Fiscal Phil's mish-mash means a botched budget

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

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

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

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

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

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

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

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

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

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

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

Medical cannabis sees Sajid take the tories in the right direction

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

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

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

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

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

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

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

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

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

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

Adam Smith Institute at Conservative Party Conference

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

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

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

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

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

Sophie Jarvis playing Matt Gillow at Chequers checkers

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

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

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

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

May's rhetoric channels Thatcher but policies deliver Miliband

Following Mrs May’s speech, in which she channelled the spirit of Thatcher but delivered the policies of Ed Miliband. Sam Dumitriu, Head of Research at the Adam Smith Institute, said:

On Ending Freedom of Movement and restricting immigration:

“The Prime Minister was right to unequivocally back business and make the moral case for markets and freedom. But her rhetoric is betrayed by her policy on free movement. Pulling up the drawbridge when Britain has a record number of vacancies is a mistake and trying to plan the labour market from central government will make Britain a worse place to do business.

“Her comments on training and investment simply don’t match up with reality. The Government’s own Migration Advisory Committee found no evidence Freedom of Movement reduced investment or led to firms cutting training budget. In fact, the MAC found that migration led to higher productivity growth for native workers.”

On Stamp Duty on Foreign Buyers:

“Taxing foreign homebuyers won’t make housing more affordable, only building more homes will do that. So-called Buy to Leave is a myth – just 1% of new homes bought by foreigners are left empty. When foreigners buy property they either rent it out or live in it themselves. Advance sales to foreign investors allow more homes to be built for rent. Without that investment, fewer homes would be built, rents would be higher and it would be harder to scrimp and save for a deposit.”

On letting councils borrow to build:

“Too often councils are the barrier to, not enablers of, new housing. Councils with the greatest need for quality new housing are those least likely to build it. Rents have risen the fastest in those areas precisely because those local authorities are most likely to block development and give in to the Nimbys.

“Unfortunately I fear the councils most likely to borrow to build are the ones most likely to build in the wrong places and require taxpayers to bail them out.”

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

Foreigners should not be targeted in tax grab

In response to Theresa May’s plan to tax foreign homebuyers, our Head of Research Sam Dumitriu commented:

“Taxing foreign homebuyers won’t make housing more affordable, only building more homes will do that. ‘Buy to Leave’ is a myth – just 1% of new homes bought by foreigners are left empty – when foreigners buy property they either rent it out or live in it themselves.

“May plans to use the revenue to fund anti-homelessness schemes, but her plan will backfire as it means fewer homes will get built, pushing up rents. Advance sales to overseas investors enable developers to build affordable housing and market-rate homes faster. LSE research for the Greater London Authority (GLA) found that recent growth in the ‘Build to Rent’ sector was driven by overseas buyers.

“When rents rise, so does homelessness. Trying to prevent homelessness by taxing foreign investment is like trying to prevent crime by taxing burglar alarms."

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

McDonnell plans pension raid with nationalisation and share ownership demands

John McDonnell, speaking at the Labour Party Conference 2018 in Liverpool, today took the party back 100 years when the party first introduced Clause IV. The Adam Smith Institute responds to the Shadow Chancellor’s Chavez-style commitment to nationalise industry, force executives out of jobs at Britain’s utility companies utilities, and to force companies to move to offer share ownership.

Sam Dumitriu, Head of Research at the Adam Smith Institute, said of the forced share ownership plan:

“What is startling about Labour’s plan is just how easy it is to avoid. The reform only applies to public companies listed in the UK. The Shadow Chancellor would have no power to force private companies or foreign-listed companies to do the same creating a powerful incentive for British companies to go private or list in New York or Frankfurt instead of London.

“It would discourage fast-growing startups from going public too, starving them of investment and potentially leading to worse governance. While the 250 employee threshold creates an incentive for firms to outsource and use contractors instead.

“The plan would cut investment too. Firms are less likely to invest if up to 10% of their shares are at risk of re-appropriation. As dividends are capped annually at £500 per worker (the rest going to the state) it would have the unintended consequence of rewarding labour-intensive firms and punishing capital-intensive firms creating low-productivity, low-wage economy.

