Switching to vaping could save 1 million years of life

Adam Smith Institute report suggests if vaping replaces smoking Britons could save 1 million life years but young women risk being left behind.

  • Average smoker will lose a decade of life expectancy and have lower life quality compared to non-smokers

  • Access to alternatives and information on health risks key to switching from smoking but currently held back by domestic and EU rules

  • UK’s liberal harm reduction approach to vaping has worked to cut smoking but lifting EU legislation post Brexit could help more people kick the smoking habit.

  • Young women are being left behind by the vaping revolution and are risking their lives smoking

  • If women under the age of 24 vaped at the same rate as young men Britons could save over a million years of life

Reforms to laws that discourage switching from cigarettes to vaping could help save over a million years of life, a new paper by the Adam Smith Institute claims today with young women standing to gain the most.

Despite the overwhelming majority of UK smokers knowing the risks of smoking large numbers continue to smoke.

Young women risk being left behind as other groups move to vaping. While 8.9% of young men vape, for women it is just 2.6%. Women are however continuing to smoke with nearly 16% of women aged 16-24 smoking.

Data from the BBC’s Reality Check team revealed that vaping shops are the third largest growth sector in retail space in the UK, with 381 stores opening in 2017. Yet despite the rise in shops on high streets, vaping remains a predominantly male activity, especially among the young. While women continue to smoke they increase their exposure to carcinogenic chemicals which are heavily linked to respiratory diseases and cancers.

The paper uses World Health Organisation estimates of additional life expectancy from quitting smoking at different ages and Public Health England estimates of e-cigarette relative risk to estimate that 1,036,640 years of life could be saved if young women vaped at the same rate as young meng. In the United States estimates suggest wider adoption of e-cigarettes by smokers could lead to at least 1.6 million fewer premature deaths and 20.8 million fewer life years lost.

Despite Public Health England’s recent advice that e-cigarettes are at least 95% safer than cigarettes, the majority of smokers across the UK do not believe that e-cigarettes are less harmful than cigarettes and this situation has got worse over time. Even fewer are aware of the existence of newer reduced-risk products like "heat-not-burn" devices, warns Daniel Pryor of the Adam Smith Institute.

Daniel Pryor of the Adam Smith Institute argues that sensible reforms after Brexit to advertising restrictions, many of which were put in place at the European Union level, could mean fewer lives lost to smoking related illnesses in Britain.

Both vaping and heat-not-burn technology could be advertised directly to smokers within cigarette packaging, on online platforms and with reference to Public Health England’s advice on the benefits of swapping from smoking. While larger vaping liquid sizes, currently restricted by EU Single Market rules could be reformed to make it easier to ensure access to liquids and reduce the temptation to slip back into standard cigarettes.

Some reforms could happen at home now. The new report argues that Britain should look again at bans on indoor vaping in public places, on rail platforms and other shared spaces. This builds on calls from the British Lung Foundation to ensure e-cigarettes aren’t “banned in enclosed public spaces by legislation as smoking is.”

Reduced-risk alternatives to smoking matter, Sweden has one of the lowest smoking and cancer rates in Europe – linked to the prevalence of snus – which studies have shown to have little impact on life expectancy. In Japan, where heat-not-burn technologies are both openly advertised market share is now up to 10% of nicotine products and cigarette sales have plummeted by 12.4% in the past year.

Lack of alternatives matter too. In Australia, where e-cigarettes are banned, smokers as a proportion of the population dropped by just 0.6 percentage points between 2013-2016 (the last dataset available).

The UK by contrast saw a fall of 2.9 percentage points – and there are now more ex-smokers who use e-cigarettes than current smokers. The UK’s mostly liberal approach over the past decade has been a large part of the success of lower smoking rates and higher vaping rates, the report argues.

If Britain is to achieve a continued fall in smoking rates then more liberalisation for reduced risk alternatives is key.

Daniel Pryor, Research Economist at the Adam Smith Institute and author of the paper, said:

“To its great credit, successive UK governments and public health bodies have maintained a comparatively liberal approach to vaping and other consumer nicotine products. Domestic and international evidence shows that the health benefits of this harm reduction approach are enormous, but young British women who smoke are being left behind.

