Friday, 28 August 2015

Rent controls and high pay

Although politicians are calling for "New York-style controls on landlords" because the rents in London are so high, it appears that they are again missing the point.
Why recommend rent controls, which restrict more "in-contract rent increases and lease conditions", when rents are already too high, having risen, in the case of one-bedroom flats, for example, in Greater London, "by an average of 22% in the last five years"? Rents need to be reduced. How can paying approximately 50-75% of take-home pay on rent benefit anyone but the greedy landlord? It certainly does nothing for the economy, especially when, as Aditya Chakrabortty reported last year, one in three of rented properties in the private sector is officially classed as "non-decent", whilst on in five present "a health or safety risk" to the occupier? The government`s right to buy scheme has been exploited by landlords wanting to add to their property portfolios, whilst the Tory promise to replace every home sold is clearly a nonsense; of the £1.54bn generated through the scheme since discounts increased, just £558m has been spent on replacement. 
 What could be the solution is the setting-up of an Ofsted-type inspectorate, which could classify all rented property, including student houses and flats, into bands, and set a maximum rent based on the condition and size of the property, and the area in which it is situated, for each band. Politicians with such a proposal might get attacked for their "Venezuela-style rent controls" from the Tories, but they might also get the gratitude of millions! 

With the information from the High Pay Centre revealing that "renumeration for bosses in FTSE100 companies" is up to "184 times the UK median earnings", your editorial did well to compare this to the situation in Germany (Moderates must confront excess, not cede the issue to others,18/08/15). There, the "equivalent ratio " is less than 100, largely as a result of the "consultative capitalism" which was imposed on the Federal Republic by the west in 1951. The system of co-determination, with workers` representatives sitting on the boards of large companies, and having a say in the pay of all employees, has clearly much to recommend it.
       If introduced in this country, it could also have a positive effect on productivity. Whilst lack of investment in new plant and machinery is frequently identified as being important in the recent "collapse in productivity growth", is not the method of paying bosses and managers hugely significant? Not only are they paid by an over-generous monthly salary cheque, but with "supposedly performance-related" company shares. If CEOs can only be motivated by the prospect of their share options rising in value, their focus will inevitably be placed on the firm`s profits in the short-term so that their renumeration increases. Productivity is not a priority.
     Is it any wonder that the neo-liberal "third way" has "become a more difficult sell", and that New Labour`s idea of being "intensely relaxed" about the filthy rich has led to the situation where Corbyn is a shoo-in for the leadership?

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