“The only workers who might benefit are the corporate lawyers and accountants who will help companies avoid McDonnell’s plan altogether.”

Matt Kilcoyne, of the neoliberal think tank the Adam Smith Institute, said of McDonnell’s remembrance of Labour’s old Clause IV and his recommitment to nationalisation:

“McDonnell's full throated love-in for Labour's old Clause IV risks clawing the UK economy back into the dark days of strife and stagnation.

“The Shadow Chancellor isn’t handing back power to the people, he is planning a raid on millions of Britons' pension pots. Funds invested in our country’s utilities and the record levels of investment that private ownership has brought, are now at risk from a Labour government that intends to appropriate these assets with a partisan parliament setting any price paid.

“The Chavez-style commitment to readvertize jobs at utility firms taken back into state control will make the roles political and take people with years of experience and track records of success away from where they're most needed.

“At least he was honest about what all this would be called: Socialism.”

11 US & UK Think Tanks produce the ideal free trade agreement

• 11 Think Tanks in US and UK draft the legal text of an Ideal Free Trade Agreement;

• Simultaneous launches in the UK and US stress political and commercial will of securing a deal between world’s largest and 5th largest economies;

• Key policy innovations include:

  • Enshrine the “negative list” approach to liberalization across goods, services, investment, and government procurement, which is conducive to faster, broader, and deeper economic integration

  • Eliminate tariffs on nearly all goods upon entry into force

  • Permit free movement of British and American workers, conditioned on an offer of employment

  • Commit the parties to expedited customs clearance and administrative procedures

  • Mutually recognize professional qualifications and licenses

  • Mutually recognize the efficacy of conformity assessment, and equivalence provisions, which would allow companies to sell and operate in both markets by satisfying either Parties’ regulations in areas where there is agreement as to the objectives of the regulations

  • Are less restrictive on the use of inputs from third countries by lowering “rules of origin” thresholds that must be met to qualify for the agreement’s preferential terms

  • Preclude application of anti-dumping measures between the Parties

  • Preclude the use of investor-state dispute settlement

  • Provide for the accessions to the agreement of other Parties that can demonstrate willingness and capability to meet its market-liberalizing standards

This morning, a collaborative project spearheaded by the Initiative for Free Trade in London and the Cato Institute in Washington, D.C. presents its first fruit. With contributions from policy experts affiliated with 11 U.S. and U.K. think tanks, The Ideal U.S.-U.K. Free Trade Agreement: A Free Trader’s Perspective is the proposed legal text for a bilateral free trade agreement between two of the world’s largest economies and the two richest English-speaking countries.

With both states deeply committed to the institutions of free-market capitalism and the rule of law, the ideal free trade agreement between the United States and the United Kingdom is an opportunity to create greater prosperity for Brits and Americans. Novel, sensible, transparent rules to eliminate costly barriers to trade will help stimulate innovation, encourage competition, provide opportunities for all, and incentivize reform-minded governments around the world.

The agreement includes provisions that foreclose governments’ access to discriminatory protectionism and obligate both parties to refrain from backsliding. Mutual recognition across sectors in developed countries would help achieve maximum market barrier reduction, the report argues, and enables consumers to access goods and services across both markets fully. All the while both states would preserve national sovereignty to legislate and regulate in ways that do not discriminate against imported goods, services, or capital.

As the U.K. government prepares to repatriate its authority over trade policymaking for the first time in 45 years, concluding and implementing a free trade agreement with the United States should be among its highest priorities. Indeed, the Department for International Trade has selected the U.S. as one of four potential trade agreements on which it is currently seeking public consultation.

In many respects, the U.S. and U.K. economies already benefit from a high level of economic integration. U.S. entities are the largest foreign direct investors in the United Kingdom, and U.K. entities account for the largest share of foreign direct investment in the United States. The value of the cumulative investment stands at nearly $1.3 trillion today. More than 1.1 million Americans work for British companies in the U.S. and nearly 1.5 million Britons are directly employed by U.S. affiliates.

It is, in addition, an exceptionally popular proposition for both the UK and the US. In a recent Public First / YouGov Poll, 67% of British people surveyed said that they supported an FTA being signed with America (with just 9% opposed), while 64% of Americans would support an FTA with Britain (with just 7% opposed).

