TfL and Sadiq Khan harming Londoners by banning Uber

Following the completely disgraceful ruling revoking Uber's licence in London the Adam Smith Institute is leading the attack on the decision by TfL and Sadiq Khan that will leave Londoners worse off, less safe and with less choice over their lives.

Sam Dumitriu, research economist at the Adam Smith Institute, slammed the decision saying:

"TfL's decision to revoke Uber's license is a disaster for Londoners. They are choosing to punish the 3.5 million Londoners who regularly use Uber just because it's cheaper, it's safer, and it's quicker. This decision jeopardises the livelihoods of 40,000 drivers who choose to use the app because it gives them valuable flexibility.

"The only people that will benefit are the Black Cab lobby who have crushed a competitor through cronyism, rather than providing a better service.

"Londoners will face higher prices, longer wait times and will no longer benefit from a safe service where every journey is logged and tracked by GPS.

"Sadiq Khan likes to claim that London is open, but this decision sends a powerful message that London is completely closed to innovation, competition and business."

For further comment or to arrange an interview please get in touch with Matt Kilcoyne via email (matt@adamsmith.org) or phone (either 02072224995 or 07584778207).

Vince Cable hits out at all the wrong targets on housing

Today the Liberal Democrats' annual party conference came to a close. Unfortunately Vince Cable missed the mark in his maiden speech as leader, attacking all the wrong targets for high house prices and ignoring causes to supply that government could easily fix.

Sam Bowman, Executive Director of the Adam Smith Institute, said of the speech:

"On housing, Vince Cable has indulged in the sort of foreigner-bashing that his party usually attacks others for, and missed the point. 'Oligarchs and speculators' are neither a major feature of the housing market nor are they the real cause of high house prices. The problems he points to only exist because housing is an investment asset as well as a place to live, and that is because supply of new homes is so constrained.

"Many people in the Liberal Democrats recognize that the Green Belt is one of the main barriers to building more houses, and indeed Vince Cable has himself acknowledged this in the past. The market isn't working because planning laws have prevented house builders from providing the new homes that people want. Cable's proposals will do little to change that and might even make the housing market seem more dysfunctional by adding complications and extra taxes."

Notes to editors: to arrange an interview or further comment please contact Matt Kilcoyne via matt@adamsmith.org or via mobile on 07584 778207.

UK banking system an accident waiting to happen

New report shows UK banks still sickly, 10 years on from run on Northern Rock

• Latest round of Bank of England stress tests drastically underestimates vulnerability of UK banking system and risks to the UK economy
• UK banks remain highly leveraged; a 2007-08 level shock could still cause the banking system to collapse 
• Properly stringent stress tests and market valuations of bank capital would have seen all major UK banks fail
• Bank of England’s stress tests are worse than useless – offering false comfort while herding banks into identical business models

The British banking system is an ‘accident waiting to happen’ according to a new report released today by the Adam Smith Institute, ten years after the run on Northern Rock heralded the beginning of the financial crisis.

Kevin Dowd, author of the report and professor of finance and economics at Durham University, says the Bank of England’s stress tests continue to greatly overstate the financial resilience of the UK banking system. 

High bank leverage was a key contributing factor to the severity of the financial crisis and UK banks are still highly leveraged, but easy-to-game risk weighting measures still hide this.

The Bank of England’s stress tests look at book-values – values of assets and securities recorded in accounts. On these measurements UK banks’ leverage fell by around a third since 2006. Using more accurate numbers based on real market value reveals that banks’ leverage has actually increased by about a half.

Market-valuations of bank capital are more reliable than book valuations, says the report, indicating that markets believe banks are still carrying large hidden losses not reflected in book valuations or in the stress tests. By doing so, the report suggests, the stress tests provide the public with false assurance about the financial health of their banks.  

UK banks experienced losses of around half a trillion pounds from the last crisis. The Bank of England, as recently as last month, suggested from its view that British banks were in a far better shape to cope with a major shock than they were ahead of the last recession. The paper argues that this is not the case and another crisis on a similar scale could wipe out the entire capital of the banking system multiple times over. 

