Press Releases

Adam Smith Institute: Housing market out of control; planning system to blame

Commenting on sky-rocketing house prices in London, Research Director of the Adam Smith Institute, Sam Bowman, said: 

"London’s house prices are out of control, and the planning system is to blame. The ONS’s headline data, which shows that house prices rose across the UK by 9.1% in the year to February, is extreme enough, but drilling down into the data reveals that prices rose in London by an eye-watering 17.7%.

"This is a disaster – the housing market is out of control, particularly in London, making housing increasingly unaffordable for many people, particularly the poor and young. Rising house prices are nice if you own your own home and are planning on downsizing or want to leave your house to your children, but if you want to get onto the property ladder or move to a larger home, say, to start a family, the price rises revealed by today’s news are devastating. Rents are rising more slowly than house prices but it seems likely that eventually they will catch up, particularly for short-term leases.

"Help to Buy is likely to be one factor in these price rises, because the scheme inflates demand by subsidizing home buying. [1] And if house prices fall, the taxpayer will take the hit. But the biggest cause of these runaway train price rises is the planning system, which makes it inordinately difficult for new construction to take place to allow supply to meet demand. Since 2008, issuance of construction permits for residential buildings has been at a fifty-year low [2].

"Unless the government liberalises planning radically to allow a huge amount of new house construction, house prices are likely to stay high for the foreseeable future

[1] http://www.adamsmith.org/sites/default/files/research/files/ASIburningdownthehouseWEB.pdf

[2] http://research.stlouisfed.org/fred2/series/ODCNPI03GBA661N

For further comment or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

Comment: Fall in annual CPI inflation to 1.6%

Ben Southwood, ASI Head of Policy, commenting on the fall in annual CPI inflation to 1.6%, said:

"After years of above-target annual consumer price index (CPI) rises, then coupled with lacklustre growth or even retrenchment, below-target inflation at the same time as substantive recovery is highly encouraging.

"Disinflation is a worry in a time of weakness, but should be desired and expected in a time of strength—many economists believe the failure to account for the "good deflation" generated by productivity improvements from inward migration and developing world growth in the early 2000s set the scene for the 2007-8 crash.[1]

"Since this fall is accompanied by robust real GDP recovery, and appears to be mainly driven by cheaper fuels, we needn't be too worried that the Bank of England has decided to go the way of the European Central Bank and let nominal aggregates fall well below the appropriate and previously expected growth rates.

"But the difficulty of working out whether or not this inflation is in fact supply- or demand-side, and thus whether or not the Bank should respond by easing or doing nothing, is yet another indication that we should look to an alternative policy regime. Targeting nominal income would automatically let inflation fall when RGDP growth is strong and automatically let inflation rise when RGDP growth is weak—both the ideal appropriate policies.[2]

"The Treasury and the Bank should seriously consider this alternative—to take uncertainty out of the system and avoid a repeat of 2008."

[1] http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2008/11/cj28n3-1.pdf

[2] http://mercatus.org/sites/default/files/Sumner_NGDPTargeting_v2.pdf

For further comment or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

Comment: Labour's immigration policy is conservatism in progressive clothing

Commenting on the Shadow Home Secretary's policy announcements regarding UK immigration and migrant workers, Research Director of the Adam Smith Institute, Sam Bowman, said: 

“Yvette Cooper is almost entirely wrong on the economics of immigration and her policy announcements today amount to a nearly wholesale adoption of the Conservative Party’s worst policy.

“Cooper’s position on low-skilled wages is baseless. According to the impact assessment published by the Home Office last month, if low-skilled immigration has any impact on low-skilled native wages at all, it is a minor and short-lived one. Immigration also seems to raise average native wages and have a positive impact on economic growth, neither of which Cooper mentions.

