Government is right to continue Everything But Arms trade policy

Today, with the release of the UK Government's briefing paper on future customs arrangements the Adam Smith Institute welcomes the government's continued support post-Brexit of the EU's current Everything But Arms initiative with Least Developed Countries. But we can go even further.

Sam Bowman, Executive Director of the Adam Smith Institute, says:

"It’s good news that the UK government had pledged to maintain the EU’s Everything But Arms and Generalised System of Preferences initiatives even after we leave the Customs Union. These give exporters in many of the world’s poorest countries duty-free and quota-free access to EU markets, preferential market access for many other developing countries’ exporters, and less strict rules of origin checks on goods. Free trade is one of the best tools we have to reduce poverty in the developing world and it is an encouraging sign that the UK has committed to maintaining openness to the world’s poorest producers.

"But we can go a lot further. Many more countries can be given full duty-free and quota-free access to the UK’s market once we leave the EU’s Customs Union, particularly countries that we are unlikely to agree trade deals with in the near future and countries that are not major export destinations for British businesses. Giving full duty- and quota-free access to exporters in places like Vietnam, Bangladesh, Nigeria and Pakistan would drive economic development there and cut costs for British consumers here at trivial additional cost to the Exchequer. It would also help to prove to internationalist voters that Brexit really is about creating an open, free trading, globally-minded Britain."

To arrange an interview or to seek further comment please contact Matt Kilcoyne, via email (matt@adamsmith.org) or via mobile (07584778207).

Forget NIMBYs, it is all about YIMBYs now

New report explains how politicians can easily end the housing crisis, boost the economy and win more votes. 

  • The UK’s housing crisis is among the worst in the world and needs urgent action
  •  Inaction is holding back economic growth, hurting productivity and wages, and creating a generation who can never hope to own their own home
  •  UK could boost GDP per capita by 30% if we built enough homes in the right places
  •  We should let residents vote on letting their own streets add homes
  •  Millions of homes, enough for all the housing anyone could want, could be built within a generation if proposals are adopted.

The United Kingdom is suffering from a housing crisis caused by a chronic lack of new homes being built. A new paper by John Myers of London YIMBY (Yes In My Back Yard), released today in conjunction with the Adam Smith Institute, offers three ways to beat the housing crisis, boost living standards and disposable incomes, and revitalise the economy.

Households would be on average £10,000 a year better off if we had better planning and built enough homes in the right places, shows John Myers, author of the report. Shortages of housing near job opportunities lead to high rents and prices. These prevent young people - as well as those from deprived communities - from moving to areas which have good jobs. This is a needless and self-inflicted brake on growth.

After a string of prominent rejections of developments, such as the redevelopment of an ASDA and its car park on the Isle of Dogs into nearly 2,000 new homes, it is more important than ever to reform the planning system so that residents feel they benefit from new housing. The alternative is economic stagnation, social divide, and potentially political turmoil.

The report suggests three practical proposals to win the support of existing homeowners for development that makes the country richer and fairer:

  1.     Letting individual streets give themselves planning permission to extend or replace buildings. This, coupled with a design code chosen by the street, could allow up to 5 million new homes to be built over a generation in London alone, while making existing homeowners two to three times better off and beautifying streets by turning semis and bungalows into traditional terraces.
  2.     Giving local parishes the power to improve their green belt by swapping out ugly dead land or intensive farmland for development and adding protections to areas of outstanding beauty.
  3.     Handing the new set of devolved city-region mayors radical new powers to choose different planning regimes for their area, to see what works best. What’s right for London might not be right for Leeds, and Birmingham may want to grow even if Cambridge does not.


Politicians could neutralise NIMBYs, the paper argues, by seizing the opportunity and letting local people take the lead on deciding how and where to build new homes. By giving more power to locals, the billions of pounds spent on armies of planning lawyers and consultants could be retained within communities. The reforms would also benefit the exchequer, not just through property taxation, but also as people move closer to better jobs and earn more.

Failing to end our housing crisis will most hurt those that can least afford it, according to the report. Those who are just about managing (Theresa May’s JAMS) will pay the price for inaction—once you take into account housing costs real incomes are completely stagnant.

