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ADAM SMITH INSTITUTE

AUTUMN 2010

Beyond the spending review The Comprehensive Spending Review will be the defining political issue of the next three months. But it is only the beginning…

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ne word will dominate Britain’s political discourse between now and Christmas: cuts. The newspapers are already full of speculation about the 10, 25, and even 40 percent savings that some government departments have been asked to identify. The unions, meanwhile, are agitating for a new winter of discontent. This will only intensify in the run up to the

contrast, raised spending by almost 60 percent during its thirteen years in office. But this matters little to advocates of everhigher spending and an ever-larger state. To them, any deviation from the road to serfdom has to be fought tooth and nail. In this context, the great challenge for the coalition government is to come up with a positive agenda, and to make their administration seem like more than just

Comprehensive Spending Review, due to be delivered on 20th October. The truth is that the Government’s spending plans, as outlined in June’s emergency budget, are only set to deliver a real terms cut of around 2 percent by 2015-16. The Labour government, by

a penny-pinching exercise. They should aim to be transformative. That means two things. First, they must avoid taking a salami-slicer approach to downsizing government, making arbitrary, across-the-board cuts and stirring up resentment among big >>

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Events

>> government’s all-too-significant payroll vote. Such cuts, though effective in the short term, are not sustainable. As well as risking a severe backlash, they can easily be undone by subsequent administrations, which may not have such an enlightened commitment to fiscal responsibility.

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We are going to be tailoring our output more closely than ever to the political debate, and pushing hard for our radical solutions to be turned into reality

Instead, the coalition must refocus government on the things it actually needs to do, work out better, more costeffective ways of doing those things, and then cut out the rest. Crucially, it needs to embed these changes for the long term. The emphasis in making savings must therefore be on reform. Anything else is no more than a temporary solution. Take welfare as an example. If welfare spending is to be brought under control – rather than merely suppressed – the Government needs to deal with perverse disincentives to work that riddle the current system. Iain Duncan Smith’s proposed ‘universal credit’ has great merit in this regard, but it remains to be seen if it will make it to the legislative chamber. Whether it does will tell us a lot about how ambitious the coalition really is. But there is something else that the government needs to do to get Britain working again, and that brings me to the second aspect of the coalition’s muchneeded positive agenda. Put simply, we need policies for growth. Without them, any attempt to eliminate the deficit is doomed to failure. That means radical tax reform, which would strengthen incentives to work, eliminate the bias against savings and

investment, and attract overseas capital to the UK. It means overhauling Britain’s increasingly burdensome regulatory state, which costs 10 percent of GDP every year while doing little to protect consumers, workers or even the environment. And it means a renewed commitment to international trade – an issue that the government should be prepared to act unilaterally on if the EU and the WTO continue to drag their feet. Not entirely coincidentally, these are some of the issues that the Adam Smith Institute will be focusing on over the next six months. We are going to be tailoring our output more closely than ever to the political debate, pushing hard for our radical solutions to be turned into reality. As we’ve always said, we are policy engineers – not academics – and I hope our activities and successes will reflect that. Our cause is certain to be aided by two recent recruits to the ASI staff. JP Floru, a Westminster councillor best known in libertarian circles for organizing Freedom Week, the annual student seminar in Cambridge, joined us in August as Parliamentary and Government Affairs Liaison. He will be building relationships with MPs, ministers and their advisers, and promoting our work at the heart of the Westminster machine. Sam Bowman, meanwhile, will be overseeing the expansion of our research and publications programme. As an alumnus of the Mises University and the Foundation for Economic Education’s Austrian Economics Seminar, and with a masters thesis on Zaire’s economic development behind him, I have no doubt that he is up to the task.

Tom Clougherty Executive Director

ASI Events More than 200 people turned up for our annual boat party in July, with subscribers, Next Generation members, politicians, journalists and friends of the ASI all gathering to enjoy a fine Summer’s evening along the Thames. During the summer we held our first Liberty Lectures. Aimed at students, the event brought together top thinkers on liberty to discuss their views over the course of an afternoon’s lectures. It was a great success with a packed lecture hall and many wide-ranging discussions on issues such as the financial crisis, social liberties and the free market. The power lunches continued over the summer with Hugh Hendry (CEO of Eclectica), Bernard Gray (Chairman of TSL Education), Douglas Carswell MP and Iain Murray (Vice President for Strategy at CEI) all coming in to speak In August, The Next Generation were treated to a talk by Brian Carney (Editorial Content Editor at the Wall Street Journal Europe) on the problem

with libertarian polemics. Tim Harford (author of the Undercover Economist and columnist at the Financial Times) also gave an intelligent, thoughtprovoking speech at TNG in September on preventing financial meltdown. Separate events were held to accompany the release of Madsen’s and Eamonn’s latest books. Philosopher Jamie Whyte was the guest speaker at the St Stephen’s Club launch of Madsen’s Understanding Economics. In September, Eamonn held a launch party for his latest book ‘Austrian Economics: A Primer’, which received praise from bloggers and politicians alike. Speeches at the reception focused on business cycle theory and its implications for our current predicament, regulation and competition policy, and the latest scholarship in Austrian Economics. We also held a joint event with the Institute of Economic Affairs and Liberal Vision at the Liberal Democrat conference in Liverpool. Guido Fawkes, Jeremy Browne MP, Lembit Opik, Prof Richard Grayson, Stephen Haseler and Julian Harris had a lively debate on ‘Coalition, Cuts and Conservatives: an attractive agenda for the Lib Dems?’

ABOVE: Students at our Liberty Lectures LEFT: Tom Clougherty (right) with Jamie Whyte (left) at Madsen’s book launch

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Publications

Adam Smith Institute in the news

Publications We released a number of reports and books over the summer, which received considerable media attention.

