Standing up for safe standing after West Brom decision

Following the news of West Brom's safe standing bid rejection by government Sam Dumitriu, Head of Research, Adam Smith Institute said:

“Sports Minister Tracey Crouch’s decision to reject West Bromwich Albion’s plan to introduce ‘safe standing’ next season is a blow to football fans across the country. The requirement for all teams in the top-two tiers of English football to have all-seater stadiums is outdated. Rail seating is widely used in German, Austria and Sweden, and was recently introduced at Celtic Park to great success. 

“Right now in most football grounds, many of the most enthusiastic fans will stand throughout the match, regardless of the all-seater nature of Premier League stadia. This is more dangerous than rail seating as fans frequently fall over the seats in front of them causing injury. Under the status quo, we have unsafe standing. 

“Safe standing is overwhelmingly popular with football fans, with polls regularly finding more than 80% of football supporters in favour. According to Adam Smith Institute research, it could cut the cost of a season ticket at some top-flight grounds in half and save West Brom fans around £120 a year on the lowest-priced season ticket. Tracey Couch should follow the evidence and listen to the fans. After the season they’ve had, the Baggies’ deserve all the good news they can get.”

For more information, read the Adam Smith Institute report Safe Standing: Why it’s time to remove the ban. Please get in touch with Matt Kilcoyne (07904099599 or 02072224995) to arrange an interview or further comment.

Getting a ruddy grip on Britain's drug gang problem

Following the Home Secretary's speech this morning unveiling her plan to tackle violent crime, Daniel Pryor, Head of Programmes at the Adam Smith Institute, said:

"In setting out her strategy for tackling violent crime, the Home Secretary has inadvertently made a powerful case for ending drug prohibition. Gang violence, including youth violence, is intimately connected to the illegal drugs market. You’re less likely to face violent crime purchasing alcohol in an off-licence than buying cannabis in a dark alley. Taking drugs out of the hands of gangs by legalising and regulating them would significantly reduce violent crime: putting drug dealers out of business, protecting young people (drug dealers don’t ask for ID) and destroying the black market.

Last week, David Lammy MP told BBC Radio 4's Today programme that “the police and our country has lost control of [the] drugs market,” but the truth is that they never had control in the first place. Our failed policy of prohibition undermines relations between police and communities, and leaves criminal gangs violently competing over power vacuums left in the wake of police disrupting incumbents. Get drugs into the light of the legal market. Until we do, the police will be left chasing shadows."

For further comment or to arrange an interview please contact Matt Kilcoyne (matt@adamsmith.org, 07584778207, 02072224995).

Auction work visas after Brexit

New report shows how the UK can reform immigration after Brexit, be responsive to business needs and pay for public services.

• UK must set out post-Brexit immigration system by year-end
• Immigration has been a net positive to the UK’s fiscal position, with little impact on unemployment or wages of low-skilled workers
• Reducing high-skilled immigration would hit businesses and UK competitiveness
• Points-based systems attract workers who look good “on paper” but are not necessarily the best fit for employers
• A more business friendly approach would be to auction work visas to employers
• Auctioning visas would promote economic growth and allow government to raise funds to spend on addressing concerns about pressures on public services and low-skilled wages

With just over one year to go until Britain leaves the European Union, the country must design an immigration system that can win popular support. Building on the work of Nobel Prize winning economist Gary Becker, labour economists Pia Orrenius and Madeline Zavodny argue that auctioning employer permits to hire foreign workers, provided security checks are met,  would maximize the economic benefits of immigration and increase government revenue. The Adam Smith Institute’s new report comes at a time that the UK has to decide on how it will manage immigration. It’s time to kick-start a mature debate on how we organise this system. 

At present the UK has two migration systems. The first, for non-EU migrants, has five tiers for work- and study-based visas as well as additional channels for family migration and humanitarian migrants. The second is the free movement regime that the UK has with the European Union, which grants EU citizens preferential access. As we prepare to leave the EU, the government has made clear it is seeking to control numbers, the skill level of migrants, their length of stay and the benefits they receive. 

It might be easy for the UK government to simply fold the EU into the existing skills-based tiered system. While doing so might enable the Conservatives to hit their goal of reducing annual net inflows to the tens of thousands, it would come at considerable economic cost with businesses hit by labour shortages and consumers facing higher prices for goods and services, the report suggests. Points-based immigration systems, as used by Canada and Australia, tend to attract workers who look good “on paper” but are not necessarily the best fit for employers. 

