Combine Targeted Support, Business Loans and Tax Cuts to Ease the Cost of Living

Extend the cash payments scheme, introduce business loans and cut taxes to help households and businesses through the cost of living crisis, says think-tank

• Since the publication of the Adam Smith Institute’s previous report on the cost of living crisis, households and businesses’ economic woes have been exacerbated by rising inflation and energy costs. 

• The Government will need to help mitigate the impacts to reduce economic scarring. However, policy proposals such as freezing energy prices will have long-term negative consequences. 

• A combined approach of immediate, targeted support through cash transfers and the benefits system, combined with tax cuts designed to allow people to keep more of their own money, is the preferable option. 

A new report from the Adam Smith Institute (ASI), called In the Bleak Midwinter: How (and How Not to) Tackle the Energy Crisis, argues that a combined approach of immediate, targeted support through cash transfers and the benefits system, combined with tax cuts designed to allow people to keep more of their own money, is the best way to ensure households get the help they need over the coming months.

Our report authors highlight that some of the policies that have been touted over the course of the leadership campaign, including ‘nuclear’ VAT cuts, and an energy bill freeze, are distortionary, not properly targeted and increase the risk of winter blackouts through failing to incentivise cutting down on energy consumption. 

It further makes the case for support for households and businesses based on their previous energy use. For households, this means the Government would transfer cash based on the difference in bill payments relative to 2021. For businesses, similar criteria would be used in an extensive Government backed loan scheme, to help spread the increased cost of energy bills over a longer period. 

The report makes the following suggestions:

1. Extend the cash transfer scheme to include quarterly cash transfers of £350 over the next year under the same targeting scheme. 

2. Tie further relief to households to their levels of energy consumption in the previous year. We propose a 75% coverage of rises for those eligible for the £350 cash transfer, 50% for households with a higher income taxpayer. 

3. Provide 100% backed loans to businesses struggling to meet monthly energy payments. 

4. Implement an emergency uprating of benefits in line with current inflation figures, rather than waiting until April 2023.

5. Index the personal allowance rate of income tax to inflation in order to eliminate fiscal drag.

6. Bolster national energy supply through securing emergency electricity from Norway and opening discussions with the Dutch to reopen Groningen gas field.

John Macdonald, Director of Strategy at the Adam Smith Institute, said:

“The stakes for Liz Truss and her new Cabinet are incredibly high; pursue the wrong policy, and the country could drive itself further into debt, fail to avoid energy rationing this winter or push thousands of businesses into bankruptcy. Rather than pursuing un-targeted and expensive policy options, such as an energy price freeze, the Government should instead consider direct cash transfers, indexing benefits and income tax thresholds with inflation, energy relief based on previous consumption and loans for struggling businesses.”

-ENDS- 

Notes to editors:  

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207.

John Macdonald is Director of Strategy at the Adam Smith Institute.

Emily Fielder is Head of Communications at the Adam Smith Institute.

Alex Hughes is a Research Associate at the Adam Smith Institute.

The report is now live and available 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.

Cut Corporate Taxes to Boost Growth, Wages and Investment

Reversing the corporation tax hike and replacing the super-deduction would have significant positive impacts on growth, investment and wages says think-tank

• The UK currently ranks 22nd out of 37 OECD countries in terms of tax competitiveness. This does not account for the scheduled rise in corporation tax from 19% to 25% and the expiration of the super-deduction. 

• Raising corporation tax to 25% and failing to replace the temporary super-deduction would lower businesses investment by 7.6% and average household wages by £2,500.

• In contrast, reversing the planned hike and allowing businesses to deduct the cost of new investment for all asset types by 100% would raise investment by almost 10% and GDP by 3%

A new report from the Adam Smith Institute (ASI), A Recipe for Growth: The Economic Effects of Corporate Tax Reform in the UK, presents analysis which shows that next year’s corporation tax hike and the end of the super-deduction policy is set to lower British business investment by 7.6%, output by 2.3%, and average household wages by £2,500. In contrast, if businesses were allowed to continue to deduct 100% of the cost of new investment in equipment, then relative to current law it would raise business investment by approximately 5% and real output by 1.3%. Extending 100% cost recovery to all asset types would raise investment by almost 10% and GDP by 3%. 

