ASI welcomes Hancock COVID-19 testing plan

The Adam Smith Institute, who today released a report calling for companies, universities and charities to be given permission to test for COVID-19 have welcomed Hancock’s remarks.

The ASI’s Head of Research Matthew Lesh said:

“We’ve wasted too much time with an excessively centralised, bureaucratic approach to testing. It’s welcome news that the Government will be allowing the private sector to begin testing. Lives are on the line and this couldn’t come soon enough. We will need both fast-track approval for labs and new tests in order to reach the ambitious 100,000 tests per day target.

“There is no time for usual bureaucratic delays or power grabs. PHE must stop trying to do everything themselves, we need to fast-track approval of companies, universities and charities. Importantly, we should be using every type of machine and every type of reliable test.”

Testing times in this coronavirus crisis

A new report by the Adam Smith Institutes argues that if the UK had followed the USA's CDC in allowing private lab testing, and stopped confirmatory testing at a single site (Colindale) then we could have ramped up testing to the same per capita level as those three countries have done. South Korea has tested four times as many people as the UK, Germany almost three times and the United States now almost twice as many, per capita. 

The UK is now in the bottom quarter of OECD countries for COVID-19 diagnosis testing.Since 16 March, the United Kingdom has just over doubled daily testing capacity. In the same time period, the United States has increased daily testing by a factor of 21.

The free market think tank argues that the UK is failing to make use of the over 600 accredited medical laboratories in the kingdom, of which 474 are NHS, 120 are private, and 12 are PHE and Public Health Wales. As well as the dozens of University labs that are suitable for testing. 

Former Health Secretary Jeremy Hunt reiterates his call for a more co-ordinated and sped up approach, saying:

"A mass community testing plan is challenging but not impossible if we mobilise in the way we have to produce ventilators. That means tapping into every laboratory, every pharmaceutical company and every university in the country without delay."

The Adam Smith Institute believes that the UK Government can meet its testing targets and save lives, if it is able to:

1. Fast-track approval for private sector laboratories to conduct COVID-19 testing;

2. Substantially expand usage of NHS and university laboratories to conduct COVID-19 testing;

3. Undertake rapid approval of private sector developed tests, including mutual recognition of tests approved by other regulatory bodies such as the FDA; 

4. Reduce testing red tape, including the requirement that all initial tests must be retested centrally by PHE; and

5. Explicitly call on companies to help make testing kits and develop lab capacity for COVID-19 testing, modelled on the successful call for businesses to make ventilators.

For further comment, or to arrange an interview with report author Matthew Lesh, please contact Matt Kilcoyne via email (matt@adamsmith.org) or mobile (07904099599).

ASI comments on new housing reforms

The Adam Smith Institute has strongly welcomed the Government's housing reforms announcement by Secretary of State Robert Jenrick today.

The ASI’s Head of Research Matthew Lesh said:

“The Government’s housing reforms will improve the lives of millions by providing access to quality, affordable housing while substantially boosting the economy. They could finally succeed where others have failed: solving the housing crisis.

“The focus on densification, building around stations and on brownfields will make a real difference. The ability to demolish vacant buildings for new developments without lengthy bureaucratic processes will not only reduce antisocial behaviours but also provide more places for people to live.

“These reforms will enable more people to live where they can be most productive and earn the highest incomes while helping reduce commuting and carbon emissions. 

Adam Smith Institute budget comment: 'spending like drunken sailor' won't work

The Adam Smith Institute has raised concerns about today’s big-spending budget. They have called for tax cuts and reform to create the foundations for sustainable growth.

The ASI's Head of Research Matthew Lesh said:

“It is seriously concerning that the Government is looking at ripping up the fiscal rules. A Conservative Government should not implement debunked Keynesian stimulus theories. Some infrastructure and public services spending, as well as supporting individuals and businesses during Covid-19, is necessary.

"But in the longer-run, spending like a drunken sailor will not create a thriving entrepreneurial economy. Expansive vanity projects won’t make us better off. Bureaucrats picking winners does not support risk-taking by entrepreneurs — the Government should be cutting red tape on innovation like limits on biotechnology, not presuming to know what is best.

