Seeing It Through: A Plan for 'Full Fat' Freeports

The Adam Smith Institute’s latest paper, written by Sam Ashworth-Hayes, argues that freeports can turbocharge growth in the UK economy if they focus on redressing the UK’s unique policy failures.

• Some academic economists are sceptical of the ability of freeports to add value to the British economy, arguing that they primarily divert (rather than create) economic activity;

• Policymakers need not risk this being the case—freeports offer an exciting opportunity to create growth by addressing inefficiencies within the British economy;

• This paper sets out four ways this can be achieved;

  • Creating a light-touch planning regime, providing fast and certain planning permission for high value economic activities;

  • Providing significant packages of local investment to alleviate concerns about crowding of public services and infrastructure, with short run disruption smoothed by offering payments linked to the port’s success;

  • Implementing a tax regime designed for growth, including full expensing for capital investment, the simplification of customs processes, and the elimination of property taxes;

  • Establishing a regulatory sandbox, allowing governments to trial regulatory changes across a sample of freeports, testing policy alternatives against one another and getting real world feedback on their performance.

• By tailoring the freeport model to address the UK’s unique policy failures, these facilities can boost growth and provide a proof-of-concept for beneficial future reforms to the wider economy.

Smarter Money: Reforming HM Treasury

The Adam Smith Institute’s latest discussion paper, written by Tim Ambler, proposes a number of reforms to improve the efficiency and value for money of HM Treasury.

This paper is part of the Adam Smith Institute’s “Reforming the Civil Service” series.

• The Treasury has responsibility for a number of functions that are currently performed inefficiently and represent poor value for taxpayer money;

• The department’s stated objectives are too broad and cannot be used as indicators of objective achievement. It should instead be organised around realistic quantified objectives aligned with executive agencies that could feasibly deliver them;

• Non-departmental Public Bodies (NDPBs or ‘quangos’) should either be abolished or become Executive Agencies if they are substantively adding to their departmental capacity;

• The paper’s recommendations include the following:

  • Close down the Government Internal Audit;

  • Abolish the National Infrastructure Commission;

  • Consider ways in which the UK Infrastructure Bank’s objectives could be achieved by the private sector;

  • Close the Office of Tax Simplification and the HMRC Administrative Burdens Advisory Board, and replace them with an independent body drawn from academia;

  • Abolish the Financial Reporting Advisory Board;

• Taken together, if all the recommendations within this paper were implemented, this would amount to a saving of 1,505 staff (43% of the present total).

Keeping the Lights On: Testing the Government's Projections for Electricity Supply and Nuclear Capacity

The Adam Smith Institute’s latest paper, written by Simon Clanmorris MA, Peter Edwards FRS, ML and Paul Norman PHD, highlights the fact that the Government is under-investing in the nuclear power it needs to reach its decarbonisation targets, and sets out how we can fast-track approval for modern, less expensive, reactors.

• The Department for Business, Energy and Industrial Strategy (BEIS) is under- estimating the UK’s energy demand in 2050;

• In particular, it appears to be failing to take into account the fact that we will not be able to rely on Variable Renewable Energy—such as wind and solar—during periods of Dunkelflaute (where the sun doesn’t shine and the wind doesn’t blow);

• As a result, BEIS is also underestimating how much nuclear power will be required if the Government intends to maintain its goal of decarbonising the UK’s electricity system by 2035;

• The Government plans to replace our current nuclear capacity with older generation nuclear reactors, which are costly and unlikely to be built in time to meet decarbonisation targets;

• Modern Small Modular Reactors (SMRs) could be a solution to address the shortfall in zero carbon electricity generation. Compared to conventional nuclear reactors, they are quick to build and have far smaller capital costs and space requirements;

• SMRs are also less of a safety hazard owing to features such as their modern design and the fact that they are mostly low pressure, so regulation could be streamlined were the UK to fast-track any design that had been approved in the USA or Canada;

• In the medium term, Advanced Modular Reactors would be a better solution. If the UK were to fast-track regulatory approval, these could be supplied from 2030 onwards.

In the Bleak Midwinter: How (and How Not) to Tackle the Energy Crisis

The Adam Smith Institute’s latest paper, written by John Macdonald, Emily Fielder and Alex Hughes, sets out the most effective policies to tackle the energy crisis and alleviate pressure on poorer households.