As the paper outlines, lower rates of corporation tax have a significant positive impact on workers’ wages. Firstly, increasing productive capital (machinery and equipment) per worker boosts productivity, which in turn generates higher wages. Secondly, more profitable industries tend to use their increased profits to hire better quality labour, bidding up wages in the process. Moreover, lower domestic corporation tax rates can improve workers’ bargaining power, as incentives for firms to move abroad are diminished. 

Based on this analysis, the Adam Smith Institute recommends reversing the corporation tax hike and replacing the super-deduction with a 100% deduction on all asset types. 

Daniel Pryor, Head of Research at the Adam Smith Institute, said:

“It’s vital that the next Prime Minister goes for growth and boosts Britain’s bleak business investment numbers. But as this report shows, the coming corporation tax hike and the end of the super-deduction will hammer the economy, choke off investment and reduce the average household wage by £2,500. If the contenders for the Conservative party leadership are serious about getting Britain back on track, they should commit to canceling the corporation tax increase and making full expensing of capital investment permanent. In the long-run, keeping corporation tax low largely pays for itself.”

Greg Smith, Member of Parliament for Buckingham and Deputy Chair of Conservative Way Forward, said: 

“If going for growth and bringing down the cost of living is our top priority, then cancelling the corporation tax rise is an absolute must. As this timely report from the ASI makes clear, lower corporation tax will increase both investment and wages, boosting the economy and driving down the cost of living.”

Steve Baker, Member of Parliament for Wycombe, said: 

“As individuals, families, and businesses suffer from the cost of living crisis, it is clear that we need to spur investment and output in the UK. This cannot be done by increasing corporation tax. As this great paper from the ASI makes clear, cancelling the increase to corporation tax and allowing firms to continue to fully expense new equipment will boost our economy and increase investment at a time when we need it the most.”

-ENDS- 

Notes to editors:  

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207.

Dr Tyler Goodspeed is a Kleinheinz Fellow at the Hoover Institute at Stanford University and Senior Fellow of the Adam Smith Institute. He served as Acting Chairman of the White House Council of Economic Advisers, 2020-2021.

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.

Slim Down the Cabinet Office to Ensure Value for Taxpayers

Reduce the Cabinet Office headcount and simplify its structure to ensure greater efficiency says think tank

• The structure and working of the Cabinet Office is complex, confused and unwieldy.

• Large recent increases in Cabinet Office spending are unexplained. 

• Several key responsibilities of the Cabinet Office are better suited to other departments. Its role should be limited to managing the civil service and coordinating policy formulation and delivery. 

• Many of the Cabinet Office’s departments, agencies and public bodies should be privatised, closed, integrated into the core Cabinet Office or investigated by the National Audit Office. 

• Significant reform is needed to ensure value for taxpayers and efficient governance. 

A new report, Count Down: Reforming the Cabinet Office, from the Adam Smith Institute (ASI) argues that the Cabinet Office is too large and cumbersome to efficiently concentrate on its core priorities.

Tim Ambler, the report author, makes the case for slimming down the department in order to focus on the two core streams of work of the Cabinet Office; managing the civil service and coordinating policy formulation and delivery.

One possible outcome of these reforms would reduce the Cabinet Office headcount to 1,286 (i.e. by about 90%). In order to be sure such a dramatic cut is feasible, the report recommends conducting a ‘reverse Parkinson’ exercise. Parkinson’s Law means that work, however unnecessary, expands to fill the time available. The reverse exercise would look at, given reductions, what would not be done up until all the essential work, and only that, is covered. This would be implemented before any redundancies take place.

The report further recommends the following: 

1. Urgently clarify the headcount employed by the Cabinet Office. 

2. Reduce the Cabinet Office to six ministers and two permanent secretaries from the present 13 ministers and 5 permanent secretaries.

