England will foot the bill for the SNP’s trail of destruction
Two plus two makes four. The earth is round. And Liverpool will struggle to find another manager as good as Jürgen Klopp. There are a few facts that are so obvious they can be regarded as impossible to contest.
We could add one more to the list. As anyone with even a passing acquaintance with economics could tell you, rent controls have been a catastrophe every time they have been tried. The trouble is, the SNP-Green alliance ruling Scotland hasn’t been paying attention.
The administration was this week forced to admit that trying to legislate how much landlords can charge has spectacularly backfired. From stopping North Sea oil, to huge increases in tax rates, the Nationalists are driving the Scottish economy into the ground. The only real question left is how much longer the rest of the UK has to tolerate that.
It was always a crazy policy. A rational person would have worked out that refusing to build any new homes, combined with very high national levels of net immigration and punitive tax rises driving landlords out of the market might just lead to a mismatch of supply and demand, sending prices spiraling upwards. The solution would then appear to be encouraging supply.
Unfortunately, the SNP and its Green allies didn’t quite manage to think things through that far, deciding instead that greedy property owners were to blame. All that was required was for a ‘caring’ government to legislate to control rent, and, hey presto, the problem would be fixed.
Except it hasn’t turned out quite like that. Instead, supply has collapsed, there are now “housing emergencies” in Glasgow, Edinburgh and Argyll and Bute, rents in Scotland have increased by 12.9pc over the last year, and the average cost of a rental property has now hit £1,097 a month. The humiliated housing minister Patrick Harvie has been forced to extend support to try and sort out the mess.
There should not have been any surprise about that. As it happens, rent controls are one of the best studied subjects in economics. Indeed, the textbooks often use them as a key example of why it is better for governments to resist the temptation to intervene, and leave the market to set the price.
The Nobel prize-winner Milton Friedman wrote perhaps the best of the classic exhortations on the subject way back in 1946, and ever since then real world experiments in Berlin, in Ireland, and in countless other cities have proved time and again that they don’t work.
Indeed, by driving landlords out of the market, and creating lots of tenants who can only survive with controlled rents, while encouraging people to hang onto properties with “controlled prices”, they only make the crisis worse. And perhaps worst of all, since it takes a while to get property back into the market, it is many years before the damage is undone. Even if the policy is scrapped, Scotland is likely to have a housing crisis for many years to come.
Of course, this is nothing new for Scottish voters. They’ve been here before. Time and again, they’ve watched as the SNP and the Greens simply ignore basic economics.
The duo have thrown their weight behind a complete ban on new licences for North Sea gas and oil, and cheered on windfall taxes. The result is that one of Scotland’s most significant industries is in steep decline, with production now falling at the fastest rate in a decade.
Output in other mature areas such as Texas and Alberta is hitting all time highs. When you over-tax something, production goes down. Who knew?
Speaking of which, the top rate of tax in Scotland is set to rise to 48pc in April. If anyone wants to spend a few nano-seconds on the web, you can find plenty of studies from the US and Switzerland – which have state and canton income taxes – that make it clear what happens when there are different tax rates for parts of the same country. But I will save you the trouble: people move from the higher tax to the lower tax part of the country.
There are already reports that even civil servants are moving south of the border, while Scottish businesses are being forced to offer higher wages to compensate (which means of course that some of them will go bust). Within a year, the Scottish government will have “discovered” that the policy doesn’t work.
The competence of the SNP is not really a left-right issue anymore. It is a sanity test. The devolved Scottish administration has been captured by a virtue-signaling clique that refuses to pay any attention to all the available economic evidence. There are already signs that Scotland’s once prosperous economy is doing worse even than the miserable performance of the rest of the UK. Its budget deficit is a whopping 9 per cent of output, rendering the country dependent on subsidies from the rest of the UK.
Only this month, it has been forced to cut the number of “free” places at university for Scottish students to save money. Even in Scotland, it turns out that nothing is really “free” – which, come to think of it, is another thing you can learn from an economics textbook.
The real question is surely this. For how much longer can the rest of Britain be forced to pay for an administration that ignores all the evidence, and pushes ahead with policies that have failed time and time again when they have been tried elsewhere?
And when will we work out that the experiment in devolution has failed?
