Personal views from University of Bath researchers on the news of the day

Polluted dwarf star could hold the key to the origin of water on Earth


📥  Heath Science & Technology, The Conversation

Professor Carole Mundell is Head of Astrophysics in the University's Department of Physics.

Astronomers have discovered a white dwarf star with a polluted atmosphere that may shed light on where the water on Earth comes from and how much water there is outside our own solar system.

A major question in planetary science is whether the water on Earth was already present in the primordial material that formed our planet or whether it was planted here by collisions with bodies such as asteroids, comets and proto-planets.



The window of free speech has now been firmly shut

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📥  Public Policy

Further to announcements this morning that a new counter-extremism bill will make up part of the upcoming Queen’s speech on 27 May, Professor Bill Durodié from our Department of Politics, Languages & International Studies, who specialises in radicalisation and the politics of fear, has given his reactions.

Speaking from Bath, Professor Durodié said:

“The announcement by Prime Minister David Cameron today that a new counter-extremism Bill is to form part of the Queen's Speech on 27 May to provide authorities with new powers to tackle terrorism confirms that, as early as the first week of his new government, all pretence at inspiring and engaging has been set aside for legislating and coercing.

“When Home Secretary Theresa May told the Today programme that she wants to "bring people together to ensure we are living together as one society" she omitted to say that this is to be made mandatory, with severe penalties for those who will not comply or live up to what the authorities define as British values.

“The window for free speech has now been firmly shut just a few months after so many political leaders walked in supposed solidarity for murdered cartoonists in France. Observing the spirit of liberty unleashed 200 years ago the very British poet Wordsworth exclaimed "Bliss was it in that dawn to be alive, but to be young was very heaven!"

“Today, we face the twilight of freedom, and to be young is to be cowed and scrutinised, as the government implicitly reveals that it has given up on trying to understand the reasons why growing numbers of youths are disengaged from society. Interception and incarceration are their vision of the future for Britain."

Election result highlights enduring brand truths

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📥  Election 2015

It’s been a busy 24 hours for the political parties as the Great British public took to the polling stations to decide who will run the country for the next five years.

With David Cameron’s Conservatives winning the 2015 General Election with a majority and Mr Cameron subsequently retaining his position as Prime Minister for another term, Ed Miliband, Nick Clegg and Nigel Farage have resigned as leaders of the Labour Party, Liberal Democrats and UK Independence party, respectively.

Professor Michael Beverland from the Centre for Research in Advertising and Consumption in the University’s School of Management examines where the different political parties got their branding right, and perhaps more significantly, got it wrong.



Live Election Blog - #GE2015

📥  Election 2015

Throughout the night as the results start to emerge, we'll bring you the latest analysis and comment on what's happening across the country. With resident British elections expert, Dr David Cutts, we'll explore what's happening in different political battlegrounds and dissect the results from a number of marginal seats.

From Sheffield Hallam to South Thanet and local seats around the South West including here in Bath, we'll look at the performances of different political parties and consider (if the polls are correct) the prospects for a hung parliament.

For media wishing to speak to Dr Cutts please telephone Andy Dunne on 07966 341431 or email a.j.dunne@bath.ac.uk. ISDN interviews available.


6.27 On air with BBC Bristol
David Cutts has hotfooted it from Bath to Bristol to take part in their Good Morning Breakfast programme to further examine the results, in particular those here in the West. Listen in from 6 - 9am where he'll be talking about all the latest news, including the Lib Dems losing one of their key South West seats, Paddy Ashdown's former seat, Yeovil. From 9am, he'll be on the BBC Points West Election Special too. We'll blog again later in the day...

5.40 Distinct lack of female representation in new Parliament

"For the Lib Dems it appears that there will be no women MPs. Labour's inability to win seats from the Conservatives means there's going to be little change in the number of women MPs in Parliament - even with the influx of successful SNP women in Scotland."

- Dr David Cutts

4.40 Conservatives take Bath - worst results for Lib Dems 'for a generation'.

“Given the national picture the local result here in Bath is not a surprise, but it’s a big upset for the party and reflects a terrible night across the country. Their South West heartland is crumbling all around.

