Is the OECD right that inequality has significantly curbed economic growth? – Ben Southwood argues ‘no’ in the CityAM Forum

Head of Research at the Adam Smith Institute, Ben Southwood, argued against the recent OECD report that found income inequality curbs growth in the CityAM Forum: 

Ben Southwood, head of research at the Adam Smith Institute, says No.

International cross-sectional studies like the OECD’s – which compare different countries at one point in time – are prone to errors. This is true even if you look at a group of similar (rich) countries like the OECD, which includes Sweden on the one hand and Mexico on the other.

Countries that punish crime harshly may have more crime, but that doesn’t mean punishing crime harshly increases crime.

Countries with more doctors may have more disease, but we’d expect that doctors are a response to disease, not a cause.

Similarly, countries with less inequality may have more growth, but cutting inequality may not boost growth.

For such questions, it’s better to use time-series data. And if you look at countries or regions where inequality jumps, growth typically jumps as well.

A highly-cited paper by Kristin Forbes, for example, found “an increase in a country’s level of income inequality has a significant positive relationship with subsequent economic growth.”

Read the full debate here.

Kate Andrews’ comments on Osborne’s proposed spending cuts feature on BBC News online

Communications Manager at the Adam Smith Institute, Kate Andrews, was quoted in a BBC News article on where spending cuts should be implemented and whether the Chancellor can achieve his projected spending goals:

If the government is going to achieve its projected spending goals by 2020, then it’s going to have to reform the big-ticket items: welfare, pensions, and the NHS.

It’s not realistic to expect that policing and other unprotected areas will be cut by 50%; if the arithmetic is going to add up, the meaty parts of the budget are going to have to be cut too.

Local government cuts should fall precisely where the community and local council feel they can best handle a decrease in spending.

Westminster is not in an effective position to decide the level of services needed in local communities throughout the UK.

The solution is to devolve taxation and spending powers to local communities, where funding for public services and benefits can be better, and more efficiently, allocated.

Kate Andrews, communications manager and research associate, Adam Smith Institute

Read the full article here.

Ben Southwood’s comments on the Autumn Statement feature in the Daily Express, Huffington Post UK, and This is Money

The Adam Smith Institute’s Head of Research, Ben Southwood, was featured in the Daily Express, Huffington Post UK, and This is Money on the Chancellor’s abolishment of the stamp duty slab system:

From the Daily Express:

It is a victory for the Daily Express End The Stamp Duty Rip-Off crusade and was hailed by economists and property experts yesterday.

Ben Southwood, head of Research at the Adam Smith Institute, said: “The old stamp duty slab system was one of the worst taxes Britain had, and we welcome the Chancellor’s radicalism in abolishing it, rather than simply tinkering around the edges.”

From the Huffington Post UK:

Ben Southwood, head of research at the Adam Smith Institute, said it was an end to “one of the worst taxes Britain had.”

“According to the best economic research, raising £1 through stamp duty imposes £2-£5 of cost on the economy. This is a tax cut for the squeezed middle that will make a big difference to a lot of people’s lives. Politically, it could be a game-changer.”

From This is Money:

Ben Southwood, head of research at the Adam Smith Institute, said: ‘The old stamp duty slab system was one of the worst taxes Britain had, and we welcome the Chancellor’s radicalism in abolishing it, rather than simply tinkering around the edges.

‘According to the best economic research, raising £1 through stamp duty imposes £2 to £5 of cost on the economy.Though it will still, as a transactions tax, cost the economy heavily, the reform will reduce the economic cost substantially.

‘This is a tax cut for the squeezed middle that will make a big difference to a lot of people’s lives. Politically, it could be a game-changer.’

The ASI’s reaction to the Autumn Statement features in Conservative Home and the IBTimes UK

The Adam Smith Institute’s commentary on the 2014 Autumn Statement were featured in Conservative Home and International Business Time UK:

From Conservative Home:

The Adam Smith Institute welcomed the roads, stamp duty and ISA announcements, but said that Osborne’s R & D proposal “riskscrowding out private sector solutions” and argued that the Chancellor should make raising the National Insurance threshold “one of his top priorities”.  It concuded that his plans to reduce the deficit “still seem credible”.  On business rates, it said -

“A cap on business rate rises is welcome but the rates system itself needs more fundamental reform. The longer rates take to be revalued, the more distortionary the system is, penalising firms located in areas that have done badly since the last valuation. The longer the gap between rates revaluations, the greater the penalty for businesses in poorer areas and the effective subsidy for businesses in richer ones. Ideally the government should move towards a system of constantly rolling rates revaluations. If Zoopla can judge land values accurately on a rolling basis, so can HM Treasury.”

From IBTimes UK:

In the immediate aftermath of Osborne’s Autumn Statement announcement in the House of Commons, economists, lobby groups and taxpayers hailed the radical move as one of the Conservative-led coalition government’s best yet.

“The old stamp duty slab system was one of the worst taxes Britain had and we welcome the chancellor’s radicalism in abolishing it, rather than simply tinkering around the edges,” said Ben Southwood, head of research at the Adam Smith Institute.

“According to the best economic research, raising £1 through stamp duty imposes £2 to £5 of cost on the economy.

“Though it will still, as a transactions tax, cost the economy heavily, the reform will reduce the economic cost substantially. This is a tax cut for the squeezed middle that will make a big difference to a lot of people’s lives. Politically, it could be a game-changer.”