“It is baffling that Cooper can claim that immigrants are a burden on public services. As repeated studies have shown, immigrants pay more in tax than they cost in services – a phenomenon which over the next few decades can mean the difference between a national debt of over 180% of GDP and less than 60%. It’s possible that a huge liberalization of low-skilled immigration could change that, in which case reforms like charging immigrants a fee to reside in the UK or restrict access to public services would be a decent solution. There is no problem with immigration to which strict immigration controls are the best solution.

“Cooper’s announcement that students and refugees would be excluded from the net migration cap if Labour was in government is welcome, but the fact remains that Labour has accepted the facile “logic” of the net migration cap, is making no reforms to high-skilled immigration, and, like the Tories, is basing its immigration policy on anecdote instead of evidence.

For further comment or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

Comment: Bank of England's decision to hold policy was the right choice

Commenting on the Bank of England's decision to hold policy, the Adam Smith Institute's Head of Policy Ben Southwood said:

"The MPC has made the right choice.

"The path of aggregate demand—as measured by nominal GDP growth—is just about where we'd want it, given the Bank's apparent decision to start a new trend rather than catching up with the one we saw prior to the recession.

"In general, and historically, we'd want to catch up to pre-recession trends, but by now most of the costs of failing to do so have probably been borne.

"It would certainly be inappropriate to tighten policy now—the recovery is only just setting in and there is considerable slack in the labour market, with nominal wages growing just 1.4% annually according to the latest data."

For further comment or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

 

Comment: Plain Packaging is gift to counterfeiters, nanny statists and prohibitionists

  • Plain packaging will encourage cigarette counterfeiting and smuggling
  • Government's position totally disregards individual liberty & smokers’ rights
  • Plain packaging is a dangerous step towards complete ban on tobacco

Commenting on the government's announcement that it will move to introduce plain packaging for cigarettes, the Adam Smith Institute's Research Director Sam Bowman said:

"The government is wrong to bring plain packaging back onto the agenda. Plain packaging will make counterfeiters’ jobs much easier, will infantilise adults, and is a dangerous step towards a complete ban on tobacco.

"Since Australia introduced plain packaging, smoking rates have not changed, but the proportion of illicit cigarettes had increased substantially. So-called “illicit whites” now account for more than half of illegal sales and about 7.5% of all sales in Australia. The wide availability of illicit whites, in part due to Australia’s plain packaging rules, means adolescents now likely have greater access to cigarettes than previously—and at lower prices.

"Furthermore, plain packaging is a deeply illiberal policy that infringes our right to Freedom of Speech. It clearly infringes on tobacco firms’ freedom of expression, but the freedom for adults to have free exchanges of ideas with each other. In short, a restriction of my freedom to speak, like plain packaging, also affects my freedom to listen and consider what you have to say.

"Smokers enjoy smoking (and actually overestimate the risk of lung cancer), so if moves to curb smoking are successful they will probably make society less happy overall.

"Perhaps most worryingly, plain packaging would be a major step towards a complete ban on tobacco. Prominent public health lobbyists are now calling for a total ban on cigarettes. Plain packaging is a massive step towards the denormalization of smoking that those prohibitionists crave to make their crazy dreams a reality.

"The government’s announcement today marks a dangerous, illiberal new extension of the nanny state. Nobody who values individual liberty can allow it to be thrown away in the name of ‘public health’."

For further comment or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

Comment: The sale of Royal Mail was well handled

Commenting on the sale of Royal Mail, the President of the Adam Smith Institute, Dr Madsen Pirie, said:

"The sale of Royal Mail was well handled.

"It was the first major privatization in two decades, and the aim was not to raise the greatest possible sum for the government, but to turn a state-run corporation into a successful and flourishing private business.  

"No-one knew what the "correct" price was for Royal Mail, any more than they did for BT, British Gas and the dozens of others.  Since they had not traded in the private sector, or had to attract private investment, no-one knew how they would be valued.  Government took expert advice knowing that it would be, at best, an estimate.  It covered itself by retaining a proportion of the shares so it could gain later from any increase in value.  In the case of Royal Mail it has retained 30% for later sale at a higher price.