Paying through the ear to rent a box or a dump is radicalising the youth, but politicians stand to benefit hugely if they can make housing within reach of job opportunities abundant and affordable. The UK can avoid clarion calls for rent controls or mass social housing if we act to expand private housebuilding now.

Britain has one of the worst housing crises in the world, the report shows, but that should mean benefits of even partial reforms are felt greatest here. Simple changes could substantially increase the supply of new homes, boost the economy, tackle intergenerational inequality and improve social mobility, while making our existing cities better. It is time to build a better country.

John Myers, co-founder of London YIMBY and author of the report, said:

“A new generation of young people is demanding change to avoid being worse off than their parents. There are vote-winning ways to make decent homes truly affordable with the support of existing homeowners, if only we seize them.”

Ben Southwood, Head of Research at the ASI, said:

“The planning system is a mess. We all know we need more homes and infrastructure in the places people actually want them—but it isn’t delivering. But we can hardly blame locals for blocking development when not only does it blight their views with ugly designs, but it detracts from their living standards. So we are proposing a raft of measures that may bring homeowners around the country on-side. If new housing benefits people already living there, then we may finally be able to build enough to stop rents taking half of people’s pay packets.”

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07584 778207.

The report “Yes In My Back Yard - How to end the housing crisis, boost the economy and win more votes’’  is available here.

Student debt can be taxing

  • New idea reveals how Britain can deal with student debt
  • Current student loan system has not carried popular support since its inception
  • England should move from a fees system to a graduate tax
  • Remove interest charges and replace with an index against inflation
  • Have repayment at a fixed percentage of income above a threshold and capped with higher repayment for higher earners
  • Faster repayment and lower default rate means graduates are freed from debt earlier but the state gets a better return from its investment

The current system of student loans by which university education in England is financed has been dogged by controversy since it was brought in by the Labour Government under Tony Blair. This was compounded by fees rising to £3000 per annum in 2004 and to £9250 under the Coalition Government. Critics of the policy regularly claim that it discriminated in favour of middle class students and those from well-off backgrounds.

At the election in June the Labour Party pledged to scrap tuition fees altogether and insinuated they would look again at dealing with the debt burden by students that had already graduated. Student voters are thought to have flocked to Labour as tuition fees financed by student loans shift the finance of university education away from older taxpayers towards a cash-strapped younger generation.

A new report by the Adam Smith Institute says that while the current scheme has positive features - including the increased numbers of pupils from disadvantaged backgrounds going to university - the complexity and fears of high levels of personal debt continue to dog the system.

Repayment has proved difficult in practice with the default rate estimated at 45% and the average student accruing £5,800 of interest before they graduate. The system of funding also incentivises students and institutions towards courses that do not, on average, lead to high salaries. Institutions that offer low-cost arts and humanities courses now attract 47 percent more income per student than they did in 2011, whereas the highest-cost courses only attracted 6 percent more income.                 
            
Madsen Pirie, President of the Adam Smith Institute and author of the report, says that all this is undermining the government’s desire to ensure a fully funded system and boost take-up of places in core subjects such as science, maths and engineering.

While loans given to students are not like conventional loans - with repayment delayed until earning and dependent on salary - it operates like a graduate tax. The current system has the disadvantages of both tax and loan based systems. Students are told the full value of debt they are accruing at the time when their earning power is at its weakest. Adult taxpayers that earn well are funding the courses of those that earn little. Education is not perceived as free and not all graduates end up paying the tax that funds it.

The suggestion is made in the paper for a new model of graduate tax, one capped at a level commensurate with the amount of education consumed and with a high threshold for repayment. Dr. Madsen Pirie suggests repayment could start at £22,500 per year, above the current level, with a 5% tax on salary level, rising to 8% beyond an earnings threshold of £30,000. This could allow for quicker repayment and reduce the level of non-payment in the system.
                    
The report also calls for incentives to boost take-up of places in a number of core subjects, those that have high remuneration for graduates. One suggestion made is to remove the obligation to refund their education if awarded a first class honours degree in a core subject. What constitutes a core subject would be decided by a body of academics so people actually involved in education were making the judgements, rather than politicians or civil servants.          
            
