Month: September 2007

• The Arctic ice cap has collapsed at an unprecedented rate this summer…
  There can be no doubt that we have very little time indeed to prevent runaway climate change.
• ICT in schools: Costs a lot, delivers little
  Despite being very keen on technology, I’m reassured that my own instinctual suspicion of ICT flag-waving in schools is supported by recent studies which show little benefits from large ICT spends.
• How to miss the point: The Green Standard
  A group of environmental groups have published their assessment of how Labour, Conservatives and LibDems measure up in terms of their environmental policies. I find it baffling that these groups thought it would be a good idea to reinforce the tired politics of just the grey parties galavanting in Westminster. At the Green Party conference Caroline Lucas MEP and Siand Sian Berry challenged the parties to commit to 10 urgent policy priorities.

The government’s guarantee of all deposits held by Northern Rock is an astonishing move.

Turmoil in the market was affecting Northern Rock’s ability to operate given it’s mortgage-heavy business model. To protect UK financial markets and consumers, measures were put in place. This included financing from the Bank of England at a ‘punitive rate’. In other words Northern Rock could access money to tide it over, but profits would suffer due to the rate they would have to pay. Northern Rock didn’t actually use the facility, just arranged for it to be available as a precaution.

Somehow this was worked up into a media frenzy which saw queues forming _at some branches_ as customers tried to withdraw their money lest it get lost in some kind of catastrophic financial implosion. This ignored the fact that the Financial Services Compensation Scheme guarantees the first £2k and 90% of the next £33k. For the vast majority of customers this more than covers their savings.

It seems to me that not only did many savers not understand what was going on, but that some journalists didn’t either. Some did and chose to whip up a frenzy whilst a few remained calm. Not an unusual state of affairs.

The government, in an attempt to calm fears and stop panic withdrawals, offered to guarantee all existing deposits in Northern Rock. Whilst very thin on specifics, this was an extraordinary thing to do and in my view a huge overreaction. Suddenly taxpayers were liable for all deposits in the bank, and the precedent was set so that by implication any other bank appearing to fail (even if not failing in reality) would be provided such guarantees at taxpayer expense.

It’s quite astonishing that the government felt such a huge intervention in the market was necessary, with so little attention to detail or the implications of the precedent it set. Will no bank be allowed to fail, no matter how poor its management?

The government overreacted and have created a situation which could essentially nationalise any failing bank. The question then becomes… was it Alistair Darling who got the jitters or Gordon Brown?

Public reaction to the Northern Rock story has also shown the low level of trust people seem to have in financial institutions and the system at large. This is an issue the Financial Services Authority and the Bank of England will need to urgently address.

*UPDATE* I was flabbergasted by the BBC’s 1 o’clock news coverage of Bank of England Governor Mervyn King’s appearance before the Finance Select Committee. Suddenly the entire problem was his and the Bank of England’s fault, plus the British banking regulatory system was flawed. Rather it was coverage by outlets such as the BBC which stirred up the trouble, including their incessant presentation of a queue outside one branch when I hear other branches had no queues at all. I’m finding the heavily lopsided presentation of the facts increasingly disturbing.

The boom in buy-to-let property investment over the last few years has been a staple news story. First time buyers are often reported to complain about older, wealthier people coming in and buying up homes to create lucrative rental portfolios they can retire on.

For some buy-to-let hasn’t been quite the golden goose they hoped for, a glut of rental properties has made it difficult for them to break even. When I rented in a central Brighton “loft conversion” I was fortunate: I could negotiate the price down between three desperate private landlords in the same building. There were repossessed flats on every floor of the apparently “prestigious development” as the developers had described it to my landlord.

Yet, for many, the combination of rising house prices and the people left unable to buy, buy-to-let is profitable. At the extreme end of the scale are the maths teachers who are apparently en-route to becoming Britain’s first buy-to-let billionaires. I do think there should be firmer taxation on multiple home owners, but there will always be a rental market.

What strikes me is how few incentives there are for landlords to make their homes more energy efficient. Tenants almost always pay the bills themselves but often stay only for a short time, so have little reason to make long term investments in energy efficiency beyond low-energy light bulbs.

The Telegraph reported in May that energy performance certificates (which are also part of the controversial Home Information Packs or HIPS) would be required of landlords October 2008. However it’s not really clear what purpose they would serve. The certificates would be unlikely to sway the majority of people looking to rent. It’s a small, pointless gesture from a Labour government continuously failing to take action on climate change.

85% of Brighton & Hove residents live in privately owned property. 21% of homes are privately rented, twice the national average. These rented properties often see a high turnover of tenants and landlords who show little concern for energy efficiency.

While there are grants available to improve the energy efficiency of private rental properties, they are usually limited to tenants on benefits or over 60 whilst being complex to apply for. Whilst these grants may help those most in need of warmer homes, they will barely make a dent in the carbon footprint of private rental properties overall.

Buy-to-let isn’t going away, so the government needs to get serious about addressing this major part of our housing stock. Without clear incentives for landlords, either in the form of taxation related to the energy efficiency of their properties or through bearing the burden of energy costs themselves, I’m afraid I don’t see private rental properties getting any greener.