Instead, the UK should consider auctioning employment visas to employers. Auctions are a flexible alternative to complex points-based systems and replace central planning with employers’ bottom-up knowledge. By allocating visas to the firms that value migrant labour the most the policy has the potential to boost economic growth and government revenues.

Visas purchased by companies could be resold, while foreign workers would be allowed to move across employers with a visa, to ensure workers’ rights are protected. With the Migration Advisory Committee providing advice or setting a target number of visas up for auction, it would be responsive to changes in UK economic conditions and the demand for foreign workers. Changes in permit prices would act as a signal to increase or reduce the numbers of permits available in auctions in future years.

The UK should consider separate auctions for high- and low-skilled permits, with low-skilled permits reserved for foreign workers who will earn less than a certain amount or work in certain occupations or industries. Creating another separate auction of short-term permits for seasonal foreign  workers, such as those working in agricultural jobs or at holiday  resorts, might also be advisable.

Visas as currently constructed are not free. At present a typical Tier 1 exceptional talent applicant pays ₤585 to apply, while a typical Tier 2 general applicant for a three-year visa pays between ₤587 and ₤1267 (although less if in a shortage occupation). Sponsoring employers of Tier 2 and Tier 5 workers also pay an Immigration Skills Charge of up to ₤1476. Thousands more are paid in legal fees to lawyers as applicants and employers attempt to prove need and skills. An auction system would allow the government to streamline the process, make it more responsive to business requirements, and capture funds currently spent on legal costs.

In 2014, Professor Sir David Metcalf, who chaired the Government’s Migration Advisory Committee until 2016, proposed using auctions to allocate investor visas. 

The paper also draws on extensive research to conclude that immigration has had negligible effects on employment, unemployment, or the earnings of people born in the UK. However, some research suggests that low-skilled immigration slightly lowers the earnings of low-paid workers, with the most-negative effects on wages felt among other immigrants.

Immigrants to the UK contribute more to taxes than they consume in terms of public benefits and services. Immigrants from countries that joined the EU in 2004, including Poland, Hungary and Lithuania, are strongly net positive contributors to the UK government’s coffers. 

Immigration responds to and generates more economic activity, the report suggests, with the economy especially able to absorb higher migrant rates during times of expansion. Extensive research finds migration leads to greater levels of trade, innovation, and productivity gains. Report authors Zavodny and Orrenius report that migration increases patent activity and productivity, and in the UK has been instrumental in retaining the City of London’s pre-eminent position at the centre of global finance. 

Immigration was named by 73% of those who voted leave as a concern in the British Social Attitude survey immediately after the EU referendum. But instead of using Brexit as a means toward reducing immigration from the EU, the UK government should seize it as an opportunity to design an immigration system that best strengthens the country’s economy. Creating an auction system would be a bold move that would maximize the economic benefits from immigration while possibly bolstering public support for immigration.

Madeline Zavodny, author of the report and Professor of Economics at University of North Florida, said:

“The UK has a unique opportunity to replace its immigration system with one that would benefit the economy and increase support for immigration. Auctioning visas to employers is the best way to bring in talented workers who contribute to the economy while minimizing any harms to UK natives. It would also generate funds that could be used to achieve other public goals.”

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

“It is vital that the UK’s post-Brexit immigration policy is informed by evidence. This important report by two distinguished economists reviews extensive empirical research to develop the framework for a innovative immigration policy that meets the UK’s specific economic requirements and improves the public’s support for immigration.”

About the authors:

Madeline S. Zavodny is a Professor of Economics at the University of North Florida. She is also a Research Fellow at the Institute of Labor Economics (IZA), a Fellow at the Global Labor Organization, and an Adjunct Scholar at the American Enterprise Institute. Much of her research focuses on economic issues related to immigration, including Beside the Golden Door: U.S. Immigration Reform in a New Era of Globalization (AEI Press, 2010) and The Economics of Immigration (Routledge, 2015). Her research on immigration has also been published in the Journal of Labor Economics, Industrial and Labor Relations Review, the Journal of Policy Analysis and Management and Demography, among others. Before joining UNF she was a professor of economics at Agnes Scott College and Occidental College and an economist with the Federal Reserve Bank of Atlanta and the Federal Reserve Bank of Dallas.

