25 years after the Big Bang we ask: Was it a good idea?

Published in City AM here.

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Old Teaser

 27 October 2011

On the 25th anniversary of the Big Bang, Dr Eamonn Butler argues in City AM that the deregulation was needed in order make London the world's top financial centre.

Case for high speed rail 'fundamentally flawed' says right wing think tank

Read in the Daily Telegraph here.

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Old Teaser

26 October 2011

The Daily Telegraph write on our report arguing that there is no case for High Speed Rail

Think-tank attacks high-speed rail link

Read the article in full in the Financial Times here.

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Old Teaser

 26 October 2011

The Financial Times covers the release of the ASI's report questioning the case for High Speed 2.

High Speed Fail – there is no case for HS2

26 October 2011

In a report released today, the Adam Smith Institute exposes the weaknesses in arguments for High Speed 2 and argues that the case for the project is fundamentally flawed. The research reveals the huge cost of HS2 to the taxpayer, and suggests that many of the uptake projections are overoptimistic. Looking at HS1 (London to the Channel Tunnel) and international examples, it is clear HS2 will not make enough revenue to cover operational and construction costs and will bring very few tangible benefits.

The cost to the taxpayer

• HS2 will become a state financed project. The first phase will cost £17bn and when extended to Scotland, £50bn, – funded at great cost to the taxpayer at a time of austerity and increasing debt interest payments
• The potential for going far above the £4bn “optimism premium” set aside for overspending is high, especially in light of current inflation. Public pressure for more tunnels (which cost much more per km to build) through environmentally sensitive areas such as the Chilterns will push up construction costs.
• DfT will have to pay for HS2 mainly through debt markets. This will put DfT’s budget under strain, meaning there is less money available for investment elsewhere on the UK railway network

Demand and profit predictions

• The figures don’t add up for HS2 to make a profitable return. HS1 (London to the Channel Tunnel) cost £5.7bn but raised only £2.1bn when sold off. Alarmingly, the financial case for HS2 is even weaker than for HS1.
• Over-forecasting of passenger numbers has plagued previous rail projects in the UK. London and Continental Railways (LCR) forecast passenger numbers for Eurostar for 2004 as being 21.4 million. In reality, passenger numbers were a third of this figure.
• Predictions of passenger numbers and demand for High Speed 2 may also be overambitious. This would have huge repercussions for HS2’s profitability.
• Passenger predictions do not take into account the potential response of classic train line franchises and airlines to generate increased demand for their service in the light of HS2 competition.

What benefits?

• Environmental benefits have been cited as one of the key merits of HS2. There is little environmental case for HS2. Carbon emission reduction projections are weak and real environmental benefits won’t be realised until Phase 3 (extending to Scotland) in at least 30 yrs time.
• HS2’s analysis suggests that ‘the impact of HS2 on carbon emissions will be between an increase in emissions of 26.6MtCo2 and a reduction of 25.0MCo2 over sixty years’. This is a tiny change, and over that time frame UK rail operations are expected to have generated a stable or lower carbon footprint than currently.
• The construction of the first phase of HS2 will have a major environmental impact along the route, especially the Chiltern Hills are and may blight house prices locally
• The justification for HS2 is based on intangible benefits such as a narrowing of the North/ South divide. A similar reason was used to justify the investment of the TGV in France – its losses continue to be underwritten by the French taxpayer.
• Looking at Europe we see that nearly all high-speed rail projects are subsidised. The TGV in France has caused SNCF’s debt to rise to c£25billion. The World Bank warned in 2010 of the debt created by high speed rail systems talking of the ‘near certainty of copious and continuing budget support for the (high speed rail) debt. The government should take heed of these warnings.

Commenting on the report ‘High Speed Fail’, Sam Bowman, Head of Research at the Adam Smith Institute, adds:

“The case for High Speed 2 is based on wildly unrealistic projections. It will probably end up making a loss, and will mean a lot more borrowing for the government in the mean time. There are no significant benefits to HS2: it will cost a lot of money and achieve virtually nothing.

“Governments are spectacularly bad at predicting the future – taxpayers should not be forced to pay for a project with no significant benefits. To spend at least £17 billion and up to £50 billion on a train network for which there is no demand is wasteful enough; to do so at a time of austerity is obscene.