“It’s vital that we combat the widespread and worsening misperception that vaping is as harmful as smoking through sensible advertising reforms and public health guidance. We must also ensure that smokers who hold strong preferences for tobacco have viable quit options by making it easier to bring other innovative reduced-risk products (such as ‘heat-not-burn’ devices) to market.”

Sophie Jarvis, Policy Advisor at the Adam Smith Institute, said:

“Women are being left behind by the vaping revolution. And it’s costing them years off their lives. The EU’s ban on advertising stifles innovation and is holding back people from switching from harmful cigarettes. As we leave the EU we have the chance to scrap these bans and save lives - in particular women’s lives.”  

Dr Roger Henderson GP, a leading smoking cessation expert, said:

“Smoking is the single biggest cause of preventable early death and illness in England, with around 100,000 deaths in the UK attributable to smoking each year.

“In my surgery, increasing numbers of smokers are telling me they are trying e-cigarettes as an aid to cutting down smoking or quitting, we shouldn’t ignore them. Let’s save lives by making it easier to market safer nicotine products. It may be nicotine that makes it hard for smokers to quit, but it is smoke and tar that puts them in the ground.”

Notes to editors:

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

The report ‘1 Million Years of Life’ is available here.

Politicians, academics and think tanks call for cannabis legalisation

Following the call on the government from Lord Hague to look again at legalising cannabis MPs, Ron Hogg PCC, academics and think tanks write to the Telegraph to call for a Royal Commission to examine the evidence of legalising cannabis.

Dear Sir/Madam,

We believe that Lord Hague is right to say that the war on cannabis has been ‘irreversibly lost’.

The Adam Smith Institute has estimated that legalisation, regulation, and taxation of cannabis would raise at least £1bn a year for the Treasury, while the TaxPayers' Alliance has suggested nearly £900m could be saved from police, prisons, courts and NHS budgets from legalisation. The UK could use a ‘cannabis dividend’ on expanding access to addiction treatment centres and reducing wait-times for mental health services on the NHS. 

Ensuring the safety of citizens is the first duty of government. Prohibition of cannabis is failing to keep Britons safe. Pushing people into the hands of gangs that peddle drugs on the black market risks their safety and gives cash to criminals. Users have no way of knowing the potency of the cannabis they consume, which varies wildly depending on where they get it from. 

With cannabis legal in some form in a majority of US states, and Canada preparing to fully legalise recreational cannabis, we believe the status quo is unsustainable.

The government should appoint a Royal Commission to look again at how cannabis is treated under the law and consider legalisation. 

Crispin Blunt MP, former Prisons Minister
Michael Fabricant MP, former Lord Commissioner of HM Treasury
The Rt. Hon the Lord Lilley
Ed Davey MP, Liberal Democrat Home Affiairs Spokesperson
Alistair Carmichael MP, Liberal Democrat Chief Whip
Tim Farron MP, Liberal Democrat DEFRA spokesperson
Tom Brake MP, Liberal Democrat Brexit Spokesperson
Norman Lamb MP, former health minister
Lord Foster of Bath
Ron Hogg PCC
Professor David Nutt
Dr Gary Potter
Professor Celia Morgan
Professor Adam R Winstock, Founder & CEO Global Drug Survey
John O'Connell, Chief Executive of the TaxPayers' Alliance
Rebecca Lowe, Director of FREER
Polly Mackenzie, Director of Demos
Dr Eamonn Butler, Director of the Adam Smith Institute
Chris Snowdon, Head of Lifestyle Economics at the Institute of Economic Affairs
Oliver Wiseman, Editor of CapX
Miranda Larbi
Carrie Wade, Director of Harm Reduction Policy at R Street Institute

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

The Cannabis Dividend

Lord William Hague has come out for cannabis legalisation and we are happy to say that we stand with the noble Lord. Sam Dumitriu, our Head of Research, says:

"Lord Hague is right to move beyond drug policy dogma and call for the legalisation, regulation, and taxation of cannabis.

"We estimate that legalisation would raise at least £1bn a year for the Treasury, on top of reduced policing and prosecuting costs. The ‘cannabis dividend’ could be spent on expanding access to addiction treatment centres and reducing wait-times for mental health services on the NHS. 

