Size does not matter

Micro-homes central to inner-London living says Adam Smith Institute

  • Micro-homes could help new, younger Londoners move into flats in the city centre close to places of work and leisure

  • Design and liveability requirements should be kept, while floor space requirements scrapped, to green light a new wave of innovative development

  • Average house price is 5 times higher than 50 years ago

  • In the past 20 years London’s population has grown by 25%, but the number of homes by only 15%

  • By 2025, 3.5m Londoners will be living in rented housing, with 79% of adults moving to London in the last year renting

  • On average 1/3rd of income is spent on housing, up from 1/5th just 15 years ago

  • The upcoming GLA ‘London Plan’ should remove minimum space requirements for co-living units and micro-homes, while retaining the demand that they are “appropriately sized to be comfortable and functional for a tenant’s needs”

It’s not size that matters in housing, it’s how you use it.

Restricted supply of new housing has meant sharp rises in house prices and rents in central London in recent decades, with young Londoners priced out of the market. Micro-homes are purpose designed flats with floor space below 37sqm that make innovative use of space to expand choice available to many Londoners open to living in smaller, but more personal and private apartments.

Micro-housing is not the same as cramped sub-division of existing units, they are smart, modern, custom designed units that make good use of space which have won prestigious architectural awards. Micro-housing is often accompanied by communal amenities such as games rooms and open living spaces that help address loneliness.

Report author and urban policy researcher Vera Kichanova stresses that while micro-housing is not a panacea or a replacement for planning reform, it could be a partial solution for those in cities like London that want to live close to where they work, as well as close to bars and restaurants.

In London this means living in what the Greater London Authority calls the Central Activities Zone. Stretching from King’s Cross in the Northeast of the city to Battersea in the southwest, this area alone is home to 1⁄3 of all jobs in the capital and generates 10% of the UK’s GDP.

With 79% of adults moving to London in the past year in rented accommodation, being younger and with less disposable income than older generations, and with rents taking up an average of a third of their income, micro-homes in could be the only chance to stay within the Central Activities Zone.

Without micro-homes many Londoners are forced to pack into crammed peak hour commuter trains, are forced to share living space with complete strangers, or leave the city altogether.

Ms. Kichanova lays the blame for all of these squarely at the feet of government—specifically the Town and Country Planning Act 1947. By requiring local or central government permission for building projects, the Act detached house prices from just the cost of construction and tied it heavily to a price for land that was heavily rationed.

A previous report by the campaign group London YIMBY for the Adam Smith Institute had found London rents have been inflated by over 300% due to planning restrictions with over 75% of the cost of development coming from planning red tape.

A green light to innovative development could help London become a denser, more liveable city for its increasingly younger and dynamic residents by providing a choice that fits their individual requirements in the world’s most diverse city.

The Adam Smith Institute’s Head of Research Matthew Lesh said:

“Small, but perfectly formed micro-homes would expand choice for young Londoners. There are many who would rather live close to the city centre, in a building full of amenities such as game rooms and co-working spaces, rather than spending hours commuting every day.

London’s housing crisis is not just an economic problem, hurting growth because people cannot live where they would be most productive, it is also having very real and serious political ramifications. The lack of housing affordability is leading many to lose faith in the entire free market system.

Housing policy reform is an urgent priority, and while micro-housing is no substitute for fundamental planning reform, it is an important first step.

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, at matt@adamsmith.org | 07584 778207.

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Low tax good, anti-migration bad

Responding to Boris Johnson's latest Brexit intervention, Daniel Pryor says warm words on free markets are not enough. While we welcome the idea of simplfying tax and defense of competitive markets, it will mean little if his promises on migration will harm investment, business and the lives of those who seek to make a home here Daniel Pryor, Head of Programmes at the Adam Smith Institute, said:

“High levels of income tax damages investment, economic growth and innovation—so it’s good to see a competitive tax system being defended. Simplifying our needlessly complex property taxes into one straightforward levy on land values will encourage investment and help end the housing crisis.”

“Cracking down on immigration won’t solve Britain’s productivity woes—it will make matters worse. The Migration Advisory Committee recently found that immigration increases productivity by contributing new skills and ideas, doesn’t lead to less training for native workers, and has little to no impact on wages.