“The tax burden is already at the highest it has been in forty years. We spend an extraordinary 5 months of the year working for the state before earning for ourselves. We should welcome the increase to the national insurance contribution threshold, the fuel and alcohol duty freezes, and maintaining the Entrepreneurs’ Relief albeit in a scaled-back form. But it is disappointing that the Chancellor has not used this opportunity to take more radical, longer-term steps to reduce the burden of the state and reform taxes. The targeting of environmental bogeymen, like increasing the gas levy and tax on plastic packaging, is not the right approach to environmental concerns — we need a broader approach.

“The structures and buildings allowance increase from 2% to 3% will help stimulate investment, but we need to go further. The Chancellor should remove barriers to investment by fully abolishing the Factory Tax, which holds back spending on buildings and machinery. The business rate review is a welcome opportunity to consider moving to a system that taxes on the basis of land value."

ASI comments on new immigration system proposals

Responding to the Government’s new plans for a post-Brexit immigration system, Daniel Pryor, Head of Programmes at the Adam Smith Institute, said:

“The Government’s post-Brexit immigration proposals represent a welcome shift away from the economically illiterate approach that characterised the May era — but we should be honest, all attempts to end free movement of workers will reduce productivity and growth, and represent a step back to central planning of the economy by Whitehall.

“Salary is not synonymous with skill shortages. Lower, looser salary thresholds will help relieve some pressure on businesses: although ideally they should be scrapped. Quadrupling the seasonal agricultural work scheme will help British farmers and introducing a route for highly skilled workers without a job offer removes expensive, bureaucratic hassle that stands in the way of attracting top international talent.

“There are still major issues. Around 70% of EEA citizens who arrived in the UK since 2004 would likely be ineligible for the most common visas under the new system. These people have massively contributed to the economic and cultural life of the UK—and concerns about future skill shortages remain paramount. This is especially true for regions like Scotland that rely on EEA workers for key industries like health and social care. The Government embraces market forces when it comes to the free trade debate, but they're still struggling to extend that logic to immigration.”

Abolish the Factory Tax to level up Britain

A new paper from the neoliberal think tank the Adam Smith Institute says that if the Prime Minister is serious about boosting wages and levelling up; then he needs to Abolish the Factory Tax. 

• The UK has had the lowest level of private investment in fixed capital as a share of GDP in the G7 for over two decades 

• Abolishing the Factory Tax by allowing businesses to immediately write-off capital expenditures, would boost investment by 8.1%

• Annual rate of growth in output per hour since the financial crisis has been 0.3%. Abolishing the factory tax would boost labour productivity by 3.54%, the equivalent of £2,214 per worker, in the long run

• UK is currently ranked 33rd (out of 36) in the OECD on the Tax Foundation’s Capital Cost Recovery index

• The Factory tax accelerates deindustrialisation and holds back growth in parts of the country that are relatively more dependent on manufacturing, including the North and Midlands 

In the Prime Minister’s first speech to Parliament after winning the leadership of the parliamentary Conservative Party, Boris Johnson made boosting the productivity right across the country a central pillar of agenda. In the upcoming Budget, the Adam Smith Institute argues that new Chancellor Rishi Sunak should commit to Abolish the Factory Tax.

The Factory Tax is the inability to fully expense investments in machinery and buildings — that encourages low-capital intensive knowledge economy businesses in the South East and London over high-capital intensive businesses in the Midlands and North that need to invest in long-run assets.

At the heart of the UK’s recent productivity issues, the authors argue, is a lack of investment. Every year since 1998, the UK has had the lowest level of private investment in fixed capital as a share of GDP in the G7. This low level of investment has contributed to the rapid downfall of the UK’s manufacturing sector, which has declined by more than any other G7 nation. 

The UK’s tax treatment of capital investment is in effect a Factory Tax, the free market think tank argues. According to the Tax Foundation’s Cost of Capital Recovery index, the discounted value of the deduction for plants and machinery in the UK is just 75.6% of its total cost. As the costs of capital investment, unlike other costs, cannot be fully recovered capital-intensive businesses are penalised. 

The think tank says the tax system should not discriminate between day-to-day spending and long-term investment, that it should not favour one form of financing over another (such as debt rather than equity), and that it should be sector-neutral. Investing in capital means not spending today in order to get more in return tomorrow. High taxes on capital discourage saving, and mean taxing consumption at a later date higher than just spending the money now. In the long run this means the lower wages and lower growth the UK has experienced in the past few decades. 

The amount of revenue raised from corporate tax has remained relatively stable despite substantial reductions in the rate over recent decades. This is largely because of decisions to make the system less friendly to investment. 

