16 June 2011
In response to Ed Balls' proposals for an emergency VAT tax cut:
Tom Clougherty, Executive Director of the Adam Smith Institute, says:
“How ironic that Ed Balls – the man who wanted to extend the reach of the deeply anti-growth 50p tax rate – has suddenly decided that tax cuts would boost the economy.
“But today’s announcement is pure politics. A temporary cut in VAT would do little to boost confidence or growth. People aren’t fools – they know that you can’t just borrow more, spend more, and raise less without it coming back to bite you further down the line.
“A growth agenda that coupled lower taxes with less red tape and less wasteful spending would be a good thing. But the shadow chancellor’s reckless, have-your-cake-and-eat-it too approach to the economy would do nothing except march Britain further down the road to a sovereign debt crisis. It would damage confidence, not boost it, and destabilise the economy, not stimulate it.”
30 May 2011
The Adam Smith Institute, the libertarian think tank, has released calculations today (Monday 30th May 2011) revealing the shocking length of time we work to pay off our tax bill. Britons have worked for a full 5 months this year to pay their taxes, with every penny earned in the UK between January 1 and May 29 taken by the taxman to support government expenditure.
This means that Tax Freedom Day, the day when people stop working for the government and start making cash for themselves, will come on May 30 in 2011 – 3 days later than in 2010.
The main reason for this is that the government has raised VAT, in order to help reduce the UK’s record budget deficit.
New calculations by the ASI also reveal the worrying extent of the UK’s debt. Our burden of debt is so great that UK income taxpayers would need to work for nearly a year and a half (525 days) - with their entire wage packet going to the government, and not a penny being spent on public services – to pay off the national debt.
Dr Madsen Pirie, President of the Adam Smith Institute identified the linkage between the lateness of Tax Freedom Day and the government’s attempt to tackle the deficit and UK debt:
“The last government left an appalling legacy. Its reckless spending has driven Britain into record levels of debt that threaten the lives and happiness of future generations. Bringing down that debt has to be an absolutely urgent priority. However it isn’t enough to merely cut spending. We need targeted tax cuts to encourage economic growth.”
Sam Bowman, Head of Research added: “Tax Freedom Day underlines the huge burden of government on working people’s lives. For five months of the year, we are slaves to the state. No wonder growth is so slow – we need robust tax reform now, bringing lower, simpler, flatter taxes. The government should resolve to make Tax Freedom Day something we can celebrate earlier and earlier each year.”
A full breakdown of how long it takes Britons to pay off each tax can be found in the Notes to Editors (below). The tax burden also varies by region, falling more heavily on some and more lightly on others. The figures below show, in ascending order, how long each region has to work in 2011 to pay income tax:
Britons as a whole work the following amount of days to pay each of the following taxes:
How is Tax Freedom Day calculated?
For more information
24 May 2011
In response to today’s vote on Eurozone financial assistance
Sam Bowman, Head of Research at the Adam Smith Institute, says:
“The eurozone bailouts haven't worked, and MPs are right to try to block Britain's participation in future bailouts. Greece is almost certain to default in the near future, and Ireland will have to default within the next two years on current trends. Portugal is not far behind. Saddling eurozone countries with even more bailout debt will only make their problems worse.
“The government has risked £12.5bn on bailouts for Ireland and Portugal. Throwing more and more money at the eurozone bonfire does nobody any good except senior bondholders who should have known better. Even if it was possible to do so, saving the euro would not be worth the cost to them and us.”
To arrange an interview with Sam Bowman, please contact Sally Thompson, Communications Director, on 07584 778 207, firstname.lastname@example.org
· Leading regulators examine 25 years of regulatory experience and say how regulation should change in the next 25.
· Blair-era regulators for utilities, communications, rail have had their day, says think-tank.
· The Coalition is failing in its promise to rein back regulation.
· The regulatory offices are expanding – when they should instead be encouraging competition and scaling their bureaucracy back.
In a report released today (Thursday) the independent Adam Smith Institute (ASI) calls for radical changes in the way the privatised utility and transport networks are regulated. The gas, water, electricity, telephones and rail regulators, it says, have lost their independence and have become subservient to national politicians and officials. Regulators should be given a new mission – to make the utilities fully competitive and then phase themselves out.
Margaret Thatcher created the first regulatory offices – such as Ofcom, Ofgem, and Ofwat – as a way of curbing newly privatised utility monopolies. But regulation has become Britain’s fastest-growing industry, says the Institute, and the regulators are strangling the utilities with nitpicking intervention when they should focus on the real concerns of customers. Meanwhile the utilities have become adept at ‘gaming’ the system, using its very complexity to hide profits and inefficiencies.
