Matthew Lesh: Funding isn’t enough to boost education. The Government must be radical and promote microschools.

22 Oct

Matthew Lesh is the head of research at the Adam Smith Institute.

The Covid-19 pandemic was immensely difficult for millions of parents and children who were forced into homeschooling. The exodus from the classroom has undoubtedly left many students educationally scarred.

Over two million school children did between zero and one hour of school work per day during lockdown. Education Policy Institute analysis found that primary school students were an average of 3.5 months behind in maths and 2.2 months in reading by March 2021 – with disadvantaged and state school students even further behind.

The Institute for Fiscal Studies estimates that an astronomical £350 billion in lost lifetime earnings because of reduced education time. Students also missed out on normal socialisation and extracurricular activities.

The debate about educational catch-up has largely focused on how much money the Government is willing to throw at the problem. Sir Kevan Collins resigned as education recovery commissioner after being unimpressed that the Government would “only” allocate £1.4 billion for a school catch-up plan. He wanted £15 billion. Why not £30 or 150 billion is unclear.

There is clearly some need for money to fund the likes of private tutoring for left behind students and perhaps even a longer school day. But the focus on money is extremely shallow.

A decade ago the Conservatives came to Government with a radical reform agenda to boost educational quality. They introduced free schools, reformed curriculums and improved teaching techniques. It was politically costly but it proved effective in boosting standards. The UK’s position in the gold-standard Pisa education rankings from the OECD substantially increased between 2009 and 2018 – from 25nd to 14th in reading and 28th to 18th in maths.

The pandemic once again presents the opportunity to rethink how schools operate, to further improve educational outcomes. A silver lining of homeschooling during lockdowns is that parents have been far more engaged in the education of their children – and, suffice it to say, not all have been unimpressed. While the situation has improved, it is far from perfect.

Many parents simply gritted their teeth, however, others banded together to form a ‘pandemic pod’ or microschool with around two to a dozen others. This allowed children to continue face-to-face education led by a professionally qualified teacher or capable lay educator. Microschools are often conducted from the home of one of the pupils, and therefore have basic facilities but, accordingly, low costs. Additional activities, like sports, music and yoga, are provided within the local community.

Microschools have gotten much attention in the United States but they also exist, and continue to do so, in the United Kingdom. Hove Micro-School was started in September 2020. “Mainstream schools no longer suit many children’s needs and home schooling can be overwhelming or simply impractical for families,” founder Rachael Ammari explains. Hove Micro-School has expanded from just a few children to over twenty in the last year. There is clearly a demand by parents for a more bespoke education in a smaller class size.

Microschools give parents and children greater choice, allowing the diverse preferences of parents and children. They are small and private, meaning the parents of children attending these schools are treated as valued customers. They can focus on what parents want the most, such as excellence in maths, science and languages.

The smallness and intimacy also requires parents to take a greater interest in their child’s education. The added competition can also be good for students in the existing state sector schools, who will be forced to raise their game or face the loss of students.

Importantly, microschools provide greater educational diversity, fostering innovation on a small scale, experimenting with new techniques and models that may be more suited to the way different children can learn. Compulsory education was first introduced in Britain in the 1880s to create a system of functional clerks for the Empire who could do basic routine tasks and follow orders.

Edwin G West’s 1965 book, Education and the State, explains how state education suppressed the emerging private, voluntary and competitive efforts supported by families, churches and philanthropists. Almost all schools revolve around a stringent 19th century model of children sitting in rows in front of a teacher at the front, similar to workers in a factory. Microschools present the opportunity to return to a more competitive and innovative educational system.

The Adam Smith Institute’s latest report, School’s Out: How microschools boost educational choice and quality, explains how the Government can embrace microschools to address post-Covid educational disadvantage.

In practice this means not strangling these smaller schools in red tape – that is, reforming the regulatory system to create a new category of schools between heavily regulated large independent schools and the minimal rules for homeschooling.

This could take the form of a ‘schools sandbox,’ modelled on the Financial Conduct Authority’s regulatory sandbox, to allow educational entrepreneurs to experiment with a diverse array of new arrangements for schooling in a light-touch regulatory environment.

The Government could also make microschools a more viable financial option for lower income parents by providing educational vouchers for any school type – equal to the average per-student cost of supplying a state education, or about £6,000 a year for secondary pupils.

Microschools may be small but they could have a big impact.

Connor Tomlinson: Britain’s Net Zero pledges must not cost the Earth

1 Sep

Connor Tomlinson is the policy director for the British Conservation Alliance and a Young Voices UK Associate Contributor.

Modern environmental policy boils down to a binary of which to burn: our world, or our wallets.

In a GB News interview with Andrew Neil, Rishi Sunnak admitted that the Prime Minister’s net zero pledge will cost taxpayers upwards of £1 trillion.

In addition, the new gas boiler ban set to take place in 2035 will cost £250 billion – an average of £10,000 per household – disproportionately burdening Britain’s lowest earners.

These new policies are further exacerbating their existing widespread apathy and opposition to climate policies, which will abolish the industries that put food on their tables. The head of the Scientific Advisory Group for Emergencies (SAGE) has launched a new Climate Crisis Advisory Group, stoking concerns that cabinet ministers will be convinced to reuse lockdown-like restrictions to reduce carbon emissions.

Now that the Net Zero transition has become the UK’s post-Covid imperative, it is urgent that policies designed to fulfill that promise don’t cripple Britain’s economic competitiveness.

A market-environmentalist approach belays both concerns by compensating private sector actors with profit incentives for ecological responsibility. This framework also insulates the public purse from the damage of incorrect climate predictions (and any all-encompassing policies based upon their faulty assumptions). Companies burden themselves with all possible risk in exchange for the long-term financial viability of identifying a more sustainable business model. Meanwhile, public goods like clean air, clean water, and a green-lined horizon are produced as externalities for all to enjoy.