“The Bath seat will mirror others in the South West. The Conservative vote is similar to 2010, but the Lib Dem vote has collapsed with centre left voters returning to Labour or the Green Party.

“Overall this is a disastrous night for the Lib Dems. This looks set to be their worst result for a generation.”

- Dr David Cutts

Election Result - Bath

04.32 Vince is gone (and Ed, Lynne and Simon)

"With the likes of Ed Davey, Lynne Featherstone, Simon Hughes and now Vince Cable all falling for the Lib Dems, there's little evidence that the personal incumbency factor is enabling local parties to buck the national trend - as they have in the past."

- Dr David Cutts

03.01 'Seismic losses' for Labour in Scotland, England and Wales

“We’re seeing a complete annihilation for Labour in Scotland to the SNP. Labour’s collapse in Scotland is unprecedented in modern times. Gordon Brown’s former seat – Kirkcaldy & Cowdenbeath – was one of their safest seats. It is a seismic loss.

“In England and Wales it now seems there’s barely any swing from Conservative to Labour. The Conservative’s hold in Swindon South is another illustration of Labour’s failure to convert a top target seat.

“For pollsters and election forecasters this is the darkest of dark night. They didn’t see this coming!”

- Dr David Cutts

02.13 'Tactical unwind' for the Lib Dems in South West stronghold

“As the results emerge it looks like Labour might have actually performed worse than the initial exit poll suggested. This looks bad for Labour in Conservative – Labour marginals.

“Here in the South West and for the Lib Dems in particular there has clearly been a ‘tactical unwind’ with Labour and Green supporters voting for their party instead of voting tactically for the Lib Dems to keep the Conservatives out.

“The South West is the Lib Dem strong hold but there might be big shocks ahead. Look out for David Laws’ seat in Yeovil and Steve Webb's in Thornbury and Yate. Both are under threat.”

- Dr David Cutts

01.35 Periscoping on the election

Dave Cutts is live on periscope right now with the BBC Politics and Ali Vowles looking ahead to the local seats here in the South West. Shocking results coming through.

Periscope - Election

23.53 Bleak prospects for Lib Dem big hitters and women MPs in next Parliament

“If the exit poll is correct, big hitters in the Lib Dems like Charles Kennedy, Danny Alexander, Ed Davey, Steve Webb, Norman Baker, Simon Hughes and Jo Swinson all could lose their seats tonight.

“On this basis of this there would be NO women Lib Dem MPs and, overall, certainly no great leaps in the number of women MPs in Parliament.”

- Dr David Cutts

22.10 'Meltdown' for Lib Dems and 'total disaster' for Labour
Dr David Cutts has arrived and has given his first reactions to tonight's BBC exit poll. He said:

“At this stage we have to exercise extreme caution with these results, but if these are correct the Conservatives have enough seats to go into coalition with the Liberal Democrats.

“This points to a complete meltdown for Lib Dems and a total disaster for Labour in seats where they are fighting the Conservatives. But for the Lib Dems a lot will depend on local circumstances and the popularity of the incumbent.

“On the basis of this exit poll around fifteen to twenty seats will be won by Labour from the Conservatives in these key battleground since 2010.”

David Cutts

21.40 All eyes on the election
We have BBC, Sky, ITN and a whole host of journalists here at the University tonight to cover the election. Throughout the campaign our researchers have appeared in international, national and regional media commenting on election developments. Read about it all here.

Media - Election

20.20 Who will win the race?
With election counting soon to take place inside, our athletes are outside the Sports Training Village being put through their paces tonight. Politically who will win the big race and how might this pan out locally here in the South West? Watch David Cutts' piece on the power of local campaigning and read his HuffingtonPost article on why the performance of the Lib Dems might be central to everything.

Running Track

18:47 - Reaching out to the Bath Studio School
Ahead of the result, Professor Charlie Lees headed to nearby Bath Studio School to talk to students on camera about the likely outcomes and why this election is important. Read Charlie's 'step-by-step guide to forming a coalition' and watch the video.

Charlie Lees - Bath Studio School

18:05 - What's at stake?
A week before the election researchers from our Department of Politics, Languages & International Studies and Department of Economics presented an 'Ignite: Election Special' event on the key issues at stake in this election. Watch it again.