The Bank’s stress tests are seriously flawed in a number of respects, Prof Dowd shows:

1. they are based on book values instead of market values,
2. pass standards are based on minimum capital requirements that are way too low,
3. they generate implausibly low losses for a severe stress, 
4. they are based on discredited and gameable metrics such as Risk-Weighted Assets and Tier 1 capital (which include OECD government debts - including eurozone crisis countries such as Italy), and
5. they fail to even consider some of the biggest risks faced by the UK banking system.

Professor Dowd suggests that the stress test programme is so severely compromised that it should be scrapped. Instead, the Bank of England should focus on the reforms really needed to get the UK banking system on its feet – raising capital standards, and establishing tighter corporate governance and reforming accounting standards. 

Another shock on the scale of 2007-08 is a possibility, something the tests are designed to prepare for, but UK banks and the Bank of England are not remotely ready for it. Instead, the report argues, the Bank’s policies towards the banking system amount to a form of Russian roulette risking disastrous consequences for the UK economy.

Kevin Dowd, senior fellow of the Adam Smith Institute and author of the report, said:

“The stress tests are about as useful as a cancer test that cannot detect cancer. They seek to demonstrate a financial resilience on the part of UK banks that simply isn’t there. 

"It is disturbing that 10 years on from Northern Rock, the best measures of leverage – those based on market values – indicate that UK banks are even more leveraged than they were then.

"The biggest risk facing the UK banking system now is the Bank of England’s own complacency.”

Ben Southwood, Head of Research at the Adam Smith Institute, said:

“The Bank of England, understandably, wants to prepare for bad eventualities. But its definitions of risk are nonsensical—Italian sovereign debt counts as zero-risk—and easy to game. That means that the stress tests are yet another incentive for banks to put all their eggs in one basket. Even if the Bank were right about risks, this would make crises less frequent, but when they did arrive, much, much worse.

“The Bank of England, now with all its extra powers, should focus on improving the rules of the game, not micromanaging banks’ balance sheets.”

Notes to editors:

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07584 778207. A full version of the report "No Stress III – The flaws in the Bank of England’s 2016 stress tests" can be found here. 

Plan to curb EU migration a disaster

This morning new strict immigration proposals were leaked to the Guardian newspaper, and reported extensively as a commitment to end free movement of workers from the EU, the Adam Smith Institute damns the move as creating a potential economic disaster for the United Kingdom. 

Sam Bowman, Executive Director of the Adam Smith Institute, says if implemented the leaked proposals would undermine British businesses and public services:

"The government’s migration plans would be a disaster if implemented. The Home Office has shown again and again that it isn’t capable of dealing with non-EU immigration effectively – as orders to leave the country wrongly sent to long-time British residents prove. Extending this sort of system to EU immigration will massively drive up waiting times, uncertainty and bureaucracy facing businesses and public services who need to hire foreign workers. Requirements that firms prove that they have tried to hire British workers first don’t work in other countries, they just add bureaucracy and costs.

"EU migrants do not harm native wages or job prospects, and they pay more in taxes than they cost in benefits, effectively subsidising British public services. Curbing their numbers substantially will mean higher taxes or deeper spending cuts just to keep the public finances at their current level, and public services that rely on foreign workers – like schools and the NHS – will face shortages of key workers and need to cut spending on frontline services to fill in the gaps."

In order to arrange any further comment, or to arrange an interview about this topic please do get in touch with Matt Kilcoyne via phone (07584778207) or email matt@adamsmith.org

Attacking CEO pay is pointless and will hurt British firms

Commenting on the government's proposals to force FTSE 100 firms to publish pay ratios between their CEOs and ordinary workers, and to 'name and shame' firms if 20% of shareholders vote against the executive pay packages, Sam Bowman, Executive Director of the Adam Smith Institute, said:

"Forcing firms to publish executive pay ratios and ‘naming and shaming’ firms that face minority shareholder opposition to executive pay levels are both likely to backfire. Pay ratio information is not particularly helpful, and will misleadingly suggest that executives of firms that employ large numbers of low-skilled workers are less valuable than firms that employ skilled workers. Tesco will have a much less favourable pay ratio than somewhere like Goldman Sachs even if the two CEOs are paid the same.