This monetary prize has not been ‘astroturfed’ either: rather, consumer choice has driven many businesses’ transitions to environmental friendliness. Businesses adopting sustainability tenets saw a rise in profits long before the pandemic. The Environmental Kuznets Curve lays this trend out, by showing how conservation efforts correlate with an increase in a nation’s GDP. Sustainable fashion, consumer behaviours, and dietary changes even experienced an uptick in search engine traffic during lockdown.

Quite inversely, 98 of the 100 big business polluters on The Guardian’s bombshell list collect state subsidies. Market-environmentalism is as organic as its products; whereas governments prop up the world’s biggest emitters.

Beyond raw numbers: it makes sense that corporations would want to ensure the continuation of their target markets. Mobilising the ethic and efficacy of free markets allows environmental policies to avoid the enforcement costs implicit in any government edict. Without prescriptive legislation, innovation and competition can replace compliance and hesitation at the core of our climate solutions.

The proclamations of eco-socialists and propaganda of Marxist states aren’t reflective of reality. Controlled-economy countries are disproportionately culpable for environmental atrocities. Russia, China, and Cuba emit several times more carbon per unit of GDP than the United States. In the Soviet Union, as Solzhenitsyn documented, the ‘dry execution’ of inefficient outdoor labour under communism meant Russians ‘hate[d] [the] forest, this beauty of the earth’, and walked ‘beneath the arches of pine and birch with a shudder of revulsion’.

In Venezuela, the “Tragedy of the Commons” plays out in the form of the ‘Dutch Disease,’ where countries become reliant on natural resources, but don’t practice sustainable extraction or use. Chavez and Maduro’s petrostatism has produced an economic collapse which dwarfs the Great Depression, with 90 percent of Venezuelans experiencing starvation.

In Britain, our appreciation for nature is a product of capitalism. Before the Industrial Revolution, our countryside was routinely depleted for firewood. We scorn fossil fuels now, but they once constituted a necessary stage in improving our quality of life. Only with coal could Blake, Keats, and Wordsworth cultivate an appreciation of sublime. Without the contrast of high-rises and skyscrapers, we would still see nature in Medieval fashion: as a wilderness, where predators lurk in the dense underbrush, to be tamed with blade and flames.

Therefore, it’s vital we mobilise the engine of innovation that are free-markets to fulfill the public promise of a cleaner, greener nation. A new paper, published by the Adam Smith Institute, lays out the policy pathways toward prosperity that a market-environmentalist approach could take Britain down.

Nuclear is our best bet for carbon neutral electricity, while renewables’ storage, battery, and grid inertia production capacities continue to play catch-up. Liberalising funding vectors for nuclear plants would make planning and construction a less precarious investment, and could alleviate our present unsavoury reliance on Chinese state subsidies.

Accompanying this with adjustments to post-Brexit trade – such as a border-adjusted carbon tax, and membership of international pacts exempting environmental goods from tariffs – could net the UK treasury plenty to patch up our COVID deficit.

It’s easier going green than the Government makes it seem. All it needs do is bow out of the limelight that coronavirus briefings and intrusive emergency powers have gotten them used to, and allow industry experts and innovators to get on with improving our planet.

Morgan Schondelmeier: The Government’s ban on junk food adverts before 9pm is regressive and infantilising

25 Jun

Morgan Schondelmeier is Head of External Affairs at the Adam Smith Institute.

Yesterday the Government pushed forward with its overbearing and unscientific nanny-state agenda. It has decided to ban “junk food” advertisements online and before 9pm on television. This policy lacks substantial evidence, is incredibly damaging for countless industries, and treats adults like children.

But can we be all that surprised? Are we shocked that this Government, and the ones been and gone, are infringing on our rights to see, hear, and taste yet again? This policy is just another in a long line of paternalistic nonsense that stems from the constant need for politicians to be seen to be doing something. Anything at all, really, no matter how damaging.

And these policies are damaging. They’re purporting to be “for the greater good”, masquerading as necessary interventions to protect us from whatever damage we would certainly do to ourselves if we didn’t have the guiding hand of the state. But what we’re really encountering are policies which will undoubtedly do more damage than they purport to fix. Even the Government’s own cost-benefit analyses show this.

Take the ban on “junk food”. The ban, spurred on by the Prime Minister’s own health journey (note: he managed to lose weight by taking personal initiative, not through government-backed punitive measures), claims to target childhood obesity by removing the “temptation” posed by seeing adverts for “junk food”.

You may note my repeated use of quotations around “junk food”. That’s because the category, officially known as high fat, salt, and sugar (HFSS), doesn’t just include sweets and crisps but countless other foods, including many British dietary staples. The Government has made some concessions on this front, generously allowing things like avocado and olive oil to still be seen on our screens, but far too many products still fall under this ban, like favourites fish and chips, sausage rolls and scones and jam.

The Government’s impact assessment found that banning this advertising would only reduce around 2.7 calories per day from a child’s diet. Even this claim is highly speculative. It is based on experiments in which children are shown television advertisements and immediately offered copious quantities of food. It’s hardly a surprise that they consume some of the food on offer. The Government’s impact assessment states that these studies “may lack generalisability to real world conditions e.g. where children have more limited access to unlimited HFSS food during and immediately after HFSS advertising exposure.”

The Government also admits that there is zero evidence, even of the speculative type mentioned above, to suggest that banning online advertising has any impact. It is also not known whether it will reduce lifetime calorie consumption or whether there will be calorie substitution effects (i.e. children eating more at meal times). The evidence also suggests that advertisement bans do not limit adult consumption. At all turns, the Government’s own research proves that this plan has no scientific backing.