Pia M. Orrenius is Vice President and Senior Economist at the Federal Reserve Bank of Dallas where she works on regional economic growth and demographic change. She manages the regional and microeconomics group in the Dallas Fed Research Department. Her academic research focuses on the labor market impacts of immigration, unauthorized immigration and U.S. immigration policy. She is coauthor of the book Beside the Golden Door: U.S. Immigration Reform in a New Era of Globalization (2010, AEI Press). She is research fellow at the Tower Center for Political Studies at Southern Methodist University and at the IZA Institute of Labor in Bonn, Germany, as well as adjunct scholar at the American Enterprise Institute. Orrenius is also adjunct professor at Baylor University (Dallas campus), where she teaches in the executive MBA program. Orrenius was senior economist on the Council of Economic Advisers in the Executive Office of the President, Washington D.C., in 2004–05, where she advised the Bush administration on labor, health and immigration issues. She holds a PhD in economics from the University of California at Los Angeles and bachelor degrees in economics and Spanish from the University of Illinois at Urbana—Champaign.

PLEASE NOTE: The views expressed here are solely those of the authors and do not reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.   

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 report 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.

Build out of the mess we've got ourselves in

After the Prime Minister's speech in central London this morning on tackling the housing crisis Sam Dumitriu, Head of Research at the Adam Smith Institute, speaks out on Mrs May's policy priorities:

"The Campaign to Prevent Real Estate may object, but the Prime Minister is right to take-on NIMBY councils in high-demand areas. Restrictions on new development push rents up and hold back productivity by pricing workers out of the best jobs. But we must go further and build on the Green Belt.

“Building on the Green Belt doesn’t mean ugly sprawl or trashing the environment. If we only freed up intensively farmed land within a ten-minute walking distance of a train station for development, we could build one million new homes.”

“Paying executives for generating profit rather than building homes may seem perverse to Mrs May, but the alternative would create even worse incentives. In a market economy, executive pay should be determined by shareholders, not by compliance with the government’s five year plan.

“We shouldn’t blame land banking for slowing down construction. The uncertainty of the planning system incentives housebuilders to build up a pipeline of permissions. Without it, withdrawn permission could leave builders, tools and cement mixers sitting idle."

To arrange further comment, opinion pieces or interviews please contact Matt Kilcoyne (matt@adamsmith.org, 07584778207, 02072224995).

Corbyn's custom union proposal is not finger licking good

As Jeremy Corbyn comes out to support a customs union with the European Union risks throwing away the key benefits from Brexit. Matt Kilcoyne, Head of Communications at the Adam Smith Institute, says:

"Jeremy Corbyn’s latest position on Brexit makes little sense. A customs union with Europe, while walking away from the single market threatens any potential gains from Brexit and Corbyn's hostility to America will also hurt British consumers.

"The customs union of the European Union is dominated by continental manufacturing interests. Britain could be nimbler in its approach than the EU has managed over the past four decades and draw down its tariff structures on third countries to reduce costs for consumers while boosting trade (be it with the developing world or with the largest economies like America and China). Corbyn says that he doesn’t want the UK to become a rule taker but that is precisely what this proposal will see us end up as. The UK is the tenth largest trader in the world. In 2016, the United Kingdom exported $404bn and imported $625bn. We should make the most of this opportunity to be the bastion for free trade with the rest of the world, not be shackled to institutions and decisions made in Brussels without our say.

"A comprehensive free trade deal with the USA could open up a market of 323m to our world-beating financial services, high-quality food, legal services and cars – while driving down costs for consumers here. Corbyn might be getting all in a flap about chlorine chicken in an FTA but EU institutions like the European Food Safety Authority he so lauded have said it was safe to eat time after time. Throwing away the chance for trade deals with the USA by hamstringing the UK to a customs union with the EU would be like buying a chicken burger, throwing out the meat, and eating the wrapping."

For further comment or to arrange a interview please contact Matt Kilcoyne (matt@adamsmith.org, 07584778207, 02072224995).