Students will see in this tweaked system that they can receive an education free at point of take-up and would see repayment as a tax based on their earnings. They will not pay fees when they enrol and will not have to take out loans to do so - removing the fear of large personal debts built up during a time they are not earning. This gives students more security, universities a greater degree of independence and the nation a continued flow of highly qualified graduates.    

Madsen Pirie, President of the Adam Smith Institute and author of the report, says:

“Students in England have been short-changed by a complex and expensive loans system which leaves them feeling a huge burden of debt, made worse by high interest rates. A simple and fair reform like that proposed in the paper, would allow students to pay for the benefit of their education through a graduate tax surcharge and without interest.”

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07584 778207.

The full report is available to read here.

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Don't get into a flap about chlorinated chicken!

New paper stresses the importance of flexibility in upcoming trade talks between US and UK

  • A trade deal between the UK and the world’s largest economy is a key priority post-Brexit
  • Removing the ban on chlorinated chicken will be a highly symbolic move and will allow a speedy trade deal
  • American chicken, treated with the chlorine wash process, is more than a fifth cheaper than British chicken—reforms could cut UK prices by 21%
  • Water is responsible for 99% of someone’s intake of chlorine by-products
  • Brits would have to eat three entire chlorine-washed chickens every day for an extended period to risk harm

As trade talks between the United Kingdom and the United States of America begin in Washington, a paper released by the Adam Smith Institute this morning shows how Britain can make symbolic concessions to wrap up a deal as quickly as possible.

Donald Trump and Liam Fox have both previously stressed the ease with which a bilateral trade agreement can be reached. The paper argues that the UK should use its new found nimbleness outside of the EU to do what’s necessary to strike trade deals quickly.

Poultry market access has been at the heart of EU-US negotiations in the past and is likely to be a ‘take-it-or-leave-it’ condition attached to any deal that the UK pursues. One of the major stumbling blocks in previous talks has been an EU ban on imports of poultry meat due to the USA’s use of chlorine rinses. The report argues that allowing the import of chlorinated chicken products would show Britain is willing to agree sensible compromises, and is able to use partial agreements such as TTIP as templates to rapidly make deals with other partners.

Chlorine-washed chicken is safe. The paper’s author, Peter Spence, highlights that the volume of evidence: the process is deemed safe not just by US regulators, but also by the EU’s own scientific advisors. The European Food Safety Authority has said four types of chemical rinse, including chlorine dioxide, ‘would be of no safety concern’: a person would have to eat around 5 per cent of their body weight in chicken every day (nearly three whole birds a day for the typical British man) to reach the safety limit, according to European Commission data. Drinking water poses a far greater risk, making up 99 per cent of the disinfection byproducts consumed in a typical daily diet.

Chlorination kills harmful bacteria often found in chicken. Immersing poultry meat in chlorine dioxide solution of the strength used in the United States reduces prevalence of salmonella from 14% in controls to 2%. EU chicken samples typically have 15-20% salmonella.

US imports could also help to bring down British grocery bills. A whole kilo of chicken costs an American shopper around 21 per cent less than the equivalent on UK shelves.

The UK has a chance to show that it is serious about being open for business by striking a deal with the largest economy in the world. The Government can show it bases regulation on scientific evidence and that it’s serious about helping hard-up families by bringing down the cost of living.

Peter Spence, independent researcher and author of the report, said:

“Trade critics like to suggest that signing a deal with the USA will mean that Brits will be forced to eat unsafe produce. In reality, chlorinated chicken is so harmless that even the EU's own scientific advisors have declared that it is 'of no safety concern'.

"Agreeing to US poultry imports would help to secure a quick US trade deal, and bring down costs for British households. European opposition to US agricultural exports has held up trade talks for years.

"By scrapping the ban on chlorinated chicken imports, the Government will send a signal to potential trading partners across the globe that the UK remains an open-facing and free trading nation.”

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07584 778207.

 “Chlorinated Chicken - Why you shouldn’t give a cluck’’ is available here.

 

Environment Secretary should seize chance to reform agricultural subsidies

The Adam Smith Institute welcomes the announcement by the Environment Secretary, Michael Gove, to reform the subsidies offered to farmers and calls on the Government to go further as Britain leaves the European Union.