So what are we sacrificing in order to knock off 2.7 calories per child per day? Considering the ban hits not just fast food restaurants but also producers and consumers of goods and the platforms which rely on advertising revenue, the Government estimates a loss of £1.5 billion from broadcasters, £3.5 billion from online platforms, £550 million from ad agencies and £659 million from product makers. This doesn’t even factor in the cost to consumer welfare, including for adults, from not being able to see adverts for products, consume what they want and get the best value.

We have seen it time and time again, with this misguided policy and countless other paternalistic interventions: minimum alcohol pricing doesn’t decrease consumption but increases costs for the poorest; gambling bans show little evidence of curbing problem gambling but slash useful tax revenues; hesitancy to accept vaping or heated tobacco only prolongs the damage done by smoking; and banning by-one-get-one ready meals makes it harder for families to feed themselves.

At every turn, this Government puts forth unscientific, regressive, and infantilising policies under the guise of public health. This highly interventionist mindset is hardly a Conservative approach.

We should demand more from our policymakers. Yes, we want to live in a happier, healthier, more prosperous society –– and supporters of these policies genuinely think they will help us achieve that goal. But the evidence always points elsewhere. The benefits do not outweigh the costs. The least we should be able to expect are policies which are thoroughly researched, robustly challenged, and backed by evidence. Right now, all we’re getting are back of the napkin calculations drawn up at a lunch paid for by lobbyists.

Matt Kilcoyne: Streamlined lawmaking would make the UK a richer, safer, fairer and better place to work and live

9 Apr

Matt Kilcoyne is Head Of Communications at the Adam Smith Institute.

We’re now over a year into the pandemic radically shifting the creation of legislation, from a long-winded process studded with Parliamentary scrutiny and debate to laws affecting so many now so often made on the fly.

Frankly if any Member of either House tells you that they know what each of 600 sets of regulations (plus primary legislation and 1014 Statutory Instruments (SIs) used to amend past legislation) does and how it has updated laws previously in place, including that of the 1833 St Helena Act, then they’re having you on. No one could understand or advise on what has happened in whole to the laws our Parliament makes, amends, and repeals.

Now a lot of the SIs that went on in Parliament, last year especially, were to do with converting the EU’s acquis into British law. These SIs were put in place to ensure the promise of Britain starting independence from a position of non-divergence was kept;

This past year could be seen as an exposé of what’s been happening more generally with our legal system for decades: Parliament dictated to by foreign bodies, impacted by devolved ones, and bypassed by executive order. No one could tell you what has occurred across all our laws and the tens of thousands of pages of additions. Yet ignorance of that law is no excuse, and it can cost dearly to not know.

Our Common Law system, uncatalogued laws with no search function, and the lack of understanding about case law specifics and Parliamentary reasoning all add to the cost of compliance for firms. In turn that adds up to lost innovation and productivity, lower wages, and fewer life chances. All told the cost of regulation was estimated by the National Audit Office to be over £100bn in 2017, and a large chunk is just checking you’re on the right side of the law.

But wait, wasn’t one of the reasons that we left the EU that we could look again at all the little laws and silly additions to our statute and start to rid us of these meddlesome interventions? Didn’t Boris Johnson in 2019 order a bonfire of red tape?

Well, yes and no. Johnson’s bonfire is as mal-quoted as his “f**k business” exclamation. The latter was a broadside at corporates pretending to speak for the whole market when they actually speak only and rightly in the interests of themselves and their shareholders.

Likewise, the ‘bonfire’ was actually an explicit attempt at introducing mercantilist procurement practices rather than having non-discrimination of bids by nationality – the vast majority of which have actually now been kept in place via the UK-EU Trade and Co-operation Agreement.

However there are some signs of life in the government’s plans for deregulation. Or as they’d rather call them, plans for better regulation.

Before alighting to lead preparations for COP, Alok Sharma set up a series of consultations and reforms across industries and sectors. Kwasi Kwarteng’s brush with the unions and the FT over an employment rights review put paid to any labour market shake-up, but all the rest continue.

Some of these were supposed to be of higher stakes than others — we’d all assumed the consultation on a new subsidy regime was bigger than the reform of audit, at least until a former Prime Minister’s relations to a certain financial services company started hitting the headlines.

Jacob Rees-Mogg has oversight of the vast bulk of Covid legislation because of the sunset clauses backbenchers forced the Cabinet to put in place on the emergency powers. I think it’s reasonable to trust the Leader of the House’s desire to return ancient liberties to modern Britons and so I suspect some simplification will be coming our way purely by the ticking of the clock.

The real big potential, though, is thought to be with Rishi Sunak’s Better Regulation Cabinet Committee, which has oversight across all departments and involves the likes of Kwarteng, Lord Frost, and Michael Gove all in one place.

Quite what is within scope is less certain than what isn’t. Anything ringfenced by the manifesto or which could go viral on social, such as environmental standards or labour standards, is out. But technically everything else is in, including how and what and when to diverge whole sectors from Europe, when to sandbox as the UK did successfully with fintech, and even the form and role of lawmaking at Westminster.

The Adam Smith Institute’s latest paper, Ignorantia Legis, tries to give the Chancellor some neat new ideas to ensure we get better laws, rather than just more of them.

The first thing is to stop the direction of travel towards more laws as a matter of course. A lot of this stems from process-driven regulation. This year the full cost of that way of thinking was laid bare with the precautionary principle and the vaccine in Europe. Expedited experiments where there is a clear cost-benefit case to do so would allow circumvention of onerous process-driven regulation, replacing it with clear result-driven approaches.