"Just as the prohibition of alcohol failed in the US, the prohibition of cannabis has failed here. Ensuring that licensed shops, not criminal gangs, are able to sell cannabis for recreational use will prevent sales to minors and ensure users are informed through product labelling. 

"We should follow Canada’s lead and regulate cannabis."

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

Royal Bank of Scotland share sell-off is a good news

Sam Dumitriu, Head of Research at the Adam Smith Institute, featured on the front page of City AM and in the coverage of the government's share sell-off in The Times and the Guardian today we welcomed the sale and criticised those that would see the government pursue unsound investment strategies.

Read City AM's coverage here.

The Times' story can be found here.

The Guardian's piece on the sale can be found here

To arrange an interview with Sam Dumitriu, or another member of Adam Smith Institute staff, please contact us via email (matt@adamsmith.org) or phone (02072224995 or 07584778207). 

Grayling has something (good) to declare on Heathrow

Following the news from Chris Grayling that the government is recommending approval for the third runway at Heathrow, Matt Kilcoyne welcomed the decision and criticised campaigners that want Britain to pay the price for more delays and less capacity: 

"Chris Grayling is right to greenlight a new runway at Heathrow. With increased capacity from 85.5m to 130m by the end of next decade this decisions could bring in billions of pounds for the British economy.

"If other domestic airports need new flights to compete they should be allowed to expand too, especially Gatwick. Capacity is tight across the country and fortunately demand isn’t letting up with over 40m overseas visits expected this year.

"The country needs more links across the world as we leave the European Union if we're to make a success of Brexit. More connections mean new business opportunities and more lives made easier – in short it means Britain can soar.

"Campaigners rushing out to say house prices will fall under the flight path are forgetting the generous compensation that taxpayers will pay out and the fact that expansion has been in the offing for decades – the price change should be factored in by now."

If you would like an interview or further comment please contact Matt via email (matt@adamsmith.org) or mobile (07584778207).

Selling this RBS share is fair

Following the announcement by the government of an RBS share sale and the Labour Party's criticism, Sam Dumitriu of the Adam Smith Institute calls on the government to follow sound investment strategies, not populism:

“Labour are wrong to oppose plans to sell-off RBS shares. It is a mistake to think that just because they were once twice as valuable that they will be again. The state-owned bank’s share price has fallen by 50 pence since the last sell-off three years ago.

If George Osborne had followed Mr McDonnell’s advice, then we would £320m worse off. Chasing your losses is not a sound investment strategy, it’s problem gambling.”

Please contact Matt Kilcoyne (matt@adamsmith.org or 07904099599) if you would like to arrange an interview or further comment from ASI staff. 


Happy Tax Freedom Day 2018!


Taxpayers worked 148 days for the Chancellor this year, today is the first day they start working for themselves

  • Tax Freedom Day falls on May 29th the latest it's been since 1995
  • Brits work 148 days of the year solely to pay taxes, 3 days more than last year, but as of today workers are earning for themselves
  • UK Taxpayers will fork out over £700bn to the Treasury this year, 40.65% of net national income
  • Cost of Government Day, which factors in borrowing as well taxes is the earliest it has been since 2008. The UK is successfully bringing down the deficit, but spending is still too high.
  • With tax demands at record highs, if political parties want economic growth they need to come up with ways to reduce, not increase, the national tax burden. 

Tax Freedom Day is a measure of when Britons stop paying tax and start putting their earnings into their own pocket. In 2018, the Adam Smith Institute has estimated that every penny the average person earned for working up to and including May 28th went to the taxman—from May 29th onwards they are finally earning for themselves.

British taxpayers have worked a gruelling 148 days for the taxpayers this year. More than in any year under New Labour, and three days longer than last year. Britain’s tax burden is moving in the wrong direction.

Government spending choices fall on UK Taxpayers, this year they will fork out £703.7bn—representing 40.65% of net national income. 

Tax Freedom Day in the United Kingdom is now over a month later than in the USA, where this year it fell on April 19th

The ONS has revised net national income data and the Adam Smith Institute has calculated this means Tax Freedom Day is later than any day since reliable records began in 1995. The shortest number of days worked to meet HMRC’s tax demands was 122 in 1996. 