15:13 - Engaged students
Throughout the day our students have been voting here on campus at the University polling station. Read Ben Bowman's take on the issues associated with young people's engagement in politics and the democratic process.

Students Polling Booth

14:00 - Stage set
Set up complete for the count and declaration for the hotly contested Bath seat which is taking place here at the University.

Bath General Election Count


Our experts in the media

📥  Uncategorized

Throughout the course of the election campaign, experts from the University of Bath have been called upon by the local, national and international media to give their views on what's happening.

Here's a snapshot of our election coverage to date:


Cameron, Heading for Win, Faces Tough Challenges Ahead - David Cutts for the Wall Street Journal on Election Night (8 May)

Nationalism on the march across Europe - Aurelien Mondon for CNN (30 April)

Greens in Final Push to Double UK Commons Seats in Bristol - David Cutts for Bloomberg (28 April)


Why the performance of the Lib Dems could determine the General Election - Huffington Post (5 May)

What the Lib Dems need to do in the South West - David Cutts on Radio 4's Today Programme from 1 hour, 20 minutes (1 May)

The rise and rise of 'Surging Sturgeon' - Charlie Lees for MailOnline (27 April)

General Election 2015: Decoding the manifesto minutiae - Michael Beverland quoted on the BBC Election pages (21 April)

TV Election Debate - Michael Beverland was interviewed for BBC 5Live Radio from 2 hours, 6 minutes (15 April)

Who do you trust - business leaders or economists? - Chris Martin picked up by Robert Peston for BBC (1 April)

Who will be in seventh heaven? - Mike Beverland assesses the strengths and weaknesses of candidates ahead of the 7-way TV debate (1 April)

'Are you OK Ed? Are you all right?' - Michael Beverland quoted in MailOnline (27 March)


Prospects for an EU Referendum following the General Election - Nick Startin for BBC Somerset (12 May)

The crisis of democracy - Aurelien Mondon discusses turnout and engagement in this year's General Election with BBC Bristol (9 May)

What happened in the West - David Cutts used throughout BBC 1 Points West's Election Special (8 May)

Dissecting the results in Bristol and surrounds - David Cutts for BBC Bristol's Election Special (8 May)

Analysis on North East Somerset seat - David Cutts in the Bristol Post (8 May)

Bad night for Labour - David Cutts in the Bath Chronicle (8 May)

Setting the scene for the General Election - Nick Startin on BBC Wiltshire (6 May)

Latest Ashcroft polls and the likely impact in the South West - David Cutts for BBC Points West and BBC Bristol (both 27 April)

Who will come out top in the debate tonight - Mike Beverland quoted in the Bath Chronicle

The likely election outcomes - Charlie Lees for BBC Gloucestershire looking ahead to 7 May (30 March)

The Conversation

European reactions to the UK election result - Aurelien Mondon (11 May)

Experts respond to exit poll - Fran Amery, Charlie Lees and David Cutts (7 May)

What does the next government hold for higher education - Roger King (6 May)

Want to form a coalition? Follow this simple step-by-step guide - Charlie Lees (6 May)

The next government will need to heed housing, if we’re to avoid another financial crisis - Bruce Morley (30 April)

Hate the players, love the game: why young people aren’t voting - Ben Bowman (30 April)

Manifesto Check: UKIP risks it all on a Brexit - Sue Milner (24 April)

A political party is threatening the union – and it’s not the SNP - David Moon (20 April)

Manifesto Check: Plaid Cymru’s top policies - Chris Martin (18 April)

Manifesto Check: UKIP’s top policies - Sue Milner (17 April)

Manifesto Check: the Conservatives take a combative approach to the EU - Sue Milner (16 April)

Manifesto Check: Tory defence policy talks tough but cuts deep - Simon Smith (16 April)

State of the Nation: welfare shifts towards the working poor - Paul Gregg (16 April)

Manifesto Check: the Conservatives' top policies - Sue Milner (14 April)

Manifesto Check: Labour leaves the door open to downscale Trident - Simon Smith (13 April)

Manifesto Check: Plaid Cymru rejects austerity, but their policies could cost taxpayers - Chris Martin (2 April)

Fact Check: will renewing Trident cost £100 billion? - Simon Smith (19 March)

Flat whites and fixies won’t save the economy, but there is some value in the creative pivot - John Hudson (17 March)

Cover story: Lib Dem manifesto tries to offer something for everyone - Steve Wharton (16 February)


What the party manifestos really tell us

📥  Election 2015

The outcome of the 2015 General Election may surprise us all but the manifestos offered up by the political parties have by-and-large failed to do so. Indeed, the scope of debate in the 2015 General Election campaign has been quite narrow and parochial.