“The HS2 project has itself become a runaway freight train. If the government is serious about getting tough on wasteful spending, it will hit the brakes on HS2.”

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Inheritance tax: enemy of entrepreneurs

Published in City AM here.

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Old Teaser

24 October 2011

Dr Madsen Pirie writes in City AM that inheritance tax distorts and damages the economy and should be scrapped as it creates an extra hurdle to entrepreneurs.

There is no question that the EU comes at a huge and growing price in economic terms

Read on ConservativeHome here.

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Old Teaser

22 October 2011

Dr Eamonn Butler writes in ConservativeHome that our membership to the European Union is coming at a huge economic price.

Privatise adoption

Read in The Times here.

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Old Teaser

 18 October 2011

 Sally Thompson writes a letter to The Times arguing that the UK should follow the US model and privatise adoption agencies.

Al-Jazeera: Sam Bowman on Occupy Wall Street

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16 October 2011

From cradle to grave: The death of the NHS?

Read the article in full on Al-Jazeera here.

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Old Teaser

13 October 2011

Tom argues that the government shouldn't be in the business of providing healthcare on Al-Jazeera.

UK needs lower taxes to attract and retain highly skilled workers

 12 October 2011

• An ageing population means that the government must work harder to keep highly skilled workers from leaving the country, and do more to attract foreign-born highly skilled workers to the UK.
• Research shows that the best way to attract and retain highly skilled workers is by ensuring that Britain’s tax burden is competitive internationally. That means scrapping the 50p tax, and cutting rates across the board.

New research released today (WEDNESDAY) by the Adam Smith Institute (ASI) calls on the government to scrap the 50p tax, reduce other tax rates, and reform current immigration policies to attract more highly skilled migrants to the UK.

At present, the UK has the 4th highest number of highly skilled immigrants in the OECD, but also has the highest emigration levels in the OECD, accounting for almost 20% of all OECD migrants. With an ageing population the government must focus on policy changes designed to keep highly skilled workers in the UK, while also attracting highly skilled migrants. Unless it can do this, the UK faces economic stagnation and a pensions crisis.

ASI author Alexander Ulrich, a Danish analyst and consultant at the Danish Confederation of Business, highlights ONS statistics that show that the proportion of people not working, and thus dependent on those employed, will increase by 75% in the next 40 years. The problem of an ageing population is made worse by the fact that the UK only takes in slightly more highly qualified workers than it loses. Almost 10% of Britons live abroad and these high emigration rates constitute a problem to the UK economy. Government solutions must therefore be focused on making the UK attractive to both native and migrant workers who produce more than they consume.

The report, Taxing talent: how Britain can attract and retain the world’s best workers, draws on established academic studies of migration and identifies the overall tax burden as a crucial factor influencing highly skilled migrants’ choice of where to emigrate to. In order to attract and retain the most productive workers, the government must abolish the 50p tax rate and reduce taxes across the board. International competition over highly skilled workers is becoming increasingly intense and to remain competitive the UK must offer an attractive tax regime. The report adds that if the tax burden remains high the UK may experience a ‘brain drain’ in the future.

Concerns about migrants’ abuse of the welfare system could be addressed by the introduction of an ‘open borders, closed public accounts’ system for migrants over whatever level the government deems necessary. This would require immigrants to use private insurers for healthcare and other large welfare state expenditures for the first few years of working in the UK before becoming eligible for full benefits. Such a system would address current concerns without the possible negative economic consequences of the government’s current migration cap.

Sam Bowman, Head of Research at the ASI, adds: “People are the ultimate resource, and Britain should be the world leader in attracting and retaining talent. We should be trying to adapt to migration, not restrict it. That means flexible public services and policies that attract the very best people the world has to offer.

“Of the things that highly-skilled migrants consider when deciding where to move, the tax burden is the only one the government can influence. If Britain is to keep its competitive edge, it needs to cultivate policies that attract the best workers from around the world and keep more Britons at home. That means cutting income taxes – not just the 50p rate, but the 40p and 20p rates as well.”

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