The greatest area of benefit could come from an enhanced equivalence model of mutual recognition across all financial sectors. Finance and insurance represented 7.5% of US GDP (or $1.45 trillion) and 6.5% of UK GDP (£119bn). After the financial crisis of 2007-2008 financial regulators have sought equivalent outcomes with high degrees of synchronization on Wall Street and in the City and the report argues fostering greater collaboration between regulators could increase best practice while expanding and access to services for consumers.

In total, the ideal free trade agreement includes provisions to liberalize trade that are spread over 18 different chapters.  Innovative, market-based rules are presented on subjects such as Regulatory Coherence, E-Commerce, Sanitary and Phytosanitary measures, Dispute Settlement, and provisions governing third party accession.

Dan Ikenson, director of the Cato Institute’s Centre for Trade Policy and co-author of the paper, said that the the objective of the project is: “to persuade policymakers and the public in both countries that a comprehensive bilateral trade and investment agreement removing all barriers to trade across all sectors of both economies without exception is in their best interests and to provide the blueprint of an agreement that would be the most liberalizing FTA in the world.”

Beyond providing the formal agreement text and summaries, the paper “provides an intellectual basis for why real free-traders are often skeptical of free trade agreements, which often include protectionist or ‘managed trade’ provisions, and how this FTA overcomes those concerns,” Ikenson explains.

Victoria Hewson of the Institute of Economic Affairs, says:

“This has been a fascinating and important project, cutting through rhetoric and misinformation to point the way towards a genuine free trade agreement to deliver increased prosperity to the people of the UK and the United States. As the British government makes pivotal decisions that will have far reaching effects on trade policy for a generation, a glimpse of what the ideal free trade agreement might look like could not come at a better time.”

Tom Clougherty, Head of Tax at the CPS and co-author of the report, said:

"This isn't just an ideal free trade agreement between Britain and the United States; it is a model for how trade liberalisation can and should work in the 21st Century.

“Our draft agreement would put British and American policymakers at the forefront of a new movement for free trade in goods and services, for unrestrained cross-border investment, and for mutual recognition of national regulatory regimes.

“In short, it represents a modern gold standard for international trade and cooperation."

Matt Kilcoyne, of neoliberal think tank the Adam Smith Institute and co-author of the report, said:

"Together the US and the UK have the clout to rewrite the rules of global trade. This deal would be about freeing citizens of the two largest English speaking countries to trade without impediment, to be able to move for work and change their stars.

“Britain's future is bright, so long as it doesn't just buy into the status quo or joining in trade wars against her own citizens. Instead the UK must seek to bring down barriers and push up prosperity."

Sheila Lawlor, Director of Politeia and co-author of the report, said:

“A mutual recognition free trade deal for services will bring great benefit to the US and UK. And for the financial services sector, in which London and New York are global leaders, Barnabas Reynolds' chapter pioneers an equivalence-based trade deal.

“Already developed and adopted as the UK plan for trade with the EU, the concept is here extended to the US, increasing the depth and range of global financial market activities.”

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

For further comments or to arrange an interview in the USA, contact Sheridan Hoover, Media Relations Coordinator @ The Cato Institute, via shoover@cato.org| +1 (202) 216-1495

Old McDonnell has a broken record at the TUC conference

As John McDonnell took to the stage late at the TUC conference, it turns out that we’d already heard the speech before. Matt Kilcoyne of the Adam Smith Institute, criticised the crack down promised by the Shadow Chancellor on gig workers’ rights and his ill focused cures for the British economy.

“Like a broken record John McDonnell is out again criticising gig economy workers that won't work like he wants them to. But the gig economy has been good for both consumers and workers. Freedom to choose flexibility is not one that workers will want to relinquish easily. It might be called a jobs miracle but Britain's record employment is very much a human achievement.”

“If McDonnell wants to increase people's purchasing power he won't achieve it by pushing up the minimum wage – that will just price people out of the market altogether. Instead he should commit Labour to making it easier to build houses where workers want to live, and reduce the burdens on childcare providers to bring down the bills that working families have to pay.”