Higher risk, and higher personal responsibility and in ordinary times assigned liabilities, but with higher rewards. Moonshots if you will.

From moonshots to sunsets, so much of regulation is designed to stop the possibility of the very worst outcome happening. Often this is done where the potential for such an outcome is not known at first but becomes known over time. There are plenty of laws already on the statute relating to harming others, duplicating them time and again when new issues arise is unnecessary and often duplicates legislation.

To combat this, MPs should make more frequent use of sunset clauses when passing penalties and regulations, so that they can be routinely revisited and then set aside if and when the harms or moral panic they were designed to address have either been dealt with or failed to materialise.

Ministers will not win the war on wasteful legislation if they start looking for individual wins or headlines. They should instead commit to reducing lines of rules, pages of books, and issues contained within Acts. Doing so will cut the.bill the Government imposes to British businesses and each of us as citizens. That will make the UK a richer, safer, fairer and better place to work and live.

Would ‘full expensing’ be worth a permanent hike in Corporation Tax?

4 Mar

As our editor pointed out this morning, there are plenty of grounds to be cynical about Rishi Sunak’s solemn warnings of steep taxes, especially Corporation Tax (CT) two years from now.

With the Government committed to repealing the Fixed-term Parliaments Act, there will be no legal impediment to the Chancellor using good economic news to abandon the proposed increases – just in time to sweeten an election campaign in 2023.

Besides which, did he not throw the free-market wing of the party a big slice of red meat with his ‘super-deduction’, which will allow companies a 130 per cent tax deducation for “qualifying plant and machinery assets”?

However, it would be discourteous to the Chancellor not to even entertain the notion that he might introduce the taxes he tells the House of Commons he plans to introduce. Which raises the obvious question: is the above trade-off worth it?

On the face of it, obviously not. As it stands the super-deduction window will likely accelerate qualifying investment in the short term, but do nothing for the long term. Meanwhile a serious increase in (CT) would have the predictable effect on corporate behaviour.

But it seems unlikely the Government would, having conceded the logic behind the super deduction, completely abandon it in two years. More sensible would be a move to put it on a permanent basis in a slightly less dramatic form – i.e. by cutting the rate to the 100 per cent envisioned by ‘full expensing’ – along with broadening its scope so that it compasses investments in buildings and ‘intangibles’ (such as websites) as well as plant.

Would that be worth it? According to Sam Dumitriu, who co-authored the Adam Smith Institute’s paper on ‘scrapping the factory tax’, it would be a finely-balanced argument.

Full expensing would help to rebalance the economy by supporting manufacturing businesses which are more likely to be in the parts of the UK targeted by the ‘levelling up’ agenda, and continue to stimulate domestic investment by cutting the effective marginal tax rate on it to zero.

But by imposing a higher tax rate on companies’ day-to-day operations through a higher headline CT level, the Government would be strongly discouraging inward investment from outside the UK. Michael Devereux, Professor of Business Taxation at the University of Oxford’s Saïd Business School, puts it thus:

“There has been a wealth of academic research on the question of how differences in effective tax rates affect flows of foreign direct investment – and the evidence suggests a sizable impact. A consensus estimate is that inward foreign direct investment falls by 2.5 per cent for every one percentage point increase in the corporation tax rate. Roughly, then a 4 percentage point rise in the tax rate would reduce inward investment by 10 per cent.”

This would obviously be a strange move to make when ‘global Britain’ is meant to be doing everything it can to chart an independent economic destiny outside the European Union. All the more reason to suspect, perhaps, that we won’t end up seeing this CT increase after all.

Budget 2021: Think tank response round-up

3 Mar

Centre for Policy Studies

Robert Colvile, Director – ‘Should help business and the economy rebound powerfully’

“The combination of business rate reductions, investment incentives and other measures should help business and the economy rebound powerfully in the next few years – and we are pleased to see our proposal for free ports at the heart of the Chancellor’s speech. But there is the danger of a cliff edge later on as support is withdrawn and taxes increased – or that businesses will anticipate higher taxes and fail to invest.

“Britain still has a huge problem with its long-term growth rates – as the latest OBR figures show only too clearly – and the tax burden is set to increase inexorably. We appreciate that the Chancellor needs to balance the books. But the great challenge facing the Government is not just to put the economy back on an even keel in the short term, but put in place permanent pro-growth measures that raise growth rates for good.”

Institute of Economic Affairs

Mark Littlewood, Director General – ‘A barrage of short-term costly measures’

“After months of damage inflicted by the pandemic and lockdown measures, the Chancellor had the opportunity to deliver a pro-business, pro-growth Budget by lowering and simplifying taxes and slashing unnecessary regulations.

“Instead, we received a barrage of short-term costly measures which risk depressing economic growth, reducing employment, hampering entrepreneurialism, and ultimately harming the long-term economic recovery. Dialling up taxes was a mistake, and our economic growth will be less impressive as a result.”

Adam Smith Institute

Matt Kilcoyne, Deputy Director – ‘The most serious attempt to rebalance the economy a Chancellor has made’

“Rishi Sunak’s super deduction will induce investment into Britain’s factories and help businesses bounce back and Britain’s economy boom as we leave the pandemic behind. We’d estimated at 100% full expensing would be worth over £2,214 per worker, going beyond that is a bold move to help the private sector build the recovery. It will benefit most those areas that have been left behind in recent decades. It is the most serious attempt to rebalance the economy a Chancellor has made and it is truly welcome.

“Rates relief and employment support will be welcome while the ability to operate and raise revenue remains suppressed even as we leave lockdown. But the success of vaccines means the economy will reopen and activity will return; the government cannot continue propping up our economy indefinitely. Moving forward, the strategy should be to get the state out of the way, by lowering taxes to encourage investment and cut red tape that hurts entrepreneurs.