3. Present a smaller and simpler annual presentation for Parliament and the public which explain major changes, such as the jump in net costs of goods and services. 

4. Rationalise the Cabinet Office’s departments, agencies and public bodies. 

Tim Ambler, report author and Senior Fellow at the Adam Smith Institute, said:

“Over time, senior politicians have lost control of civil service numbers, the management structures they need and what governing is really about. They need a wake-up call.”

Daniel Pryor, Head of Research at the Adam Smith Institute, said:

“The Cabinet Office blob has ballooned in recent years, delivering poor value for taxpayer money. Many of its associated public bodies and groups are in dire need of closure, privatisation or transfer to other departments. This paper provides a range of suggestions for how to achieve a radical reduction in headcount. Fundamentally, the Cabinet Office must get back to basics—managing the civil service and coordinating policy delivery.”

About the ‘Reforming the Civil Service’ series:

The UK government plans to reduce the civil service headcount by nearly 20%. We believe that deeper savings—bringing lower costs and greater efficiency—are easily possible. Whitehall has grown far more than 20% in the last seven years alone; and we have found most departments to be a confused clutter of overlapping functions and agencies. This series aims to cut through that clutter to suggest nimbler, lighter structures.

Whitehall departments have two functions: to manage policy and to provide services. We believe that services (such as passport provision) should be provided by executive agencies, without being swamped by the core department staff. We also believe that the cores could work, more effectively, with a fraction of their staff.

Deep staff reductions can be managed through natural turnover, early retirement, pausing non-essential recruitment and other methods. The result would be a slimmer, more focused civil service, better services for users and substantial savings for taxpayers.

-ENDS-

Notes to editors:

For further comments or to arrange an interview, contact Daniel Pryor, daniel@adamsmith.org | 0758 477 8207

Tim Ambler MA (Oxon), MSc (MIT) is a Senior Fellow at the Adam Smith Institute, previously Senior Fellow, London Business School.

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. 

The Adam Smith Institute respond to the Khan Review

In response to the Khan Review on the government’s ambition to make England smokefree by 2030, Daniel Pryor, Head of Research at the Adam Smith Institute, said:

“The Khan smoking review is nanny-statism on steroids. 

Raising the smoking age every year is just a stealthy way of making smoking illegal and creates a bizarre two-tier system of adulthood. Do we really think 21-year-olds asking 22-year olds outside shops to buy cigarettes for them is a rational state of affairs?

Moreover, plans to massively jack up the price of a pack will clobber poorer smokers and drive them into the welcoming arms of a booming black market. These are the very people that the review claims to be helping. 

Everyone already knows that smoking is bad for your health. If graphic health warnings on plain packs aren’t deterring today’s smokers, it’s hard to see how writing health warnings on individual cigarettes or painting them green will make a difference.

Smokers need the carrot, not more of the stick. The only sensible aspect of this review is the acknowledgement that the Government should double down on the success of safer smoking alternatives like vaping. But even then it takes a lukewarm attitude, dismissing any reforms targeted at reduced-risk products like heated tobacco and snus: which help address the different preferences of different smokers.”

Notes to editors:

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207

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.

Brits Spend Over 40% of the Year Working for the Taxman

Taxpayers worked 159 days for HMRC this year.

The 8th of June is the first day they start working for themselves. 

• Tax Freedom Day falls on 8th June.

• Brits work 159 days of the year solely to pay taxes.

• UK Taxpayers will fork out over £869.4bn to the Treasury this year, 43.29% of net national income.

• This is the latest Tax Freedom Day since reliable records began in 1995—and compared to earlier (less reliable) data it is the latest since the mid-80s. 

• Cost of Government Day, which factors in borrowing as well taxes, is July 10th—almost a month earlier than in 2020 but 4 days later than last year.

• MPs have provided comments in support of Tax Freedom Day, recognising the need to reduce the burden on people and businesses during a cost of living crisis. It is now incumbent on the Government to lower taxes to boost growth and investment. 