The Conservatives and Labour Party have both run so-called ‘small target’ campaigns designed to shore up their core support whilst avoiding any distinctive but potentially divisive policies that would deter floating voters.

The Liberal Democrats have run a ‘safety first’ campaign that appeals to centrist voters scared of (real or apparent) ‘lurches’ to the left or the right, but at the same time they have taken care not to include any substantive barriers to co-operation with either the Conservatives or Labour after the election.

In addition, there has been very little serious and informed debate about immigration or about the environment, even from UKIP or the Greens.



Want to form a coalition? Follow this simple step-by-step guide

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📥  Election 2015, The Conversation

Professor Charlie Lees is Head of Department for our Department of Politics, Languages & International Studies

Dear Dave, Nick, Ed, Nigel, Natalie, Nicola, Leanne, Peter, Alasdair, David, and Mike (Gerry and Martin, you can ignore all of this),

The outcome of the 2015 General Election may surprise us all. But what’s clear is that none of you will be able to govern alone. The coalition seemed like a one-off in 2010, but now it looks like the new normal of UK politics.

This is frustrating for you, Dave and you, Ed, but it does provide new opportunities for the others. You may get the chance to be in government or at least exercise influence over it.

In order to make sure you understand what the stakes are in this game, and how you can best play the hand dealt you by the great British public on May 7, I’ve put together a bluffer’s guide for you.

Rule 1: draw red lines in pencil

Nick knows what happens when you campaign with a big flagship policy only to have to go back on your word after the election. But by the same token, you should never completely rule yourself out of making a political deal with your opponents. You never know when you will need to talk to that erstwhile implacable political foe, as Ed may find out if Nicola holds the balance of power.

Rule 2: take your time

There will be a lot pressure from the civil service, media, and financial markets to come to a quick deal after the election. But there’s no need to rush.

As far as Europe goes, the time it usually takes for a new government to form in the UK is uniquely short. The average time for European countries is about a month and, in some countries (see the Netherlands and Belgium) it can be many months before a government forms. And guess what – they are no less stable for it.

So take your time, and weigh up your options.

Rule 3: really, really know your options

So you think you know the numbers, but how well informed are you about them? Did you know that 1,024 possible coalitions could have been formed after the 2010 election? This of course ignores inconvenient details such as party membership, ideology, pre-election promises, and personal enmities, though. Taking all that into account, these are the likely options in 2015:

Conservative minority government

Dave, I am sure you will find this an attractive option if the parliamentary arithmetic allows. As the incumbent prime minister and possibly the leader with the largest share of parliamentary seats, you will argue strongly that this is the only legitimate option. But the UK is a parliamentary democracy, and you’ll have to command the confidence of the House of Commons and be able to put forward a legislative agenda to make it work.

Strike a deal with Nick if you can, but you might also need to bring someone else in. Nick and Nigel don’t get on. Can you get them to play nicely if Nigel is elected? If not, ditch Nigel and consider looking to Northern Ireland to link up with Peter or David.

Labour minority government

Ed, you’ve made this option more complicated by ruling out “deals” with Nicola and by not going out of your way to woo Nick. On the plus side, you have more potential allies – and even if they’re not really allies, it would be hard for Nicola to vote with Dave to bring down Labour. What would she tell voters in Scotland? So Nicola, are you able to really lever Ed? And Ed, can you call Nicola’s bluff? Or can you find other potential partners? Have you talked to Nick? If you haven’t, you should.

