Britain's Ten Year Rule - A Warning on AI Adoption in Defence
The following report was submitted to the Defence Select Committee of the House of Commons in January 2024, in order to educate policy makers on the adoption of AI in Britain’s defence sectors.
Recommendations:
Move to a proactive approach to AI capability development and deploy capabilities today without perpetual delay waiting for ideal conditions
Do not wait for the MOD’s data strategy to progress, or for massive hand labelled data sources. Training on available data (including open source data and internal classified sources) and using self-supervised and low-shot learning AI techniques can enable capability gains today.
Do not wait for or overly rely upon future secure cloud solutions, edge computing and on-premise hosting should be used now.
Support Small and Medium Enterprises (SMEs) to overcome bureaucratic challenges, and the “chicken and egg” problem of not being able to do classified work (except typically after years of delay), because they have not managed classified work before, including:
Secure Compute - Offer at-cost secure hosting/cloud services or blueprints for self-provision to handle classified data.
Facility Security Clearance - Provide or sell at-cost secure facilities to provide SMEs locations to handle classified data.
Personnel Clearances - Hold clearances on behalf of SMEs at-cost (similar to its own employees), to facilitate their participation in classified defence work.
Commercial Frameworks - Make existing frameworks like G-Cloud accessible to SMEs, without needing to wait for infrequent entry windows which introduce years of delay.
Separate software and hardware contracts, avoiding “Prime” bias, or at minimum create distinct “lots” within procurements
Stop bundling software and hardware by default, and make this the exception, to genuinely get “best athlete” support. Bundling is the default because MOD fears integration challenges.
No matter how astute the MOD considers itself as a customer, the Primes exploit bundling to their advantage and dominate the integrated contract market, especially given cultural MOD biases towards hardware over software.
Seek to purchase COTs (commercial off-the-shelf) products, and hardware-agnostic software solutions, rather than developing new software from scratch for each hardware platform. Hardware is the commodity, software is the differentiator.
Unbundling and COTs also opens up opportunities for a broader range of suppliers, including smaller, more agile firms that specialise in AI and software
Comprehensively reform acquisition and commercial processes to enabling a rapid end-to-end process
Streamline business case and approval processes, especially for lower value projects and cutting-edge technology.
Pull capabilities through after experimentation programmes - initiatives like DASA should provide a realistic pathway for SMEs to scale up, rather than offering false hope, consuming scarce resources and condemning them to the “valley of death”.
Embrace genuine “agile” development, giving capability owners the opportunity to get end use feedback, “fail fast” and “learn by doing” to quickly test new opportunities. MOD is still culturally dominated by lethargic “waterfall” development, where only years or decades later programmes are declared a failure, with no accountability, as incentives block early intervention.
Abolish social value criteria in procurements and return to scoring tenders based on the quality and price of the capability - as explored in more detail in the ASI’s dedicated report on the Social Value Act,1 it adds waste to the procurement system and reduces value for money for taxpayers.
Cost of Rent Day 2024
Cost of Rent Day falls on the 5th May;
Renters in England work 125 days a year solely to pay their landlord;
Cost of Rent Day is the day on which, on average, renters in England earn enough before tax to cover their annual rent bill;
Cost of Rent Days have been calculated for 9 regions and 309 local areas across England;
This analysis of local areas shows Cost of Rent Day is even later in England’s major cities and the South East;
For example, the average Cost of Rent Day in London is the 16th July, more than two months later than the national average. This means that higher salaries are no sufficient to compensate for higher rent prices renters face in the capital;
This research has also exposed gaps in ONS housing statistics that need to be addressed, to enable better tracking and understanding of rental costs;
It is now incumbent on policymakers to fix the housing crisis, in particular, by addressing the shortage of homes.
On the Rocks: London's Nightlife in Crisis
London’s nightlife is a great national asset, which generates £46 billion for our economy, and helps to cement the city’s global reputation. Beyond a direct financial contribution, the U.K. night-time economy acts as a catalyst for secondary spending across transportation, security, and food services. For many Londoners, the opportunity to eat, drink, and socialise with friends, colleagues, and loved ones is a large part of the city’s appeal.
