Adam Smith Institute

Foundation

Dr. Madsen Pirie, and brothers Eamonn and Stuart Butler were students together at the University of St Andrews in Scotland. Pirie left in 1974 to work for the Republican Study Committee in Washington DC, and then took up a professorship in Philosophy at Hillsdale College. He was joined there by Stuart Butler, while Eamonn Butler went to work with Edwin Feulner, who became co-founder and director of the free-market think tank The Heritage Foundation.

After their US experience, they returned to the UK in 1977 to found their own think tank, the Adam Smith Institute. After a year Stuart Butler returned to the US as Vice-President of the Heritage Foundation in charge of domestic policy, while his brother Eamonn remained with Madsen Pirie as co-directors of the Adam Smith Institute.

One of their St Andrews friends, Douglas Mason, who had been active in the university's Conservative Association, did his most influential research and writing for the Institute. Mason became one of its regular authors.

The ASI's Omega Project (1981–83), led by Peter Young, produced a series of 19 papers shadowing each Department of State, and advocated such things as the compulsory contracting-out of most local services such as refuse collection, the replacement of much of the welfare state by private insurance, and further privatisation of public sector services and industries, including aspects of police services. The Omega Project was very influential, and many of its recommendations were adopted as policy and enacted into legislation.

Unlike some think tanks, the Adam Smith Institute chose not to retain charitable status, but maintained the small Adam Smith Research Trust to fund mainstream academic educational projects.

Thatcher's inner circle

The Thatcher era saw the think tank movement come of age and achieve influence, and with the Institute of Economic Affairs (IEA) and the Centre for Policy Studies (CPS), the ASI was one of three relied upon by the Thatcher government for policy. Unlike the CPS, which had been established by Thatcher and Keith Joseph, and the IEA, which focused on more theoretical matters, the ASI was well-placed to produce bold and direct policies. Despite this role, the Adam Smith Institute developed an iconoclastic reputation, cynical about politicians, but enthusiastic to engage with them. The Institute's relationship with Thatcher was not without troubles. Although Madsen Pirie was the architect of much of the privatisation policy, he had no emotional ties to Thatcher, nor did the ASI propose policies on a range of social issues, despite its Thatcherite reputation.

The ASI took the view that the market was "more genuinely democratic than the public sector, involving the decisions of far more individuals and at much more frequent intervals". The Institute published Douglas Mason's recommendation that local government rates (the local government tax) should be replaced by a per-capita charge. A version of this was later implemented by the Conservative government, introducing the Community Charge in Scotland in 1989, and in England and Wales in 1990. It brought unpopularity for the Thatcher government and was seen by some as having weakened her political hand ahead of her departure from office, though her attitude to Europe was a more significant factor.

Other policy recommendations which Douglas Mason published with the ASI included the privatisation of the Royal Mail (The Last Post −1991); the introduction of charges in British public libraries (Ex Libris – 1986); the privatisation of the Forestry Commission; the complete removal of arts subsidies (Expounding The Arts – 1987); and the abolition of restrictions on drinking (Time To Call Time – 1986).

After Thatcher

In November 1994, the Institute began a review of welfare reform, called 'Operation Underclass', aimed at methods of creating jobs for the long-term unemployed. Some elements of the programme were adopted by the government within months.

The ASI, with its author Kenneth Irvine, pioneered the privatisation of British Rail with private companies competing for franchises on a separately owned national network (The Right Lines – 1987). This policy was enacted by John Major's government.

The ejection of the Conservative government in 1997 did not have as dramatic an effect on the ASI as some had anticipated. The Institute praised the government's welfare-to-work programmes, describing it as 'the most successful policy initiative of this century',. The ASI publicly welcomed the news that Labour had implemented the long-held ASI aim of an independent Bank of England, Madsen Pirie gave it a nine out of ten for performance. Eamonn Butler has ascribed this flexibility to who is in power to their role not being 'to be political or shout slogans', but to be 'policy engineers'.

The ASI then collaborated with the MORI organisation on a series of opinion polls to measure such things as the goals of young people and students, and public attitudes to state services.

International work

In 1992, the Institute founded a consulting company, Adam Smith International Ltd, which was "charged with overseeing the overseas work of the institute... [in] an attempt to capitalise on the growing international trend towards economic liberalization and marketization". While Eamonn Butler and Madsen Pirie were, as of 1998, members of the management board of both organisations, the management team of Adam Smith International and the Adam Smith Institute is now separate.

Funding

Think tank Transparify, which is funded by the Open Society Foundations, ranked the Adam Smith Institute as one of the four least transparent think tanks in the UK in relation to funding. Transparify's report 'How Transparent are Think Tanks about Who Funds Them 2016?' rated them as 'highly opaque,' one of 'a handful of think tanks that refuse to reveal even the identities of their donors.' Website 'WhoFundsYou?' rate the Adam Smith Institute as 'E', the lowest score possible for funding transparency for think tanks and political campaigns. 'TobaccoTactics', the website of the Tobacco Control Research Group at the University of Bath, details the Adam Smith Institute's funding by the tobacco industry.

Tax Freedom Day

The Adam Smith Institute publishes the British version of Tax Freedom Day, the day in the year when the average person has earned enough to pay his or her annual tax bill. The Institute calculates the figure by expressing the government's take of the economy as a percentage of the year, including all forms of taxation, direct and indirect, national and local. The ASI uses Tax Freedom Day to draw attention to UK tax rates and fiscal policy in a dramatic and readily understandable way.

