The right and wrong form of government intervention



Classical liberals, and many Conservatives, will tend to take a dim view of government intervention, but should they be equally dismissive of all government action?

Take a couple of examples from housing policy. First, social housing is funded in part by government subsidy and is allocated to those households that are considered vulnerable and in greatest need. However, because of their vulnerability they are deemed to need continuous support to maintain their tenancy. And of course, they are likely to be out of work and so are eligible for Housing Benefit to fund their rent. So the majority of social housing tenants receive a subsidised tenancy and a further subsidy to pay their rent, all backed up by a support system of housing professionals. So, even though their housing need is fulfilled by the granting of a tenancy, these households remain dependent on continuous support.

Second, the Right to Buy allowed social tenants to purchase their existing dwelling at a discount that depended on their length of tenancy. After a number of years they may sell the dwelling and keep any capital gain. In many cases this provided a considerable financial benefit to households. However, the key point about Right-to-Buy discounts is that this subsidy is a one-off: once they receive it households can no longer claim any state support for their housing costs and are expected to maintain the dwelling themselves. The result in this case is independence and heightened personal responsibility. They are given initial support, but after that they sink or swim on their own.

I would argue that the Right to Buy was a thoroughly benign form of state intervention that created greater freedom and independence rather than tying households permanently to state support. Perhaps we should see this as the model for how a newly elected Conservative government should act: they should seek to develop forms of support that make a permanent difference through a specific limited intervention.

Peter King’s new book, Housing Policy Transformed: The Right to Buy and The Desire to Own, will be launched at the IEA tonight. Click here for details of the event.