“Boris is right that Britons deserve a pay rise. But that won't come from locking foreigners out of the economy. When women entered the office that didn’t destroy the world of work for men. Newly arrived citizens buy things we make here, live here, eat here, and contribute their skills to our economy. They encourage existing workers to upskill. If politicians want to increase the value of workers’ pay packets, they’d stop pickpocketing them with the highest tax burden in half a century.”

To arrange an interview or further comment please contact Matt Kilcoyne (07904099599 / 02072224995 / matt@adamsmith.org).

Patents, not boondoggles, really reward innovators


Britain’s history of patents helped the country become the powerhouse over the 19th century and the market based system helps maintain economic growth and innovation to the present day.

New research out today by free-market think tank the Adam Smith Institute shows that by being both a market mechanism and rewarding outcomes rather than intentions, patents beat the efforts of grants, tax credits and prizes in both effectiveness and value for money — all while keeping open and actually helping innovation by offering incentives in direct proportion to level that the invention or innovation services consumers' demands.

The paper stands as a challenge to both traditional libertarian thought that argue against the principle of intellectual property on grounds of principle, and state interventionist economists that call for more grant based funds and credits to researchers (often to their own benefit), by showing the system works in both principle and practice. 

Author Ben Southwood helps to back up the suggestion of the Tabarrok Curve, which shows patent protection boosting innovation by awarding firms economic rents for delivery of new products/services more than closest substitutes—but with effectiveness of this impacted by length of the patents.

Long patents, the paper suggests, only slightly increase incentive to invest but drastically slow flows of ideas into the public domain. The most costly in both the United States and the United Kingdom have been in the areas of medicines, especially the flow of specialist medicines to generics. This was seen in 2016 when Actavis UK 'evergreened' their hydrocortisone tablets with new slightly modified patents, and hiked the price over a decade from 70p a pack to over £88 a pack. 

Uncertain IP regimes, and uncertainty between IP regimes, have hindered collaboration and consumer benefit. This is especially relevant as the UK's ability to join the EU's patents union remains in question post Brexit this year.

With the UK having patents in one form or another since the 15th century they have played an important role in providing the property rights that enabled economic growth in this country to outstrip much of the world's remainder. In reform of the system, and as we leave the EU, we must be careful not to throw the baby out with the bathwater. 

For further comments or to arrange an interview, contact Matt Kilcoyne, via matt@adamsmith.org| +44 (0) 7584 778 207

Fat Cat Cod Stats Won't Help Workers

The High Pay Centre and Chartered Institute of Personnel and Development (CIPD) have declared today to be “Fat Cat Friday”.

Matthew Lesh, Head of Research at the Adam Smith Institute, commented:

“Another year, another set of cod statistics on executive pay. If these activist organisations actually cared about workers — and not just the politics of envy against our best and brightest — they would talk about ways to actually increase worker pay.”

“The only way to increase wages is by boosting productivity through innovation, cutting red tape, and making it easier for people to move for jobs.”

“In a global market for CEOs, British firms must be able to compete for top CEOs who provide immense value to companies. Decisions made by Britain’s makers and doers now have global impacts and their value to firms reflects this.”

“Limits on executive pay would drive top British talent and companies offshore, ultimately leading to fewer jobs and lower pay for workers.”

If you would like further comment, or to arrange an interview with a member of the Institute, please contact Matt Kilcoyne via phone (07584778207, 02072224995) or email (matt@adamsmith.org).

Government unskilled at guessing skilled migration needs

After the release of the government’s white paper on immigration post-Brexit, the Adam Smith Institute takes aim at the idea that government knows the skills employers need, better than employers do themselves.

Daniel Pryor, Head of Programmes at the Adam Smith Institute, said:

“Today’s white paper ignores the elephant in room—the Government’s nonsensical 100,000 annual net migration target. Most sensible politicians don’t think we should set arbitrary quotas on the amount of doctors and nurses we can bring into the country, but Number 10 seems determined to apply this logic to our post-Brexit migration policy. Taking back control of our borders means deciding who should be at the front of the queue, not pulling up the drawbridge to those who want to contribute to our economy and public services.”

“Scrapping the cap on high-skilled workers and taking a more liberal approach to post-study leave are long overdue and welcome reforms, but proposals for a £30,000 minimum salary requirement risk creating widespread skills shortages and should be scrapped without hesitation. This is pure central planning. There is a reason the government doesn’t manage hiring for UK natives; it is worse at identifying the skill gaps of businesses than those businesses themselves. This is equally true for foreign-born workers.”