"The pricing was cautious, as it was in the earlier privatizations, because government wanted a successful launch into the private sector more than it wanted the highest possible price.  

"We now have a successful private company holding its own in a competitive market, a company that has become one of the UK's leaders, and one whose future prospects look good.  This was a successful sale, and those who carp about not gaining the maximum possible price simply do not understand what privatization is all about.  It isn't about selling off stuff for the top price; it's about building up companies that can thrive by providing goods and services in a dynamic competitive market."

For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

Adam Smith Institute report: Plain packaging has failed in Australia and will fail in Britain

Plain packaging has failed in Australia and will fail in Britain, says report:

  • Plain packaging for cigarettes does not appear to have reduced smoking rates in Australia, the only country to have tried plain packaging so far.
  • Illicit cigarette sales are way up, particularly "illicit whites" which are not legally sold anywhere in the world.
  • The proliferation of "illicit whites" has made cigarettes even more accessible to young people than before.
  • The report comes ahead of the government's plain packaging consultation announcement next Monday, March 31st. 

Plain packaging for cigarettes appears to have failed in the one country to have implemented it, Australia, a new report by the Adam Smith Institute and Reason Foundation has found. The report comes ahead of the government's plain packaging consultation announcement next Monday, March 31st. 

The report, "Smoking, Plain Packaging and Public Health" (http://www.adamsmith.org/sites/default/files/research/files/ASIsmokingplainpackagingWEB.pdf), looks at surveys of smokers in Australia which show that, although plain packaging may have led to stronger intentions to quit, many reported engaging in defensive behaviors such as covering up health warnings and even smoking more. In the year to July 2013 the proportion of smokers had not declined.

Another study, which looked at discarded packs, found that consumption of cigarettes in the year to July 2013 remained at the same level as in 2012, but found that the proportion of illicit cigarettes had increased substantially. This was corroborated by the most recent Annual Report of Australia’s Customs and Border Protection Service, which shows that the number of illicit cigarettes entering Australia has indeed risen dramatically in the past three years.

The discarded pack study concluded that contraband—much of which is in the form of finished cigarettes that are not legally sold anywhere in the world, known as “illicit whites”—now accounts for more than half of illegal sales and about 7.5% of all sales in Australia. 

The wide availability of illicit whites, in part due to Australia’s plain packaging rules, means adolescents now likely have greater access to cigarettes than previously—and at lower prices. Moreover, these illicit whites have no health warnings. On this basis, it seems reasonable to conclude that plain packaging has been at best useless and at worst counterproductive.

The author of the study, Julian Morris, Vice President of Research at Reason Foundation, notes that “On the basis of what we currently know, it appears that Australia’s experiment with plain packaging has failed to reduce rates of smoking among any of the target groups. Worse, it may have made smoking more attractive to the youth. Until we understand better the impact of plain packaging in Australia, it would be misguided to move forward with similar restrictions in Britain.”

For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

Adam Smith Institute Budget Reaction: Well, that was boring

Commenting on the 2014 Budget: 

“Well, that was boring. The total tax and spending changes barely scratch the surface at around £2bn/year in each direction – that’s a tiny 0.3% of the £732bn the government is expected to spend this year. The exception may be the pensions announcements, which may prove to be very significant in the years to come.

“Much of the budget was gimmicky: inheritance tax exemptions for emergency services personnel who die in the line of duty must only affect a handful of people and giving LIBOR fines to Help For Heroes continues to be one of the most bizarre revenue hypothecations of modern times. Even the much-heralded ‘welfare cap’ can be easily undone by any Parliament that wishes to in future, so cannot count as more than a political stunt.