Mutually Assured Prosperity

Following David Davis' speech this morning where he called on European Union partners and member states to agree mutual recognition on the basis of trust the Adam Smith Institute says that the government's Brexit secretary is speaking sense. Matt Kilcoyne, Head of Communications at the ASI, said:

"When talking about trade we often hear of the importance of rule makers and rule takers. Most countries though know that in some things they make the rules, in others they take them. It will be the same for Britain as we leave the EU. In insurance, in banking, in legal contracts and many commodities it is British rules that are the basis of global trade. In goods we've worked for four decades with European partners to set global standards. 

"The Adam Smith Institute has argued in favour of mutual recognition before and it makes sense that we'll seek to mutually recognise the work of institutions that we've helped to build. Use of a single set of approvals boosts trade by removing barriers and time costs. 

"But it mustn't stop at the borders of Europe. The safety of medical devices in the USA, Switzerland, and Canada are just as good as those found on the continent. Cars from Japan are just as safe as those sold by German manufacturers. At the heart of this issue is trust. Governments should trust each other, just as multinational companies do in their supply chains. If we want a globally facing Britain we'd do well to support further mutual recognition and trust between our allies."

For further comment or to arrange an interview please contact Matt Kilcoyne (07584778207, 02072224995, matt@adamsmith.org).

Scrap the Bank of England's Inflation Target

New Report calls on Bank of England’s remit to be reformed to move from CPI Inflation rate targeting to a nominal income target and remove discretion over Quantitative Easing. 

• Government should replace the Bank’s 2% CPI Inflation target with a nominal income (NDGP) target
• By moving to NGDP targeting, the Bank of England can credibly maintain a single target in good times and bad
• Forward guidance must be clear and credible, ambiguity creates uncertainty and reduces the effectiveness of monetary policy.
• Clear and consistent action by central banks allows effective financial market reaction and reduces spillover effects in the wider economy 
• Prediction markets, allowing people to trade on bank’s solvency, would punish excessive risk taking and create a more sustainable financial sector 

Ten years on from the financial crisis, a new report by the Adam Smith Institute urges the government to scrap the Bank of England’s 2% inflation target and move to a new system that targets nominal income. 

Conventional monetary policy by central banks used interest rates control inflation, but since the financial crisis a decade ago, the central bank has used emergency asset purchases (i.e quantitative easing). A move to nominal income (NGDP) targeting would mean more accurate and responsive decisions made by the Monetary Policy Committee (MPC) by allowing a single focus on aggregate demand.

The price system is meant to reflect real scarcities – and so supply shocks should be reflected in inflation data with policymakers trained to ‘see through’ them. The central bank itself is described as being the primary cause of demand shocks. As nominal income is demand, NGDP targeting avoids requiring ratesetters to distinguish between supply and demand shocks and increases stability.

Decisions on asset purchases by the MPC at present are discretionary and arbitrary. While forward guidance has been issued, it is sometimes seen as publicly committing the bank to future actions and sometimes seen merely as a forecast of where the economy is headed. Instead the Bank of England should move to a rules-based system, the report argues. The MPC should clearly set out the amounts and types of assets the Bank will hold in each scenario. For example, if the Bank of England owns more than a certain percentage of gilts of a specified maturity, they then extend asset purchases to a pre-announced basket of investment-grade bonds.

Monetary policy since the crisis, including consistently near-zero interest rates have prompted destabilising capital flows and driven large swings in emerging market currencies, increased the costs of pension provision, and encouraged speculation in commodities. With open market operations limited in scope, and financial markets knowing in advance which margins the Bank of England intends to exploit, these spillover effects could be limited.

By being clearer with markets about the intention of monetary policy, the Bank of England’s actions would have stronger intended effects, the paper argues. 

Ten years on from the financial crisis, it’s time to look again at whether we regulate lenders and financial markets correctly. The cat and mouse charade of complex banking regulation, setting banks up against government regulators presumed to know all, is destined to fail, the paper says. Referencing Andrew Haldane’s 2012 speech at Jackson Hole, the paper argues that clear, simple and consistent rules based regulation has a better effect than increasing complication as “you do not fight fire with fire, you do not fight complexity with complexity.”

By replacing bank stress tests that straight-jacket bank behaviour with prediction markets, the Bank of England could also help taxpayers avoid future bailouts. Questions could be posed relating to the banks objectives which could be traded on, the paper argues, and so provide real time probabilities of risks that are transparent to all markets. These markets would end up boosting competition and punishing excessive risk taking efficiently and effectively, more effectively than current regulation allows and far better than that a decade ago. 

