Introduce school vouchers and liberalise free school creation to improve UK education

As Britain faces dire PISA education rankings, the government should liberalise the free schools application process and give parents a voucher for a place in any approved school, state or private, says a new research report from the Adam Smith Institute and the Centre for Market Reform of Education. (School Vouchers for England: Harnessing choice and competition for greater quality and equality in education. Executive summary here.)

The move would abolish the restrictions that prevent poorer parents from accessing England’s best schools. Proximity-based admissions should be scrapped, being replaced by lotteries and subsidised transport in cases of oversubscribed schools.

At a time when many areas will face a 20% shortfall in places by 2015, urgent and cost-efficient action is required, the report says. Parents may be left without schools to choose from unless the government accelerates the development of new free schools.

The government therefore must simplify the school creation process, says the report, cutting through red tape and introducing a voucher system so that parents can signify where and how they require schools to be built.

Gabriel Heller Sahlgren, co-author of the report and Director of Research for the Centre for Market Reform of Education, said:

“Parents are currently restricted to choosing schools they can afford or the schools they can afford to buy a house near. Giving parents a voucher, redeemable to all state schools and participating private schools, would usher in a new era of social mobility and reverse the decline in the quality of English education.

“A voucher programme would expand the number of schools that parents could choose. Parents could choose participating private schools, which would be incentivised by the prospect of a more steady income. The resulting increased competition between schools to attract pupils would cause significant improvement in education.

“Good schools in sparsely populated areas would be incentivised to expand by receiving more pupils and money. Similarly, bad schools would be incentivised to improve by the threat of losing pupils, and therefore funding. A voucher programme would avoid the need to build more costly free schools, as well as the huge costs and regulations surrounding which have hampered the government’s education reforms."


A copy of the paper is downloadable here: An executive summary of the paper is downloadable here:

Please contact Alexander Blackburn to arrange an interview with the paper’s authors by calling 020 7799 8903 or 07400 902 290, or emailing

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The Trading Dead: The zombie firms that threaten Britain’s recovery, and what to do about them

Zombie firms threaten to cause a “lost decade” of economic stagnation – new Adam Smith Institute report

  • Up to 108,000 “zombie firms” threaten to cause a “lost decade” of stagnant growth and productivity
  • Corporate insolvencies are unusually low, suggesting that zombie firms are holding up capital and labour that could be used productively elsewhere
  • “If a business can be saved, it is entrepreneurs who are best place to make the changes required” says OpCapita’s CEO Henry Jackson

Over 100,000 “zombie firms” are threatening the UK’s recovery from the Great Recession, according to a new report by the Adam Smith Institute.

Record low interest rates and the willingness of banks to show “forbearance” to unprofitable firms is damaging productivity, undermining competitiveness and preventing workers and money finding its way to the companies of the future.

The Trading Dead: The zombie firms plaguing Britain’s economy, and what to do about them, by Tom Papworth, identifies “zombie firms” as heavily indebted firms that can generate enough revenue to pay down debt interest but not debt principle and are dependent on low interest rates to continue doing so. The paper argues that many of these firms require either insolvency or restructuring for a strong economic recovery to emerge. The report is sponsored by OpCapita, an international private equity partnership that specialises in turnaround through operational change.

The report shows that Britain’s “productivity problem” may be partially due to zombie firms holding up capital and labour in relatively unproductive sectors, raising the costs of entry for new, innovative firms. The two main factors responsible for the zombie phenomenon are low interest rates and bank capital regulations. Low interest rates may be misdirecting money to unproductive zombie firms, and bank capital regulations (such as Basel III) discourage banks from foreclosing on zombie debtors, which would worsen the liability on their balance sheets. This also discourages business lending by banks in general.

The report finds that private sector rescue of zombie firms is possible, but only for some. This rescue, in the form of corporate restructuring, must also be done in a decentralised “bottom-up” fashion by individual entrepreneurs and investors such as private equity firms using their local knowledge of specific firms and industries. A government-led drive would likely suffer from chronic inefficiencies.

Tom Papworth, Senior Fellow of the Adam Smith Institute, said “We tend to see zombies as slow moving and faintly laughable works of fiction. Economically, zombies are quite real and hugely damaging, and governments and entrepreneurs cannot simply walk away.

