report stressed that the idea would not be appropriate in deprived areas.

But the authors suggested that home owners living near parks might be persuaded to pay more for amenities that raise the value of their properties. An analysis of price increases of homes in south London before and after a £2.7m regeneration of Southwark Park revealed a significant increase in prices of properties located within 100m of the park. The report could not conclude that this increase was due to renovation of the park, but suggested that the link between green space quality and property prices was worth further investigation.

The green benefit districts idea has received a cool response from coalition ministers, who suggest that cutting waste and inefficiency in local government is preferable to additional taxation. But, with the prospect of councils’ budgets being squeezed further in the coming years, the idea of green benefit districts might well take root.

Further reading

The Idox Information Service has a wealth of research reports, articles and case studies on urban green space. Items of interest include:

The contribution of green and open space in public health and wellbeing

Future parks (Birmingham City Council seeking NHS funding for upkeep of parks)

Time to re-think parks (innovative income generation for public parks)

Park land: how open data can improve our urban green spaces

Rethinking parks: exploring new business models for parks in the 21st century

N.B. Abstracts and access to subscription journal articles are only available to members.

Britain’s cities push for more powers

Posted on February 4, 2015 by jamescarson2014

Manchester Town Hall: (Photograph, James Carson)

On 9 February, leading politicians, decision makers and academics will meet in Glasgow to discuss how more powers can be devolved to the UK’s cities. The meeting is being organised by the Core Cities group, which advocates a bigger say for Britain’s major cities outside London.

The Glasgow gathering is the latest sign of a growing appetite for financial freedom for the UK’s cities and regions. The movement picked up pace during the Scottish independence referendum campaign with the pledge by political party leaders at Westminster to give more powers to the Scottish Parliament. The subsequent publication of the Smith Commission’s recommendations prompted Sir Richard Leese, leader of Manchester City Council and chair of the Core Cities UK cabinet, to respond:

“What’s good enough for the Scottish Parliament should be good enough for big cities across the UK. Today’s commission report unveils significant fiscal devolution for Scotland and the power to retain more of the tax revenue it raises. This is something that Core Cities UK strongly advocates for cities on both sides of the border, giving us the power to make a difference on the ground and unlocking their full potential.”

But even before the Smith Commission had reported, devolution for cities was rising up the political agenda, and the major Westminster parties had already started setting out their proposals:

In November, the chancellor of the exchequer, George Osborne, unveiled a plan to give Manchester new powers over transport, planning, housing, police and skills. Similar packages are proposed for Leeds and Sheffield, part of the government’s commitment to build a ‘Northern Powerhouse’ as a counterbalance to the ‘London super-region’;
The Labour Party has promised that, if elected to government, it will pass control of business rates to the major cities, and that the House of Lords will be replaced by a senate of elected regional and city representatives;
The Liberal Democrats have called for devolution on demand to be offered to any part of England with a population in excess of one million.

Politics is one factor driving the demand for more city devolution; another is the economic situation. As the Centre For Cities recently observed:

“From a public finance perspective, there is an increasing realisation that future reductions in public sector expenditure will be impossible to deliver without changing the way public services are designed and delivered, and this requires more to be done at the local level.”

For many, the moves to cut the purse strings held by Whitehall and Westminster are long overdue. The City Growth Commission noted in October that the UK has the most centralised system of public finance of any major OECD country, with sub-national taxation accounting for only 1.7% of Gross Domestic Product (GDP), compared to 5% in France and 16% in Sweden.

The Commission argued that more powers for the cities would build on the momentum of the government’s City Deals by creating stronger, more inclusive and sustainable growth in the UK, and suggested that London, Manchester and West Yorkshire are already equipped to take on the risks and benefits of fiscal and funding devolution. While some, including the Prime Minister, welcomed the report, others, such as Stephen Brady, leader of Hull city council felt short changed:

“I’m really, really disappointed that Hull once again has been overlooked in favour of the bigger cities. We’re like the forgotten city, despite being strategically so important. We’ve won the City of Culture 2017 bid. What else can we do to prove that we want to be given the chance to run things ourselves?”

His response is a reminder that establishing a comprehensive devolution settlement that covers all of Britain will prove challenging.

Ultimately, the real prize of city devolution could be a fairer society. A report from the International Monetary Fund in April 2014 found that decentralising government expenditure and revenue can help achieve a more equal distribution of income. But the authors stressed that this would require several conditions to be fulfilled, including comprehensive decentralisation on both the expenditure and revenue sides.

During its Glasgow meeting in February, the Core Cities group promises to unveil a ‘Charter for Local Freedom’ setting out the powers it wants central government to devolve down to cities. And with cities set to play a key role in shaping the outcome of the general election, it’s clear that this is one issue that will continue to build. As Alexandra Jones from the Centre for Cities observes:

“The debates about devolution and the city regions have not always had political momentum; there’s no shortage of that now.”

Further reading

We’ll be attending the Core Cities Devolution Summit on 9 February – follow @idoxinfoservice for live tweets and this blog for follow-up commentary.

Devo-City: a short guide to Britain’s devolving city regions in words and data

Tales of the cities

Economic growth through devolution: towards a plan for cities and counties across England

Charter for devolution

Abstracts and access to subscription journal articles are only available to members of the Idox Information Service.

The Knowledge Exchange Blog

The official blog of The Knowledge Exchange from Idox

Tag Archives: taxation

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The rising price of checking in: is there a case for visitor taxes, or will business fund tourism development?

The UK digital economy: how can the government support digital businesses?

Discarding bag habits: England joins Scotland, Wales and Northern Ireland in charging for carrier bags

Who pays for parks? Are ‘green benefit districts’ the answer?

Britain’s cities push for more powers

The official blog of The Knowledge Exchange from Idox

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