Britain - Brown's fuel and housing packages - a cynical PR exercise

Sept/Oct 2008

Following Labour's dramatic losses in the Crewe and Glasgow East by-elections, the so-called "anti-Brown" faction was smelling blood and flexing its muscles on the eve of this year's Labour party annual conference.

Not that Charles Clarke, Patricia Hewitt, and other critiques of his government, whether former "Blairites" or non-aligned backbenchers, have any alternative policies to offer, of course, except more of the same. But what better opportunity is there for them to take their distance from an unpopular government in preparation for the next general election? And what better time is there to raise their profiles and advertise themselves, in preparation for the changes which will take place in the party's top spheres, if and when Brown is ousted, whether now or, more probably, after the general election?

In the meantime, amidst the vocal chaos thus created by his opponents within his own party, Brown has to put on a brave face, while trying to regain some of the electoral ground lost by his party since he came into office. Hence the much-advertised "help packages for households" launched at the beginning of September, officially to counter the impact of the housing crisis and fuel price hikes, particularly on the poorest families.

However, who really stands to gain from these packages is quite another question. Will they help Brown to inch up in opinion polls? This remains to be seen. But it is not hard to see that they will be of little help, if any at all, for the households which they are supposed to be aimed at.

Fuel gimmicks

Brown had the nerve to boast about the fact that his "fuel package" is not "just a one-off" change. But, this is precisely the problem: it will hardly resolve the predicament faced today, by low-income households confronted with always increasing fuel bills!

Because most of this package is actually limited to promoting better house insulation and more efficient heating and providing some financial help to households to make such transformations to their homes. But whether the poorest households, those who live on income support or pension credit, will be able to pay their share of such expensive refurbishment is unlikely - and the government knows this!

Not to mention the fact that, even if the beneficiaries of this "help" can afford the expense, it will take time to get their local council to allocate the funds, commission the work and for workers to do the work itself. If it gets done by next summer, these households will have to consider themselves lucky! And even then, their consumption of electricity and gas will only be marginally reduced by these transformations, but not to the extent of cutting their fuel bills very significantly. In the meantime, however, they will have had to pay their full bills to the energy sharks - that is, if they can find the money!

True, there are measures in Brown's package supposedly designed to help the poorest to pay their bills. One measure is the commitment allegedly made by the energy companies to freeze the bills of 500,000 among the poorest households - but only for the rest of the year. Who will choose the beneficiaries? The companies. On which criteria? It will be up to them to judge! Who will check that this freeze is respected? No-one, since it is a voluntary code agreed by the utilities. And what will happen come next January? The freeze will end (on the bills, not the weather) but these households will not be any better off. So how will they pay their full bills?

Even more shocking in its cynicism, is the measure concerning "cold weather payments". Brown brags about the "3-fold increase" of these payments, from £8.50 to £25 per week, to pensioners, disabled people and unemployed families with children under five. Except that they only kick in provided temperatures drop below zero for seven consecutive days. But how often does it happen in the South? In London, this is virtually unheard of, yet according to charities for the elderly pensioners still die every year from hypothermia - in London - because they have no money to feed their meters. So, how is such a measure going to help those who cannot afford to pay their fuel bills?

In fact, this fuel "aid package" is so derisory that even the head of the normally very respectful National Housing Federation (which represents housing associations) could not refrain from observing in a BBC interview that "ultimately many fat cat energy bosses will be able to sleep easy tonight."

Indeed, more than anything else, this package means that the idea of a windfall tax on the many billions of profits made by the energy companies over the years - an idea which had been floated by Labour backbenchers and even supported by some of Brown's junior ministers, in an attempt to defuse the voters' growing frustration over the greed of the energy fat cats - has been shelved once and for all.

Instead, the energy utilities are supposed to fund part of the £910m cost of this package out of their profits. But will they even do that? Assuming that they meet their pledge - but there is no statutory obligation on them to do so - what will prevent them from passing on this "additional" cost to customers? Brown "urged them" not to do so. But did they comply when, earlier this year, Brown "urged them" to cut their "social tariffs" to their poorest customers? No, they embarked on a new round of increases during the summer! This time round, the representative of the 6 biggest utilities did not mince this words: he was quoted by the BBC saying that the utilities "may not be able to avoid passing on the cost to customers". Brown cannot say that he has not been warned!

According to business secretary John Hutton, the utilities' profits should be left untouched so as to guarantee future investment. Except that, according to a report released by the Unite trade union at the TUC conference, their investments have remained flat for years, despite increasing their profits more than 6-fold since 2003! Last year alone they increased dividends to shareholders by 19% - almost twice the total cost of Brown's package - still leaving them with £3bn profits to play with! And the odds are that they will have even more to play by the end of the year, thanks to the average 35% increase they have levied on consumers since last January.

Yes the energy fat cats can "sleep easy". Not only do they have nothing to fear from Brown's measures, but they can rely on this government to respect their right to make profits on the back of the poor, regardless of the resulting hardship - and casualties, among the most deprived and vulnerable.

Ultimately, of course, this is a reminder of the fact that there is no point in expecting the state of the capitalist class to contain the greed of its masters. The only reliable solution for workers to protect themselves against the energy sharks' profiteering is to ensure that wages, pensions and benefits increase, not in line with the massaged inflation index churned out by the state, but in line with the real cost of food and bills that working class families have to pay.

No protection against repossessions

Brown's "housing package" is similar in every respect to his "fuel package" - cynical, tokenistic and, ultimately, designed with the protection of capitalist profit in mind.