Tax Freedom Day is the day when Britons stop paying tax and start putting their earnings into their own pocket. In 2022, the Adam Smith Institute (ASI) has estimated that every penny the average person earned for working up to and including 7th June went to the taxman - from June 8th onwards they are finally earning for themselves. 

British taxpayers have worked a gruelling 159 days for the taxman before they can start earning for themselves.

Brit’s tax burden is moving in the wrong direction. Last year, Tax Freedom Day fell an entire week earlier. In the midst of a cost of living crisis, taxpayers are being burdened with even more obligations to HMRC. While the Government’s immediate interventions to help households through the crisis are welcome, the rising cost of living cannot be effectively tackled without a growing economy underpinned by low taxes. 

With current trends, we can expect Tax Freedom Day to continue to fall later in the year. Using OBR growth and tax revenue projections from March 2022, Tax Freedom Day is projected to hit June 24th by 2026: the latest since at least the early 1960s, according to historical data.

Dr Eamonn Butler, Founder and Director of the Adam Smith Institute said:

“If people were forced to work two full days a week for the Government, they would regard it as a form of serfdom. But that is what they actually do, as the Government takes over 40% of their earnings in tax, and then it borrows because it still can’t keep its book balanced.

All this taxation eats into our economic growth. It increases the risk of starting a new business or investing to expand an existing one, choking off the recovery we desperately need right now.” 

The Rt Hon Lord Frost said:

“Tax Freedom Day comes later every year, but a jump of a whole week shows just how much this Government has raised taxes in recent months. We need to reverse this trend urgently and get the British people working for themselves again, not paying more and more for an increasingly inefficient government."

The Rt Hon Penny Mordaunt, Minister for Trade Policy and Member of Parliament for Portsmouth North, said:

“To increase revenues and growth for the nation, cut taxes. To improve options and opportunity for individuals, cut taxes. To balance the state and generate wealth funds for future generations, cut taxes.”

The Rt Hon Mark Harper, Member of Parliament for Forest of Dean, said:

“A Conservative Government has a duty to keep people’s taxes low. It is incumbent upon the Prime Minister, as First Lord of the Treasury, to remember that he is meant to be a Conservative and to use our majority to govern as a Conservative - not letting spending get out of control and reducing the tax burden, not increasing it.

I pay tribute to the valuable work the Adam Smith Institute does in highlighting Tax Freedom Day and advocating the merits of free market economics in improving the lives of our constituents.” 

The Rt Hon Ian Duncan Smith, Member of Parliament for Chingfood and Woodford Green, said:

“These figures are a terrible reminder of just how much tax we already pay to the Government. The purpose of this Government should now be to reduce the overall tax burden to allow those who work hard for their families to keep more of the money they earn and give less to the Government. That is what real freedom means.”

Steve Baker, Member of Parliament for Wycombe, said:

“If it feels like Tax Freedom Day arrives later every year, it is because it does – even under Conservative Governments. We currently have the highest tax burden in 70 years. This cannot go on. Conservatives must stand up for the formula we have always believed in and recognise that you cannot tax your way to prosperity.”

The Rt Hon Damian Green, Member of Parliament for Ashford, said:

“One of the best ways to help people in a Cost of Living crisis is to cut the taxes they pay, whether personal taxes or the tax on goods and services. I urge this path on the Chancellor of the Exchequer.”

The Rt Hon Alun Cairns, Member of Parliament for Vale of Glamorgan, said:

“When public money is being spent or committed, we should always keep the date of Tax Freedom Day in our mind.  Unfortunately, the date is getting further away from January every year!  The public and press should use it as a standard measure of assessment.  

“Tax Freedom Day is a tangible reminder that nothing is for nothing.  It is hard to believe that until June 8th all our money has gone to the taxman! 

“There is a need to see this date earlier in the year.  This is something that the public would support strongly.”

The Rt Hon Sir Edward Leigh, Member of Parliament for Gainsborough, said:

“We need less tax-and-spend and more tax cuts. Conservatives should about empowering people. The best way to boost the economy is to let people spend more of their own money.”