Conservative-led coalition

Dave, Con-Lib 2.0 would be the best available option for you. You get on with Nick and his party are a known quantity (and a bit of a pushover, you might think, but never say out loud). It becomes more problematic if you need a third party to command a majority in the Commons. Would this just be “confidence and supply” or would you need to offer a formal partnership?

Nigel might co-operate on confidence and supply, but would Nick be prepared to sit around the cabinet table with him or Douglas Carswell? In fact, Nigel has ruled out entering a formal coalition, but he also said he’d resign if he fails to win South Thanet – and Douglas might take a different view on formal co-operation.

What about Peter or David? Their “plain speaking” on cultural issues like abortion and same-sex marriage might be a problem with your more metropolitan members and supporters. The Northern Irish parties are also keen on increasing public spending in Northern Ireland. Will die-hard provincial Tory backbenchers stand for more big-state largesse flowing to the Celtic fringes?

Labour-led coalition

All options come with risks, Ed. The perils of working informally with Nicola would only be amplified in a formal coalition, and it’s hard to see how governing with the SNP would help Labour win back Scottish seats. At the same time, a Lab-SNP arrangement would play very badly south of the border, all too easily fitting a narrative of English taxpayers subsidising rebellious Scots. Ed, I can’t see Lab-SNP ending well, and would avoid it if I were you.

An alternative for you would be some sort of “rainbow coalition”, perhaps cobbled together with Nick and bringing in Leanne, and possibly Peter, David, or Alasdair along for the ride. Given the number of parties this might involve, coalition management would be a serious problem, and the press would have a field day over the inevitable gaffes and rifts. Finding a way forward over key issues such as economic policy would be tortuous. Ed, you would have to think long and hard about this option as well.

Rule 4: Know when not to play your cards

None of the most likely options for government are problem-free. Any government that emerges after May 7 will be clunky, fractious, and vulnerable to manipulation over timetabling, procedure, and favour-trading. It will not be an easy ride under any circumstances – and in the context of a fragile economic recovery, austerity, growing enmity between the UK’s constituent nations, and calls to leave the EU, the next five years are going to be unpleasant and potentially disastrous for any party whose leader makes the wrong choice in the days after May 7.

I know it’s almost impossible for politicians to give up the chance to govern, but all of you might want to consider it this time. All good card players know that there is a time to play your hand and a time to hold.

For one or two of you, there may never be a better opportunity to cash in your cards. For others, including Ed, this might be the right time to pass. Let’s wait until May 8, and see the hands you are actually dealt.

The Conversation

Charles Lees is Professor of Politics at University of Bath.

This article was originally published on The Conversation.
Read the original article.


VIDEO: To vote or not to vote?

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📥  Election 2015

Who will vote in the General Election and how will they vote? From Russell Brand's comments on not voting, to concerted campaigns to get more people registered to vote, the issue of turnout on Thursday is likely to have a big impact on the overall election results.

In our latest election video, researcher from the Department of Politics, Languages & International Studies, Dr Aurélien Mondon, asks 'does abstention mean people aren't interested in politics?'

"The problem today is that we only see politics as voting.

"Turnout doesn't necessarily mean that people are interested in politics. Some people come out to vote because they think it's their duty. Similarly, people not turning out to vote doesn't mean that they are switched off.

"The 35 per cent or so who will not turn out to vote next week might not be alienated or disengaged from politics. They might just chose to do politics differently."

Dr Aurélien Mondon, Department of Politics, Languages & International Studies

If you found Aurélien's interview interesting you might enjoy reading:


Hate the players, love the game: why young people aren’t voting

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📥  Election 2015, The Conversation

Ben Bowman is a PhD student in the University's Department of Politics, Languages & International Studies

When Labour leader Ed Miliband visited Russell Brand recently, they talked a bit about why young people abstain from voting. In a way, Miliband’s chat with Brand is a snapshot of how Britain has talked about young politics since the 1980s: a politician and a public commentator trying to figure out where the young votes went.

Miliband is right to put young voters on his list of priorities. However, no matter how you feel about abstention as an electoral tactic, commentators who hail a revolution around the corner miss the point. Young people haven’t quit the political system. It is the political system that has failed to give them something to vote for.

Rather than consulting celebrities, political parties would be best advised to put their money where their mouth is: if you want young votes, this is what you have to do.