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

Grow meat in labs to avoid growing crises

New report from the Adam Smith Institute suggests lab grown meat could transform our world, tackling climate change and the looming antibiotic resistance crisis

• Meat consumption has rocketed as GDP has grown across the world 
• Meat demands on land are intensive, with beef taking a whole hectare to feed one person against nineteen people fed per hectare of rice produced
• Cost of a lab grown burger has dropped from £250,000 to around £8 in the past 5 years
• Lab grown meat can cut greenhouse emissions by 78-96% and use 99% less land
• UK could solve housing crisis, re-wild the country and help fight climate change by adopting the technology

Agriculture is on the cusp of an historic change that could see billions access meat at affordable prices, while reducing carbon emissions and freeing up land for housing. According to a new report by the Adam Smith Institute, the coming availability of lab grown meat could mean a cut in agricultural greenhouse gas emissions of 78-96% while using 99% less land.

Implications for the fight against climate change could be immense, the report argues, with some 14.5% of human caused greenhouse gases and 60% of biodiversity loss attributed to current intensive farming practices.  

As GDP has risen, so has the demand for meat. During the 1960s meat consumption in East Asia stood at just 8.7kg per person, thirty year later that figure was 37.7kg – an increase of over 330%. This increased demand has meant huge land given over to meat production. While 19 people can be fed from just a single hectare of rice, only one can person can fed per hectare dedicated to cattle.

With demand for meat and milk expected to increase globally 70% by the year 2050 lab grown meat generated by cleaner energy could allow more people to access high quality meat at a sustainably lower environmental cost. 

While growing meat in a lab has been difficult to master, and costly to engineer, the price has been falling. Just five years ago the cost of a burger made with meat grown in a lab stood at $215,000, but now the price tag has dropped to just £8. 

While commercially competitive prices are still some way off, there is room for meat from exotic and endangered species. Meats grown from animals like the komodo dragon or the giant panda might help prove the concept, increase public awareness, drive down long-term costs and provide funds for future production. All the while, importantly for animal rights and conservation groups, not harming any wild or farmed animals in the process. 

Lab grown meat has the potential to solve the looming antibiotic resistance crisis. With farming using up to 70% of antibiotics critical to medical use in humans, the cases of resistance are on the rise, driven by intensive farming practices. In Northern China a study found 88% of E. coli samples showed resistance to the 8 forms of antibiotics commonly found in polluted waters. Cultured meats don’t use antibiotics to speed up muscle growth and the report explains that the move from livestock to lab cultures could save millions of lives.  

Government must shy away from lobbying attempts like those seen in the USA to lock out competition by changing the legal definition of meat to exclude meats produced in labs or factories. EU Law restricts plant-based foods, such as Almond or Oat milk, from being sold using terms such as milk, butter and cheese.

Instead report authors Dr Madsen Pirie and Jamie Hollywood argue that the country needs to recognize new technological developments like cultured meat “are in the process of radically transforming the world economy”. They suggest that government should learn from financial services “sandbox” regulations to encourage experimenting businesses to locate, develop and lead the world from the UK. 

Madsen Pirie, President of the Adam Smith Institute, said:

"The UK should recognize that cultured meats are a game-changer. For 12,000 years humans have reared animals for meat. In future they will not need to. This will release millions of acres of pasture land for other uses. It will resolve all of the ethical issues involved in the rearing and slaughter of animals. It will give the world access to a low cost, high protein diet, and the UK could become a world leader in this multi-billion-pound new industry.”

Jamie Hollywood, co-author of the report, said:

" The direction of technological innovation can be the key to averting many of the major ecological problems currently facing humanity. The herald of cultured meat will lessen the impact of antibiotic resistance, as well as potentially reducing the carbon footprint and levels of pollution caused by the current methods of meat production “

“The policy direction of the government should be to encourage emerging technologies; technologies which seek to provide mass benefit to society. This should be done by removing barriers to their development and introduction. Many innovations which have been impeded by inefficient and short-sighted legislation and state procedure could alleviate problems such as starvation, malnourishment, and climate change.” 

Notes to editors:

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

The report “Don’t have a cow man: the prospects for lab grown meat” can be accessed here.

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