When ministers claim that this package will help households threatened with repossession, this is a gross misrepresentation, not to say an outright lie.

One of this package's measures provides that instead of being forced into homelessness by the banks, these households will be able to get their debt paid by a Housing Association (or, most likely, a profit-making "registered social landlord") which will take over ownership of their homes and keep them as tenants.

At first, although not ideal, this may sound better than losing one's roof - although the dubious practices of some "social landlords" may mean that the rent turns out to increase quickly and becomes as expensive as the previously unaffordable mortgage repayments, if not more.

But even assuming that the rent remains affordable, this measure still comes with some small print attached. The total budget allocated to fund the social landlords' intervention is £200m, which, according to ministers, is supposed to bail out 6,000 households threatened with repossession. But this is assuming an average debt of just over £30,000, which is peanuts compared to the size of a mortgage for even the most modest home, these days. In other words the odds are that the number of households which will actually be rescued by this scheme will be much lower - possibly no more than 2 or 3,000, if even that!

Yet, official figures show that the number of repossessions in the first half of this year was just under 19,000 (a 48% increase over the first half of 2007!). The lenders' organisation, the Council of Mortgage Lenders (CML), estimates that this total will reach 45,000 at least by the end of this year.

However, this estimate only takes into account financial factors, such as the rise in interest rates experienced by many borrowers (whether those with variable rate mortgages or those coming out of an initial cheap-rate period), the rising number of households which find themselves in negative equity (i.e. which owe more money on their mortgage than their house is worth) and the virtual impossibility for low-income households to take out a personal loan from a bank.

The CML does not take into account other important factors such as, for instance, the rise in unemployment, nor the shrinking standard of living of working class families due to price and household bill inflation. In other words, the odds are that the estimate by the CML of 45,000 repossessions under-estimates the extent of the problem.

This is all the more likely considering the number of households which have been in arrears for more than 3 months. This number has increased by 20% since the end of 2007 - reaching 300,000 today - according to figures recently released by the Financial Services Authority. Moreover, due to the banks and mortgage lenders' unwillingness to offer re-mortgages at a time when house prices are falling at a rate as fast as that of the housing slump of the early 1990s, the proportion of borrowers in arrears who will end up facing repossession at some point is bound to increase.

Given this situation, the funding set aside by the government against repossessions is quite simply a pitiful joke! And what makes it even more hypocritical is that nearly 20% of all repossessions carried out in the first 6 months of this year, were against Northern Rock's borrowers, despite the fact that this bank is now under government management!

As to the jobless, they are supposed to be especially grateful to Brown due to another of his package's measures, which will bring forward payments for their mortgages (of course, only the interest, not the debt itself!) to 13 weeks after becoming unemployed, instead of today's 39 weeks. However, this will only come into force next April - which gives plenty of time for the rising number of workers thrown out of their job due to the recession to be thrown out of their homes as well! Moreover, in a cynical twist, the government used the opportunity to slap a limit on the duration of these payments - no more than 2 years - which did not exist before. Apparently it considers that the longer-term unemployed do not "deserve" to keep their homes!

A package for business too

On the day following the announcement of Brown's housing package, the share prices of house-building companies went up sharply on the stock market, by as much as 10% for some.

Obviously, City operators believe that this package will boost the profits of construction companies! And they are probably right.

As some commentators pointed out, the increase in the stamp duty threshold to £175,000 - which is part of the package - will allow property developers to increase the prices of new houses by the amount saved on stamp duty by buyers.

But there are other measures in this package which can only give business cause to rejoice without resolving the problems faced by hard-up households. Such is the case of the new shared-ownership scheme launched under the "HomeBuy Direct" label. It allows buyers to borrow up to 30% of the home's value from the government to use as a deposit, and pay no interest on it for 5 years. But this is specifically tailored to boost property developers' business. Indeed, these loans will only be available to buy newly-constructed homes. And given the price of new properties, even after the recent price fall, this will definitely do nothing to help working class families to find a home!

Much the same applies to the £400m announced for what the government calls "affordable houses". In fact, this is not new money, but spending which had been previously planned for later and has now been brought forward. Like the funds previously allocated to such programmes by the government, these are, in fact, subsidies to construction companies and developers, which mainly produce homes for better-off professionals, rather than the kind of homes which are urgently needed - i.e. decent homes that low-paid working class households can afford.

Today, 1.9 million households are stuck on local council housing lists, waiting for a home, and the lists can only grow faster due to the credit crisis. Yet, this government's only response is to increase its handouts to the profit sharks! So much for Brown's self-proclaimed "generosity" to the poorest households!

Even without taking into account the financial tricks involved in this package nor the fact that a large part of it will only benefit a handful of companies, this alleged "help for hard-up households" amounts to just about £1 billion. This is a ludicrous sum, especially when it is compared to Darling's £3 billion additional funding to Northern Rock (openly designed to return this bank as quickly as possible into the hands of private banking sharks) and even more so when it is compared to the £200 billion that British banks have been able to borrow from public coffers so far, as part of Darling's bail out of the banking system!

If the state can lavish such enormous amounts on the banks, it surely could find the resources needed for the emergency measures which would be required today, in order to really help millions of working class families out of the present housing crisis. And what would be needed is not a sprinkling of state subsidies to housing associations, house builders and property developers, but a vast programme to build hundreds of thousands of decent homes for rent within the coming months - but a programme organised by the state recruiting directly the building workers and engineers required to do the job (and it so happens that due to the recent large-scale redundancies in the construction industry, thousands of such workers are without a job today), without wasting public money on shareholders!