“The Chancellor was right to say that the state should not be borrowing to pay for everyday public spending. But it’s hard to square that circle with a new commitment to guarantee mortgages of first time buyers. This is a Fannie Mae and Freddie Mac guarantee to boost the demand side — without a credible plan to boost supply of new homes in the places people want to live we’ll just end up with another housing bubble and the risk of boom and bust.

“Keir Starmer was right to remind the Conservative Party that the proper basis on which to make tax decisions is economics not the political cycle.”

TaxPayers’ Alliance

John O’Connell, Chief Executive – ‘Big tax hikes risk choking off the recovery’

“There were some wins for taxpayers today, but it doesn’t gloss over the fact that this was a tax-raising budget.

“The chancellor is helping to rescue struggling sectors but £30 billion worth of tax increases will hit hard-pressed households and businesses already under the highest tax burden in 70 years. 

“Big tax hikes risk choking off the recovery Rishi wants before it has even started, so let’s hope that other measures in the budget help to boost jobs, spur investment and ultimately revive the economy.” 

The Entrepreneurs Network

Sam Dumitriu, Research Director – ‘Chancellor needs to think hard about fundamentally reforming how international profit is taxed’

“A higher corporate tax rate will discourage investment and make the UK less competitive internationally, so it is right that the Chancellor has combined it with a new 130% Super Deduction for investment.

“However, when the two years are up and Corporation Tax rises to 25%, the UK will fall far down the list on international tax competitiveness. Although, we currently have a low headline rate, the effective rate that businesses actually pay is mid-table by international standards due to stingy capital allowances.

“To avoid an investment slump, as the OBR forecast, when the Super Deduction expires, the Chancellor should allow businesses to write off the full value of their investments – the so-called full expensing he mentioned at the despatch box.

“But a high rate, even with full expensing, increases the incentive to engage in sophisticated tax avoidance and shift headquarters. To counter that, the Chancellor needs to think hard about fundamentally reforming how international profit is taxed.”

Centre for Social Justice

Edward Davies, Policy Director – ‘A huge help to those working low-paid jobs’

“We are pleased the Chancellor is extending the £20 uplift in Universal Credit for another six months. Universal Credit is a lifeline for the poorest people in the UK and today’s decision will make a significant difference to many people.

“Likewise, the announced increase in the National Minimum Wage to £8.91 an hour from April is also welcome and will be a huge help to those working low-paid jobs.”

Joseph Rowntree Foundation

Helen Barnard, Director – ‘Makes no sense and will pull hundreds of thousands more people into poverty’

“It is unacceptable that the Chancellor has decided to cut the incomes of millions of families by £1040-a-year in six months’ time. He said this Budget would “meet the moment” but this decision creates a perfect storm for the end of this year, with the main rate of unemployment support cut to its lowest level in real terms since 1990 just as furlough ends and job losses are expected to peak. This makes no sense and will pull hundreds of thousands more people into poverty as we head into winter.

“Even before Coronavirus, incomes were falling fastest for people with the lowest incomes due in large part to benefit cuts. Ministers know this short extension offers little relief or reassurance to the millions of families, both in and out-of-work, for whom this £20-a-week is helping to stay afloat. This cut to Universal Credit will increase hardship when the economic crisis is far from over and undermine our national road to recovery.

“It is not too late for the Chancellor to do the right thing: announce an extension of the £20 uplift to Universal Credit for at least the next year. It is also totally indefensible that people who are sick, disabled or carers claiming legacy benefits continue to be excluded from this vital support. The Government must urgently right this injustice.”

Resolution Foundation

Torsten Bell, Chief Executive – ‘Need to see wider economic stimulus to drive the recovery’

“It’s welcome that the furlough scheme which has seen British workers through this crisis will remain in place until restrictions are lifted, playing a critical bridging role between the lockdown and the recovery. The phased tapering off over the summer will also avoid a risky cliff edge.

“But the peak of unemployment is ahead rather than behind us. We also need to see wider economic stimulus to drive the recovery this autumn, and support for the millions of people who have been without work for long periods during this crisis.”

Institute for Fiscal Studies

Paul Johnson, Director – ‘A big reversal of decades of policy direction and a significant risk’

“What we can be sure of is that Rishi Sunak has spent big again, extending some support right through 2021 at a cost of an additional £60 billion or more. As a result borrowing is now forecast to again be above 10% of national income in the coming financial year. Whether the big fiscal tightening planned for subsequent years will actually happen is less certain. It continues to depend on spending being lower than planned prior to the pandemic. And it also depends on a large increase in corporation tax actually being implemented without additional measures to at least ease its long-run impact. Make no mistake, this proposed increase in the main rate of corporation tax is a big reversal of decades of policy direction and a significant risk. For all the rhetoric about it leaving the headline rate here below that in other G7 countries, our effective tax rate will be relatively high.

“Mr Sunak made much of his desire to be honest and to level with the British people. The fact that he felt constrained to raise taxes by hitting companies and through freezing allowances, rather than through more explicit rises in people’s taxes, suggests there are limits to how far he wants to level with us as he attempts to raise the overall tax burden to its highest sustained level in history.”

Bright Blue

Ryan Shorthouse, Chief Executive – ‘The Government has yet again foolishly cut, rather than maintained, the value of the cost of Fuel Duty’

“The Chancellor has been refreshingly generous, adaptive and pragmatic in his response to the economic havoc caused by Covid-19. He is right to extend the flagship furlough scheme until the autumn, gradually phasing in increased employer contributions. It has saved the livelihoods of millions of people. Indeed, considering its success, the Government might consider an adaptation of the furloughing scheme for future crises for businesses and workers – a government-supported insurance scheme requiring employer and employee contributions.