• Since the Adam Smith Institute published its paper on the cost of living crisis in March 2022, the problems facing households and businesses have been exacerbated by rising inflation and energy bills;

• Whilst the support that the Government has already committed is welcome— as are promises to reverse the National Insurance hike—it is clear that more needs to be done;

• Any support the Government provides should be properly targeted towards those who need it most, whilst avoiding the risks of energy rationing and excessive debt;

• With this in mind, the Government should not freeze energy bills. While the scale of intervention is justifiable, the policy itself will destroy price signals, subsidising energy consumption without incentivising reduced demand. With energy supply under immense pressure, this could lead to energy rationing;

• In order to ease the burden of the cost of living crisis on businesses and households, the Government should consider:

  • Continuing to use direct cash transfers to households to help them manage the cost of living in a manner best suited to individual circumstances. This could be done through targeted £350 payments every quarter from now through 2023, alongside a lump-sum energy relief payment on 2021 energy usage;

  • Offering businesses Government-backed loans (based on 2021 energy usage) to help them spread the cost of energy bills. Interest would be set at 1.75% for the first year, rising to 1.75% + CPI inflation afterwards;

  • Uprating benefits in line with inflation immediately, providing relief to lower income households;

  • Bolstering energy supply by doing deals to secure emergency electricity from Norway, and opening discussions with the Dutch to reopen Groningen gas field.

Home Truths: Reforming the Home Office

The Adam Smith Institute’s latest discussion paper, written by Tim Ambler, proposes a number of reforms to improve the efficiency and value for money of the Home Office.

This paper is part of the Adam Smith Institute’s “Reforming the Civil Service” series.

• The Home Office has responsibility for a number of functions that are currently performed inefficiently and represent poor value for taxpayer money;

• The 2021/2022 performance report admits that the Home Office had failed on all four of its delivery objectives, in spite of a large volume of plans, strategies and consultations;

• 23 out of the 29 Arms Length Bodies (ALBs) identified by the Cabinet Office as associated with the Home Office should be closed;

• The Home Office is unlike other government departments in that it has no executive agencies. If it wants to make progress on achieving its 4 delivery objectives, one or more executive agencies should focus on each one;

  • Each agency should have key performance targets and outcome comparisons;

• The STAR department (4,943 staff) and Digital, Data and Technology (1,806 staff) should be closed and staff released;

• The Police College should become independent along the same lines of Sandhurst and police officers would be better trained as a result;

• The Home Office core covering policy, legislation and the supervision of executive agencies should number 1,000 staff plus another 1,000 to deal with matters inherited from the Ministry of Justice which should be closing down;

• Taken together, the recommendations in this report would produce a total headcount saving of approximately 6,991.

Criminal Negligence: Reforming the Ministry of Justice

The Adam Smith Institute’s latest discussion paper, written by Tim Ambler, proposes a number of reforms to improve the efficiency and value for money of the Ministry of Justice.

This paper is part of the Adam Smith Institute’s “Reforming the Civil Service” series.

• The Ministry of Justice (MoJ) has responsibility for a number of functions that are currently performed inefficiently and represent poor value for taxpayer money;

• There are more civil servants working for the Ministry of Justice than there are prison inmates in England and Wales;

• Blair-era reforms should be continued to their logical conclusion, namely the complete separation of the judiciary and the executive;

  • The roles of Lord Chancellor and Justice Secretary should be separated, with the former ceasing to be part of government, while remaining in the House of Lords and a member of parliamentary committees dealing with judicial matters, such as its share of the Consolidated Fund;

  • New judges should be nominated by parliament, not government and parliament should ensure the judiciary’s share of the Consolidated Fund is adequate;

  • The MoJ’s courtroom elements should be transferred to the judiciary, with the associated MoJ staff thereby becoming public rather than civil servants;

• By moving (over a period of ten years) to the Scandinavian model of criminal justice, the vast majority of prisons could be closed and their prisoners could become trainees for their return to law-abiding society;

  • Rehabilitation would take priority over punishment but the latter would remain in the form of removing liberty by means of electronic tagging;

  • Trainees would be allocated to trainers in small groups;

  • Transition should be managed in waves by a small transition team; 

  • Remaining traditional prisons should be prepared for the new vision with greater resources funded by the savings in shifting earlier cohorts to the new regime;

• Other MoJ functions (such as the Office of the Public Guardian and Independent Monitoring Authority) should be privatised or transferred away from the department;

• Without its two main roles of supporting the judiciary and managing the prisons and probate services, the 6,330 core MoJ staff should be reduced to 800;

• Taken together, the recommendations in this report would reduce the civil servant headcount by 87,781; 

  • Some 28,172 of the reduction, however, would simply be reclassification as public servants. 

Innovation Nation: Reforming the Department for Business, Energy and Industrial Strategy

The Adam Smith Institute’s latest discussion paper, written by Tim Ambler, proposes a number of reforms to improve the efficiency and value for money of the Department for Business, Energy and Industrial Strategy.

This paper is part of the Adam Smith Institute’s “Reforming the Civil Service” series.

