Rory's Opium

Daniel Pryor of the Adam Smith Institute slams the hypocrisy shown in politicians' approach to drugs to the sons of Eton and those born on sink estates: 

"Over 12,000 Brits are in prison for drug offences, but it’s one rule for politicians and another for the rest of us. Rory Stewart’s opium experience is nothing new—countless senior politicians have admitted to using illicit drugs, but this hasn’t translated into a sensible approach to drug policy. 

"Politicians are all too happy to prop up violent supply chains that wreak havoc in Britain’s cities instead of taking back control from criminals by legalising and regulating drugs. They’re eager to lay the blame on middle class drug users to distract from their own failed efforts to enforce prohibition. They're determined to crack down on child exploitation while opening the door to county-lines gangs that use children as drug mules. Politicians should spend less time apologizing for taking drugs and more time sensibly regulating them."

Please contact Matt Kilcoyne if you wish to arrange an interview with a member of the Adam Smith Institute on 07904099599 or 02072224995.


Happy Tax Freedom Day!

Taxpayers worked 149 days for HMRC this year, today is the first day they start working for themselves

  • Tax Freedom Day falls on May 30th; the latest it's been since 1995

  • Brits work 149 days of the year solely to pay taxes

  • UK Taxpayers will fork out over £734.1bn to the Treasury this year, 40.94% 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, Tory leadership contenders that want growth in the economy and people’s wages need to come up with ways to reduce, not increase, the national tax burden.

  • Top Conservatives back ASI call to cut tax burden for ordinary Britons and ensure Tax Freedom Day comes earlier in 2020.

Tax Freedom Day is a measure of when Britons stop paying tax and start putting their earnings into their own pocket. In 2019, the Adam Smith Institute has estimated that every penny the average person earned for working up to and including May 29th went to the taxman—from May 30th onwards they are finally earning for themselves.

British taxpayers have worked a gruelling 149 days for the taxpayers this year. That’s more than at any time since 1995. Conservatives under Theresa May have seen the tax burden go in the wrong direction, and now the free market think tank the Adam Smith Institute is calling on leadership contenders to commit to reducing the tax burden, as Director Dr Eamonn Butler launches his new book 'The Street-wise guide to the British Economy'.

The Adam Smith Institute’s call for lower taxes is joined by Tory Big Beasts Sir John Redwood, Steve Baker, and Priti Patel who argues that the Conservative Party needs “leadership that will radically attack the tax burden.”

Conservative leadership candidate Sajid Javid stated that “simpler, flatter, lower taxes” should be a priority for the government and that they both “good economic sense” and are “also the right thing to do.”

Esther McVey, also running for leadership of the Tory party says that “higher tax bills hit the least well-off families the hardest and it is dispiriting for hard-working taxpayers to have to work right up until the start of June just to pay their yearly tax bill.”

Government spending choices fall on UK Taxpayers, and this year to try and meet these commitments taxpayers will fork out £734.1bn—representing 40.94% of net national income.

Tax Freedom Day in the United Kingdom is now well over a month later than in the USA, where this year it fell on April 16th, down from April 19th the year earlier.

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.

In a sign of good news though, Cost of Government Day this year falls on 18th 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.

While it’s good news that the gap is getting smaller, the money borrowed to cover the near three week 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. With a change of premiership the Adam Smith Institute argues that it’s time for the Conservatives to again become a party that again commits to a lower tax burden.

The Adam Smith Institute singles out three 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.

  3. Slash corporation tax to no more than 12.5% to induce job creation and higher wage growth.

Rt Hon Sajid Javid MP said:

“A low tax burden is not only essential to help grow the economy, which provides the tax base for public spending, but it is also morally right that workers get to keep the maximum possible amount of their earnings. It is noticeable that the increase in income tax under Gordon Brown led to a reduction in revenues, as did the recent Stamp Duty rises. Simpler, flatter, lower taxes should be a priority for any government. Not only does it make good economic sense, but it is also the right thing to do.”

Rt Hon Esther McVey MP:

“With the tax burden now at its highest in almost 50 years, we must do everything we can to get rates down.

“Higher tax bills hit the least well-off families the hardest and it is dispiriting for hard-working taxpayers to have to work right up until the start of June just to pay their yearly tax bill.

“Allowing hard-working taxpayers to keep more of their hard-earned money will show that the Conservative Party is firmly on their side and will generate economic growth, higher wages and more jobs."