"‘Naming and shaming’ firms after just 20% of shareholders vote against a executive remuneration package gives too much power to minority shareholders who may not have the firm’s best interests at heart and should not be allowed to hurt the company’s reputation if a majority of shareholders support the executive’s pay packet. It also makes firms more vulnerable to hostile takeovers as minority shareholders will be able to cause disarray by triggering a ‘naming and shaming’ of a responsible CEO. 

"The root problem with the government’s position is that many CEOs are worth a lot to their firms, sometimes well in excess of the millions that they are being paid. When Angela Arendts stepped down as CEO of Burberry the firm lost half a billion pounds in value; Tesco became £220m more valuable its CEO merely announced that he would take a more active role in managing the firm. Attacking the CEOs of FTSE 100 firms is likely to make it harder for them to attract the best leadership, and make British firms less productive and competitive compared to their foreign rivals – and that will hurt those firms’ workers as well as its shareholders."

For further comment or to arrange an interview please contact Sam Bowman via phone 02072224995 or email sam@adamsmith.org.

Scrap the Ibiza Tax and watch Tory votes soar!

• The Conservative Party needs to offer younger voters a package of policies to boost incomes and improve their lives
• A package of policy suggestions could transform the lives of young Britons including:
  • Scrapping the ‘Ibiza Tax’ of Air Passenger Duty charged on under-30s 
  • Making it easier for young people to live and work abroad 
• Conservatives can redress the current age imbalance with minimal cost and boost the economy

As GCSE results are released across England and Wales, a new paper by the Adam Smith Institute warns that the Tories must cut the “Ibiza Tax” of Air Passenger Duty for young people or risk losing a whole generation of voters. These, as well as other policies such as targeted cuts to National Insurance, are vital to show younger voters that their wellbeing matters to the government.

Air Passenger Duty in the UK is the highest in the world, rising as high as £150 on flights to and from Britain, and levied on everyone over the age of 16. With trips abroad such an important part of young people’s lives - visiting friends, working, travelling, studying and partying in Ibiza - the tax is a huge cost on those with the least ability to earn. 

A Millennial Manifesto by Dr. Madsen Pirie, President of the Adam Smith Institute, suggests raising the age APD is applied at to 30. Despite fuel efficiency rising the tax has not fallen – some of the windfall to the Treasury should be passed to younger people to allow them to enjoy their lives now. 

Young people should not have goodies funded at the expense of future generations, the paper argues. Rather, the cost of government should be better spread across the generations. Young people should face a lower rate of National Insurance and one that’s only levied above the tax-free allowance. By doing so the Tories could save a young person earning £21,500 some £533 a year.  

In addition to reducing the costs of working at home and travelling abroad the government should make it easier to work and study abroad. The paper suggests a focus on the countries young people most likely say they want to live and work in – Canada, Australia, New Zealand, and the United States. Free movement for under-30s with these countries should be made a priority after Brexit to show young people that a Global Britain can work for them.

The report also argues that fundamental reform to the housing market through planning liberalisation and longer-term tenancy arrangements are vital to create cheaper and more secure housing for younger people. Fixing the funding of social care along a social or mandatory private insurance lines would create a better balance of government spending between young and old.

The Conservative Party does not need to write off young voters as inevitable supporters of Corbyn’s Labour. With a bold package of policies tailored to the needs of young people, says the paper, the Tories could improve young people’s lives, increase the opportunities available to them and win their votes for many years to come.

Sam Bowman, Executive Director of the Adam Smith Institute, said:

“It isn’t easy being young in Britain. Houses are mostly unaffordable, rents are high and most high-quality jobs are in the most expensive parts of the country. For all but a very lucky few, times are tough. But the Conservatives have ignored this and ignored the concerns of young voters, both neglecting their wellbeing directly and taking positions that are badly out of touch in areas like animal welfare and openness to immigration.