Anthony J. Evans, author of the report and Professor of economics at ESCP Europe Business School, said:

“Since the financial crisis monetary policy has played a reasonable role in stabilising the economy, but only because it has strayed from its conventional remit. Given the damage caused by that remit in the first place, the Bank of England should take the opportunity to adopt a new approach. Reforming open market operations and adopting a Nominal GDP target is effective in good times and bad, and provides a coherent, rule-based framework for monetary stability.”

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

“Monetary policy should be stable, predictable, and rules-based. The extraordinary policy measures the Bank of England took in response to the financial crisis increasingly relied on the discretion and wisdom of policymakers. Now, nearly ten years since the start of the Great Recession, we should take the opportunity to change the Bank of England’s mandate and reform open market operations.”

Notes to editors:

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

The report ‘Monetary Policy After The Crash: Lessons Learned?’ is available here.

Corbyn onto a loser with renationalisation plans

With John McDonnell and Jeremy Corbyn saying a Labour government would renationalise energy companies, Matt Kilcoyne says that Labour are onto a loser picking the state just when dynamic markets are what the world needs to go green.

"Labour is right about one thing. The future of energy provision is decentralised, flexible and diverse. But their plans for renationalisation would threaten this by going in the exact opposite direction.

"The state is bad at picking winners, more often it subsidises losers. It is the trial and error of the private sector that will decarbonise our energy supply. Rigid state monopolies rarely innovate, but private sector competition is already driving down solar and wind costs. The freedom to experiment with new business models including dynamic pricing and home battery storage could be key to cutting emissions, but only the market can deliver it.

"The hidden cost of renationalisation is billions of foregone investment, just what's needed to turn our energy production green. Their ideological stance threatens not just our wallets and our ability to keep the lights on, but also how we deal with climate change."

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

Crack-downs on social media risks competition as well as free speech

In reaction to the moves by the Prime Minister at her speech in Manchester to announce a consultation for a new offence against online abuse Matt Kilcoyne, Head of Communications at the Adam Smith Institute, called out the dangers of doing so:

"Publish and be damned were the watchwords of our free press, it should be for individuals on social media too. We have laws that govern threats of violence and death threats, we have laws that can punish libelous and slanderous claims. We should be enforcing these existing laws better, not creating a new offence of abuse – an ambiguous term that could easily be used to shut down criticism in the name of being offended.

"This is something that the Lords’ Communications Committee confirmed when they, last year, said they were not persuaded it was necessary to create a new set of offences specifically for acts committed on social media. It is worrying the Prime Minister wants to override this advice in creating a new law to restrict free speech online. 

"Social media companies that provide a platform should not held accountable for what users on their sites post, no more so than the Royal Parks are for the views of those at Speakers’ Corner. Facebook, Google and Twitter might be able to afford thousands of staff and millions of pounds to police their users' views to swiftly take down content, but such requirements create a significant barrier to entry and risks hurting disruptive start-ups. Treating platforms as publishers risks stifling innovation and competition as well as free speech."

To contact us to arrange an interview or further comment please do so via either email (matt@adamsmith.org) or phone (mobile: 07584778207; office: 02072224995). 

Transition should allow Britain to shape its place in the world

After David Davis spoke in Middlesbrough this afternoon and demanded that during transition the UK be able to draft and sign new trade deals, Matt Kilcoyne says this is both eminently sensible and a good demand for the EU to accept:

"David Davis is right to demand that the UK should be able to sign new trade deals during any transition period after Brexit. The common commercial policy of the EU is designed for members in it for the long haul, but the UK is very much on the way out. Transition is good for both the UK and EU, providing certainty for business and citizens. But if we're unable to shape our future place in the world during this period then it is time wasted and the EU risks a no deal scenario. 

"Britons need to start seeing the dividends of Brexit and that means more trade with our friends and allies across the world–a more global Britain, with a new outward focus. Deals show how that can happen. If the EU wants a friendly and close relationship with its largest trading partner, it will need to trust the UK to act in good faith in negotiations with third countries. This is a mature and friendly proposal by David Davis, the EU would be wise to heed it."

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