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In a sign of good news though, Cost of Government Day this year falls on 21st June with the smallest gap after Tax Freedom Day in over a decade. The Cost of Government Day calculates spending over net national income—i.e. including debt-financed government activity, which we must eventually pay, as well as tax-financed government spending.

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While it’s good news the gap is getting smaller, the money borrowed to cover the near month-long gap since Tax Freedom Day must eventually be paid off with future taxes. 

With squeezed budgets, low wage growth, inflation above target and high housing costs, UK taxpayers cannot afford budget proposals from Left or Right that attempt to squeeze more money from taxpayers. Instead politicians should look at reducing the size of the state, and reforming our taxes.

The Adam Smith Institute singles out two tax changes that would boost growth and the pay packets of Britons right across the country:

  1. UK Government should move to take the poorest out of tax altogether. With budgets tight across the government should boost the take home pay of minimum wage workers by raising the National Insurance Contribution threshold in line with that of income tax. 
  2. Governments across the UK should abolish stamp duty (in Scotland the Land and Buildings Transaction Tax). Britain’s most damaging tax, Stamp Duty destroys 75p of wealth for every pound raised. The Government should prioritise cutting the taxes that do the most harm. 

Dr Eamonn Butler, Founder and Director of the Adam Smith Institute, said:

“In the Middle Ages, a serf only had to work four months of the year for his feudal landlord, whereas in modern Britain people have to toil five months for the tax gatherers.

“It appears Britain is stuck in the past with an over-large and inefficient public sector that has cost each of us 148 days' hard labour this year, the most in over two decades.

“Since the the great recession a decade ago Britons have been economising to live within their means. Frankly, it’s about time government did too.”

Mark Littlewood, Director of the Institute of Economic Affairs, said:

“We are almost half-way through the year and it is only now that UK workers are finally working for themselves, not the taxman. Tax Freedom Day demonstrates how heavy the tax burden is in this country with high income tax rates, national insurance payments and draconian VAT and stealth taxes, including the newly introduced levy on sugar.

“While the Government has brought the budget deficit down, for all the talk of austerity, progress is still too slow. Reductions in public spending to relieve workers of the burden they are saddled with will allow them to spend more of what they earn, thus providing the economic boost this country needs.”

John O'Connell, chief executive of the TaxPayers' Alliance.

“Brits are very generous, and need little pushing in order to dig deep to causes that matter to them. That's why ever-higher taxes, raised under the pretence of 'asking' people to pay 'a bit more' is so cruel. Taxpayers work longer and longer, only to see their hard-earned money wasted by politicians who don't care a jot for it. It's time we recognised the sacrifices people have to make to contribute such high taxes, and time too for the government to begin lessening this burden by getting spending under control.”

Sam Dumitriu, Head of Research at the Adam Smith Institute, said:

“Tax Freedom Day is a stark illustration of the UK’s tax burden. It is a reminder that public services such as education, welfare, and the NHS must be paid for, either through taxes or borrowing (taxes on the next generation). 

“The Chancellor must resist the pressure to declare austerity over and turn on the spending taps. Labour too, must be honest with the public. Their proposed £50bn increase in public spending will inevitably lead to even higher tax burdens on ordinary people.

“Further reductions in public spending will be necessary to allow workers to keep and spend more of what they earn.”

Notes to editors:
For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, 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.



Sadiq Khan should accept the case for legalising and regulating drugs

This morning in Mayor's Question Time, Conservative London Assembly member Andrew Boff secured a meeting with Sadiq Khan for him to listen to the case for legalising and regulating drugs.

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

It’s great to hear that the Mayor is willing to hear the compelling case for taking back control of our violent drugs market by legalising and regulating drugs. Teenagers are being exploited by county-lines gangs, with an estimated 4,000 caught up in smuggling in London alone, precisely because we hand over a drugs market worth £5.3 billion to criminals. Young people are able to access hard drugs from dealers who don’t ask for ID, and users have no access to information on the purity of what they’re taking. Our current approach leads to tragic, entirely avoidable deaths from violent crime, overdose, a lack of support for problem users.