Abstention generation

The 2015 election is a critical one for young people. This generation is facing the worst economic prospects of any since World War II. Yet, we still see an enduring rift between young citizens and the political institutions built to serve them. Abstention is a widely discussed symptom of this rift. And while some like to blame apathy, the truth is, young people feel marginalised from the institutions that run British politics.

Though voter turnout fell in all age groups between 1986 and 1999, a generational gap in electoral participation grew. Something changed in the relationship between institutional politics and the children who grew up in the 1980s and 1990s.

Voter turnout.
Ben Bowman, Author provided

In 2010, 34% of the UK population abstained from voting, but the proportion was much higher among young people. If abstention was a party, 2010 would have been a landslide victory among the young.

See elections differently - votes vs. abstention for young men and women

The results for those young people who did vote gave the three main parties remarkably close results – with the Liberal Democrats boosted to a great extent by their pledge to oppose any rise in tuition fees.

The UK is different

Young people don’t vote, but in the UK, the rupture between young people and institutional politics runs deeper than empty ballot boxes.

In fact, the UK has the largest generational gap of our European neighbours across all traditional modes of institutional participation, from protest to petitions. While their fellows in France balance electoral abstention with participation in other traditional ways of doing politics – such as protests or boycotts – young people in the UK are far less involved in any of these.

Young people are interested in politics and believe in elections – but they don’t trust politicians or political parties.

Go into any pub or park you like and ask the first person of any age what they think about politicians, and you are likely to get a negative response. Politics is the least trusted profession in the UK. So there is little to surprise us in on the right side of the chart below, which depicts a selection of the responses to a study of young people’s perceptions of politics in 2011, following the last General Election.

Young people, politics and trust.
Matt Henn and Nick Foard, Nottingham Trent University, 2011

But on the left hand side of the chart you will see data that is not often discussed. Young people in the UK tend to profess to researchers that they do have an interest in politics and that they trust elections as an effective way to go about running a country.

Despite Russell Brand’s assertion that politics itself is a broken system, young people don’t necessarily agree, even if they don’t vote. They seem to want elections as a democratic principle but distrust the current stock of politicians as custodians of that principle.

Preaching to the converted?

This lack of trust in politicians may go some way towards explaining why the hard work and imaginative adverts of the many campaigns for young turnout, which have characterised elections since the 1990s have not made a significant dent in young abstention.

Perhaps young people are already sold on democracy in principle, no matter which celebrity asks them to rock up to the polling station. Maybe they’re waiting for something everyone else wants – something to vote for.

It may not be a coincidence that the last major vote in the UK, the Scottish Independence Referendum, attracted so many young voters. It offered a clear and distinct choice more or less separate from political parties. Yes is Yes and No is No, no matter what colour tie it wears.

Unsurprisingly, the issues that matter most to young people reflect the risky nature of young lives following the global economic crisis.

Top concerns

They are concerned about affording a place to live, finding a job, and having reliable safety nets like the NHS and mental health provision there for when things go wrong.

Where do we go from here?

One way to put young people at the centre of politics is to represent them, directly, in political institutions. We may be too late to catch the 2015 election, but by 2020, the UK’s political parties would do well to revise their approach to young people as members.

Historically, political parties have considered young people as a case apart. They are kept in youth wings, segregated from the main party, from decision making processes and campaigning.

If they were to welcome young people and make them part of decisions, they might be able to repair the relationship between young people and political institutions after years of scandal, distrust and division.

They could start by giving them a more representative set of politicians to vote for. The fact that a greater proportion of young women than young men abstained from voting in 2010 might, for instance, tell us that the lack of representation of women in parliament is a factor.

Political parties need to act now to better understand the relationship between young diversities, and their representation in parliament. They need to understand that young people can be voters, but also abstainers, protesters, organisers, union members and ethical buyers, and that all these are ways of doing politics in the 21st century.

Most of all, what young voters want is a place at the main table of politics. They don’t want to rock the vote for the vote’s sake. If we are to rebuild the broken relationship between politics and young constituents, we need to start by putting young people at the centre of politics. Voting is, after all, a tool for representation in the public decision making process. If we want young people to use it, it needs to be effective.