In July, Tim Ambler, Keith Boyfield and Liam Ward-Proud worked together to produce a report entitled ‘Taxpayer Value: Rolling back the state’. The report urged the government to reduce the number of people employed in Whitehall departments and their QUANGOs by 27%. This would equate to almost

book is without question the “Butler’s most accurate and honest depiction, at the basic level, of Austrian economics and its theorists

Robert Wenzel, Economic Policy Journal, on ‘Austrian Economics: A Primer’

270,000 public sector job losses and deliver approximately £55bn of savings a year. David Graham authored a report for the ASI entitled ‘Global player or subsidy junkie? Decision time for the BBC’. Released in August, the report argued that the TV Licence Fee should be abolished and that the BBC should instead become a subscription-based service. Dr Madsen Pirie released his book on ‘Understanding Economics’, offering an introduction to the economic way of thinking and looking at some of the common errors made by mainstream economists. Targeted at students and for educational purposes, it is being distributed to TNG members, students and schools. Lawyer and medical practitioner Anthony Barton wrote a paper on civil legal aid and ‘no win, no fee’ arrangements. His report, ‘Access to Justice: Balancing the risks’, claimed that both the civil legal aid and the Conditional Fee Arrangement (CFA) systems are flawed in that they give rise to situations which are neither economically sustainable nor politically acceptable. Barton suggested scrapping civil legal aid in almost all cases and reforming the CFA system. Dr Eamonn Butler launched his book ‘Austrian Economics: A Primer’ in which he explains the foundations of the Austrian School of Economics in straightforward, non-technical language. The book is an ideal introduction for anyone seeking to understand the key insights of the Austrian School, and its relevance and importance for our economic situation today. It is available to buy or download from our website.

ASI in the news BBC report Our BBC report caused quite a reaction amongst UK media. David Graham was interviewed on the Today Programme and a variety of regional BBC radio stations, whilst Tom appeared on Radio Five Live, Sky News, LBC and other stations to argue for scrapping the TV licence fee. The widespread coverage both in print and broadcast media prompted a poll on the Guardian website on whether the licence fee should be scrapped. David also wrote articles on his report for the Sunday Times and The Sun, and Mark Thompson, Director General of the BBC, even attempted to refute our report’s arguments in his annual speech. Online, the Daily Mash did a spoof article on the report and Guido Fawkes supported our stance in his ‘wonk watch’ section. Op-eds Madsen, Eamonn and Tom wrote a number of articles for the papers over the Summer. Madsen looked at the issue of university funding for The Times and examined Philip Green’s suitability as an efficiency tsar in the Guardian. He also wrote on the need to simplify taxes and opt for a flat tax in the Sunday Times’ think tank section. Eamonn wrote about giving power back to the people by copying the Swiss canton model in The Times. Tom discussed the Big Society plans of the current government in the Yorkshire Post, expounding the need to

move away from big government and embrace personal responsibility. ASI Fellow Tim Worstall’s blog on cash for organs made the front page of the Sunday Post, as a kidney charity backed his arguments claiming they would save lives. Broadcast In addition to our numerous TV and radio appearances following the BBC report, Tom also appeared on CNBC to discuss spending cuts and the Coalition Government as the new parliamentary term began. Eamonn and Tom both appeared on Sky News to discuss welfare reform, a topic Tom also talked about on the BBC News Channel. Eamonn appeared on BBC World Service discussing oil drilling >>

ABOVE: David Graham interviewed for BBC News on the TV licence fee and Eamonn Butler’s article in the Sunday Times

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Coming soon >> in Ecuador, while Tom appeared on BBC Radio Scotland advocating the introduction of user fees in the NHS. Tom also talked to the BBC’s Look North programme about the need for spending reductions. Near the end of September, Madsen discussed public sector pay on BBC Radio Leeds and Tom made an hourlong appearance on Radio 4’s ‘You and Yours’ programme to discuss happiness economics. Online Over the summer Eamonn, Tom and Madsen wrote numerous pieces for

ConservativeHome and the Spectator’s CoffeeHouse blog on a wide variety of topics, from the role of libraries and the reform of legal aid, to the privatisation of the Royal Mail and the radical reform of the welfare system. Eamonn also penned an article on the resurgence of the Austrian school of economics for ConservativeHome, which tied in with the launch of his book ‘Austrian Economics: A Primer’. A number of bloggers wrote favourable reviews, including Mises. org, the Cobden Centre, Steve Baker MP, the Economic Policy Journal and Coordination Problem.

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Coming soon • Conservative Conference: The ASI will be present at the Conservative conference in October and will be holding two events. The first, on Sunday 3rd, is focused on ideas for far-reaching tax reform while the second, on Tuesday 5th, is being held jointly with the Institute of Economic Affairs and looks at the future of conservative politics. • ISOS: Our free one-day seminar for sixth formers will be held on Wednesday 20th October in Westminster on ‘An Agenda for Reform: Politics, Economics and Society’. • Regular fixtures: There will be a power lunch with Nigel Stapleton (Postcomm’s chairman) on 10th November and a TNG with Mark Skousen on 1st

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november, (author and producer of FreedomFest). • Publications: With a new head of research, Sam Bowman, joining us this month, we hope to be producing more briefing papers and reports than ever before. Coming soon are publications on issues as diverse as the economics of high-speed rail, tax reform, the liberalization of the National Curriculum and a strategy for regulatory reform.

For more information on our events please contact Philip on philip@adamsmith.org or check our website for further details www.adamsmith.org

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Autumn 2010 Newsletter