With around 12,000 people in prison for drug-related offences, police time and taxpayers’ money is being wasted on fighting an unwinnable war that makes our streets less safe. We should follow the examples of Canada and many U.S. states by moving towards a harm reduction approach, starting with legalising and regulating cannabis. These efforts were led by a coalition of public health experts and law-and-order conservatives, and the same groups are calling for legalisation in the UK.

Please get in touch with Matt Kilcoyne (07904099599 or 02072224995) to arrange an interview or further comment.

Bring in airline style competition to allow rail to soar

New report by analyst, former journalist and rail expert Adrian Quine for the Adam Smith Institute calls for the introduction of much greater competition in our railways. 

  • Privatisation of British Rail led to greater number of services and record passenger numbers, but DfT over-specification and monopolistic franchises are costing consumers dearly
  • Open Access operators compete directly with incumbent franchises
  • Fares on Open Access are cost less per mile with higher customer satisfaction; fares on Virgin’s East Coast franchise where it faces direct competition are 24% cheaper than on its West Coast franchise where it doesn’t
  • Open Access (OA) operators are held back by the excessive strictness of the “Not Primarily Abstractive” test, which is designed to prevent OA operators cherry picking the most profitable routes.
  • Just 1% of passenger miles are travelled on OA operators despite OA operators topping passenger satisfaction polls.  
  • Lack of competition has seen the cost of unregulated ‘anytime’ fares rise by as much as 250% on many routes since the last year of British Rail in 1995, while RPI has risen only 86%
  • UK should learn from airline competition and scrap the one-size-fits-all model of franchising to give passengers real choice on long distance routes

A new paper by the free-market Adam Smith Institute is calling for a ‘complete rethink’ of how the country’s passenger rail services are structured. Rather than re-running tired debates between nationalisation and privatisation, the think tank advocates injecting more competition into the current franchise model by making it easier for Open Access (OA) Operators to compete on long-distance routes.

Short term political thinking and civil service micromanagement of the industry is unsustainable, argues report author Adrian Quine. Competition between rail providers on key long distance rail routes will deliver lower fares, reduced running costs, improved customer service, and a greater focus on technology and innovation to ensure a better deal for the passenger & taxpayer.

This new report follows on from the Public Accounts Committee’s (PAC) damning account of the Department for Transport’s management of the Southern rail franchise Govia and the East Coast mainline, which it called a “debacle” and “totally unacceptable”.

20 years on from privatisation, its full promise is yet to be fulfilled. Despite record numbers of passengers and high levels of investment, there is a lack of competition in the market and government is increasingly over-specifying franchise conditions. As consumers are well aware, this has meant uncompetitive delivery of bare bones services and high ticket prices despite the Competition and Markets Authority’s 2015 report ‘Competition in Passenger Rail Services in Great Britain’ calling for greater competition.  

Since the last year of British Rail in 1995 the cost of an ‘anytime fare’ has risen by 250% on many routes, while RPI has risen only 86% in that time.

Fares are dragged down where competition does exist. Virgin’s fare on the West Coast is 32% more than it charges on the East Coast where it faces competition. Between London and Crewe a peak train is £131 for a journey of 158 miles, while the 156 miles between London and Doncaster where there is Open Access competition costs £99 (The two open access operators are even cheaper: £58 with Hull Trains and £52 with Grand Central).

Open Access operators regularly top passenger satisfaction leagues, with Grand Central and Hull Trains taking the top two spots.

Where franchises overlap, unintended competition delivers cheaper and more frequent services. Peterborough is the starting point for GoVia Thameslink Railway (GTR) running a half hourly stopping service to London and onwards to the South Coast. Slower and with more stops, but lower in price than Virgin’s direct service, the GTR route has seen a 70% increase in commuter numbers in just 14 years.

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But Open Access competition is rare in the UK with just 1% of passenger miles conducted by OA operators, despite the current Railway Act allowing for such competition. This slow take-up is down to the ‘Not Primarily Abstractive’ test.

At present operators are required by government to ensure that for every pound of abstracted revenue 30% of new revenue has to be generated. In practice this means virtually no competition on long-distance inter-city lines. This is part of the reason the UK is the only European country that runs its commercial inter-city operations on such a model despite the reduction in costs a move to Open Access would deliver to passengers.