However, due to ever-higher costs, restrictive regulations, and broader political mismanagement, the night-time economy is struggling to recover post-Covid, and many establishments closing their doors for good. The Night Time Industries Association (NTIA) estimates that 3,011 pubs, bars, and nightclubs have closed across London since March 2020.
In recognition of this fact, national and local policymakers should implement a series of liberalising measures designed to lift the burden on the capital’s night-time economy, and to offer a much-needed lifeline to the UK hospitality industry more broadly. In particular, we recommend the following policies:
1. Reduce costs for the hospitality sector by slashing beer duty, cutting VAT, and intervening to get rid of local alcohol levies.
2. Reform our planning and licensing regime to give hospitality venues more control over what services they can offer and when, taking power away from a vocal minority of NIMBYs.
3. Improve transport provision in the capital, through the expansion of the Night Tube, intervention to stop the harmful ‘taxi tax’, and greater police presence around major transport infrastructure.
On the one hand, these changes would make it cheaper and easier for consumers to enjoy London’s nightlife offering; on the other, it would also reduce costs and regulatory burdens for businesses, helping to keep struggling establishments afloat and stimulating a sector-wide recovery.
Short-Term Thinking: Analysing the Effect of Applying VAT to School Fees
This paper reviews the proposal to apply VAT of 20% to private school fees in order to raise significant revenue.
We build on a paper from the Institute of Fiscal Studies (IFS) which concludes that levying an effective 15% of VAT on school fees would lead to a 3-7% reduction in private school attendance and raise a net £1.3-1.5 billion;
As the IFS noted, the evidence they drew on was “old” and “thin”. We raise several further concerns about the relevance of historical small price increases to a much larger price increase in a changed macro environment. We question the IFS’ confidence that higher migration scenarios, including up to 25% can be excluded from consideration;
The IFS paper mentions some unintended consequences and risks; it would be prudent to consider many more, including school closures and cost-cutting; labour supply withdrawal, and human costs;
This paper focuses on 3 key areas:
The justification for the existing VAT exemption:
The UK exempts VAT across the education sector, including but not limited to universities, tutors and commercial language tuition, recognising education is a merit good;
Applying VAT only to part of the private sector would distort competition, favouring suppliers of near-identical services (tutoring, pastoral care, music lessons) in different settings;
A static analysis, noting that school fees motivate marginal families’ labour supply, which can be withdrawn at any time, shows that independent schools are strongly favourable to the public finances and the broader economy.
2. The effect on the public purse:
We used the IFS’ data inputs and assessments as a baseline for our own analysis, and explored further quantified variables;
In a highly optimistic migration scenario of 5%, we indicate a net fiscal impact of £1.02 billion, a reduction of £0.38bn from the IFS’ estimate;
Between 10-15% migration, we indicate that the tax would generate no net revenue;
In a 25% migration scenario, we indicate that the tax could generate a loss to the Exchequer of £1.58 billion;
We outline several further downside risks that apply in each scenario.
3. The impact on state schools:
The geographical distribution of migration and school closures is impossible to predict;
We have significant concerns about the ability of local authorities and schools to plan, adapt for and respond to unpredictable demand swings; there is a risk of children stranded without a place
We doubt that putting private school children into the state system delivers benefit to the latter
There may be even greater competition for preferred state schools, driving talented children from poorer backgrounds from high-performing state schools and grammar schools.
Boosting Brownfield: Full Expensing for Brownfield Development
In partnership with PricedOut, the Adam Smith Institute is sharing this briefing document which outlines the application of full expensing, which was successfully made permanent in the 2023 Autumn Statement, to brownfield development.
By applying this policy to Brownfield development, the Government could:
Have a rate of return of up to 17% over the policy’s lifetime, providing significant fiscal benefits to the public purse.
Reinforce house builder’s its focus on Brownfield development by improving project viability because of the securer financing pipeline it provides.