The Chancellor is right to set out how this Government will get a grip on the public finances in the coming years, but postpone action until the years ahead. However, this makes the decision to cut the international aid budget and public sector pay in the coming fiscal year, as announced last autumn, odd and unnecessary.

“There was an agenda that was notably lacklustre in the Budget. In the year of COP26, this was meant to be the year that we trigger a post-Covid green recovery. But the Government has yet again foolishly cut, rather than maintained, the value of the cost of Fuel Duty for drivers of petrol and diesel vehicles. And it still lacks the ambitious and necessary policies to support more people with the path to net zero, especially in the way they drive their cars and heat their homes.”

If the Government won’t force the Tory shires to build more houses, perhaps it should bribe them instead

18 Dec

There was something soul-crushingly inevitable about announcement that the Government is going to abandon the algorithm at the heart of its planning reforms. But how big a setback is it?

To hear them tell it, not much. The core overhaul of the planning system – summarised here by London YIMBY – remains in place, including the part where areas are ‘zoned for growth’, a process that will, as Housing Today puts it, “grant automatic permission for development in certain areas”.

But ‘zoning for growth’ is only useful if you do it where the demand is. It is quite clearly a mechanism for brute-forcing a degree of much-needed development past the “more homes yes, but not here” brigade. Yet following a mutiny by Conservative backbenchers, Robert Jenrick has abandoned the algorithm the Government had been using to decide where such zones should go.

We don’t yet know what is going to replace it, but we do know that it will fall much less heavily on leafy, Tory-voting shire seats in the South East – a tactical victory for MPs such as Theresa May, whose Maidenhead constituency is now spared the shadow of a few hundred new homes.

The go-to solution for these MPs seems to be more development in urban areas. But this is clearly parcel-passing, and the problems are various. In London, where the demand really is, it will likely mean another unpopular application of ‘zoning for growth’ to push for densification in the (also Conservative-voting) suburbs. Otherwise it entails, as Bob Seely suggested in a piece for this site, shifting housebuilding targets northwards (where the demand isn’t) in the vague hope that economic regeneration will follow.

Unless you have ‘simultaneously build more houses and make no dent in the housing shortage’ on your housing policy bingo card – and given the state of British housing policy, you might – this likely isn’t a good idea.

In any event, given the backlash it will likely spark (Google ‘garden grabbing’ for a foretaste of it) it seems probable that the Government will eventually retreat from this as well, raising the spectre of a wholesale surrender of any effort to fix the Southern housing shortage by shifting the focus northwards under the rubric of ‘levelling up’.

If so, that would stand in a long and counter-productive Conservative tradition of trying to solve the problem without aggravating any of the vested interests in the Party’s electoral coalition, such as the repeated efforts of Chancellors from George Osborne onwards to solve a supply problem by pumping more demand into the market via schemes such as Help to Buy.

Yes, housing is a complicated problem and issues such as excessive credit – which we tackled in the ‘Homes’ section of the ConHome Manifesto – are part of it. But if your goal is to spread genuine property ownership, then jury-rigging mechanisms for getting cut-price assets into the hands of first-time buyers runs into the same problem that Margaret Thatcher’s attempt to create a ‘shareholding democracy’ did: how do you stop people selling them on at full price? Laws restricting the scale of mortgage lending to more old-fashioned levels may be part of the answer, but its absurd to pretend that they’re an alternative to building more houses.

Addressing the housing shortage – and once again for those at the back, the Southern housing shortage – has to be a strategic priority for the Conservatives. The current situation is delaying home-ownership, family formation, and otherwise reshaping society in ways antithetical to conservatism.

Not only is this squeezing the Party’s position in London, where the Tory vote in many seats has collapsed even since 2010, but it will spread the issue across the South East and the East of England as more London-based workers trade a longer commute for more affordable housing. Where Brighton and Canterbury have lead, many more true-blue seats could follow.

But what to do? Some of the Conservative-leaning think-tanks have their ideas. Alex Morton, the head of policy at the Centre for Policy Studies and a housing specialist, is working proposals to make an obligation to build part of planning permissions, to prevent developers banking the land value uplift without doing anything in return.

A paper for the Adam Smith Institute suggests the right ‘YIMBY’ policies could unlock up to five million homes in London alone, and they have elsewhere floated the idea of building ‘commuter villages’ near existing railway stations, effectively replicating the ‘Metroland’ project which saw swathes of north-west London effectively built by the Metropolitan Railway. But it isn’t obvious that London’s main commuter lines could take this extra pressure (at least until High Speed ‘it’s-capacity-really’ 2 is finished), and in any event a proposal that involves building on the green belt is politically-speaking just a thought experiment.

Policy Exchange also lean towards densification, drawing on the work of the late Sir Roger Scruton’s lamentably-named ‘Building Better, Building Beautiful Commission’.

However rather than trying to brute-force development through in the teeth of local opposition, which is what ‘zoning for growth’ aimed to do, this agenda aims to win public support both by making sure new developments are attractive (cue the lamentations of architects) and by making sure existing homeowners profit from new developments:

“They propose that we allow streets to hold a vote on whether to let homeowners redevelop their homes. If a two-thirds majority support it, homeowners would receive planning permission to add floors to their homes and to take up more of their plot area. The limits on what streets should be able to grant themselves would be those of traditional European cities: five-storey buildings in a terraced format. Many streets would probably choose to go up to these limits in order to maximise the increase in property values.”

