Guido\’s got a little campaign going.
Booze is vastly cheaper in Parliament and we should stop there being the subsidy which makes it so.
Well, yes, quite. Last number I saw (a few years back) was that the subsidy was £5 million.
So, if the subsidy disappears, if prices rise so that there is no direct taxpayer subsidy, is that the end of it?
Well, no, actually it isn\’t. For something closely related to opportunity costs then raises it\’s ugly head.
Even if there is no direct, out of the taxpayer\’s pocket, subsidy there will still be an indirect one.
Firstly, Parliament is a Royal Palace. Thus the bars in there do not pay business rates.
From numbers I glanced at a few years ago (no matter why) a pub on the Vauxhall Bridge Road, not that far away, would be paying £40,000 to £50,000 a year in such rates.
Secondly, I am absolutely certain that such bars are not paying a full commercial rent. I don\’t know whether they\’re paying any rent at all of course but even if they are it\’ll not be a full commercial one. For that pub just down the road that would be another £40,000 to £50,000 a year.
So, even if there\’s no direct, out of pocket, subsidy, there would still be the money lost by those bars not paying the same costs into the Treasury that a fully commercial operation would have to. And thus, even without a direct subsidy, booze would still be cheaper.
Now, with booze in Parliament (and it\’s not as if there aren\’t enough people willing to pay to pour booze into the people who work there) it\’s all a bit trivial. But it illustrates a much larger problem.
Think, for example, of those who say that Housing Benefit it very expensive (which it is, at £21 billion a year, £700 on average per taxpayer) and thus that the solution is more social housing. It, perhaps, does cost less in cash outlay to build housing on land the government already owns, or to insist that developers put some amount of social housing into a new development. OK, we\’ll grant that then, that cash outlays are lower.
However, that doesn\’t make the subsidy go away, it only disguises it. As an example, the difference between market rent and social rent for a three bed house in Westminster (used only because I happen to know this number) is around £20,000 a year. If the State builds a house and lets it out at a social rent it is therefore foregoing that £20,000 a year. It\’s foregoing £400 or so a week actually: which is, as any fule kno, about the amount that Housing Benefit is to be limited to.
No taxpayer has had to stump up that cash, this is true. But they have just as certainly had to forego either what could have been bought with that money or the lessening of the depredations upon their wallets that charging the full rent could have produced.
Imagine, just as an example, that we replaced all HB with social housing. We\’ll ignore, just in this model (for that\’s what models do, see, they ignore things in order to make clear the salient points under discussion) that private rents are currently inflated by the existence of HB and simply say that it doesn\’t really matter which way around we do it.
We can either subsidise private rents by £21 billion via HB or we can subsidise social rents by £21 billion by not charging market rents. Either way, it\’s still £700 per taxpayer: yes, in one people have to cough up, in the other they\’re just made poorer without realising it but the economic cost is the same. As are the people who have to carry that economic cost.
It might be true that social housing is in some manner \”better\” than subsidising private housing. I don\’t happen to think so but you might, fair enough. But I have a very strong feeling that much of the support for social housing comes from some weird belief that it is either free or cheaper. Which it simply ain\’t.