In the report, five experienced regulators – Stephen Littlechild (electricity), Ian Byatt (water), Graham Corbett (mail), John Swift and Chris Bolt (rail), reflect on how the system has developed over the last quarter century, and where it should go from here. They argue for gradual change in the system and a restoration of independence from government. Professor Littlechild wants regulators to become much less adversarial, and to facilitate negotiated agreements, rather than imposing prices and rules as they do now.
Academic expert Tim Ambler goes further, questioning whether the regulatory offices are still effective, and arguing that the regulatory offices should work harder to make the utilities properly competitive and then dissolve themselves. He argues that in banking and finance too, most of the problems stem from too little competition and too much regulation, rather than the opposite. Regulators should concentrate on creating real competition which in turn will protect customers.
Adam Smith Institute director Dr Eamonn Butler says the need for radical change has become urgent, as regulators have been captured by the politicians and civil servants. They are no longer independent. “The regulatory system needs to be smaller, less bureaucratic and more focused,” he says. “Regulators should focus on opening their markets to competition rather than increasingly detailed control.”
Competition is the best regulator, and the regulatory offices should aim to grow competition and then retire gracefully. Regulators are not something inevitable: we just need to figure out how to run our utilities without them.
21 April 2011
· The success of the government’s school reforms depends on a large increase in the number of good school places. But the Free Schools programme, as currently constituted, will not be able to deliver this.
· In-depth new research suggests that the only way the government will be able to meet its targets for new schools and extra school places is by allowing profit-making schools to participate in the Free Schools programme.
· There are already 489 independent profit-making schools in England, and these are overwhelmingly non-selective, secular, and concentrated in some of our most wanting metropolitan areas.
· 41 percent of these schools operate on fees less than or on a par with the national average per-pupil funding in the state maintained sector, but still significantly outperformed the independent sector as a whole in Ofsted inspections between 2007 and 2010.
In a report released today (Thursday 21st) the Adam Smith Institute has called on the government to allow profit-making companies to open and run Free Schools, without the need for a charitable vehicle or trust framework, as required by existing legislation.
The Institute endorses the spirit of the Free Schools programme, but argues that unless the profit motive is introduced, its impact will be limited. Tom Clougherty, executive director of the Institute, says:
“The idea behind Michael Gove’s reforms is that if you let independent providers open schools within the state sector, you will hugely increase the supply of good school places. That will create choice and competition, and drive up standards. But unless you allow for-profit companies to enter the market, it is very hard to see where all those new school places are going to come from.”
In 2008 the Conservatives set a target of 3,000 new schools to provide 222,000 extra school places. The state education system as a whole will need to provide 350,000 extra places by 2014. Yet so far, only 323 applications to open Free Schools have been made. Just 41 have proceeded to business case stage, and only a handful will open in September 2011. The Adam Smith Institute believes that for-profit schools can and should fill that gap.
Profit-Making Free Schools: Unlocking the Potential of England’s Proprietorial Schools Sector, by education expert James Croft, provides the first in-depth, empirical analysis of England’s existing for-profit schools. It identifies 489 of them, which – perhaps contrary to expectations – are overwhelmingly non-selective, secular and urban or suburban. Moreover, 41 per cent of these schools operate on fees less than or on a par with the average per-pupil spend in the state sector. Both this subset of inexpensive for-profit schools, and for-profit schools in general, significantly outperformed the independent sector as a whole in Ofsted inspections between 2007 and 2010.
Crucially, Croft also finds that these for-profit schools have significant spare capacity relative to their size – although they only have 15 percent of the total number of pupils educated in the independent sector, they carry 25 per cent of the sector’s spare capacity. This, coupled with their proven ability to add capacity (1), suggests that for-profit schools are the ideal solution to the Department for Education’s problems.
“There is no evidence to suggest that trust governance guarantees solid educational outcomes. Nor is there any evidence to suggest that for-profit management compromises standards – in fact, the opposite appears to be true. So why shouldn’t we have profit-making Free Schools? My research suggests they would provide sorely needed additional capacity and deliver a good education at an affordable price. The government should be welcoming them with open arms.”
The report concludes by proposing that the government remove any requirements relating to corporate or legal structure from the Free Schools legislation. Schools would no longer have to be run via a charitable vehicle or operate under a trust framework. Public companies, private companies, partnerships and sole traders should all be able to participate in the Free Schools programme. The report also advocates measures that would make it easier for existing for-profit schools to convert to free school status, and suggests that the government set up a bursary scheme that would allow children eligible for the pupil premium to take advantage of spare capacity in independent schools.
You can read the full report here. For media enquiries please contact Sally Thompson on 07584 778 207.
