Chancellor's speech at the CBI's 2015 annual dinner
The Chancellor's keynote speech at the Confederation of British Industry's (CBI) 2015 annual dinner.
Thank you, Mike, for that warm welcome.
It is good – very good – to be back.
I vividly remember coming here to this dinner a couple of weeks after the previous General Election.
I was new to the job and I spoke then of the determination and the urgency we would bring to tackling the economic crisis then facing Britain.
Five years later, less than two weeks after this General Election, I return here to tell you about the determination and urgency we will now bring to overcoming long term economic weaknesses that hold our country back.
I want to tell you about our plan to make Britain work better.
And I want to work in partnership with you, the businesses of Britain – large and small – to deliver it.
Under the leadership of Mike and John, the CBI has already been a partner in what we’ve achieved so far. I will never forget how you consistently supported me on our deficit reduction plan – you never wavered, even as the chorus of the critics got louder. You spoke for your members who knew Britain had to deal with its debts – and I’m hugely grateful to you for that.
And let me say this, in particular, to you John. You’ve given 33 years of life to the CBI, you’ve been a great Director General. And on behalf of everyone here, thank you for the service you’ve given our country.
If anyone doubted the importance of the voice of business in our public discourse, then they won’t doubt anymore after the election we’ve just had.
You spoke up.
Your voice was heard.
And together we saw off attempts by those who promoted an anti-business agenda, and tried to divide large business from small business.
Let us hope that this decisive election result will leave a lasting impression on our public debate, so that political parties in the UK never again believe they can win votes by talking down wealth creation.
Backing business is not about abstract economic policy. It’s about backing those who provide the jobs and offer the opportunities to the working people of Britain.
In the last parliament when others predicted unemployment would rocket, it was you who created the 2 million new jobs.
When others complained about a lack of skills in our workforce, it was you who got on with providing the training to 2 million more apprentices.
And it was you who told us we needed to invest in infrastructure and new high speed lines – now we’re delivering the biggest investment in our rail network since Victorian times.
Why did we listen? Because we don’t fool ourselves into thinking government can fix the country all on its own.
There’s no lever on the Chancellor’s desk in the Treasury that you simply pull to make the economy perform.
We know that the only way you stand up for working people is by giving businesses the economic security you need to invest, and the levers you need to create the jobs, develop skills, build houses and offer the pay rises we are now seeing in Britain.
The British public have given us a clear election result, and a Conservative majority government and the stability that brings.
Now is the moment to build on the solid foundations of all we’ve achieved these last few years together.
Let’s be ambitious for country.
Let’s not accept there are problems we can’t solve.
Let’s aim to make Britain the most prosperous of the major economies of the world in the coming generation.
So here’s our plan to achieve that goal. Here’s our plan to make Britain work better. First, you know that nothing works without economic security.
That security evaporates when a country can’t pay its way.
We have robust arrangements in place with our independent Bank of England to ensure price stability.
I am pleased to confirm tonight that I am re-appointing Ian McCafferty, your former chief economist here at the CBI as an external member of the Monetary Policy Committee. Ian, we all thank you for your service.
I’m also beginning the process of appointing a successor to David Miles, whose two terms of fine service come to an end.
Monetary policy is at its most effective when you have fiscal credibility. That credibility provides a bedrock of economic security for families.
So in this Parliament we’re not only going to deal with our debts and eliminate the deficit.
I also want to entrench permanently in our politics and government a culture of financial responsibility – so we never repeat the mistakes of the past.
This has been achieved in other nations, from Sweden to Canada. And it’s something within our grasp here.
Here’s how.
We need to complete the task of getting the public finances into surplus – so we bear down on our excessive national debt, and fix the roof when the sun is shining.
The deficit is less than half what it was, but at just under 5% it is still one of the highest in the developed world.
We’ve all learnt there’s no shortcut to dealing with it – so we have to roll up our sleeves and get on with the hard work of identifying the savings, making the reforms and treating public money for what it is – the money that you, the public, has worked hard to earn, and which you’re entitled to expect us to spend well on your behalf.
We will pursue a balanced approach. I expect to find savings across Whitehall while we go on investing in our NHS.
We will save money on our welfare bill – ensuring work pays while protecting the most vulnerable.