John Baron, Member of Parliament for Basildon and Billericay, said:

“It should give a Conservative Government pause for thought that Tax Freedom Day is getting ever later and is now the latest for 40 years. Ministers from the Prime Minister down should be going for growth and cutting taxes – remembering the lessons of the Laffer Curve.”

Andrew Mitchell, Member of Parliament for Sutton Coldfield, said:

“As Conservatives we believe in keeping taxes as low as possible consistent with properly funding our great public services . 

But the inexhaustible pressure to spend more and tax more now requires a fundamental reassessment of our priorities . 

As a society we now have unrealistic expectations of what the State can feasibly deliver.”

Andrew Bowie, Member of Parliament for West Aberdeenshire and Kincardine, said:

“The fact that Tax Freedom Day is the latest it has been for 40 years should be of serious concern to the Government. If they are to fulfil their promise of driving down taxes, there is no time like the present to work on bringing it forward next year."

Greg Smith, Member of Parliament for Buckingham, said:

“That tax freedom day has moved later this year should be a wake up call for all conservatives. Our over riding imperative must now be to radically reduce the tax burden in the United Kingdom for individuals and business.”

Craig Mackinlay, Member of Parliament for South Thanet, said:

“With the tax burden at its highest for 70 years and the Treasury's insatiable appetite for additional tax revenues both from existing sources and newly devised ones, it is time we considered carefully whether an ever-expanding state is conducive to growth, entrepreneurial spirit and attractiveness to new UK inward investment. As Conservatives we lose sight of it at our political peril."

Andrew Lewer, Member of Parliament for Northampton South, said:

"It is a severe challenge to the core beliefs of most Conservative Parliamentarians to see Tax Freedom Day get later and later, especially after so many years of Government led by our Party. If this country is to move back into a sustained pattern of growth and improved productivity then this must change." 

Henry Smith, Member of Parliament for Crawley, said:

“Lower taxation increases economic growth and so actually also the amount of revenue raised to support public services; morally too, most people work hard and deserve to keep more of what they earn.

The fact that over half a year now elapses before we are in essence free of paying tax is not sustainable or right and we must rethink the effects of such a burden on individuals and our country.”

Adam Afriyie, Member of Parliament for Windsor, said:

“I strongly believe that individuals and their families are better placed than the Government to make financial decisions for themselves. This must start with lower taxation and reducing the burden on working people. I am encouraged by the work of the Chancellor on raising income tax thresholds. This is a step in the right direction but we must do more to allow workers to keep their hard earned money – especially low earners.”

Gary Sambrook, Member of Parliament for Birmingham Northfield, said:

“For most people their biggest expense each month is not their mortgage, their bills or childcare; it is tax. Today, 8th June, is Tax Freedom Day; the day on which the average person has made enough money to pay their taxes for the year. As a Government we need to do more to lower taxes which make us all better off.”

Alexander Stafford, Member of Parliament for Rother Valley, said:

“The Conservatives are the party of hard work, high growth, and low taxes. This Government understands that the only route to prosperity for the British people is a growing economy which enables individuals and companies to flourish. I welcome Tax Freedom Day and our Government’s plan for the high skill, high wage, low tax economy of the future.” 

Tom Clougherty, Head of Tax at the Centre for Policy Studies, said: 

“We are simultaneously experiencing the biggest rise in cost of living and the highest tax burden in a generation - as today, the latest tax freedom day in 40 years, illustrates. 

Add to this picture stagnating wages and sluggish growth, and something has to give. The government urgently needs to start reforming and cutting taxes. It's not enough to say you believe in a low tax economy; at some point you actually have to deliver.

'Hopefully next year we can celebrate Tax Freedom Day a little earlier.”

John O’Connell, Chief Executive at the Taxpayers’ Alliance said:

“It's not especially surprising that Tax Freedom Day has arrived a lot later this year. Politicians have imposed a 70 year high tax burden on businesses and families, with massive spending commitments causing a cost of government crisis. Spending restraint and tax cuts will give the economy space to grow and leave more money in the pockets of those who earned it.”