Stuffing the mouths of vested interests with gold is a British policymaking tradition – it’s how Labour sold doctors on the NHS, after all – and is probably going to be essential if the Government intends to succumb to Tory MPs’ demands that planning be ‘locally-led’. The alternative is waiting until Labour get into office and unleash a housing programme drawn up with no regard whatsoever to the interests and preferences of Conservative voters and MPs. Which, at that point, some might feel they deserve.

Whatever path he chooses, the clock is now ticking for Boris Johnson. If he wants the new planning system to have had any impact on the situation in the country by the next election, he really needs to have it on the books by the end of 2021. Otherwise new applications and so on won’t have time to get through. But if he rushes into a second policy that gets thrown out by MPs, that’s very likely to mark the end of any serious efforts at planning reform in this Parliament.

As I noted recently with regards to green targets, this country has a very bad habit of endlessly putting off difficult infrastructure decisions. That the Government is still dithering over expanding Heathrow suggests this hasn’t changed. The Prime Minister’s tendency towards procrastination is well-known.

But solving the housing crisis is not just of national but of existential political importance to the Tories in a way our ports, airports, and road network frankly aren’t. Johnson needs to make a decision; it needs to be the right decision; and it needs to be soon. If he isn’t prepared to be Britain’s house-building Bonaparte, the Prime Minister needs to be clear what Plan B is.

Spending Review 2020: Think tank response round-up

25 Nov

Adam Smith Institute

Matt Kilcoyne, Deputy Director:

“The Chancellor set out plans for big-spending and big-borrowing to get the country through the pandemic, and set the course for the country in the years ahead. It is necessarily expensive to confront the Covid-19 pandemic. But this public sector spending splurge fails to put the United Kingdom onto a strong fiscal footing for the recovery. Rishi Sunak cannot tax our way out of debt or spend our way out of a recession. 

“Increasing departmental budgets as the economy shrinks is just spending money we don’t have. It is fair that while private sector wages have fallen, public sector wages do not rise. Every public sector worker does not automatically deserve a pay rise while the rest of the UK loses out. 

“Raising the minimum wage during a recession will hit the most vulnerable the hardest by preventing businesses from hiring out-of-work Brits. It risks fewer jobs and hours for the lowest skilled, young, and minority workers. For the party of business, the lack of thought about their needs and the increase in costs they’re facing coming from the government, this is a massive and unforgivable oversight.”

Institute of Economic Affairs

Mark Littlewood, Director General:

“The Chancellor’s diagnosis was correct – and it is encouraging that he grasps the scale of the problem. The eye of the economic storm has yet to hit. The Covid contraction is more than double that of the Great Depression in 1931. Five years from now our economy will be smaller than it was at the start of 2020.

“If the diagnosis is good, the medicine is inadequate. ‘No return to austerity’ is a good slogan, but austerity there will be – either in the public or the private sector. It is just a question of when, and the longer the delay the more austere it will be.

“While today was a Spending Review rather than a Budget, the Chancellor must swiftly turn his attention to mapping out a path to recovery. This will involve creating a better tax and regulatory environment, so businesses can bounce back and thrive.”

Centre for Social Justice

Edward Davies, Director of Policy:

“Amidst the eye-watering barrage of numbers, the focus first and foremost on jobs, was the right one. It is not just important for the recovery of the economy but as the Chancellor said, a job is the best route to personal prosperity – an identity, purpose, and reason to get up each morning. Various investments in housing, city growth deals, and a very welcome community levelling-up fund will all help to enable this.

“And for those out of work the announcement of the £3bn Restart Programme is welcome too. This can build on and expand the Work Programme and Work and Health Programme. But it must be personalised and human, as per the original design of Universal Support, to go alongside Universal Credit. As the Shadow Chancellor said it must address the needs of those furthest from the job market and work with the small local actors, who know their communities best.

“Lastly, support for the most vulnerable such as rough sleepers, and our prisons was welcome, but warm words on families and communities, where many find their greatest support, must be followed by action.”

TaxPayers’ Alliance

John O’Connell, Chief Executive:

“The lack of focus on value for money in today’s spending review will no doubt disappoint taxpayers.

“Coronavirus has undeniably left a large hole in the nation’s finances. But instead of forever dipping back into taxpayers’ pockets, the government should prioritise policies to get the economy going.

“With the tax burden at a 50 year high, targeted tax cuts will be vital for employment, productivity and, ultimately, economic growth.”

Centre for Policy Studies

Robert Colvile, Director:

“Today’s spending review recognises the extraordinary scale of the Government’s fiscal response to the pandemic, but also the extraordinary and long-lasting economic damage that it has inflicted.

“It is right to prioritise jobs, health and public services now, rather than immediately closing the deficit, but also right to acknowledge the enormity of the challenges ahead. The temporary cut to international aid and the imposition of public sector pay restraint, both called for by the Centre for Policy Studies, recognised this changed environment – but the country is still committed to increasing spending on a shrunken tax base.

“The Chancellor’s announcements on infrastructure investment and levelling up were extremely welcome, echoing for example the CPS’s proposal for a National Infrastructure Bank. But ultimately it will be the private sector, not the public, which digs us out of this economic hole – so as the pandemic recedes we urge the Chancellor to embrace pro-growth, pro-enterprise stimulus measures, such as tax incentives to encourage businesses to hire and invest.”

Joseph Rowntree Foundation

Helen Barnard, Director:

“Remarkably for a much-hyped statement on levelling up opportunity across the country, the Chancellor’s word’s ring hollow as weaker local economies will be getting less money than previously in the aftermath of the pandemic.

“The growing numbers of people in or at risk of being pulled into poverty in our country will have taken little solace from the plans laid out by the Chancellor today. The latest economic forecasts are stark and deeply troubling.

“Behind the figures there are real families wondering how they will get through this winter and beyond. The Chancellor has not risen to the challenge facing the nation. In the here and now families need to know how they will pay for food, childcare and keep a roof over their heads.