Research Economist at the Adam Smith Institute, Sam Dumitriu, has said:

"The Common Agricultural Policy is an economic and environmental disaster. Michael Gove is right to propose withdrawing subsidies to the UK's wealthiest landowners, but he should go further and follow New Zealand's lead and scrap wasteful farm payments entirely.

"When New Zealand's cash-strapped Labour government boldy scrapped farm subsidies in the 80s, farmers were incentivised to diversify, innovate and boost productivity.

"In the years that followed, productivity growth doubled, food prices fell dramatically and agricultural exports surged. This didn't come at the expense of the environment either - fertiliser and pesticide usage halved.

"It would be harsh to throw small family farmers in at the deep end, but they already are shortchanged by the subsidy system. 80% of farm subsidies go to the 25% of farmers with the largest land holdings. We could reform the system without hurting family farms by paying out a five-to-ten year "transition allowance" equal to their recent average subsidy to family-scale farmers."

To arrange an interview or request further comment please contact Matt Kilcoyne on 07584778207 or via email matt@adamsmith.org

Welcoming the rising retirement age

The Adam Smith Institute has welcomed the Government's move to bring forward the rise in the pension age to 68 and calls on it to go further, faster.

Ben Southwood, Head of Research at the Adam Smith Institute, says;

"The Government has seen sense by raising the retirement age, but they should up the pace.

"Retirement should be more of a steady decline in work than an abrupt cliff. Today our sub-replacement fertility, combined with our steadily improving healthcare, mean that a smaller and smaller working population support a larger and larger group of dependent elderly.

"The mandatory retirement age, combined with the new flat rate, which reduces the disincentive to building up wealth, are steps in that direction. Retirement age hikes are another.

"The evidence from retirement age reforms is absolutely clear: they have huge effects on labour hours for older workers. [1] Not only do later retirement ages mean that older workers take out less—they also pay in more.

"Politicians, and society in general, are usually far too relaxed about the upcoming population bomb, but this move, at least, makes the situation a bit less difficult."

Please contact Matt Kilcoyne for further comment or to arrange an interview.

Email: matt@adamsmith.org Mobile: 07584778207

 

[1] https://ideas.repec.org/p/cra/wpaper/2017-02.html

https://ideas.repec.org/p/hhs/ifauwp/2016_011.html

http://ftp.iza.org/dp9834.pdf

http://nber.org/papers/w19913

http://www.nber.org/chapters/c13334.pdf

http://www.nber.org/papers/w19370

 

Politicians should stop trying to regulate a porn industry they don't understand

The Adam Smith Institute has reacted with dismay at the suggestion by the Government's Digital minister, Matt Hancock, that users of porn websites should have to hand over credit card details to access sites hosting pornographic content.

Sam Dumitriu, Research Economist at the Adam Smith Institute, says:

"Requiring adult websites to force users to provide their credit card details poses a dangerous threat to privacy and will enable widespread credit card fraud.

"Consenting adults shouldn't be forced to announce that they're looking at pornography to their credit card company.

"There are massive fraud risks. It could mean that users are nudged into handing over data to unsafe sites - leaving them at the risk of fraud. Pornography is especially attractive to fraudsters as victims are often too embarrassed to flag up unexpected payments to adult sites to their credit card company.

"Politicians should stop trying to regulate things they don't understand."

To arrange an interview or further comment please get in touch with Matt Kilcoyne on 07584778207 or via email matt@adamsmith.org

Entire generation risks never knowing their grandchildren

  • New paper reveals Britain’s housing crisis risks turning into a fertility crisis
  • Unaffordable housing is causing a fertility crisis in Britain
  • Homeownership has collapsed among young people, as house prices and rents continue to rise
  • This has forced people to have fewer children and put off having children until later in life
  • 157,000 children were not born due to the cost of housing between 1996 and 2014
  • Cheaper housing allows people to have as many children as they want, as early as they want

High house prices are preventing a generation of people from having children, says a new report by the Adam Smith Institute. Unaffordable housing has forced people to have smaller families and delay starting a family until later in life, threatening an entire generation of children who may never meet their grandparents.