Send a signal to developers, domestically and internationally, that the UK is serious about solving its housing crisis.
Stop, and even reverse, the collapse of the SME building sector by ending the stop-start cash flow caused by Britain’s sclerotic planning regime.
Improve placemaking in local communities up and down the country, ensuring that all Brownfield developments are given the investment they deserve.
My Generation: Introducing the Next Generation Centre
An enormous political, economic and social gulf has emerged between younger people and their parents and grandparents;
Young people are becoming increasingly sceptical of liberal democracy, its institutions and market economics;
Political dissatisfaction and disengagement amongst younger people is directly informed by their material circumstances. Many of them feel that our economy no longer works for them;
In particular, we have identified six areas of economic life in which young people today face challenging conditions:
Housing Affordability
Rental Costs
Taxation
Higher Education and Professional Prospects
Family Formation
Savings
This status quo is not inevitable. With the right ideas and policies, Britain can once again become a country that works for young people;
That is why we are launching the Next Generation Centre at the Adam Smith Institute, which will promote bold new ideas written by young people, for young people, with the aim of delivering greater opportunity to the next generation through market economics.
Free Wills: The Case for the Abolition of Inheritance Tax
This paper, newly updated since its initial publication in 1995, finds that many of the arguments made in favour of the abolition of inheritance tax (IHT) nearly thirty years ago are still relevant today- and, in some cases, are even more so.
We outline the following reasons to abolish IHT:
It places an unfair burden on those liable to pay the tax, often when their relatives are in the midst of grieving the death of a loved one. The responsibility to pay the right amount in tax falls entirely on the executor of the deceased’s will, often at great administrative expense. The pages of forms that have to be filled in have quintupled from 23 to 118 since the paper was first published;
The way the tax is structured encourages individuals to invest their money into less productive areas of the economy, rather than investing in companies and capital;
Inheritance tax yields a very small proportion of total tax revenue, raising £7.1bn in revenue in 2022-23, or 0.89% of total tax revenues collected in 2022;
Family-owned businesses, and assets in general, that are best and most efficiently looked after by long-term family owners acting to some degree in the quality of stewards. This socially desirable activity of stewardship is inhibited or prevented by death duties.
The Treasury’s current method of costing any changes to IHT assumes that the economy is static, rather than dynamic. For the reasons outlined in this paper, it should at least properly consider the impacts that any adjustments to IHT might have on levels on income, spending and saving.
Cooped Up: Quantifying the Cost of Housing Restrictions
In this new paper, we present the UK’s first calculation of the cost of restrictions on densifying our cities to the UK economy. Written by Adam Smith Institute Next Generation Fellow Duncan McClements and Jason Hausenloy, it is intended to demonstrate the destructive effects of Britain’s planning regulations.
This paper classes the removal of restrictions as allowing owners of existing dwellings to redevelop their properties so they are up to 8 stories tall.
Our model found that
Liberalising these restrictions would boost the welfare of every person by 6.5% if limited to London, and 11.7% if extended to all cities;
A liberalisation would correspond to annual nominal and real GDP gains respectively of 3.7% (£83bn) and 2.9% (£66bn) with conservative inputs, and 7.4% (£168bn) and 6.1% (£138.5bn) with liberal inputs. In other words, this is how much the UK economy has been losing out on every year as a result of our planning system;
It is currently costing the government £15,000 to provide infrastructure public services such as schools, GPs and utilities, to every new person who moves to a city.
Our findings outline the huge gains to be made from liberalising housing restrictions.
World Traders: The Case for the UK's Participation in the WTO MPIA
The World Trade Organisation (WTO) has long been a central pillar of wealth-maximising free trade amongst its member nations. But without the WTO's ability to settle disputes between states, via the Dispute Settlement Body, the benefits of tariff reduction and the elimination of non-tariff barriers would never have been realised.
Until recently, the Appellate Body (AB) was the highest ‘court’ in the WTO’s dispute system. States which were unhappy with a legal judgement on a dispute could submit an appeal to be heard by the AB, which is composed of 7 experts in WTO law and is intended to be broadly representative of the world’s chief legal systems. It has the authority to uphold, modify, and reverse the panel’s judgement, but it is not permitted to deviate from any WTO treaties.