The UK’s headline corporate tax rate was reduced from 30% to 19% from 2018 to 2017. But the headline rate cut was financed by reductions in the value of capital allowances. The rate at which investments in plants and machinery can written-off has fallen from 25% to 18%. These changes have led to a dramatic fall in the value of investment deduction.

On top of this the fall in the value of the UK’s capital came at a time when “all other G7 countries have seen their present value of capital allowances increase.” In the United States at both a state and federal level the Factory Tax has been reduced in recent years, leading to the conclusion by economist Eric Ohm that full expensing increased investment by 18%. 

The authors set out three recommendations to Abolish the Factory Tax:

1. Allow businesses to immediately deduct capital expenditures on plants and machinery from their taxable income by making the Annual Investment Allowance (AIA) unlimited.

2. Allow businesses to immediately deduct expenditures on non-residential structures and buildings as well.

3. Allow trading losses to be carried forward to compensate for inflation.

Allowing firms to write-off the costs of new investments immediately would unlock 8.1% in additional investment and boost labour productivity by 3.54%, with most of the benefits going to places outside London and the South-East. Abolishing the Factory Tax, the Adam Smith Institute argues ahead of the Budget on March 11th, would help the Prime Minister ensure that the campaign promise to “level up” the economy becomes more than just a slogan.

Sam Dumitriu, Fellow of the Adam Smith Institute and co-author of the report, said:

“Beneath Britain's internationally-competitive Corporation Tax rate lurks one of the most restrictive treatments of investment in productivity-boosting equipment in the OECD. We should follow the lead of Canada and the US and move to a system where businesses can write-off new capital expenses immediately. Ending the Factory Tax would unlock investment and raise productivity in the long-run.”

Notes to editors:  

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

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.

Business rate cuts won't help the high street

Responding to new recommendations on cutting business rates from the Retail Sector Council, Daniel Pryor, Head of Programmes at the Adam Smith Institute, said:

“There are no economists on the Retail Sector Council committee—and it shows. Business rate cuts are a sop to landlords and do nothing to adapt to the fact that fewer of us are working, living or traveling to the high street. Landlords have reacted to previous rate cuts by increasing rents and within a few years any savings for businesses evaporated. 

“Funding this misguided policy through corporation tax hikes will subsidise landlords while punishing companies that have been the backbone of the British jobs miracle. Hiking taxes now would hurt jobs, growth and investment across the country: all for very little benefit.”

E-Scooters are a wheely good policy

A new paper from the neoliberal think tank the Adam Smith Institute comes hot on the tail of the UK Government’s announcement to consult on legalising e-scooters and argues that a liberal approach would provide low-cost, environmentally friendly last-mile transport for Britain’s towns and cities. 

• One-third of e-scooter rides replace car rides, the ASI has calculated, helping reduce CO2 emissions, NOx pollutants and busting congestion;

• The UK Government must amend the outdated Highways Act 1835 and the Road Traffic Act 1988 to legalise e-scooters; 

• In just over two years e-scooters have become available in over 350 cities worldwide and are available in over twenty European countries;

• Two-thirds of car trips in cities are under three miles and replaceable by e-scooter;

• E-scooters are safe, presenting a comparable risk to bicycles. They will become safer over time due to increased familiarity of passengers and other road users;

• E-scooters address economic immobility by serving areas lacking in traditional transport options;

• The Government should take a devolved approach to legalisation, empowering cities to decide the specifics within a broadly liberal framework.

The UK Government’s move to consider legalising e-scooters brings into sharp focus the need to ensure that regulation is well thought-through and evidence based. 

Instead of succumbing to moral panics on safety that have plagued launches of every new travel technology from the bicycle to cars, the Government should look at how e-scooter legalisation will help meet environmental targets, reduce costs of congestion to the economy, and give more people choice over how they get around our major cities.

New research by the Adam Smith Institute has shown that, where legal already, one third of all e-scooter journeys have replaced car rides — reducing CO2 and congestion in major cities. If legalised they could help the UK meet the country’s climate change and air pollution targets. 

Cars are the most popular transport method in the United Kingdom, with over two-thirds (70%) of trips to work undertaken by car. A majority (58%) of car journeys in the UK are for a short distance, with 7% of car journeys below one mile, 18% between one and two miles, and 33% between two and five miles. The free market think tank argues that there are therefore millions of journeys that green modes of short transport that could be made by e-scooters or bikes that are currently made by car.