Chris Snowdon, Head of Lifestyle Economics at the Institute of Economic Affairs, said: 

“It is obscene that the average person has to work for nearly half a year to pay for the bloated, inefficient state. The NHS alone consumes one in every eight pounds, while one in nine of us is on a hospital waiting list. Britain is a high tax, low growth economy and will remain that way until a concerted effort is made to reduce the size of the state. Yet, the government shows little to no appetite to do so.”

Notes on Tax Freedom Day and methodology:

What is Tax Freedom Day?

Every year, the Adam Smith Institute calculates the number of days the ‘average’ person (more on that later) would have to work off to pay their taxes. This year, every penny the average person earned until June 7th went straight to the taxman. From June 8th (Tax Freedom Day) onwards the average person will get to keep every penny they earn. 

We calculate Tax Freedom Day each year to illustrate the true size of the tax burden once you factor in taxes from every source. 

Complications

While Tax Freedom Day is a simple idea in principle, in reality it’s a little bit more complicated. First, there’s no average person. Because we don’t have a proportional tax system, every individual will have a different tax freedom day. In theory, Tax Freedom Day will come later for high-earners and earlier for low-earners and the unemployed. In practice, this isn’t necessarily true because HMRC does not simply tax income, but also taxes consumption, investment and ‘sin’ activities at different rates.

Second, we measure the total tax take. This includes indirect taxes (such as VAT and Corporation Tax) as well as direct taxes (Income Tax and National Insurance). Economists distinguish between legal and economic incidences (a fancy economist word for ‘burden.’) The legal incidence of Corporation Tax may fall on individual firms, but corporations are artificial legal constructs. In reality, Corporation Tax is paid by people, the debate between economists is to what extent it falls between consumers, shareholders and workers. (Our paper Corporation Tax: Who Pays had a crack at the answer.)

Thirdly, we take into account depreciation and foreign investment earnings, as is standard around the world, measuring total taxes over net national income, not gross domestic product, so as to more closely approximate net wealth creation rather than economic activity. 

Fourth, tax receipts and net national income statistics are regularly revised by the Office of National Statistics and we revise past Tax Freedom Days along with them. Four years ago, the ONS made massive revisions to the net national income series. Irritatingly, as a result more reliable records now only go back to 1995.

Projections

The data for the most recent figures are not available up-to-date for calendar years so they are proxied from government and OBR forecasts and financial year numbers. They are then revised when exact numbers become available. This means the Tax Freedom Day for a given year in the past may well have changed. Typically the changes are very small, and the overall picture tends to be robust to these alterations. But over the past year, significant revisions to the net national income stats have pushed Tax Freedom Day back by around a week (we’re freer than we thought).

Tax Freedom Day (and its sister, Cost of Government day, which measures total spending over national income) is not meant as anything but an illustration—an indication of the size of the state. As the complexities details above suggest, it does not correspond exactly to any individual’s experience. And yet many people do find it shocking to see how large the state really is, expressed in an intuitive way.

If you want further info on methodology, feel free to call up the ASI on 02072 224995 or send our Head of Research, Daniel Pryor, an email at daniel@adamsmith.org.

Notes to editors:

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207

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.

Targeted Support and Tax Grabs: ASI Responds to the Chancellor's Announcement on Cost of Living Relief Measures

In response to the Chancellor’s Statement on the Cost of Living, Morgan Schondelmeier, Director of Operations at the Adam Smith Institute, said:

We welcome the Government’s introduction of targeted support for households, a policy which the Adam Smith Institute called for in a recent report. 

A one off cash payment direct to the most vulnerable households is the clearest way to provide immediate support with the least distortionary effects. Uprating benefits in line with CPI is also a sensible measure to ensure the least well off don’t get left behind. Finally, the Chancellor is right to scrap the repayments on the energy bills rebate - a poorly designed scheme from the start. It’s just a shame that it took the Chancellor so long to come to these conclusions.

