NEWS

Emily Fielder 17/07/2024 Emily Fielder 17/07/2024

The Adam Smith Institute Responds to the King’s Speech

Commenting on the King’s Speech, Maxwell Marlow, Director of Research at the Adam Smith Institute, said:

“The new Government’s King’s Speech is a case of the Good, the Bad, and the Ugly. On the positive side, the Government’s proposed planning reforms could, if executed properly, get Britain building the homes, infrastructure, and lab-space that we desperately need. Moves towards leasehold and commonhold reform will be a welcome relief for the 5 million UK households still living under our outdated leasehold system. Businesses will be relieved that the Apprenticeship Levy will be stripped, and that a better emphasis on skills and productivity will be introduced into the economy. And legalising the production and sale of lab grown meat will help to substantially reduce greenhouse gas emissions and will be a boon for the UK’s science and technology sectors.

But not all the Government’s policies are evidence-led. The proposed Black Market Charter that is the generational smoking ban could empower criminals to sell tobacco to younger people who would be turned away from shops. Likewise, the proposed Education Tax of applying VAT to private schools risks actually costing taxpayers and causing chaos as pupils leave their independent schools for the state sector. Meanwhile, the Government’s ‘New Deal for Working People’ will create additional constraints on businesses, while disadvantaging working people by making it less attractive to hire new staff.

We also know that Martyn’s Law will add considerable strain for SME hospitality venues, at a time when liberalisation is needed. Plans to empower the OBR, regulate AI, create a new Football Regulator, introduce a new industrial strategy and impose a burdensome Race Equality Act are further worrying signs that this is a government that will expand the size and scope of the regulatory state.

The Government promised ‘Change’ during the election. Whilst there are elements of promising reform in mission and growth, this King’s Speech in great part is a continuation of managerialism, needless intervention in the lives of everyday people, and shows a lack of imaginative thinking about how this country should be governed.”

--ENDS-

Notes to editors:

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

The Adam Smith Institute has previously published a report on the potential negative consequences of levying VAT on independent school fees , including the impact on the economy and on state schools. The report can be found here.

The ASI has previously commented on the government’s proposals for planning reform. The comment can be found here.

The ASI has previously published a report on the benefits of legalising lab grown meat. The report can be found here.

The Adam Smith Institute is one of the world’s leading think tanks. It is ranked first in the world among independent think tanks and as the best domestic and international economic policy think tank in the UK by the University of Pennsylvania. Independent, non-profit and non-partisan, the Institute is at the forefront of making the case for free markets and a free society, through education, research, publishing, and media outreach.

Emily Fielder 17/07/2024 Emily Fielder 17/07/2024

The Adam Smith Institute to Rachel Reeves’ Plans for Planning Reform

Commenting on the Chancellor’s Plans for Housing and Planning reform Maxwell Marlow, Director of Research at the Adam Smith Institute said:

“ New housing and infrastructure is directly correlated with economic growth. So we welcome the Chancellor’s plans to introduce supply-side reforms, in particular re-introducing mandatory house building targets, reversing the ban on onshore wind, and plans to make decisions about vital infrastructure nationally, not locally.

There are ways she should go further. A new task-force and 300 extra planning officers will reduce the backlog and speed up the approvals process, but this could be accelerated further if all planning applications are automatically approved after 6 weeks. She will also need to consider that there is a significant labour and skills gap in the planning and construction industry. We also hope too that a review into the greenbelt boundary results in the release of land within a 10 minute walk of a train station for development, as we have previously called for.

Overall, this indicates a seriousness of purpose in fixing one of the greatest drags on Britain’s prosperity. But ultimately, these plans must be based on results rather than intentions.”

ENDS

Notes to editors:

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

Emily Fielder 16/07/2024 Emily Fielder 16/07/2024

Today is London’s Cost of Rent Day

Renters in London worked for 197 days for their landlords this year. The 16th of July is the first day they start working for themselves.

London’s Cost of Rent Day falls on 16th July;
Renters in London are working 197 days of the year solely to pay their landlords;
Cost of Rent Day is the day on which, on average, renters in England earn enough before tax to cover their annual rent bill;
This analysis of local areas shows Cost of Rent Day is even later in England’s major cities and the South East;
Specific Cost of Rent Days in local areas in London can be found in the London tab of this spreadsheet.
The average Cost of Rent day in London is the 16th July, more than two months later than the national average, which fell on the 5th May. This means that higher salaries are not sufficient to compensate for higher rent prices renters face in the capital;
This research also exposed gaps in ONS housing statistics that need to be addressed to enable better tracking and understanding of the costs of rent;
It is now incumbent on policy makers to fix the housing crisis, in particular, addressing the shortage of supply of homes.

