Sam Bowman, Executive Director of the Adam Smith Institute, gives our response to the Queen's Speech on the 21st June 2017.
Commenting on Jeremy Corbyn's pledge to cut commuter rail bills by £1000, Adam Smith Institute Head of Research Ben Southwood said:
Labour’s fare cap is a bung to train passengers which will be paid in higher taxes on those who cycle, drive, or get the bus instead.
Railway improvements cost money. The government already pays around a quarter of the price of a ticket—although very little of this goes to commuters—and the more of the cost they take on, the less money we have to modernise and improve our railways.
Under British Rail, the government chronically underinvested in the railways and they dwindled for decades and half the network had to be mothballed; since we returned operating companies to the private sector passenger journeys have more than doubled. HS2 effectively rebuilds, at great cost, the high speed line that already existed—built by the private sector, and scrapped by the state.
Before privatisation there were 17 trains a day from London to Manchester—now there are 47.
The franchise system isn’t perfect, but nationalisation is a step backwards. To move forwards we must learn from the most successful systems, like Japan’s, where integrating track and train in a private system has unlocked a torrent of investment—newer and faster bullet trains every year.
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Following The Sun’s report that ministers are planning to force tech companies like Facebook and Apple to introduce backdoors for encrypted messaging services, Sam Dumitriu, Research Economist of the Adam Smith Institute, said:
"The encryption backdoor that intelligence services are proposing is exactly what led to the NHS WannaCry attack two weeks ago, and would put everyone who uses WhatsApp at risk.
"Criminals and terrorists will always have access to encryption whether or not it’s banned for apps that you and I use. If you outlaw encryption, only outlaws will have encryption, and that will make us all less safe.
"Terrorists like Salman Abedi will simply switch to lesser known, even more secure apps like Telegram, which protect journalists and activists from government survelliance and censorship in China and Iran.
"Hackers already dedicate substantial effort to seeking out and exploiting every vulnerability out there. Just two weeks ago we saw the harm and chaos they can cause when they shutdown IT systems at forty NHS trusts. The WannaCry exploit they used was based off a leaked NSA vulnerability in Windows. If WhatsApp, Facebook, and Google were forced to create vulnerabilities in their encryption, it'd risk giving cyber criminals a blank cheque to cause chaos and extort billions - and do nothing to stop terrorism."
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In response to the International Workers Union of Great Britain's attempt to force Deliveroo to accept it as a union for its riders, Sam Bowman, Executive Director of the Adam Smith Institute, said:
“Deliveroo riders do the job because it gives them so much flexibility, and ruling against that would hurt them. Just like Uber drivers and other ‘gig economy’ workers, being able to work when they want allows riders to work around other commitments – essential for students or people with irregular social lives. Deliveroo is hardly a monopolistic employer either – riders can choose between UberEats, Deliveroo or even similar services like Amazon Flex, choosing between whichever is offering the best deal at the time for them. That’s just one freedom that would be limited if riders had to be classified as ‘workers’.
“It’s misleading doublespeak to say that the court will be giving these riders more “rights”. Only 19% of Deliveroo’s riders in Camden supports the union's motion. The whole reason these jobs exist is because they are less tightly constrained by the type of job restrictions and barriers to entry that many full-time workers face. If you want to see what full-throttle “protections” for workers do, go to Italy or France, where unemployment rates are double Britain’s.
“Our flexible labour market is what’s allowed us to create two million new private sector jobs since 2010, while the rest of Europe has stagnated. It allows firms like Deliveroo to innovate with new employment models and gives workers more choices and more opportunities. Ruling against the gig economy would be bad for Deliveroo riders, bad for innovation, and bad for Britain’s workers as a whole."
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In response to Theresa May's pledge of a raft of new European-style workers regulations, as well as a crackdown on the gig economy, the ASI's head of research damned them as risky.
Ben Southwood, Head of Research at the Adam Smith Institute, said:
Theresa May’s decision to copy Ed Miliband’s continental-style labour laws risks continental style unemployment and stagnation.
One of the British economy’s greatest strengths is its flexible labour market: it is easy to hire and fire workers, and when you do, the terms are simple and lightweight. It is this flexible labour market that has allowed us to get unemployment down to 4.7%, and employment up to a record high, despite a historically slow recovery around the world.
And it is this flexible labour market that has allowed “gig economy” employers like Uber, Deliveroo and Airbnb to flourish here, completely changing markets with new innovative products. Clamping down on this kind of work will make it harder for British firms to experiment with new business models in the future and act as a drag on innovation at a time when we need all the entrepreneurship we can get.
Look over the channel where countries ban new entrants like Uber, and cynically regulate away their business models, and you find 10, 20, 30% youth unemployment in rigid labour markets that cannot deal with shocks. We don’t want to emulate that here.
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In response to Theresa May's call for an energy price cap, ASI Head of Projects Sam Dumitriu, commented:
"When Ed Miliband called for 70s style price controls on energy prices in 2013 the Tories were right to oppose it. The facts haven’t changed since then, only the politics. We said back then that proposing a cap would force energy companies to keep prices high even as wholesale prices fell as a precaution – and, with the price cap on the table since then, that’s exactly what’s happened. Since Theresa May floated resurrecting Red Ed's price cap, energy companies have hiked prices by as much as 40% in anticipation of a cap.
"The real solution to high energy prices is more competition – something that the Competition and Markets Authority and five previous Ofgem regulations have said is the real problem with the British energy market. Britain used to have an incredibly competitive energy market with the highest rates of active customer switching in Europe, but since 2009 over-regulation has lead to a nearly 50% fall in switching rates. Theresa May’s proposed cap on Standard Variable Tariffs would destroy the incentive for customers to shop around for cheaper tariffs making the market even less competitive.
"Ultimately expensive bills are caused by high wholesale prices and bad regulation, not profiteering – energy firms are no more profitable than similarly sized companies in other sectors. If the Prime Minister really wants to cut energy bills, she should go for competition and make switching easier and more attractive for billpayers."
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In response to Corbyn's promise to raise the minimum wage to £10 by 2020 Executive Director of the Adam Smith Institute, Sam Bowman, commented:
"Labour’s commitment to raise the minimum wage to £10/hour is reckless and ignores the potential costs of such a move. We know that increases to the minimum wage have to come from one of three places – either through lower wages or employment for other workers, lowered company profits, or higher prices. The evidence is pretty strong that higher minimum wages kill jobs, whether through direct layoffs or by slowing down new job creation, and this effect seems to get stronger the higher the minimum wage level is.
"Higher prices may be even worse for the poor, because they are regressive – poor households disproportionately consume goods produced with minimum wage labour.
"As well as being bad policy, this is also evidence that we were right when we warned that Osborne’s politicised “National Living Wage” would poison policymaking in this area. Instead of being set by the technocratic Low Pay Commission, with an explicit mandate not to risk unemployment, the National Living Wage is now subject to a political bidding war, with neither the Conservatives nor Labour having any real incentive to keep the level at a level that minimises harm to Britain’s poorer workers."
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