Unlike commuter trains, long-distance inter-city services are “closer in style to the airline business” with most routes used by one-off business or leisure passengers who buy their tickets in advance, the report argues. But, while passengers choosing to fly have access to choice between budget operators like Ryanair and premium services like British Airways, rail passengers lack a similar range of options.

And that competition delivers dividends for passengers. Report author Adrian Quine finds that where competition does exist between airlines on intra-UK flights fares were nearly half as much as where there is a sole operator.

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The lack of innovation in rail stems in small part from the level of micromanagement by the Department of Transport, which has left private companies hamstrung by what they can provide. The DfT can dictate timetables, frequency of trains, stopping patterns and even minor details such as whether a train has a catering trolley or not.

The paper argues that the level of detail the DfT can stipulate and the power of unions on services with just a single provider often leads to unexpected consequences, such as the recent scandal where half of the carriages on some inter-city services were closed on trains run by Great Western Railway.  

With such high levels of government oversight and control over the railways, what we have is now nationalisation in all but name. But Adrian Quine argues that ‘advocates of nationalisation really need look no further than the current costly’ running of the publicly-owned National Rail to understand why renationalisation would not work.

Opening up inter-city services to competition would drastically improve services, drive down operating costs, reduce fares, boost innovation, and give passengers real choice. By steering people away from road and air onto rail, the paper argues, we will see additional revenue from rail and reduce the burden on the taxpayer.

Competition in the Long Distance inter-city rail market has the potential to bring about the most radical and progressive realignment of our rail system since privatisation and create a true rail renaissance.

Adrian Quine, author of the paper and rail consultant, said:

“The UK rail industry structure is wasteful, bureaucratic and largely not fit for purpose. This paper highlights many of the core issues at stake yet provides radical, achievable solutions that are in the best interests of users, the taxpayer and the wider economy”.

Sam Dumitriu, Head of Research at the Adam Smith Institute, said:

“Renationalising the railways wouldn’t solve today’s problems. We need more, not less, competition on the UK’s railways. Allowing more Open Access operators to compete directly on long-distance rail routes would boost productivity, improve customer service, and deliver cheaper fares”


About the author:

Adrian Quine is an analyst and entrepreneur with a specialist interest in transport and infrastructure. He is a former investigative journalist and broadcaster and has worked for many leading publications including: the BBC, Discovery Channel, National Geographic and the Times. He also writes regular opinion pieces on rail as a columnist for The Telegraph.

Adrian has worked as a consultant on various projects including rail and aviation. He has specialist knowledge in public transport and infrastructure.

Adrian has a particular interest in rail competition and was one of the original founders of ‘Alliance Rail Holdings Ltd’ – he devised the name around a proposed ‘Open Access’ service between the Scottish and Welsh capitals from Edinburgh to Cardiff via the West Coast Mainline and Shrewsbury.

Notes to editors:

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

The report ‘A Third Way for Britain’s Railways’ can be accessed here.

A capitalist revolution in housebuilding

New paper by top architect Patrik Schumacher for the Adam Smith Institute calls for radical capitalist reform to solve Britain’s housing crisis

  • Housing crisis is a failure of politics not markets and is the result of restrictive planning laws.

  • Restrictive planning laws have led to an increase in house price to earnings ratio in London from 4:1 in the early noughties to 10:1

  • Rent-to-income ratio has climbed from 1:5 to 1:3 in the last 15 years

  • Government should resist calls to impose rent controls or mandatory long-term tenancies as they reduce supply and hamper labour mobility

  • Sadiq Khan’s plan to mandate that up to 50% of developments be “affordable” will discourage development and push up prices elsewhere

  • Micromanaging land uses creates high price distortions in our cities and should be abolished

  • Reliance on home ownership as a savings and retirement vehicle is risky and hampers locational adaptation and labour mobility. Saving and housing should be decoupled

The housing crisis of ever rising prices and unaffordability can only be ended by a capitalist revolution in housing, a new paper by leading architect Patrik Schumacher, released by the Adam Smith Institute, argues today.

Instead of populist state-led solutions, the housing crisis can only be fixed effectively through the denationalisation and depoliticisation of development rights in general and in the radical liberalisation of housing in particular.