“Today’s paper should start a conversation in the government and the Conservative Party at large about how to win back some of the younger voters lost to Corbyn, both in terms of specific policies that might improve young people’s prospects by raising their spending power, cutting their rents and giving them better access to the public services they need, and in terms of a wider culture shift that puts the priorities and problems of young people at the heart of Conservative governance.”

Madsen Pirie, President of the Adam Smith Institute and author of the manifesto, said:

“Older people have done very well from recent governments. And some have suggested that there is now an imbalance. There are many things that governments could do to help young people. 

“The Conservatives should look at innovative policies, like reducing the cost of travelling and making it easier to work abroad, to win over young voters.”

The report “A Millennial Manifesto’’ is available to read here.

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.
 

Devolution of transport strategy is welcome, devolution of spending should follow

We welcome the commitment of Chris Grayling, the Transport Secretary, to devolve planning and strategy for infrastructure but also call on the government to go much further and devolve spending too. 

Matt Kilcoyne, Head of Communications at the Adam Smith Institute, says:

"The North remembers the promises of the last parliament to devolve significant powers, it also knows that these have amounted to very little real change. So while it is extremely welcome that the transport secretary wants the North to take control over planning its transport infrastructure this time it has to translate into results - faster journey times, more and better quality trains, faster decisions taken on infrastructure projects.

"If the government is serious about reversing regional decline and ending the UK's reliance on London for economic growth it has to get serious about where it spends constrained resources on infrastructure. The government should, however, go further than changing who suggests where money is spent. Spending should be devolved entirely, on a per-capita basis, so that city-regions have the money to spend – not just advise – on local infrastructure. The Northern Powerhouse, with a population of over 10m people, a mix of manufacturing and services industries, and famously poor public transport links, would be the right place to start."
 

For further comment or to arrange an interview please contact Matt Kilcoyne, via phone 07584778207 or email matt@adamsmith.org

[Image Credit: Manchester City Centre sunset photo. Taken from the 15th floor of a Piccadilly building. Tecmark Manchester]

Public Health England needs to pizz-a off with its busybody interference

Following the news that Public Health England are seeking to set targets to limit calories in pizzas, burgers and ready meals, the Adam Smith Institute is quick to blast this absurd decision.

Sam Bowman, Executive Director of the Adam Smith Institute, condemned the move saying:

"Public Health England needs to wind its neck in. It’s one thing to give advice about how to live healthily, but threatening food producers into making their foods less calorific and, let’s face it, less enjoyable to eat is way out of line. People eat high-calorie foods like pizza and pasta because they taste good – we know it’s fattening, but that’s a choice we make. If we feel we’re too fat, we can eat less or exercise more.

"Lucozade has already faced a massive backlash over its new ‘low sugar’ recipe, which many people think now tastes disgusting. Making pizzas less cheesy or smaller for the same price just means people getting ripped off and having more of the pleasure sucked out of their lives. We don’t need miserable bureaucrats at Public Health England interfering with our food choices and making the world a greyer, sadder place – even if it’s a slimmer one."

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

Government is right to continue Everything But Arms trade policy

Today, with the release of the UK Government's briefing paper on future customs arrangements the Adam Smith Institute welcomes the government's continued support post-Brexit of the EU's current Everything But Arms initiative with Least Developed Countries. But we can go even further.

Sam Bowman, Executive Director of the Adam Smith Institute, says:

"It’s good news that the UK government had pledged to maintain the EU’s Everything But Arms and Generalised System of Preferences initiatives even after we leave the Customs Union. These give exporters in many of the world’s poorest countries duty-free and quota-free access to EU markets, preferential market access for many other developing countries’ exporters, and less strict rules of origin checks on goods. Free trade is one of the best tools we have to reduce poverty in the developing world and it is an encouraging sign that the UK has committed to maintaining openness to the world’s poorest producers.

"But we can go a lot further. Many more countries can be given full duty-free and quota-free access to the UK’s market once we leave the EU’s Customs Union, particularly countries that we are unlikely to agree trade deals with in the near future and countries that are not major export destinations for British businesses. Giving full duty- and quota-free access to exporters in places like Vietnam, Bangladesh, Nigeria and Pakistan would drive economic development there and cut costs for British consumers here at trivial additional cost to the Exchequer. It would also help to prove to internationalist voters that Brexit really is about creating an open, free trading, globally-minded Britain."