Rt Hon Priti Patel MP said:

“It is shocking to see that under a Conservative Government Tax Freedom Day keeps getting later as the tax burden rises to its highest level in a generation. A high tax economy hits people hard in their pockets, strangles economic growth and prevents investment in job-creating enterprises. People should not be working for nearly five full months to pay taxes. We need to see new Conservative leadership that will radically attack the tax burden, reduce complexity in the tax system and free families and businesses so they can keep more of what they earn.”

Sir John Redwood MP said:

“Better late than never. Tax Freedom Day should be brought forward. If we had lower tax rates the economy would grow faster and we could pay for our public services more easily. Taxes like Stamp Duty, Capital Gains and Higher Rate Income Tax are now at levels which mean the Treasury collects less revenue than if the rates were lower.”

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

“If we were forced to spend 40% of our time working for the government, people would regard it as the most tyrannical slavery. But that is exactly what people in Britain have to do. And when they see what their forced labour goes on—the overspending on HS2, the dismal bureaucracy, the daily pantomimes in Parliament—they are quite understandably annoyed.

Taxes of 40% make working for a living pretty pointless. That’s why economists are clear that tax takes over 15% actually damage economic growth. And with less growth, there is less money to fund the essential services that are really needed.”

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

“It’s demoralising to think we spend so long each year working for politicians. It's even worse to think just how much of that hard-earned cash is wasted. We hope the Adam Smith institute will report an earlier Tax Freedom Day next year, as it might mean that Britain is becoming a more pro-enterprise country with lower, simpler taxes funding better public services.”

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.”


Notes to editors:

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

Government must not prop up British Steel

With the news that government is to 'willing to act' and that it will 'leave no stone unturned in support of the UK steel industry', please find the following quote from Matt Kilcoyne of the Adam Smith Institute calling on the government to reveal the civil service advice received on any loans to be offered by government to this commercial operation and rejecting corporate welfare: 

"Before the government commits to throwing any more cash into a burning furnace to prop up the business of two super-rich brothers, they should make public the civil service advice on whether there was any business case for the £100m loan made just three weeks ago. And we should inquire whether this loan was used by British Steel to try and extend the private lines the company holds with banks and insurers. It is never in the national interest to make bad commercial decisions on the back of taxpayers' money.

"Greybull Capital demanding taxpayers put money on the line to save their business while limiting their own exposure is the worst of crony capitalism. Money funnelled from your pockets to Westminster and onto Mayfair, with the pretense of saving Scunthorpe just prolongs the inevitable. On top of this it undermines trust in our economic system and opens the door to even more direct control of our economy under Jeremy Corbyn.

"The British people have had enough of throwing their hard earned money at failing enterprises. No small business can demand a bail out, nor should any big one. It’s not the government’s role to bailout collapsing businesses."

For further comment or to arrange an interview, please contact the Adam Smith Institute press team via email (matt@adamsmith.org), mobile (07904099599), or office phone (02072224995).

Modern Monetary Theory is no Magic Money Tree

New paper by neoliberal think tank the Adam Smith Institute breaks down the case for Modern Monetary Theory:

  • Modern Monetary Theory advocates are driven by Utopian thinking, by those who want massive unaffordable public spending programmes.

  • MMT adherents claim that government spending can activate substantial unused economic capacity is false, and practice shows impact is inflationary and hyperinflationary.

  • From the Green New Deal to Corbyn’s People’s Quantitative Easing, MMT is gaining ground in mainstream political activism while still being a fringe economic theory

  • Venezuela’s economic collapse following years of deficit spending shows again Hyperinflation marks the end point of thinking that suggests deficits don’t matter

  • MMT deserves critical thinking and debunking before it influences government policy in a major Western state

John Maynard Keynes said that economic ideas are powerful “both when they are right and when they are wrong”. The Adam Smith Institute today argues that an idea that is gaining ground among heterodox economists and left wing politicians in the USA and the UK is powerfully wrong.

Modern Monetary Theory hinges on the claim that since government issues its own currency it cannot go bust, and it is possible to use printing money to fund substantial government spending with the goal to deliver full employment.

It is this belief that leads author of the report, Professor Antony P. Mueller, to say that “Modern Monetary Theory is to economics what the flat earth movement is to geography.”