London’s house prices have gone from four times to over ten times the average annual wage over the past two decades. Meanwhile the average renter has gone from spending one fifth of their income each year on rent to spending over a third. Fifty years ago land values in the UK amounted to just 50% of GDP, now prices are nearly 200% of the national income. Local planning restrictions on supply, and increased demand to live in cities has led to these price rises. An expansion in supply, the paper argues, would help to alleviate the price rises that have made housing increasingly unaffordable for so many city dwellers.

While most of the 20th century was marked by increased numbers living in suburbs, recent decades have seen this trend reverse. IT, finance, and other service industries are most productive in dense urban clusters. With growing numbers needing and wanting to live in cities like London, prices have increased as new supply has been prevented from meeting demand.

Politically motivated nimbyism, as seen in the rejection of the 2,000 home redevelopment of an ASDA car park on the Isle of Dogs, and the discouragement of the redevelopment of the Bishopsgate Goods Yard in Hackney, shows the difficulty that developers face with any project in the capital. Delays or outright rejections of development are the most obvious costs of political interference. But the report also highlights the high cost of restrictions on different land uses, with residential plots reaching values nearly four times those of office space in London. As heavy industry has moved out of the city there is little social benefit to cities micromanaging land uses. Leaving decisions about the best use for a plot of land to entrepreneurs and consumers would increase affordability and boost growth.

All of this is hurting Britain’s productivity, argues the paper. London, which Patrik Schumacher calls the global prosperity engine, is artificially held back as many workers are discouraged due to the cost of living. While those that do choose to live in the city (and other high-price cities like Oxford, Cambridge, and Manchester) see their disposable income shrunk, live in less desirable locations, and spend more time and money commuting.

The answer to this problem, Schumacher argues, is to end the cycle of restrictive planning and price rises. More homes must be built to reduce house prices. Current land values are hugely enhanced by the permissions they receive if they receive them, with windfall gains as permission is granted. Removing planning restrictions across the board would push land prices down and make housing more affordable. Further restrictions on the number of small units allowed per development and size should also be reviewed to increase the number of studio flats available to those on lower incomes.

Government should resist calls to impose rent controls and mandate long-term contracts, argues the paper, with such actions reducing the supply of low-income housing. In doing so these measures hamper labour mobility and further hit productivity.

Plans by London Mayor Sadiq Khan to force developers to earmark up to 50% of developments as ‘affordable’ will have the opposite effect, suggests the paper. Affordable housing requirements act as a tax on new development. Schumacher argues this creates a vicious cycle as developments are disapproved, disrupted or abandoned, and other plots on sites are hiked in price to reflect politically imposed rationing.

A capitalist revolution is needed in house building the paper suggests, arguing “there is no need to infantilize people via paternalistic subsidies” but instead to reform planning laws to enable house builders to “deliver decent, truly affordable housing”.

Patrik Schumacher, top architect and author of the paper, said:

“Capitalism was and is the great prosperity engine behind all the material freedoms of modern life. Tragically capitalism is not allowed to work its magic with what matters most to us, namely our dwellings and cities. Urban development and housing provision have been unduly politicised and thereby paralyzed. We should be experiencing an urban Renaissance as a crucial productivity boosting component of our knowledge-and network society. Instead planning restrictions and imposed standards block the adequate supply of urban residences leading to prohibitive prices. Paradoxically, the “affordability” system contributes to rather than alleviates the affordability crisis.”

Sam Dumitriu, Head of Research at the Adam Smith Institute, said:

“There is a growing consensus that our planning system is not fit for purpose. Restrictive planning systems are pricing people out of the places where they are most productive and redistributing wealth upwards. This situation is crying out for change, so it is great to see a leading architect call for a capitalist revolution in housebuilding.”

Sophie Jarvis, Research Associate, Adam Smith Institute, said:

“Millennials already know that they are at a massive disadvantage to their parents in terms of getting on the housing ladder. What they don’t know is that rent caps and restrictive planning laws are holding them back, not helping them out. Liberalising planning laws, however, could get them on that ladder. The best example of this is if developers were allowed to build smaller houses, millennials could live in a compact, ergonomic flat in  Zone 1 or 2, instead of a rundown, cold flat in at the end of the Central line or half-way to Hull”.

Notes to editors:

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

You can read the full paper here.

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.