14 April 2011
Sam Bowman, Head of Research at the Adam Smith Institute, said:
“Any argument that immigrants create unemployment uses the same flawed logic that says that open trade makes us poorer.
“In the long run, immigrants increase native wages. Technological advancement and the entry of women into the labour force displaced workers and created frictional unemployment, but ultimately created large gains in per capita income. The same is true of immigrants.
“Fears that immigration creates a drain on the welfare state are misguided. Immigrants contribute more in taxes than they use in services. Home Office research suggests that is equivalent to 1p off the basic rate of income tax. Immigrants don't drain the welfare state, they subsidise it.”
To arrange an interview with an ASI spokesperson, please contact Sally Thompson, Communications Director, on 07584 778 207,email@example.com
30 March 2011
Ahead of announcements today on Arts Council cuts, Sam Bowman, Head of Research at the Adam Smith Institute, said:
“The government should phase out arts funding altogether. Subsidies distort the market and fund art that nobody wants. Artists that have to appeal to a government body rather than the public for their income will inevitably compromise the quality of the art they produce.
“Great artists like Shakespeare, Dickens and The Beatles have always relied on consumer demand and private patronage to fund their work, and private institutions like the Royal Academy of Arts and Glyndebourne Festival Opera provide fine art without any government funding. If people want something, they should be prepared to pay for it.”
To arrange an interview with Sam Bowman, please contact Sally Thompson, Communications Director, on 07584 778 207, firstname.lastname@example.org
23 March 2011
In response to today's budget announcement, the Adam Smith Institute has released the following analysis of Osborne's budget:
Tom Clougherty, Executive Director of the Adam Smith Institute, and Sam Bowman, Head of Research, have released the following comments in response to today's key announcements:
The government will consider merging income tax and national insurance.
“The only remaining justification for keeping income tax and national insurance separate is to prevent people realizing just how much tax they actually pay. Merging the two taxes on income is a welcome and long overdue move towards transparency and simplicity in the UK tax system. The Adam Smith Institute first proposed this reform in 1984. Sometimes, good things come to those who wait.”
"But leaving employer NI contributions unchanged means that double taxation of income will continue even after this reform." - TC
The government will continue with reforms to make the UK’s corporate tax regime ‘the most competitive’ in the G20.
“Competitive business taxes are essential to growth, but corporation tax is only one part of the picture. The coalition’s capital gains tax hike makes Britain a world loser, and that can only hold back the capital investment that is vital for economic growth." -TC
The government will review the 50p tax rate
"The Chancellor should have set out a clear timetable for the abolition of the 50p tax rate. As highlighted in our 2011 report on the 50p tax rate, high earners are leaving Britain permanently to avoid the tax, and a vague assurance that it will be removed won't change that." - SB
Inheritance tax relief for charitable giving
"It's better to give to charity than to the taxman. But it should be your choice who you leave your estate to, not the Chancellor's" -SB
The government will cut fuel duty and introduce fair fuel stabilizer.
“This is great news for motorists, who have been viciously overtaxed by successive governments. But the government should have applied a similar rationale to the rest of its environmental programme, which is set to significantly raise energy costs in coming years. It doesn’t make sense to talk about boosting manufacturing, while also pursuing policies that will raise the cost of energy by a third.” -TC
The government will significantly raise the tax on cigarettes.
“Delaying the travel duty was a recognition that some taxes bite harder than others. Cigarette taxes are no different. "Sin taxes" may be effective revenue tools but only because, for many, they are a tax on fun. They’re regressive and hit the poorest the hardest. In tough times like this, the Chancellor should spare us the grim paternalism of the sin tax and allow people some small pleasures in life.
“Britain’s high tobacco taxes encourage illicit trade, with smuggled and counterfeit cigarettes now making up a significant part of the market. Today’s budget will only compound that problem.” -SB
The government will attempt to boost the construction industry through the relaxation of planning laws and the use of ‘land auctions’.
“The British planning system is absurdly strict and anachronistic. Land auctions might be a sensible way of minimizing the economic damage, but they are no substitute for proper, thoroughgoing liberalization. Rather than tinkering around the edges, we should be ripping up the Town & Country Planning Act and starting again.”
"Enterprise zones are a good idea but they raise the question: why isn't the Chancellor making the whole country an enterprise zone?" -TC
One big disappointment…
“The budget will do little to encourage job creation. Yes, the Chancellor announced a handful of welcome changes to employment rules, but these pale into insignificance when compared with the rise in employers’ national insurance contributions now coming into effect. Changes to thresholds do little to help the overall picture. Raising the cost of employment at a time like this is madness – the Chancellor should have cancelled the rise in employer contributions.” -TC