Despite gaining ground among political activists, Modern Monetary Theory remains rejected by mainstream economists. In a poll of 50 elite economists the University of Chicago’s Booth School of Business found not a single one believed that countries that borrow in their own currency need not worry about deficits. None found it possible to fund as much real government spending as desired simply by creating money.

MMT asserts, with limited evidence, that there is substantial unused economic capacity that government spending can activate. In practice, when government excessively expands the monetary supply (prints money) the impact is inflationary, if not hyperinflationary — as historically seen in the Weimar Republic, Zimbabwe, and today in Venezuela.

Dependent on government knowing precisely the natural rate of unemployment, and therefore when spending and taxing is needed to drain the excessive inflationary impact of creating money, MMT ignores ignorance on the part of politicians and government actors with no price incentive or competition to counterbalance political prejudice.

Instead of a serious theory about the role of money, the free market Adam Smith Institute stresses we should view increase support for Modern Monetary Theory as a sign of the growing tolerance for debt and deficits in political debate.

If there is no fiscal restraint for public spending, the report argues, opposition to huge public expenditure programs loses its legitimacy. Projects like the ‘Green New Deal’, ‘free’ university education, renationalisations, and massive increases in infrastructure spending can be launched with gusto.

There is no Magic Money Tree to be found in the annals of Modern Monetary Theory, the think tank argues, just a new justification for the same historic mistakes of printing money to finance government spending beyond its means.

Matthew Lesh, the ASI’s Head of Research said:

“MMT promises politicians almost limitless cash to spend on their pet projects. But if something sounds too good to be true it probably is. The state cannot print money without risking crippling inflation. More cash chasing the same amount of goods inevitably leads to sellers increasing their prices.

"When inflation spirals out of control it has disasterous consequences from the Weimar Republic to Zimbabwe to now Venezuela. MMT may just be wishful thinking today - the danger is that tomorrow a politician is stupid enough to follow its prescriptions."

Professor Antony P. Mueller, the paper author, said:

“Old wine in new bottles is a recurring phenomenon in economics, particularly if it is the bad wine of economic ideas that failed in the past. Modern Monetary Theory (MMT) is neither modern nor a theory - it is the attempt to sell something as new which is spoiled and rotten. While promising to cure all kinds of economic woes, MMT is the poisonous elixir that will ruin those who take it as it has happened before.”

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07904 099599.

ASI condemns British Steel corporate bailout

News has emerged that the Government is considering providing British Steel with a £75 million loan to prevent the company from becoming insolvent. The ASI has consistently opposed corporate bailouts on the basis that taxpayer money should not chase failing businesses.

Matthew Lesh, Head of Research at free market think tank the Adam Smith Institute, says:

“This massive loan is as good as shovelling taxpayer cash into a furnace. The British public should not be forced to subsidise failing, heavily polluting businesses like British Steel. Just like any other company, if you cannot convince enough people to buy your product to cover the costs then you shouldn’t exist. Too big to fail is a myth. The proposed £75 million loan comes after £100m of taxpayer cash was bunged over to the company just two weeks ago, amounting to a whopping £43,000 per employee.

“The Conservative Government should not adopt Labor’s socialist policy agenda. The British people are sick of massive corporations, who have close connections with the government, getting huge handouts at the taxpayer’s expense. It is time to leave the era of taxpayers propping up failing businesses where it belongs: in the past."

If you have any questions or wish to arrange an interview with Matthew Lesh please contact ASI media line on 07584778207 or via info@adamsmith.org.

End socialism for the banks: ASI report

A new volume from the free market, neoliberal think tank the Adam Smith Institute, What a Capital Idea!: How to make Britain’s banks more competitive, innovative, and safer, is calling for a radical rethink of banking regulation:

  • UK banks that issue high levels of capital should be freed of other cumbersome prudential regulation, such as the mandatory deposit insurance scheme

  • Banks are more leveraged now than in the lead-up to the Great Financial Crisis of 2008, when market-value leverage ratios were just over 7% — they now stand at just 4%

  • The ‘Great Capital Rebuild’ that banks undertook in the past decade is ‘as real as the Wizard of Oz’ says Professor Kevin Dowd

  • Higher capital requirements and less other prudential regulation would help restore public faith in banking, make banks safer and less prone to causing financial crashes, and reduce the barriers to entry of new banks that would increase competition and customer service

  • This is similar to the regime in the United States’ CHOICE Act, which was passed by the Republican-controlled House of Representatives in the last Congress

Banks are not trusted. A poll last year found that two-thirds of the public do not trust banks to work in the interest of society and 63% are worried that banks may cause another financial crisis. They are broadly blamed for the global financial crisis, and prone to excessive risk.