• The Department for Business, Energy and Industrial Strategy (BEIS) has responsibility for a number of functions that are currently performed inefficiently and represent poor value for taxpayer money;

• The core department lacks transparency on how its teams operate and what each achieves in relation to targets;

• Public research and development money should be restricted to UK National Interest Research Projects (NIRPs).

  • The government department responsible for funding a large NIRP should be the one most closely associated with the topic;

  • These can be funded directly in the case of larger, more expensive projects;

  • The others should be funded indirectly via universities, other research institutes and local enterprise partnerships, through annual ‘NIRP research pots’ in amounts reflecting their track records;

  • UKRI would fund the direct NIRPs with no obvious alternative homes, distribute NIRP research pots and monitor and report expenditure and outcomes in sufficient detail that government and other funders can learn from one another;

  • BEIS/UKRI should retain responsibility for the areas currently covered by Innovate UK but, given the small number of large NIRPs, it would only require one Executive Agency to do so. Space science should also come into this Agency;

• All advisory arm’s length bodies (ALBs) should cease existence as formal bodies; advisors can be called on ad hoc;

• All other ALBs should either become executive agencies or privatised if they are substantial or merged into core or other bodies if they are not;

• Taken together, the recommendations in this report would produce a total headcount saving of nearly 12,704: 39.6% of the current 32,069 total.

Stuck in the Slow Lane: Reforming the Department for Transport

The Adam Smith Institute’s latest discussion paper, written by Tim Ambler, proposes a number of reforms to improve the efficiency and value for money of the Department for Transport.

This paper is part of the Adam Smith Institute’s “Reforming the Civil Service” series.

• The Department for Transport (DfT) has responsibility for a number of functions that are currently performed inefficiently and represent poor value for taxpayer money;

• DfT should be structured as an HQ dealing with policy, legislation and all matters too small to need a specialist Executive Agency;

  • All other matters should be handled by Executive Agencies and no other public bodies should be required;

• Network Rail is in dire need of significant reform and lacks transparency—a headcount reduction of 20,000 staff should be possible;

• The Office for Rail and Road devotes much of its staff time and resources to matters that should be left to rail management, therefore it should be closed;

• The Driver and Vehicle Licensing Agency (DVLA) and Driver and Vehicle Standards Agency (DVSA) should be merged, with a consequent reduction in staff numbers of 50% (5,000);

  • The two bodies duplicate each other in record-keeping and online updating can be left to garages and drivers;

• Further improvements to departmental efficiency can be realised by merging other DfT arm’s length bodies;

  • Taken together, the recommendations in this report would produce a total headcount saving of nearly 30,000.

A Recipe for Growth: The Economic Effects of Corporate Tax Reform in the UK

The Adam Smith Institute’s latest paper, written by Dr. Tyler Goodspeed, argues that reversing the corporation tax hike and replacing the super-deduction would have significant positive impacts on growth, investment and wages.

• In 2023, the UK’s corporate income tax rate is scheduled to rise from 19% to 25%, and a temporary provision allowing businesses to deduct 130% of the cost of new investment in qualifying plant and machinery will expire;

• Compared to making the 19% rate and 130% deduction permanent, if enacted these changes will lower business investment by 7.6%, output by 2.3%, and average household wages by £2,500;

• If instead businesses were instead allowed to continue to deduct 100% of the cost of new investment in equipment, then relative to current law it would raise business investment by approximately 5% and real output by 1.3%, while extending 100% cost recovery to all asset types would raise investment by almost 10% and GDP by 3%;

• Over 10 years, macroeconomic feedback could offset 34% of the static budgetary cost of corporate tax reform, and 72% over the longer term.

Indefensible: Reforming the Ministry of Defence

The Adam Smith Institute’s latest discussion paper, written by Tim Ambler, proposes a number of reforms to improve the efficiency and value for money of the Ministry of Defence.

This paper is part of the Adam Smith Institute’s “Reforming the Civil Service” series.

• The Ministry of Defence has responsibility for a number of functions that are currently performed inefficiently and represent poor value for taxpayer money;

• Defence procurement has long been associated with delays, financial overruns and equipment failures;

  • Previous reform efforts have proved ineffective: the solution is to remove procurement from the MoD altogether;

• A number of MoD enabling organisations are ripe for privatisation, including the Defence Infrastructure Organisation, the Hydrographic Office and the Oil and Pipelines Agency;

• Several other MoD enabling organisations could have their functions effectively performed by existing bodies;

  • Taking care of veterans should be left to the Royal British Legion with pensions contracted out as other large employers do;

• Full headcount numbers which carry no security risk should be published annually, with a view towards greater transparency and appropriate scrutiny;

• This paper demonstrates opportunities to reduce the MoD headcount by approximately 28,682 civilian personnel (45%) through restructuring, redistribution and redundancy.