This plan will be developed at the Budget I will present on 8 July – and completed at the Spending Review in the autumn.
To provide the best start our new Chief Secretary, Greg Hands, is today asking government departments to identify further savings that can be made in this financial year. We’ve achieved underspends in previous years; we can do so again this year. When it comes to saving money, we all know that the more you can do early, the smoother the ride.
And without fixing the public finances so our country lives within its means there can be no economic security for businesses or families.
Making Britain work better is not just about making the sums add up.
The second part of our plan is rebalance the economy and build the Northern Powerhouse.
We all know this is a big challenge.
For too long we’ve put too many of our eggs in one basket – relying heavily on the success of London, and in particular financial services.
I agree with Mike that we want Britain to be the home of the most successful and competitive financial firms – and we will take futher steps to ensure we stay ahead. But we have to develop other national economic strengths, and ensure all parts of our country contribute.
We achieve that not by pulling down our capital city. It is a huge asset for the UK to have one of the greatest global cities on earth. Instead, we do it by building up the Northern Powerhouse.
If the north of England grew as fast as the forecast for the rest of the UK the prize is huge.
We could add £37 billion to the economy by the end of the next decade.
We achieve that by bringing the great cities and counties of the north together, so the whole is greater than the parts.
It’s an idea based on the solid economic theory developed by, amongst others, the world leading economist Jim O’Neill – it’s a sign of the strong team that we have that he’s joined the Treasury as a new Minister to make it happen.
Since I set out the vision for a Northern Powerhouse 11 months ago we’ve made more progress than I frankly dared hope possible.
We’ve created Transport for the North, drawn up proposals for new high speed links and committed to major investments in science and health technology and culture in the north.
In this Parliament we must go further and faster.
My first visit as Chancellor after the election was to Manchester to explain that giving power to local people will be at the heart of the Queens speech.
We will introduce a City Devolution Bill to enable a radical new model of city government.
Any major city that wants to will be able to take greater control and responsibility over all the key things that make a city work, from transport to housing to skills, and key public services like health and social care.
And in return cities will elect a mayor – someone accountable to local people.
Someone who takes the decisions and carries the can.
But this isn’t just about Manchester and the north.
I want opportunities for greater devolution to be available across England – in the Midlands, East Anglia and the South West too. From the retention of business rates, to new Enterprise Zones to elected mayors – we’ll consider all proposals.
This is a huge agenda. It’s all about creating the conditions for private sector growth alongside our great capital – and I urge you all to engage with it. We need the help of business to make it work.
It’s not just within England that power is being handed back to the people.
It’s happening in Wales, and Northern Ireland, and Scotland too, where we remain true to the promise we made to implement the cross-party Smith agreement to give Scotland one of the most accountable and powerful devolved parliaments in the world.
The debate about power and the role of those elected to represent us is being played out in the European debate too. So let me say this about Europe.
I accept that there are people, maybe in this room, who want us to leave the EU come-what-may.
And there are also those, including some in this room, who want us to go further into a more federal Europe.
But our position – which I think is shared by the majority of British people and a majority of British businesses – is that we want Britain to be in Europe, but not run by Europe.
That is what we’ll be fighting for.
Because we need to confront some hard truths about Europe.
The problem of making the single currency work is inevitably drawing its members toward ever-closer integration.
We don’t want to be part of that integration.
The challenge for us is to ensure that while this happens we protect the single market, and make sure the EU continues to work in the interests of all 28 Member States, including Britain.
We also want to ensure Europe is a place where businesses invest and jobs are created.
Yet the continent is sleepwalking towards a future where it has priced itself out of the global economy, with its rules and regulations, financial services legislation and red tape.
When we fight for de-regulation, and completing the single market, and for trade deals with the rest of the world, we’re fighting on behalf of millions of Europeans citizens who can’t get a job or who see their living standards decline.
And we must also address the genuine public concern about people who come to this country to claim our benefits – not bury our head in the sand and think this doesn’t matter. The Prime Minister has set out the changes on welfare that we want to see. The challenge for all of us is raising the skills of British workers so you can find the talent you need right here in the UK.
Now you will hear plenty of commentary about this EU negotiation.