The failure of the banking sector is not, however, a failure of the free market left to its worst impulses. Banking is highly regulated and directed by the state from the Bank of England’s control of interest rates to the Financial Services Act’s thousands of pages and the Financial Conduct Authority’s thousands of regulators.

The Adam Smith Institute report, written by Professors Kevin Dowd and John Cochrane, argues that the existing regulatory regime creates a moral hazard: the public deposit insurance scheme and expected taxpayer bailouts in a time of crisis encourage banks to take excessively risky behaviour and issue limited capital.

The growth of banking regulation does little to make banks less risky but it does increase compliance costs and create substantial barriers to entry for competitor banks. The lack of new entrants reduces customer service quality and innovation.

Professor Kevin Dowd argues that banks are considerably more leveraged now than they were going into the Great Financial Crisis. He says that the banks’ ‘Great Capital Rebuild’ in the wake of the crash is as real as the Wizard of Oz.

He argues that with banks more heavily leveraged that the next financial crisis will be bigger than the last, warning that there is a “good chance the next round of bailouts and stimulus will be beyond even our governments’ fiscal resources” and that “our fiscal firehouse is not infinite.”

Instead of following the same script of bailing out creditors to stop a run on a bank in any future crisis, and expanding asset and anti-competitive regulation, the free market think tank suggests that we should require banks to issue immense amounts of capital (and long-term debt) so that their remaining run-prone liabilities are not in question.


Banks should be required to issue immense amounts of capital, the free market think tank suggests, so much that their remaining run-prone liabilities are never in question. The issuing of more higher capital may mean banks can take fewer risks and are therefore less profitable, however current profits are dependent on an unfair taxpayer subsidy.

The United States’ CHOICE Act, passed by the US House of Representatives, offers banks a choice to either continue with the existing system that requires low levels of capital or if a bank operates with a higher level of capital it can be exempt from swaths of regulation. Britain should introduce a similar regulatory option for banks.

In the UK, the Adam Smith Institute argues that banks that issue more capital could be able to opt out of regulation stemming from Basel III and Solvency II (for insurance companies) and the Financial Services Compensation Scheme (i.e. deposit insurance).  Banks would be free to walk away from normal PRA supervision and new banks that wanted to set up on with high capital requirements (above 20%) would get automatic approval to do so.




Steve Baker MP, said about the report:

“Socialism for the banks — extensive regulation, state direction and taxpayer bailouts — is a disaster there as it is everywhere. In the public interest, it must be brought to an end. I congratulate Cochrane and Dowd on setting out how it might be done.”

John Cochrane, Senior Fellow at Hoover Institution at Stanford University and chapter author:

“We have the chance to end financial crises forever. If banks got most of the money they use to make risky investments by selling stock, as other companies do, we would not have crises when banks lose money. Modern financial, communications and computation technology allow such equity-financed banking to take over. This volume describes just how we can end financial crises forever in this way – and how the continuing effort to subsidize and regulate banks will not work.”

Kevin Dowd, Professor of Finance and Economics at Durham University and chapter author:

“Most people don’t realise that in market-value terms, banks are more leveraged now than they were before the crisis. This high leverage means that banks are vulnerable to a downturn and are being subsidised by the taxpayer to take excessive risks. It is therefore essential that minimum capital standards be much higher than they currently are.”


Matthew Lesh, the ASI’s Head of Research said:

“Banking as it stands is not the free market at work, but crony corporatism at its absolute worst. The time for tinkering around the edges is over. Taxpayers should not be on the line to pay the costs of excessive risk-taking from banks. It’s time to recreate an actual free market in banking, secured by proper capitalisation and limited prudential regulation that reduces risks while encouraging competition and innovation.”

-ENDS-

Notes to editors:  

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07904 099599.

ASI slams porn laws announcement

The Adam Smith Institute has responded to the announcement that the Porn Laws, the government’s age verification scheme for adult content, will be delayed until July 15.

The Adam Smith Institute is currently running a campaign calling for the government to Repeal the Porn Laws.

Matthew Lesh, Head of Research at free market think tank the Adam Smith Institute, says:

“It is disappointing that the Government is steaming ahead with its ill-thought-out plan to block porn sites and require age verification.

