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Coffee House

Rents are falling, in real terms. So why does Ed Miliband want state intervention?

2 May 2014

2:59 PM

2 May 2014

2:59 PM

In recent weeks, I have found myself defending Ed Miliband as much as attacking him. I do believe that his election would be a calamity for Britain, but that doesn’t mean I think he is an idiot pursuing a stupid strategy. On the contrary, I think what he is doing is bold, coherent, radical and chimes with the emerging populist mood. I also think that it is working – as things stand, he is on course to become the next Prime Minister. I look at this in my Telegraph column today.

The rent control policy announced yesterday embodies this bold populism. Britain has a problem with buying houses – one created, in my view, by government policy to keep interest rates nailed to the floor during an economic boom. But low rates also make favourable terms for buy-to-let, and rents have been falling in real terms even in London. The below graph gives some idea of how things have been getting better:-

[Alt-Text]


Bizarrely, Miliband has audaciously claimed there is a massive rental problem that can only be resolved by state intervention. So he will tell landlords to offer three-year contracts, and put a cap on annual rent increases. He’s inviting voters to blame their troubles on rapacious capitalists, and posing as the bold avenger. Give him a pint of beer and he’d be Nigel Farage. I don’t mean this as an insult – all parties are under threat from UKIP. It’s a good thing that in our democracy they are forced to respond. Miliband is doing so by embracing leftist populism. Farage has shown you can win back abstainers, if you persuade them you have an agenda to really shake things up. Miliband is showing such voters that he would do some shaking too. And I, for one, believe him.

Miliband will be calculating that the populist wave sweeping Europe may help him. This wave will help ‘give me my country back’ parties next month: the True Finns, Geert Wilders, Ukip in England and the SNP in Scotland. If you shake your fist at the establishment, there are votes in it. And does this win elections? Ask Bill de Blasio, the Mayor of New York, or French President François Hollande.

Right now, Ed Miliband is wondering if a leftwing populist agenda could work in a national election, and so is Elizabeth Warren in the US. Warren, who has just released a new book, will probably invite her party–the Democrats–to reject Clintonism and nominate her as their presidential candidate.

I have spent the last 15 years bemoaning the absence of ideas in politics – well, I can’t complain about Ed Miliband. He’s able to draw on a vast knowledge of political theory, and his idealism certainly contrasts with cynical Tory policies like the ‘pensioner bonds’. Ideas are back in British politics.

It just so happens that Miliband’s ideas were tested to destruction in the 1970s, and they won’t work any better now. I’m not sure you can get a worse policy then rent control – it makes tenants into supplicants, creates massive shortages and long waiting lists. I have friends in Stockholm who have been on this waiting list since the day they turned 18, and still have no flat. No wonder that it was a Swedish economist, Assar Lindbeck, who said that

‘rent control appears to be the most efficient technique presently known to destroy a city – except for bombing’.

But Miliband’s 70s revival policy is not an anachronism. Quite the reverse. The crash has brought this back in vogue – for a minority. But Miliband just needs a minority, 35 per cent of the vote, to triumph. He will calculate that radical policies like rent control will appeal as a break form politics as usual. He might be right.

Subscribe to The Spectator today for a quality of argument not found in any other publication. Get more Spectator for less – just £12 for 12 issues.


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