While rentable bikes have been slow to take off, e-scooters have been a hit with passengers. In the United States it took seven years to go from the launch of docked bikes to having over 30 million rides per annum, e-scooters surpassed that in their first full year of launching with over 38.5 million rides in 2018. 

The think tank argues that we must avoid the moral panics over scooter safety, noting that every transport innovation, from bikes to cars and even trains suffered from hysteria over their introduction before widespread acceptance. The report also notes that the injury rates for e-scooter use so far are comparable to bicycles and that legalisation could increase safety with clear rules. 

There is also a well observed safety in number effect: where higher numbers of road users have been shown to bring down the number of accidents. Doubling the number of people walking or bicycling increases the number of people struck by just one third — with cars the number of crashes grows in equal proportion to the number of extra journeys. The same logic should apply to e-scooters where, as they become a regular sight for motorists, we should expect to see an increase in the responsiveness of other road users and substantially reduce the likelihood of crashes.

The Adam Smith Institute warns that the UK is falling behind in the development of this new technology, with producers in other countries having a significant first-mover advantage due to the UK’s Government's slow take-up of the technology. 

The report sets out six clear and simple rules for e-scooter use under legalisation: 

1. Only ride on bicycle paths and on the left-hand side of the road;

2. Riders must be 16 or over;

3. One rider at a time;

4. Do not ride on the sidewalks unless specified;

5. A speed limit of 15-20mph; and

6. Do not ride while intoxicated or affected by drugs;

In addition, the think tank says the parking rules should minimise disruption, suggesting four rules with consequences for licence retention should they not be met by companies providing scooters:

1. Do not block sidewalks, allow at least two metres of free passage. 

2. Park only near the curb or adjacent to a building. 

3. Do not block bus stops, entrances to houses and buildings, on public gardens or parks, in the middle of bicycle paths, or on car parking areas. 

4. Do not block access for people with disabilities.

Matthew Lesh, Head of Research at the Adam Smith Institute and author of the paper, says: 

“E-scooters are reducing emissions and busting congestion in more than 350 cities worldwide. The multi-billion pound e-scooter industry has safely provided hundreds of millions of rides - including for communities and routes underserved by traditional public transport. 

“In the United Kingdom, outdated laws from as far as 1835 are preventing e-scooters from being used on public roads, bike paths and pavements. The UK should immediately legalise e-scooters and begin sharing scheme trials, with the locally appropriate regulatory regime."

Mayoral Candidate Shaun Bailey said:

“London urgently needs a solution to the clean air crisis and e-scooters should be part of that solution. As the ASI report outlines, e-scooters get people out of cars; ease congestion and reduce carbon emissions which all help to improve our air quality. “As Mayor, I will show the leadership London has lacked for four years, by embracing innovative technology, such as e-scooters, if it can help make our city a cleaner, prosperous and safer city.”

Notes to editors:  

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

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

ASI welcomes fightback against mercantilism

Following the Prime Minister’s speech today, the Adam Smith Institute welcomed calls to tear down trade barriers post-Brexit.

The ASI’s Deputy Director Matthew Kilcoyne said:

"Boris is absolutely right to emphasise the role of free trade in raising more people out of poverty than any other idea in human history.

"Britain should now become the global champion of free trade in an increasingly mercantilist world. The Government is right to commit to reducing tariff and non-tariff barriers to trade with or without deals. We should go further by making it possible for Brits to live and work in the USA, Canada, Australia and New Zealand - for free people are part of the great exchange."

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

ASI comments on Migration Advisory Committee thresholds report

The Adam Smith Institute welcomed the recommendations of the Migration Advisory Committee for a more welcoming visa system after Brexit.

The ASI’s Head of Research Matthew Lesh said:

“Today’s Migration Advisory Committee recommendation to lower the income threshold is an important first step – but we should remember that income is an arbitrary measure to restrict migration. Now that the numbers target has been dropped, the government should stick to their commitment to scrap the salary threshold as well.

“The MAC report’s recommendations to make it easier to migrate for those with a job offer, and provide more pathways for the exceptionally talented without an offer, are also important steps. But we should be moving towards an even more welcoming system, lowering fees and thresholds to enable more people who could contribute to the UK.

“Recent rises in public support for migration underline that Brexit was never to bring up the drawbridge on immigrants – but to ensure immigration matches the needs of the economy and aspirations of society while being under control. A clear and coherent policy can rebuild trust in the migration system while keeping it responsive to the needs of the economy.”