But, as of 2019, the AB has no longer been able to hear appeals, owing to the US Government’s vetoing of the appointment of any new judges. There are fears that the current absence of the AB could threaten the very existence of the WTO. The availability of a route of appeal is key to the legitimacy of the WTO’s dispute settlement procedure.
This new paper makes the case for the UK to join the Multi-Party Interim Appeal (MPIA) arbitration mechanism, the alternative to the AB set up by the world’s leading economies in 2020. This system, which has already issued its first brief but reasoned judgement, offers a feasible solution to the AB crisis, helping establish predictable and legally coherent outcomes which should act as a basis for a more secure global trading environment.
Saving the Golden Goose: how the UK's Crypto Rules Narrowly Avoid America's Securitarian Trap
The UK currently stands at the forefront of competition for cryptocurrency and digital asset investment- and it is already the world’s third largest digital asset economy.
Britain’s success is due to our more permissive regulatory regime, compared with our international peers, most notably the US. Although concerns were raised that the October 2023 reforms by the Financial Conduct Authority (FCA) have made the UK more restrictive, these measures concentrated on countering fraud. The UK has a good balance between consumer protection and support for business growth and development.
This advantageous approach contrasts with that of the USA, which is stifling innovation in the digital currency sector. Rather than treating crypto as a currency, the US regulates it in the same way it would an unstable asset such as a bond or a stock. This means it can be taxed if it fluctuates in value, and adds further layers of complex regulation, making the US less competitive in the process.
As this paper highlights, if the Prime Minister wishes to achieve his stated goal to make the UK a ‘global crypto asset technology hub,’ the government must resist calls to over-regulate.
Archive
- May 2024
- April 2024
- March 2024
- February 2024
- January 2024
- November 2023
- October 2023
- September 2023
- August 2023
- July 2023
- May 2023
- April 2023
- March 2023
- February 2023
- December 2022
- November 2022
- October 2022
- September 2022
- August 2022
- July 2022
- June 2022
- May 2022
- April 2022
- March 2022
- February 2022
- January 2022
- December 2021
- November 2021
- October 2021
- September 2021
- June 2021
- May 2021
- April 2021
- January 2021
- November 2020
- October 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- February 2020
- January 2020
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- May 2016
- April 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- July 2015
- June 2015
- April 2015
- February 2015
- January 2015
- November 2014
- October 2014
- August 2014
- July 2014
- May 2014
- April 2014
- March 2014
- December 2013
- November 2013
- October 2013
- September 2013
- April 2013
- March 2013
- February 2013
- January 2013
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- May 2011
- April 2011
- March 2011
- November 2010
- October 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- April 2009
- March 2009
- February 2009
- November 2008
- April 2008
- February 2008
- November 2007
- November 2006
- September 2006
- August 2006
- January 2006
- November 2005
- July 2005
- November 2004
- December 2003
- November 2003
- December 2002
- November 2002
- November 2001
- October 2001
- December 2000
- November 2000
- November 1999
- December 1998
- November 1998
- January 1998
- November 1997
- November 1996
- December 1995
- November 1995
- November 1994
- August 1994
- January 1994
- December 1993
- November 1993
- August 1993
- November 1992
- June 1992
- December 1991
- November 1991
- August 1991
- December 1990
- November 1990
- September 1990
- August 1990
- January 1990
- December 1989
- November 1989
- October 1989
- August 1989
- May 1989
- March 1989
- January 1989
- December 1988
- November 1988
- August 1988
- July 1988
- March 1988
- January 1988
- October 1987
- August 1987
- April 1987
- January 1987
- December 1986
- November 1986
- October 1986
- September 1986
- January 1986
- December 1985
- November 1985
- October 1985
- June 1985
- December 1984
- November 1984
- January 1984
- November 1983
- January 1983
- January 1982
- December 1981
- November 1980
- November 1979