A conclusion the Chancellor never should have reached was that a windfall tax is a good idea. Spending months arguing against it both practically and ideologically and then caving to pressure from the left leaves much to be desired for a ‘fiscally conservative’ Chancellor. Even with the sensible sunset clause and investment measures, a windfall tax is still not the most effective way to raise revenue and sets a precedent that the UK is a risky place to do business. 

Notes to editors:  

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207.

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.

More of the same? ASI comments on the 2022 Queen's Speech

Commenting on the 2022 Queen’s Speech, Head of Communications Emily Fielder said:

Despite pledging to drive “growth and strengthen the economy and ease the cost of living crisis,” the Queen’s Speech announced a raft of meddling pet projects, rather than focusing on measures that can deliver meaningful change. The only growth the Government is achieving is the growth of the state.

It’s one thing to recognise that Britain desperately needs growth—it’s quite another to actually deliver it. Unfortunately, a hodge-podge list of interventions on everything from regulating football to cracking down on protests does not constitute a comprehensive government strategy. Rather than outlining a credible plan to meet its stated objectives, the Government is making more promises it doesn’t seem prepared to keep.

What was undeniably missing from the speech was immediate solutions to the cost of living crisis. No promises have been made to put pounds in the pockets of those struggling the most whilst the Government are too busy cracking down on free speech online.

Our country needs bold new ideas to pull us out of the doldrums, but this Queen’s Speech merely offers more of the same.

Notes to editors:  

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207.

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.

Put the UK’s Taxi Laws in for an MOT and the Consumer Back in the Driving Seat

Abolish the Knowledge, support Paratransit Light Vehicles and remove barriers for market entrants to get the UK moving, says think tank

• The UK’s licensure regime is inherently exclusionary due to its expensive and overly complicated nature.

• Current TFL guidance for the licensure of taxis is 105 pages long, whilst James Button’s encyclopaedia of the UK’s current taxi regulations comes to almost 3000 pages. 

• The cost of a taxi licence in London can exceed £10,000 after the ‘Knowledge’ test is taken into account.

• Data from End Violence Against Women shows that 1 in 2 women feel unsafe walking near their home at night, and 1 in 2 women feel unsafe walking in a public area at night. Improving access to cheap and safe late-night transport would help to address these concerns. 

A new report, A Fare Shake: Reforming Taxis for the 21st Century, from the Adam Smith Institute (ASI) argues that the Government should move to overhaul current taxi cab legislation, creating a more dynamic and equitable sector to better serve the needs of Britons as they get moving after Covid. Drivers and operators should have a clearer, more liberal licensing system, giving users unprecedented choice at lower costs, better safety, and higher quality. 

Report author, Maxwell Marlow, makes the economic case for streamlining licensure rules. Taxis, PHVs (Private Hire Vehicles) and ride-source suppliers are critical to rebuilding the economy after the pandemic. Personnel Today has found that 40% of people want to use PHVs for their work commute, whilst the hospitality and night-time sectors will benefit from greater consumption of goods and services consumed either side of the rides. Moreover, in London, only 46% of households own a car meaning that, especially for lower income groups who are less likely to own one, travel is increasingly reliant on third-parties. Freedom of travel should be protected for lower-income households, who are at the mercy of restrictive transport regulation and declining TfL services. 

The paper also highlights the need to end the preferential treatment of taxis, which is currently taking place at the expense of PHVs and ride-source providers. PHVs provide a great deal of societal inclusivity for disabled people, who are often excluded from public transport and conventional vehicles, whilst ride-sourcing platforms are the most popular mode of hired transport services, offering rapid and reliable transport across urban areas. 

The report recommends the following policies:

1. Eliminate wasteful duplication and regressive licensing by creating a single, standard licensing regime, enforced by a national licencing authority. 

2. Abolish the ‘Knowledge’ advanced topographical tests, which have become unnecessary due to the advent of reliable GPS and digital maps. 

