Housing the Homeless

Homelessness in the UK is on the rise. 2014 figures show that 2,744 people slept rough on any one night in England, a 55 per cent rise on 2010. In London, there has been a rise of 16 per cent in a single year. Homelessness is a result of poverty and creates a downward spiral that is difficult to escape from. It is clear that it is an issue that needs to be tackled, particularly given the rising figures.

The current policy on homelessness from the government centres on preventing long-term rough sleeping on the streets. The ‘No Second Night Out’ scheme has been successful in achieving this aim: its introduction led to 75 per cent of rough sleepers not spending a second night on the streets. An admirable success – but largely superficial.  It does not account for the ‘hidden homeless’, those who live in hostels, nor is it a lasting solution to homelessness. It is extremely difficult to build a life around inconsistent housing.

The root problem of homelessness is not achieved by taking people off the streets into temporary housing. It is only solved by people having places to live. And the current crisis in UK housing is not helping this. The severe lack of affordable housing is forcing people onto the streets and into homelessness. In 2013-2014, only 140,000 houses were built for the demand of 250,000, hardly enough to cover those who can afford to buy them, let alone those who live on the streets. Moreover, the cut to housing benefit announced in the July budget will not be conducive to preventing homelessness, instead, making it more difficult to combat it.

When examining the most successful solutions to homelessness, offering effective housing solutions is the best way. Preventative measures have been lauded, but these do not help those who are recurrently homeless. Schemes in America and Canada offering long-term housing have been hugely successful in turning around homelessness figures. Utah has dramatically reduced their homeless problem through their Housing First program that offers housing to homeless people with no strings attached. When given a stable home, rather than inconsistent halfway housing, people were able to effectively build their lives. Similar projects in cities across Canada have brought the same results, showing that it is also more cost effective to offer housing rather than pay for the upkeep of the homeless in temporary accommodation, particularly when we included costs accrued indirectly – such as healthcare.

But these solutions seem unlikely to be as effective in the UK while housing is at such a premium and remains as expensive.  Until then, the government will have to rely on preventative measures as its most effective solution until it can solve the real problem of housing.


This article was written by Benjamin Jackson, a Research Associate at the Adam Smith Institute. Benjamin is half-way through his Classics degree at the University of Edinburgh.

The impact of interest groups on public policy

Madsen’s lecture, as Senior Visiting Fellow in the Department of Land Economy at the University of Cambridge, has now been posted on the ASI site.

The topic deals with the way in which interest groups impact upon public policy in ways that might be to their own advantage, though not necessarily conducive to the general good.  Madsen identifies with the various ways in which they exert influence on legislators.  He goes on to show how policies can be crafted to deal with their influence and turn it to advantage if possible, and circumvent it if necessary.  He gives examples throughout.

The full text of the lecture can be seen here.

Misconceptions about Europe

Madsen has written a think piece listing seven common misconceptions about Europe that are certain to feature in the referendum debate.  They are:

  • The EU is “Europe”

  • If the UK leaves, it will, like Norway, have to follow rules it cannot help shape

  • That the UK has not lost sovereignty, only pooled it with other EU members

  • That the EU membership involves sacrificing some sovereignty in return for substantial economic growth

  • That huge numbers of UK jobs would disappear if the UK left the EU

  • That foreign investment into Britain would cease without EU membership

  • That special interests (such as universities and farmers) could not manage without the EU grants they receive

Madsen concludes:

It is quite possible that Mr Cameron will secure an advantageous deal from his EU colleagues that allows the UK to protect its sovereignty while enjoying a vigorous trading relationship with its partners.  If he does, the British people might well vote to accept that deal.  It will be better for the debate leading up to that vote, however, if the above misconceptions about the Europe and the EU are laid to rest.

You can read the full text of his piece here.

New report: No Stress – The flaws in the Bank of England’s stress testing programme

In 2014, the Bank of England commenced a stress testing programme in an effort to test the capital adequacy of major UK-based banks. It concluded that its results demonstrated the resilience of the banking system. No Stress, a report from the Adam Smith Institute, suggests that we should be extremely sceptical of the Bank’s conclusions.