“If there is cause for optimism it is in the economic data released today, which shows that the labour market is rebounding strongly (even if productivity still leaves a lot to be desired), and the language used by the Chancellor. At last the government is speaking in dynamic terms, recognizing in rhetoric at least that lower tax rates can produce higher revenues. Mr Osborne is talking the talk on taxes, but he doesn’t have much time left to walk the walk.” 

– Sam Bowman, Research Director, Adam Smith Institute

Pensions

“At last Britain's private pension savers will be treated like responsible adults. As lifetimes have lengthened and financial uncertainty has abounded, annuity rates have fallen, leaving savers much worse off then they expected. The rule has long been that, apart from a proportion that can be taken as a lump sum on retirement, pensioners have had to convert their retirement pot into an annuity, paying them a lifetime income. But as lifetimes have lengthened and financial uncertainty has abounded, annuity rates have fallen, leaving savers much worse off then they expected.

“From April 2015, retirees will be able to access their pension savings pretty much as they wish. Instead of being hit by a 55% tax if they took out 'too much', ordinary rates of tax will apply. So it all becomes much easier. You build up a pension pot while you work; on retirement, you can take 25% of that tax-free (a provision designed to help people with moving costs and other changes on retirement); then you can decide whether you will buy an annuity, draw down the pot at a set rate, or withdraw the whole sum, facing tax only at the prevailing marginal rate.

“Most people are perfectly capable of managing their retirement income and do not want to fall back on the state anyway. The new rules recognise that. On the rare occasions when governments treat us like adults, they should be encouraged.”

– Eamonn Butler, Director, Adam Smith Institute

Personal Allowance & National Insurance

“As anticipated, the income tax personal allowance has been raised to £10,500. That’s good, and will help nearly all workers, but the Chancellor missed the opportunity to tackle the National Insurance threshold, which is much lower than the personal allowance and affects low paid part-time workers who may not benefit from the personal allowance rise at all.

“A part-time worker earning £10,500 will pay no income tax, it is true, but they will still face a National Insurance bill for £330 a year. National Insurance is the great elephant in the room in British tax policy: although administered separately, it goes into exactly the same revenue pot as income tax. It desperately needs reform if the working poor are to be given the tax break that almost everyone agrees they need.

“Still, the rise to the personal allowance is better than nothing, and the government is right to pursue tax cuts for lower earners.”

– Sam Bowman

Childcare

“The government is right to recognise that childcare costs are becoming increasingly unaffordable throughout the UK: at £106.38 per week, the cost of 25 hours of childcare is unaffordable for many families.

“Ofsted regulations around childcare, such as stringent qualification requirements and low mandatory child-to-staff ratios, are some of the harshest in Europe, and have caused prices to skyrocket.

“These regulations have real consequences for the consumer: the UK ranks as the second highest spender in Europe on childcare services and parents are spending a staggering 28% on childcare in out-of-pocket costs.

“Unfortunately, the government’s proposals do nothing to address these supply-side factors, and will probably just perpetuate the vicious cycle of high costs. Families would benefit far more from deregulating the childcare sector than from increasing the childcare subsidies, which fund a highly distorted and expensive market.”

- Kate Andrews, Communications Manager and Research Associate, Adam Smith Institute 

Missed opportunities

“The most obvious missed opportunity was the lack of any additional cut to Corporation Tax. Adam Smith Institute research has found that nearly 60% of the Corporation Tax comes out of workers’ wages, with the rest acting as a harmful tax on capital. The Chancellor could have boosted wages and stimulated the economy by cutting Corporation Tax even more, killing two birds with one stone.

“A change to the Bank of England’s remit. Inflation targeting has unequivocally failed, giving us the worst recession and slowest recovery in living memory. If the Bank were tasked with targeting Nominal GDP instead, as many prominent economists are now suggesting, the macroeconomy would likely improve immediately and remain stable during future supply shocks such as the 2008 Financial Crisis.” – Sam Bowman

For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org /07584 778 207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates liberal public policies to create a richer, freer world.

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