The Conversation

Benjamin Bowman is PhD candidate in Politics at University of Bath.

This article was originally published on The Conversation.
Read the original article.

The next government will need to heed housing, if we’re to avoid another financial crisis

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📥  Election 2015, Public Policy, The Conversation

Dr Bruce Morley is from the University's Department of Economics

The housing market has been an important part of the policy debates during the general election campaign. The central focus has been on the number of extra houses that each party plans on building, and the nature of the funding and support for these new houses. But as yet, there has been little discussion about how the housing market – and the suggested policies – will affect the wider economy, and effect that extra housing and funding will have on the welfare of the population.

There has been much said about the interaction between housing wealth (how much housing in total is worth to the economy), loans and economic stability. Given the crucial role of mortgages in the 2008 global financial crisis, these should be matters of great concern for all potential governments.

Lessons from the crisis

Many have argued that one of the main causes of the financial crisis was US legislation, which was enacted to encourage the main housing finance institutions to provide more mortgages to people who struggled to get them. This was known in the USA as the sub-prime sector. These people were basically borrowers who had a high chance of defaulting on the loan, and wouldn’t be offered mortgages under normal circumstances.

When interest rates were low and house prices were rising, there wasn’t a problem. But when interest rates increased, house prices began to fall, and much of the sub-prime sector struggled to meet the interest payments. As a result, many of the assets based on the sub-prime housing market fell dramatically in value, and so precipitated the financial crisis in 2008.

There are many lessons from this crisis, but above all it is clear that the housing market and its associated financing play a key role in the stability of an economy. It also suggests that excessive intervention in the housing market is potentially dangerous, and that any sizeable intervention needs to be accompanied by careful monitoring.

Influencing the economy

A number of studies, have found a strong link between the housing market and the economy as a whole, especially with regard to levels of consumption. In general, as house prices (and therefore housing wealth) increases, so does consumer confidence and access to loans. This in turn leads to increases in consumption. But the relationship is not quite this straightforward: for instance, there is evidence that a rise in house prices leads to an increase in consumption, but when house prices fall, there isn’t an equivalent fall in consumption.

Another concern is that increasing house prices can indirectly lead to inflation, through the increase in demand brought about by rising housing wealth. Essentially, if house prices rise, individuals feel more wealthy, and so increase their consumption of goods and services. This increases demand for those goods, which in turn increases their prices and leads to a rise in inflation. As a result, housing wealth is an important consideration for the Bank of England, when it is determining the interest rate. Whether or not central banks should react to changes in house prices, and potentially change interest rates as a result of excessive movements in them, is the topic of much debate.

Housing bubbles

Another feature of housing, is that like other asset markets, it is liable to forming speculative bubbles, where house prices rise sharply above the fundamental value of the house. Arguably, this occurred before the financial crisis, and the collapse of the bubble in the UK added to the economic problems then experienced by the UK economy. Of course, it is not just central banks that need to keenly observe house price movements: governments also need to monitor them. This is partially because they can use fiscal policy, such as taxation, to control house prices. But it is also because of the important social implications of homelessness and inadequate housing.

The housing market also has a role to play in the regulation of the financial system, if, for instance, the authorities decide to set limits on the amounts of mortgages with respect to household income. Since the financial crisis, there has been a move towards what is termed “macroprudential policy”. This means that the central bank monitors the financial sector as a whole, rather than institution by institution. This could include monitoring total mortgage debt, house price changes, levels of speculation in the housing market and levels of home ownership.

Although this is mainly the responsibility of the regulator, it is also important for any government: it is governments that need to produce the necessary legislation to control the financial system, where required. Another important question involves the success (or otherwise) of policy instruments. For example, would possible caps on loan‑to‑value ratios, have any influence on household gearing, credit growth or house prices? Although we are still in the early stages of developing macroprudential policy, it will be an important consideration for all future governments.

Bruce Morley's research focuses on economic growth and the main determinants of growth.

According to the latest REF2014, 84 per cent of Bath research in this area was recently judged to be 'world-leading' or 'internationally excellent'.

The Conversation

This article was originally published on The Conversation.
Read the original article.