“This scheme, that requires linking of people’s identity to their online adult viewing habits, will seriously threaten our privacy, be a massive gift to scammers, and won’t even work.

“Young people will just get around it, and end up being exposed to more hardcore material.

“The Government should Repeal the Porn Laws.

If you have any questions or wish to arrange an interview with Matthew Lesh please contact ASI media line on 07584778207 or via info@adamsmith.org.

ASI responds to ICO's Age-appropriate design code

Today the Information Commissioner’s Office announced a consultation on a draft ‘Code of Practice to help protect children online’.

The code forbids the creation of profiles on children, and bans data sharing and ‘nudges’ of children. Importantly, the code also requires everyone be treated like a child unless they undertake ‘robust age-verification’.

The ASI believes that this code will entangle start-ups in red tape, and inevitably end up with everyone being treated like children, or face undermining user privacy by requiring the collection of credit card details or passports for every user.

Matthew Lesh, Head of Research at free market think tank the Adam Smith Institute, says:

“This is an unelected quango introducing draconian limitations on the internet with the threat of massive fines.

“This code requires all of us to be treated like children.

“An internet-wide age verification scheme, as required by the code, would seriously undermine user privacy. It would require the likes of Facebook, Google and thousands of other sites to repeatedly collect credit card and passport details from millions of users. This data collection risks our personal information and online habits being tracked, hacked and exploited.

“There are many potential unintended consequences. The media could be forced to censor swathes of stories not appropriate for young people. Websites that cannot afford to develop ‘children-friendly’ services could just block children. It could force start-ups to move to other countries that don’t have such stringent laws.

“This plan would seriously undermine the business model of online news and many other free services by making it difficult to target advertising to viewer interests. This would be both worse for users, who are less likely to get relevant advertisements, and journalism, which is increasingly dependent on the revenues from targeted online advertising.

“The Government should take a step back. It is really up to parents to keep their children safe online.

If you have any questions or wish to arrange an interview with Matthew Lesh please contact ASI media line on 07584778207 or via info@adamsmith.org.

ASI warning on online harms white paper heeded

The Adam Smith Institute’s warning on the government’s Online Harms White paper has been heeded by newspapers and blogs across the world.

Comments by Matthew Lesh, the Head of Research at the Adam Smith Institute, were included in stories on the issue by the BBC, the Washington Post, Radio New Zealand, Talk Radio, The Week, The Herald, and Forbes.

If Britain adopts the measures, our country will lead the developed world in internet censorship.

Today is a dark day for liberty and we urge everyone to contribute to the government’s consultation and halt the illiberal attempt to introduce censorship through the back door.

Government harms free speech and free press with online harms white paper

In light of the government's release of the online harms white paper, the Adam Smith Institute has released the following statement. We worry that this attempt at controlling the Internet will entrench big tech players, stymie innovation, and lead to press censorship through the back door.

Matthew Lesh, Head of Research at free market think tank the Adam Smith Institute, says:

“The Government should be ashamed of themselves for leading the Western world in internet censorship.

“The proposals are a historic attack on freedom of speech and the free press, the very core of Britain's liberal democratic foundations. At a time when Britain is criticising violations of freedom of expression in states like Iran, China and Russia, we should not be undermining our freedom at home. Britain will no longer be called a free society if her citizens and her press are directed by Government as to what they can view, think and say.

“The Government aren’t just targeting illegal material, they explicitly want to censor ‘Harms with a less clear legal definition,’ that is, otherwise completely legal speech. It’s not hard to imagine an overly zealous government regulator and risk adverse tech sites, who want to avoid fines and going to jail, removing swaths of lawful speech.

“The scope of this censorship will include ‘any company that allows users to share or discover user generated content or interact with each other online,’ basically the entity of the internet – not just the tech giants. This covers web forums like Mumsnet, online retailers like Amazon, travel websites like TripAdvisor, and even news websites.

“If Britain wants to have a thriving tech and start-up sector, regulating them into oblivion is probably not the right approach.

“These measures will entrench the market position of the tech giants like Facebook – because they can afford to comply with the massive new costs of this red tape. Mark Zuckerberg gleefully called for more regulation last week. It’ll be start-ups and smaller sites which will suffer under the heavy hand of this regime."

If you have any questions or wish to arrange an interview with Matthew Lesh please contact ASI media line on 07904099599 or via matt@adamsmith.org.