“Restricting low-skilled workers to spending no more than a year in the UK pulls up the ladder and prevents these new Britons from working towards a better life for themselves and their families. Our post-Brexit migration policy looks set to make us all poorer, our society more bureaucratic and our country less open.”

If you would like further comment, or to arrange an interview with a member of the Institute, please contact Matt Kilcoyne via phone (07584778207, 02072224995) or email (matt@adamsmith.org).

Sadiq's food ad ban plan will add to TfL's unhealthy deficit

Health policy has to be based on evidence. But bad data is worse than no data at all, and our current method of measuring childhood obesity relies on bad data. There is no ‘childhood obesity crisis’. Which makes it all the more depressing that Sadiq Khan is pressing ahead with a pointless food ad ban for TfL.     

Daniel Pryor, Head of Programmes at the Adam Smith Institute, said:

“Transport for London are facing a £1bn operating deficit and now stand to lose an additional £200 million from Crossrail delays. Despite this, Sadiq Khan thinks now is the perfect time to sink another £13 million on a paternalistic fast food ad ban despite no credible evidence that it will reduce childhood obesity rates.”

“This multi-million pound hole in TfL’s budget will mean more delays, worse service, and higher fares for ordinary Londoners on their daily commute. Adults do not need the government to protect them from pictures of burgers and parents are capable of dealing with their children’s ‘pester power’.”

If you’d like further comment, or to arrange an interview, please contact Matt Kilcoyne on 07584778207 or email matt@adamsmith.org

Fiscal Phil's mish-mash means a botched budget

Today the Chancellor suggested his budget would help ordinary Britons, but with a Google Tax, a hidden hit on capital losses, and bad economics in a business rate cut, Philip Hammond looks out of touch with how the many millions on these islands live our lives.

Matt Kilcoyne from free market think tank the Adam Smith Institute said that what the Chancellor gave with one hand, he took with the other:

“Quintupling the investment allowance from £200k to £1m will mean businesses invest in equipment and machinery, it’s a promise to kickstart the British economy’s makers and doers. But if Mrs May and Mr Hammond want to see American levels of GDP and wage growth then they should move to have all investment be deducted from profits before tax.”

“What the Chancellor gave with one hand though, he took with the other as he hit firms large and small that make capital losses by restricting their exemptions—meaning less risk taking, less profit and fewer economic dividends.”

“It was a similar story in personal allowances. While the taxman will let us keep more of what we earn from April next year, the Treasury won’t link this with inflation for another two, so millions more will be dragged into higher brackets. The Chancellor’s penny pinching in the here and now will hit us all in the pocket later.”

The Adam Smith Institute’s Daniel Pryor, rebuked the Chancellor’s decision to bring in a digital revenue tax:

“A digital revenue tax—lifted straight from the Corbynite playbook—will punish the millions of people who shop online and use online services every day. The Chancellor should embrace tech firms that find innovative ways of giving consumers what they want at lower prices: not penalise them for having the temerity to scale-up or move beyond the traditional high street business model. He might not intend for the tax to be passed onto ordinary Brits, but economic facts don’t care about fiscal Phil’s feelings.”

Sophie Jarvis, from neoliberal think tank the Adam Smith Institute said the Chancellor’s cuts in business rates would mean a windfall for rent-seekers:

“The Chancellor thinks that businesses are like babies: he likes them when they’re small and cute, but rapidly loses interest and affection as they grow up (particularly if they’re tech focused). Hammond’s small business rates cut of ⅓ is good politics but bad economics. Cuts to business rates will lead mostly to a windfall for landlords rather than small business owners as they’re able to charge more rent on the properties these businesses use.

“The £675m future high street fund to help transform high streets back into places people live, work and socialise is welcome. In particular we welcome the policy transform unused commercial property to residential.”

If you would like further comment, or to arrange an interview, please contact Matt Kilcoyne via phone (07584778207, 02072224995) or email (matt@adamsmith.org)

Medical cannabis sees Sajid take the tories in the right direction

Following the news that the Home Secretary Sajid Javid is to allow doctors to prescribe medical cannabis to their patients, Daniel Pryor, Head of Programmes at the Adam Smith Institute, says:

“The Home Secretary has delivered a sensible, evidence-based approach to medical cannabis. It’s not a moment too soon. Patients like Billy Caldwell and Alfie Dingley will soon be able to legally access life-changing medication from their GPs. This should be celebrated.