“The Chancellor has failed to live up to their manifesto commitment to invest significantly in skills around the UK and allow the funds to be administered locally via mayors, devolved administrations and local authorities. The additional funding for employment support is eye catching and necessary because of the anticipated wave of long-term unemployment in the coming months.

“There is mounting concern in the UK about tackling poverty and inequality, and the time to tackle these issues is now, as we recover from a crisis which has already hit the worst off hardest. This was a moment when the Chancellor could have taken action to solve poverty – instead many families will now be preparing for still harder times ahead.”

Resolution Foundation

Hannah Slaughter, Economist:

“The Chancellor has confirmed a modest increase in the National Living Wage for next April – the smallest since 2013. After large increases in recent years, the slowdown reflects that the wage floor is rightly linked to typical earnings which have taken a hit during the crisis.

“Crucially, this increase still leaves the Government on track to abolish low pay by the middle of the decade, with one of the highest minimum wages in the world.

“Continuing on the path towards ending low pay – with bigger rises in the National Living Wage coming as earnings recover – should form part of a wider post-Covid settlement for low-paid workers, including more dignity and security at work.”

Matt Kilcoyne: CANZUK is a bold, imaginative, and popular blueprint for a global Britain

19 Aug

In less than a year the Conservative and Unionist Party will face a threat to its existence.

Maybe not the Conservative bit, but certainly the Unionist portion. Coming down the tracks are the Scottish election and a renewed Nicola Sturgeon is positioning herself and her party to rip apart the United Kingdom.

Unionists need to offer something better. Something bigger than Scotland, frankly bigger than Britain. That offer should be Canzuk.

Time is running out. The polls are going in the nationalists’ favour. Poll after poll, in fact, shows that the Union is on the back foot. We know what Nicola Sturgeon is likely to spin Scottish independence as being natural, inevitable, and the sensible option.

Far from being shown up by a pandemic that has hit Scotland hard, Sturgeon is buttressed by an impression of strength and a compliant media north of the border, and no scrutiny south of it.

The First Minister, using all the privilege that position entails, is going to cast independence as both normal, and a reprieve from chaos. Set Scotland free with Sturgeon, or risk being bound to Brexit Britain with Boris. Tories should understand the danger of this messaging, the party used it with great success against Ed Miliband in 2015.

What worries me is that, while there may be plenty of policies on offer, there is a lack of a narrative and a lack of an incentive for Scots to choose to stick with their fellow Brits in the years ahead.

My proposition to the leaders of the Conservative party then is simple. Use something popular, something bold, and something global to counter a proposition that would sow division, narrow Scotland’s worldview, and limit the freedoms of our people.

Offer them the world. Offer them the right to live and work right across Britain, Australia, Canada, and New Zealand. The North Atlantic and the South Pacific. A global alliance of modern, diverse, liberal, English-speaking democracies united by common cause, a shared head of state, institutions, businesses, academia, legal systems, and of course all important family links.

Scottish Nationalists look at the pandemic, some even at the possibility of manning the border and kicking out the Sassenach, and think their time has come. Tories should be telling them it has not, and that rather it is the hour of the Unionist instead.

For Unionists across all the Canzuk states are moving in tandem on this issue. Canzuk is now official policy of the Canadian Conservatives, it is the stated aim of the New Zealand First, ACT and National parties, and today we at the Adam Smith Institute launch a paper by Australian Senator James Paterson supporting the alliance.

His proposition should be studied carefully. New Zealand and Australia have a unique relationship in the same way that the United Kingdom does with Ireland. They treat each other with respect, understanding that lawmakers want the citizens of each to be safe and have high quality assured in the products they buy and services they procure. They recognise each other’s qualifications so teachers, and nurses, and engineers can work back and forth across the Tasman Sea.

If the EU weren’t trying to meld together ex-communist, ex-fascist, constitutional republics, monarchies, federal states and unitary government; if it weren’t pushing together 28 states with different languages and legal systems and centuries of mistrust and warmongering together, then they might try something similar. If Ireland weren’t in the EU we’d probably propose a similar idea across the whole of the British Isles.

We can, though, propose such a network between our high-trust English speaking allies. The ones with whom we share the Queen and who sit in the Five Eyes alliance. We already trust each other with the highest classified state secrets, we should be able to trust that Jenny from New Zealand can be a nurse talented enough to look after our Prime Minister without making her have to apply to have her qualification recognised.

Trust is what trade is all about, and you can trust your mates the most. We’ve fought and died together. No matter if you’re white, British Asian, Afro-Caribbean, or Cantonese, you’re likely to have family in one of the Canzuk states. In fact, 80 per cent more Brits live in CANZUK states than across the whole of the neighbouring EU, with 1.2 million Brits living in Australia alone.

Polls have consistently shown the idea is very favourably received in each of the states, with a recent poll for CANZUK International (based in Canada) showing supporting majorities in each with New Zealand highest (82 per cent in favour), followed by Canada (76 per cent), Australia (73 per cent) and UK (68 per cent). Over 300,000 people from the four states have signed a joint petition to encourage governments to commit to the idea.

Together these four states are emerging as a global force by sheer force of fact. Whether that’s challenging China over Hong Kong, or protecting the biodiversity of the oceans, or standing up for press freedom, we’re championing the liberal rules-based order that is the cornerstone of our prosperity on the global stage.

Our Canzuk states share a love for freedom, and it’s an offer that shines bright with opportunity and promise. A global future for a generation that has been disillusioned with a politics that has been inward looking. An idea that connects them to our shared civilisation, and to their own global families too.

Give Brits an offer they can’t refuse: give them Canzuk.