The Next Generation

The Adam Smith Institute facilitates regular meetings of young people who have interests in free markets and libertarian ideas. These 16- to 30-year olds form a group called The Next Generation (TNG). MPs and prominent media figures are typical guest speakers (for 10-minute speeches) at monthly meetings of The Next Generation The Liberty League, an affiliated network for groups across the UK, was founded by members of the TNG Committee.

Influence

In January 2009 Foreign Policy and the University of Pennsylvania named the Adam Smith Institute among the top 10 think-tanks in the world outside of the US. The Institute is highly influential in UK public policy, and was "a pioneer of privatisation" in the UK and elsewhere. Early Institute papers proposed the outsourcing of local government services (1980), the fundamentals of the poll tax (1981–1985), and the deregulation and privatisation of transportation (1980). Other influences include the UK's cutting of the highest rate of income tax from 83% to 40% in the late 1980s, and its liberalisation of alcohol licensing laws.

The Institute has released a series of Roadmap to Reform papers, calling for shifts in public policy in Health, Deregulation and Europe. In 2006, the Institute released a paper calling for a rethink of Britain's countryside policy.

According to the 2014 Global Go To Think Tank Index Report (Think Tanks and Civil Societies Program, University of Pennsylvania), ASI is ranked number 69 (of 150) of the "Top Think Tanks Worldwide".

Tax reform

Tax rates – As recommended by the Adam Smith Institute, the top tax rate was reduced from 60% to 40% in Margaret Thatcher's 1988 budget.

Personal allowance – Prior to the Exchequer's 2008 pre-budget report, ASI made a case for the personal income tax allowance to be raised to £12,000 (from the current £6,035 allowance) for all UK taxpayers. The policy was promoted as taking 7 million people out of the tax system, with low-income earners not paying tax at all, although in fact low earners were still subject to both employer and employee National Insurance, in addition to indirect tax such as VAT, council tax, and in reality, heavy tapering of tax credits and/or benefits such as housing and council tax benefit should also be borne in mind. Raising the allowance does of course benefit all income tax payers; in fact in cash terms those with incomes below £12,000 benefit less, with those earning less than £6036 not benefiting at all. Despite this, marketing the policy as taking the poor out of the tax system was generally accepted in media reporting as recently as the 2015 general election, with both Conservatives and Liberal Democrats claiming credit for implementing the generally well-received policy. The ASI calculated that this reform would be equivalent to giving the average worker an extra £1,730 per year in gross pay, making them £100 per month better off. The cost to the Exchequer would be £18.9 billion.

Flat tax – A 2005 paper by the Institute proposed a flat-rate income tax of 22% for UK taxpayers, with the above-referenced tax-free personal allowance of £12,000. City AM editor Allister Heath said of this report, "rarely has a think-tank publication been this influential so quickly. Its arguments have been dissected by the UK Treasury, are well known among the Shadow Treasury Team, have had an influence on some parts of the Liberal Democrats and were even adopted by several minor political parties". The ASI continues to campaign for a flat tax.

Public sector reform

Internal markets – ASI proposed that the National Health Service establish an internal market with hospitals buying the use of facilities from other districts and from the private sector. Internal markets are now NHS policy.

ASI also recommended an internal market system for UK schools that would have state funds to follow students to independently run academic institutions. This approach to school funding was adopted by the Coalition and later the Conservative majority government.

National government

ASI proposed that QUANGOs be reduced in number and subject to increased scrutiny. QUANGOs were subsequently cut by 20 percent and put under parliamentary review.

Local government

Following the Institute's call for the use of private businesses by local governments, many local services, such as waste collection and cleaning, were contracted out. Additionally, local governments are now required to solicit competitive bids for local services

Welfare

ASI called for a radical shake-up of welfare policy, which would make work requirements absolutely central to the benefits system. Many of ASI's proposals subsequently became Tory policy, and some even found favour among Labour MPs and Liberal-Democrats.

Health

ASI lobbied for a change in VAT regulations to facilitate the outsourcing of ancillary hospital services. The government now requires a solicitation of bids from private contractors for cleaning and catering services. VAT regulations have been modified to put in-house work and outside tenders on an equal basis. It is estimated that these actions save £100 million per annum.

Education

The Education Reform Act 1988 reflected many policy changes proposed by ASI including increasing representation of parents on state school governing boards, shifting control of state schools from the local authority to the board and head teachers, abolishing fixed school catchment areas.

Rail privatisation

The privatisation of British Rail in 1997 by John Major was based on a plan suggested by the Institute. The privatisation was followed by a large increase in passenger numbers.

Buses

Urban and local bus services in the UK were deregulated in the early 1980s by Margaret Thatcher and the National Bus Company was privatised and broken up into more than 60 companies following ASI's recommendation that the National Bus Company be broken up and urban and local bus services be opened to competition and choice.

Justice

In accordance with ASI's proposals, the government resolved to experiment with privately contracted prisons and electronic tracking tags for low-security prisoners.

Green belt

The ASI has written extensively about the effect the green belt has had on house prices by restricting where houses can be built. In its paper The Green Noose, it wrote that "simply removing restrictions on land 10 minutes’ walk of a railway station would allow the development of 1 million more homes within the Green Belt surrounding London alone". The ASI believes that instead of simply putting a blanket ban on building in the areas surrounding cities, instead planning permission should be granted based on the environmental, historic and scientific value of the land.

Rail policy

Amid ongoing debate about the railways, the ASI has been an advocate of the privatised system writing that much of the rise in passenger numbers since privatisation cannot be attributed to other factors. It has called for increased competition, through the use of open access operators or having two operators sharing a franchise and competing with each other.

Publications