“The UK is finally tip-toeing towards a common-sense reform of drugs policy and momentum is building in the UK and beyond. Nine US states have already legalised, with Canada legalising recreational cannabis next week. We should now follow in their footsteps to protect young people from the drugs trade and take back control of the unregulated black market.”

If you’d like to arrange an interview or further comment from Daniel Pryor please contact Matt Kilcoyne via mobile (07584778207), landline (0207224995) or email (matt@adamsmith.org)

Racial pay gap stats will not solve Britain's prejudice problems

Following the announcement of a review to force companies to reveal difference in pay between different ethnic groups, Matt Kilcoyne of free market think tank the Adam Smith Institute, says that it does little reflect Britain’s changing demographics, does not tackle remaining structural barriers to success, and shows a lack of understanding of the costs of prejudice on large firms:

“Few would deny that those from ethnic minority backgrounds face barriers to success. But we should learn lessons from the gender pay gap debate; crude figures across a whole company mask the different roles that people choose to do and equate CEOs to graduate schemers.

“Racial pay gap reporting won't explain the demographic changes that Britain has undergone. The older you are, the more likely you hold a higher position in a company. And older generations are more likely to be white. Migrants may face natural barriers to success from language, and illegitimate barriers from occupational licensing and discrimination. These figures will mask the complex causes of racial inequality and be used to sour relations between Britons.

“Rather than engaging with the hard task of removing structural barriers to opportunity many still face, this headline-grabbing measure will simply increase costs on businesses that already know the price of discrimination. Companies that deny themselves talent based on skin colour hit their bottom line, and they know the reputational risk of failing to tackle prejudice.”

To arrange further comment or an interview please contact Matt Kilcoyne via mobile (07584778207), office phone (02072224995), or email (matt@adamsmith.org).

Adam Smith Institute at Conservative Party Conference

This year at Conservative Party Conference in Birmingham the Adam Smith Institute ran three events. Firstly on the Sunday, a call for Britain to learn the lessons from cannabis legalisation around the world (more on the others later). Our event led the Evening Standard’s diary on Monday.

On Monday we released our 100 policies for Mrs May. On CapX our Matt Kilcoyne explained that if the Prime Minister backed some of our radical but reasonable policies she could go down in history as one of the great transformers. And on the Telegraph, he described the mood of conference where, for the first time, it seemed like Nimbys were on the run. Today Guido Fawkes covers our call for 10,000 refugees from Venezuela to be allowed to come to the UK.

Sam Dumitriu spoke to JOE.co.uk on about how to win young voters. It’s quite simple, paint an optimistic and positive vision for the future. Meanwhile the Guardian’s look at young Tories noted that Adam Smith Institute events attracted those least likely to be in suit and tie.

Our Ananya Chowdhury appeared on LBC with Jacob Rees-Mogg (from 7m:30s) and on the BBC alongside former intern Connor Axiotes.

Ananya & Mr Rees-Mogg on LBC

Ananya & Mr Rees-Mogg on LBC

And Sophie Jarvis, Head of Public Affairs at the Adam Smith Institute, spoke to LBC about Brexit and the Chequers Deal alongside Matt Gillow, journalist at the opinion site 1828.

Sophie Jarvis playing Matt Gillow at Chequers checkers

Sophie Jarvis playing Matt Gillow at Chequers checkers

Our second and third events were held on Tuesday. The first with Octopus co-founder Chris Hulatt, John Penrose MP, Bim Afolami MP, and Fingleton Associates’ Eleanor Mack on Boosting Consumer Capitalism and making markets work for consumers.

Daniel Pryor, Martin Cullip of the New Nicotine Alliance, and the UKVIA’s John Dunner, joined a panel chaired by the Centre for Policy Studies’ Emma Revell on how harm reduction in tobacco policy could help save a million years of life.

After the Prime Minister’s speech our Sam Dumitriu’s reminder the rents had risen fastest where councils were mostly likely to be blocked made it into the Financial Times’ coverage of Mrs May’s conference speech. His comments on freedom of movement, on stamp duty and on letting councils borrow to build can be found here.

To arrange interviews or comment pieces with any Adam Smith Institute staff members please contact Matt Kilcoyne via phone (07584778207) or via email (matt@adamsmith.org).