3. Permit PHVs to be hailed from the pavement and allow all licenced point-to-point operators to use bus lanes in order to make transport fairer. 

4. Support more Paratransit Light Vehicles. These are higher capacity vehicles which run regular services along high-demand routes and which can be summoned by a customer. 

5. Allow drivers nationwide to claim the cost of passenger-facing CCTV back against tax and encourage the use of online safety kits to improve standards of safety.

6. Offer incentives for taxi and PHV drivers to switch to green vehicles through offering discounts on green vehicles, and raising capital through a Green Taxis and PHVs Fund to subsidise faster transition away from combustion engines. 

Maxwell Marlow, report author and Development and Research Officer at the Adam Smith Institute said: 

“Britain operates critical services on last millennium’s laws. It’s time to put the brakes on special interests, who inflate costs and gate-keep with the antiquated and defunct ‘Knowledge’, and give consumers more choice. We need to simplify our licensing system, making it more fair and transparent, whilst ensuring that our fleets are greener, safer, and more efficient than before. The report contains a myriad of policies to give Britons the freedom to travel that they deserve, turbocharge the economy and relieve the cost-of-living crisis for many along the way.”

Greg Smith, Member of Parliament for Buckingham and Transport Select Committee Member, said:

“Reform of the taxi and PHV market is long overdue.  The revolution in consumer choice that services like Uber brought needs to be matched with the way the State sees taxi services, and I welcome the ASI’s recommendations in this regard.  We need to embrace deregulation for better and cheaper choices for all.”

-ENDS- 

Notes to editors:  

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207.

Maxwell Marlow is a Development and Research Officer at the Adam Smith Institute, an MA candidate at the LSE, and a Don Lavoie Fellow at the Mercatus Center, George Mason University. 

The report is now live on the Adam Smith Institute website here.

Wasting Millions of Pounds and Thousands of Lives

In response to the news that the Government is introducing offshore processing of asylum seekers in Rwanda, Emily Fielder, Head of Communications at the Adam Smith Institute, said:

“The Prime Minister has called the Government's decision to send asylum seekers to offshore processing centres 'innovative.' This overlooks the fact that Australia already has such a system in place; one which has been criticised for its failure to ensure basic human rights - hardly a model the UK should be following.

The inhumanity of this policy aside, it will neither deter asylum seekers from crossing the channel, nor will it cost the Government less. Rather than throwing out ineffective red-meat policies which will cost the British taxpayer millions of pounds, the Home Office should should work more constructively with European partners, and focus on evidence-based solutions to reducing dangerous asylum seeker crossings.”

Notes to editors:  

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207.

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.

The new Energy Security Strategy lacks basic arithmetic

In response to the Government’s Energy Security Strategy, Tim Ambler, Senior Fellow of the ASI, said:

“The authors of “Energy Security Strategy” have not heeded the advice of a previous Energy Chief Scientific Advisor, Professor Sir David Mackay, who wrote that his “sole recommendation is this: Make sure your policies include a plan that adds up!” Unfortunately, the new Strategy does not.
The best part is the recognition, at last, of the importance of nuclear to provide the baseload for wind and solar. The Prime Minister claims that 95 percent of energy needs will be low carbon generation by 2030, but Hinkley Point C will be the only nuclear plant planned to be operating by then, contributing seven percent. And if North Sea oil and gas are to be ramped up, we will apparently be relying on carbon capture and storage, which are untried technologies at scale.

Storage can provide some shifting of peaks to troughs and hydrogen will be the main means of that, albeit wastefully. It is not an energy source itself: of the electricity used to make either form of hydrogen, you only get about half back when you use the electricity it generates.

Transmission losses and risks are not addressed at all. Weather volatility apart, cyber antagonists could crash the whole grid, and the UK still seems to be lacking any kind of back-up in either eventuality.

Unfortunately, this Energy Security Strategy fails on electricity usage, capacity, storage and, most of all, arithmetic.”

Notes to editors:  

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207.

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.