“Zombie firms stop workers and money being redeployed to more productive uses, they prevent new, better firms entering the market, they undermine competitiveness, reduce productivity and slow the growth of the whole economy. Low interest rates and bank forbearance represent a vast and badly targeted attempt to avoid dealing with the recession. Rather than solving our current crisis, they risk dooming the UK to a decade of stagnation.

“Zombie firms need to be confronted with the reality that they are not profitable. With timely interventions by knowledgeable entrepreneurs, many firms can be restructured and saved. But others must be liquidated to allow resources to feed the growth of the future.”

Henry Jackson, CEO of OpCapita and the report’s sponsor, said: “Turnaround specialists are uniquely placed to help Zombie Companies to restructure and return to profitability – a far better outcome than that they continue to limp on indefinitely. And when private equity steps in it is using its expertise and insight to bring the radical changes required for a failing business to survive.”

The report sets out the role of investors in identifying firms that are ripe for restructuring through the seven key aspects of a successful turnaround: crisis stabilisation, new leadership, stakeholder management, strategic focus, critical process improvements, organisational change and financial restructuring.

Henry Jackson concluded:

“If a business can be saved, it is entrepreneurs and turnaround specialists who are best placed to effect the changes required. Private equity firms have the insight and knowledge to do that, and they are prepared to take the risks to get it right. Delivering change in such circumstances is often extremely hard and carries inevitable risk. But genuine improvements in profitability can create long-term sustainable value.”

To arrange an interview with the report's author or for further information, email or phone 02072224995. The report can be read in its entirety here.


Libertarian film screening of V for Vendetta

Tom Stringer has arranged a really fun Monday evening outing on Monday November 4th.  It's a showing of the movie "V for Vendetta" at the Bowler Bar and Pub in Clarkenwell. The screening starts at 7, but people can arrive from 6pm onwards and there'll be plenty of time to chat with fellow libertarians. There's an amply stocked bar and what's more there is a free drink for every attendee courtesy of EzyOrder when you arrive (all you need to do is download their app onto your smartphones).

You can purchase your tickets here.


ASI on shortlist for €100,000 “Brexit” plan

A team representing the ASI has been shortlisted for the €100,000 “Brexit” prize for blueprints on what steps the UK must take to secure its economic future if the electorate vote to leave the EU in the coming referendum. The prize has been put up by the Institute of Economic Affairs and attracted over a hundred submissions.

The Adam Smith Institute plan, drawn up by award-winning City analyst Miles Saltiel and senior lawyer Charles Proctor, covers how Britain should handle the negotiations and set out the future of regulation, trade, and relations with Europe.

They outline the difficult political, economic and trade environment situation in which the new EU-UK relationship will be negotiated, and how these affect each side. It sets out the areas where agreement is possible and proposes a framework for agreement that makes sense for the EU as well as our other trading partners, and cultivates the UK's standing in the international economic community. As well as economic stability and access to markets, the deal would have to cover issues such as residency, immigration and  asylum.

“We believe our entry is well-placed to win,” said Miles Saltiel, “because it embraces the timeless principles of Adam Smith, the father of modern free trade policies. And it is free trade that people in Britain most want out of their relationship with the EU.”

The organisers of the Brexit Prize have told finalists that they lay weight upon “costed and quantitative estimates and arguments”. If this is up your street, you are a third-year undergraduate or post-graduate economics student with an interest in trade ecomomics, and you would like a share of the prize and the glory of contributing to the winning entry, we invite you to send in your CV, to arrive no later than 15 November 2013, to Miles Saltiel, 23 Great Smith Street, London SW1P 3DJ.

Charlotte Bowyer

Charlotte is a Research Associate at the Adam Smith Institute, having perviously worked here on her Gap Year. Her key interest is Digital Policy, particularly freedom of expression and innovation online. She holds a degree in Politics, Economics and Economics from the University of Manchester, and is an Executive Board member of Liberty league, a network which seeks to promote and advance libertarian ideas amongst students and young professionals.

In her spare time Charlotte likes to collect taxidermy and is about to turn her hand to it. She also enjoys going to loud electronic music nights and creating extravagant, oversized meals. 

She tweets as @EileenSpalding.

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