There will be endless stories that say we are making progress, or we aren’t, depending on which of any number of European officials or politicians has just spoken to journalists. I’d advise everyone to take all this coverage with a large pinch of salt. The real negotiations will be carried out at the highest level and in private.
I want to work with the British business community to ensure we succeed in this vital task of reforming our relationship with Europe so it works for the working people of our country.
The third part of our plan is to make our economy more productive.
Now a lot has been written about the productivity puzzle.
Why, for so many years, have British workers been less productive than their German or American counterparts?
Why has productivity been so damaged by the Great Recession?
And you hear a lot of answers.
“The numbers aren’t right.”
Or: “the numbers just reflect the reality of falling North Sea production and new financial services legislation.”
Or: “this has been going on for decades, and don’t kid yourself that you’ll be any better than all the previous governments at solving it.”
Frankly, nobody knows the whole answer. But what I do know is that I’d much rather have the productivity challenge than the challenge of mass unemployment.
And what I also know is this: we have a once in a generation opportunity, right now, to find an extra gear for the British economy, and ensure higher living standards for the next generation to come.
We are two weeks into a five year Parliament.
The team around the Cabinet table is strong and experienced.
Confidence in the British economy is at its highest level in 12 years.
If we don’t, together, fix our country’s long term weaknesses now – when will we?
We know what they are.
Our physical infrastructure is not nearly good enough, and previous governments ducked the difficult decisions.
In this Parliament we’re going to legislate for and start building the high speed rail links that other countries built decades ago.
We’re going to ramp up investment in roads.
Give Britain the fastest broadband and the most competitive telecoms.
And when we get Howard Davies’ report on a new runway in the South East, we’re going to take the decision and get it built.
We’re going to make sure the homes our citizens need are built – homes that people can afford to own and buy.
The obstacles that still exist to developing brownfield sites around the country should be swept away.
The level of skills in our country is unacceptable – we’re one of only three OECD countries where the skills of our 16-24 year olds are no better than our 55-65 year olds.
What an indictment of those vested interests who still oppose the changes we’re making to raise standards in classrooms.
We’re going to take them on and deliver further reform – so kids in failing or coasting schools get the decent education that should be a birthright in our country, and we’re going to hugely expand apprenticeships.
And now we’ve seen off the totally opportunistic, populist and retrograde efforts to cut tuition fees and starve our universities of finance – we can instead make sure we back these jewels in the crown of the British economy, grow our student numbers and support the world class science research that takes place here.
If you want something to celebrate about Britain how about this. We’ve just won a fierce international competition to host the headquarters of the Square Kilometre Array telescope at Manchester University’s Joddrell Bank.
If you want to know what a Square Kilometre Array is, it’s simple – it’s the largest science experiment in the history of mankind.
We’ll continue to reduce burdens on firms, especially small ones, with our new Enterprise Bill. Our new Business Secretary Sajid Javid, is himself an embodiment of what aspiration and enterprise can achieve in our economy.
And if we want a more productive allocation of finance, let’s get the government out of the business of owning great chunks of our banking system – and indeed other assets that should be in the private sector.
To help that happen I can tell you that we’re merging UK Financial Investments and the Shareholder Executive into one organisation, to return government investments back to the private sector and deliver a good deal for the taxpayer.
Our childcare is some of the most expensive in the world, and it’s acting as a block to parents, particularly women, who want to work.
So we’re going to transform the support we give, with tax-free childcare, and full-time free nursery places to working parents of all three and four year olds. It’s what modern, dynamic economies should be providing.
I’ve mentioned transport, broadband, planning, skills, ownership, childcare, red-tape, science, innovation, finance – there is so much to do, and we will do it.
For let me be clear: improving the productivity of our country is the route to raising standards of living for everyone in this country. So by the Budget I will publish our Productivity Plan, our plan to make Britain work better.
Our future prosperity depends on it.
Dealing with our debts, rebalancing our economy and major reforms to build our productivity. They constitute our long term economic plan.
And we will pursue them through the Parliament.
It is now within our grasp to make Britain the most prosperous country in the world, and the best place to do business.
It would be very easy at the beginning of a second term to take our foot off the pedal.
That’s not what we’re going to do.
I want Britain to find that extra gear.
So we deliver for working people.
And with your help, that’s exactly what I intend to do.