Cost of Rent Day is a brand new initiative from the Adam Smith Institute (ASI). It is the day on which renters in England stop paying rent and start putting their earnings into their own pocket. This year, the ASI has estimated that every penny that, on average, renters in London earned before tax for working before and including July 15th went to their landlord- from July 16th they are finally earning for themselves.

The ASI has created this measure in order to translate the severity of the housing and rental crisis into simple terms that can be easily understood by all audiences. It provides a useful measure to hold politicians to account and track changes over time.

To calculate the Cost of Rent Day, annual rents were divided by gross annual pay, to understand what proportion of earnings are spent on rent. Cost of Rent Days were calculated for 309 local areas across 9 regions across England.

The ASI also created a tool where users can calculate their own Cost of Rent Day.

As the ASI outlines, the root problem is the lack of supply. Since the 70s, England’s construction of new homes has lagged behind population growth. In other words, new demand has outstripped supply. Even if the government manages to deliver on the 1.5 million new homes by the end of this Parliament, we will still be short of delivering the 4.3 million backlog.

Directly punishing all landlords or introducing policies such as rent controls will only make the situation worse for renters. Instead, politicians must focus on creating the right incentives for developers and landlords, and on increasing supply.

The ASI has previously outlined a number of solutions, which it calls on the government to consider. These include using compulsory purchase orders to buy, and develop on metropolitan green belt land, and give local residents a share of the profit, releasing all green belt land within a ten minute’s walk of a railway station for development, and extending ‘full expensing’ to brownfield sites.

James Lawson, Chairman of the Adam Smith Institute and author of this report, said:

“We all know that rental costs in England are just too high.

But alarmingly, as our research shows, the rental crisis is even worse in our capital city where Cost of Rent Day falls over 2 months later than the national average. This means that higher salaries, which many professionals have historically moved to London for in the first place, do not compensate for the higher rent prices that they face.

In the midst of a cost of living crisis and nearly two decades of stagnation, London’s ‘Cost of Rent Day’ is a damning indictment on the performance of our economy, and our failure to match the demand for homes with supply in the Capital.

Concrete proposals to reform our sclerotic planning system and to deliver the homes we need must be an urgent priority for both the government and opposition parties.”

-ENDS-

METHODOLOGY:

To calculate the Cost of Rent Day monthly rents were converted into an annual figure. Then annual rents were divided by gross annual pay, to understand what proportion of earnings are spent on rent.
To balance for leap years and support better inter-year comparisons, a year is treated as being 365.25 days long.
Using otherwise unrounded inputs, this calculation implied 125 days of the year are spent on rent. The 126th day of the year is May 5th.
The ASI used annual gross pay (before fiscal deductions / taxes) to generate these calculations.
This is a deliberately simple calculation and as outlined above and below, will not capture the nuances of individual circumstances. However, it enables a simple, transparent, and intuitive calculation - this is preferable to more complex alternatives we developed.
To produce this analysis, the ASI used two readily available ONS data sources. The analysis is based on the average rent, across all types of rental. The data is broken down by rental type, including a ‘room’, ‘studio’, ‘one bedroom’, ‘two bedrooms’, ‘three bedrooms’ and ‘four or more bedrooms’ properties but this is not used in the headline calculation.
Regional analysis is based on ONS data and segments England into: East, East Midlands, London, North East, North West, South East South West, West Midlands and Yorkshire and The Humber.
The two data sets have common Area Codes, enabling the analysis across the 309 local areas and 9 regions, both data sets have in common, and where there are values.
The Median was used by default for both data sets. When a series of numbers are arranged by order of magnitude the median represents the middle value. The median was chosen instead of the mean, because the data sets are skewed and have outliers.

Further details can be found in the report.

Notes to editors:

For further comment, or to arrange an interview, please contact emily@adamsmith.org | +44 7584778207

James Lawson is Chairman of the Adam Smith Institute. He led on the creation of Cost of Rent Day and is the author of the accompanying report.

The accompanying report to Cost of Rent Day is available here.

The full set of local data can be found here.

The ASI has also published extensive research on the housing crisis. Highlights include:

Media contact:

emily@adamsmith.org

Media phone: 07584778207