The report is by Kevin Dowd—Senior Fellow of the Adam Smith Institute, professor of finance and economics at Durham University, and author of three books, ten book chapters, and dozens of journal articles on risk modelling—who presents a powerful and rigorous indictment of the Bank’s stress testing programme.

Dowd makes the case that the stress tests are significantly methodologically flawed and worse than useless, giving policymakers unreliable information about the strength of the UK banking system, providing false risk comfort, and creating systemic instability by forcing banks to converge towards the Bank of England’s models.

The Bank of England (BoE) uses just one stress test scenario, which attempts to predict what would happen in the event of a major recession to the UK’s major banks: Barclay’s, the Co-op, HSBC, Lloyds, Nationwide, RBS, Standard Chartered and Santander. Using just one scenario is extremely limited – an economic downturn can take many forms, and a combination of unemployment, inflation and negative economic growth that was substantially different to the Bank’s scenario could hit the banks in a completely different way. The BoE can say that the banks are safe under its scenario, but not that they are safe in general.

The BoE’s use of risk-weightings, as opposed to leverage ratios favoured by many international authorities, to calculate banks’ assets is extremely questionable. These risk-weightings are easy to game by banks, giving a rosier picture of their health than alternative measures would show. This also distorts the bank’s investment strategy.

The BoE’s approach forces a standardisation of banks’ risk models, effectively putting all the British banks’ eggs into one basket. By misleadingly reporting that the financial sector is safe, the BoE’s stress test has provided false risk comfort to politicians and consumers.

For these reasons and more, Dowd concludes that we should end regulatory risk modelling and re-establish strong bank governance systems that make decision-makers personally liable for the risks they take. The report is available to download here. (more…)

Today is Tax Freedom Day

For the full press release, click here.

This year’s Tax Freedom Day, the day when Britons stop working to pay their taxes and start earning for themselves, falls on 31st May, according to Adam Smith Institute calculations.

The Adam Smith Institute estimates that Britons will work 150 days this year solely to pay their taxes. This is one day later than 2014′s Tax Freedom Day, which is not statistically significant. However, the UK’s Tax Freedom Day falls more than a month later than it does in the United States, where citizens started earning for themselves on 24th April.

Tax Freedom Day is designed to reveal to the public how much they really pay out in taxes, which Britain’s lengthy tax code can often obscure. The Institute’s calculations include all taxes raised by HM Revenue and Customs: direct taxes like income tax, national insurance and corporation tax, and indirect taxes like VAT and excise duties.

Cost of Government Day, which represents Total Managed Expenditure as a day of the year, falls on 29th June, three days earlier than it fell in 2014. While this suggests a slight improvement over last year, the money borrowed to cover the month-long gap between Tax Freedom Day must eventually be paid off with future taxes. This means without tax cuts or major growth Tax Freedom Day would eventually have to drift even later.

Director of the Adam Smith Institute, Dr Eamonn Butler, said:

The Treasury hates Tax Freedom Day, because they don’t want us to know how much tax we really pay. They prefer to conceal the tax burden through stealth taxes and indirect taxes that we don’t even realise we’re paying.

Most people are shocked to learn that the government takes over two-fifths of the country’s earnings – and then borrows more. Mediaeval serfs had to work about a third of their time for their feudal lord, but we are in serfdom to the government for even longer!

High taxes are very bad for economic growth, as talent and initiative drain abroad. Ask President Hollande of France.

Alan Mak, Conservative MP for Havant, added:

The ASI’s work on Tax Freedom Day reminds us that we must carry on reducing the tax burden on hardworking individuals and businesses so we have greater economic growth and individual prosperity. That’s a goal I champion as a member of the new Conservative intake; income tax cuts and frozen council tax and fuel duty have so far made millions of Britons better off, but politicians must continue to look for new ways to get money back into taxpayer pockets, not out.

The ASI calculates Tax Freedom Day by measuring local taxes, direct and indirect national taxes, and national insurance contributions as a proportion of the UK’s net national income (41.2% per cent in 2015), mapping that proportion onto the days of the year.

Tax Freedom Day figures are not available up-to-date for calendar years so they are proxied from government and OBR forecasts and financial year numbers. They are then revised when exact numbers become available.

For further comments or to arrange an interview, contact Head of Communications Kate Andrews: kate@adamsmith.org | 07476 915072