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

Forget NIMBYs, it is all about YIMBYs now

New report explains how politicians can easily end the housing crisis, boost the economy and win more votes. 

• The UK’s housing crisis is among the worst in the world and needs urgent action
•  Inaction is holding back economic growth, hurting productivity and wages, and creating a generation who can never hope to own their own home
•  UK could boost GDP per capita by 30% if we built enough homes in the right places
•  We should let residents vote on letting their own streets add homes
•  Millions of homes, enough for all the housing anyone could want, could be built within a generation if proposals are adopted.

The United Kingdom is suffering from a housing crisis caused by a chronic lack of new homes being built. A new paper by John Myers of London YIMBY (Yes In My Back Yard), released today in conjunction with the Adam Smith Institute, offers three ways to beat the housing crisis, boost living standards and disposable incomes, and revitalise the economy.

Households would be on average £10,000 a year better off if we had better planning and built enough homes in the right places, shows John Myers, author of the report. Shortages of housing near job opportunities lead to high rents and prices. These prevent young people - as well as those from deprived communities - from moving to areas which have good jobs. This is a needless and self-inflicted brake on growth.

After a string of prominent rejections of developments, such as the redevelopment of an ASDA and its car park on the Isle of Dogs into nearly 2,000 new homes, it is more important than ever to reform the planning system so that residents feel they benefit from new housing. The alternative is economic stagnation, social divide, and potentially political turmoil.

The report suggests three practical proposals to win the support of existing homeowners for development that makes the country richer and fairer:

1.     Letting individual streets give themselves planning permission to extend or replace buildings. This, coupled with a design code chosen by the street, could allow up to 5 million new homes to be built over a generation in London alone, while making existing homeowners two to three times better off and beautifying streets by turning semis and bungalows into traditional terraces.
2.     Giving local parishes the power to improve their green belt by swapping out ugly dead land or intensive farmland for development and adding protections to areas of outstanding beauty.
3.     Handing the new set of devolved city-region mayors radical new powers to choose different planning regimes for their area, to see what works best. What’s right for London might not be right for Leeds, and Birmingham may want to grow even if Cambridge does not.

Politicians could neutralise NIMBYs, the paper argues, by seizing the opportunity and letting local people take the lead on deciding how and where to build new homes. By giving more power to locals, the billions of pounds spent on armies of planning lawyers and consultants could be retained within communities. The reforms would also benefit the exchequer, not just through property taxation, but also as people move closer to better jobs and earn more.

Failing to end our housing crisis will most hurt those that can least afford it, according to the report. Those who are just about managing (Theresa May’s JAMS) will pay the price for inaction—once you take into account housing costs real incomes are completely stagnant.

Paying through the ear to rent a box or a dump is radicalising the youth, but politicians stand to benefit hugely if they can make housing within reach of job opportunities abundant and affordable. The UK can avoid clarion calls for rent controls or mass social housing if we act to expand private housebuilding now.

Britain has one of the worst housing crises in the world, the report shows, but that should mean benefits of even partial reforms are felt greatest here. Simple changes could substantially increase the supply of new homes, boost the economy, tackle intergenerational inequality and improve social mobility, while making our existing cities better. It is time to build a better country.

John Myers, co-founder of London YIMBY and author of the report, said:

“A new generation of young people is demanding change to avoid being worse off than their parents. There are vote-winning ways to make decent homes truly affordable with the support of existing homeowners, if only we seize them.”

Ben Southwood, Head of Research at the ASI, said:

“The planning system is a mess. We all know we need more homes and infrastructure in the places people actually want them—but it isn’t delivering. But we can hardly blame locals for blocking development when not only does it blight their views with ugly designs, but it detracts from their living standards. So we are proposing a raft of measures that may bring homeowners around the country on-side. If new housing benefits people already living there, then we may finally be able to build enough to stop rents taking half of people’s pay packets.”

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

The report “Yes In My Back Yard - How to end the housing crisis, boost the economy and win more votes’’  is available here.