With Brexit likely to lead to a decrease in immigration, the report argues, there is also a clear economic need to raise the birth rate in order to pay for Britain’s ageing population’s pension, healthcare and social care costs. As the country ages and immigration falls after Brexit, the government must remove barriers to population growth within Britain, or else face a demographic time bomb where taxes on working-age people spiral to pay for looking after their parents and grandparents.

Chief among these is the cost of housing, which is strongly associated with couples having fewer children than they would like and delaying having their first child until much later in life. The average age of women when they first gave birth has risen by four years since the 1970s, and looks to continue rising.

Though rising house prices increase the birth rate among existing homeowners, they keep people off the housing ladder and stuck renting, where they are less likely to have children.. With falling homeownership rates in the UK, especially for young people, this means that the net effect of rising house prices is highly negative on our national fertility rate. Between 1996 and 2014, a ten percent increase in house prices resulted in a 4.9% decrease in births among renters but just a 2.8% increase in births to homeowners – a net decrease of 1.3%. House price rises between 1996 and 2014 are estimated to have stopped approximately 157,000 children from being born, compared to if housing had not become more unaffordable.

The report warns that this trend is set to get even worse without radical action on housing supply from the government. The population over 85 years of age doubled between 1985 and 2010 and is expected to constitute almost 5% of the population by 2035. The median age rose from 35.4 to 40 between 1985 and 2014 and will rise to 42.9 years by 2039 unless action is taken.

The report’s author, Andrew Sabisky, argues this has serious cost implications for British taxpayers, with the over 85s costing the NHS three times as much as the average 65-74 year old whilst the number of working-age people for every pensioner is likely to fall from 3.2 to just 2.7 by 2037.

In the ten years between 2004 and 2014 homeownership fell from 60% to 35% among 25-34 year olds—the key childbearing demographic. In 1991 nearly two thirds of 16-25 year olds would have purchased property - that figure stands at just one in ten now.

Properties that young people do buy, the paper warns, will often be too physically small to fit a large family and the saving required pushes women towards older motherhood – in 2010 the average age of women giving birth went above 30 years of age with more than a quarter of births (26.5%) to mothers born outside of the UK. More and more young women are being forced to wait to have the children they want and, by both age and inappropriate housing, are forced to have fewer children than they want. These trends will mean that more and more grandchildren will be born after it is too late to meet their grandparents and great-grandparents.

This demographic decline is our choice, says the paper. To change course and allow people to start their families earlier the government must take radical action to allow more homes to be built. Without more homes and greater supply many babies will simply never be born.

Andrew Sabisky, Independent Researcher and author of the report, says:


“The housing crisis is a well-known immediate economic problem, but this report showcases how it is wrecking the lives of the people of this country, preventing them from having the children they want to have.

"This private tragedy will, in the long-run, entail massive knock-on costs to public finances. Housing market liberalisation is something the Government should do anyway, but this report outlines a new set of pressing reasons for it to act.”


For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07584 778207.
 
The report ‘Children of When’ is available to read in full here.
 
The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Adam Smith Institute welcomes the Taylor Review on the gig economy

The Adam Smith Institute welcomes the Taylor Review out today reporting on the Gig Economy.

Sam Dumitriu, Research Economist at the Adam Smith Institute, says:

"It's good news that Matthew Taylor has resisted Labour's call to ban zero-hours contracts. They provide flexibility that benefits both workers and bosses. People on zero-hours contracts actually have higher job satisfaction that ordinary employees and when McDonald's offered staff a choice most chose flexibility over security.

"Gig Economy firms like Uber, Deliveroo and CitySprint are good for both consumers and workers. They deserve a lot of the credit for Britain's record high employment rate. We should be wary of attempts to regulate new flexible forms of employment.

"One of the Report's findings suggested forcing platforms to calculate 'average' and expected hourly wages. But that would impose administrative burdens that established players can handle but new entrants might struggle with.

“We don’t want to punish employers for giving workers more rights by hitting them with higher taxes, and raising taxes on the self-employed is unpopular and will simply be seen as a money grab. The Government should be bold instead by combining National Insurance and Income Tax while expanding the personal allowance to help out those on low incomes.”

To arrange an interview or request further comment please contact Matt Kilcoyne on 07584778207.