HM Treasury News Release
102/98 11 June 1998
--------------------------------------------------
CHANCELLOR'S SPEECH AT THE MANSION HOUSE: 11 JUNE
1998
THE CHANCELLOR OF THE EXCHEQUER AT THE LORD
MAYOR'S BANQUET AT THE MANSION HOUSE ON JUNE 11TH
1998
MR LORD MAYOR, MR GOVERNOR, MY LORDS, MINISTERS,
ALDERMEN, MR RECORDER, SHERIFFS, LADIES AND
GENTLEMEN
I AM DELIGHTED TO BE HERE AT THE MANSION HOUSE, TO
THANK YOU LORD MAYOR FOR YOUR KIND INTRODUCTION TO
ME AND TO THANK YOU ALSO FOR YOUR TOAST TO THE
PROSPERITY OF THE PUBLIC PURSE AND TO MY HEALTH.
THIS LORD MAYOR'S DINNER TO THE BANKERS AND
MERCHANTS OF THE CITY OF LONDON HAS BEEN AN EVENT
THAT HAS PROSPERED FOR 120 YEARS.
AND OVER THIS TIME THE BANKERS AND MERCHANTS OF
THE CITY HAVE HAD TO CONTINUOUSLY ADAPT TO A FAST
CHANGING AND NOW GLOBAL MARKETPLACE.
LONDON IS A CITY THAT IS CREATIVE AND RESPONDS TO
CHANGE. IT HAS EXCELLED BECAUSE OF THE HARD WORK
AND SKILLS OF ITS WORKFORCE AND THESE ARE THE
ESSENTIAL BRITISH QUALITIES - CREATIVITY,
ADAPTABILITY, A BELIEF IN HARD WORK, FAIR PLAY AND
OPENNESS.
AND THE CITY IS OPEN AND OUTWARD LOOKING: LONDON
IS HOME TO MORE FOREIGN BANKS AND FINANCIAL
ORGANISATIONS THAN ANY OTHER CITY WORLDWIDE;
THERE IS MORE INTERNATIONAL EQUITY TRADING ON THE
LONDON STOCK EXCHANGE THAN ANY OTHER EXCHANGE.
AND LONDON'S ROLE AS AN INTERNATIONAL FINANCIAL
CENTRE IS REFLECTED IN THE GUEST LIST FOR
TONIGHT'S DINNER WHICH INCLUDES PEOPLE FROM ACROSS
THE GLOBE AND I WELCOME YOU ALL HERE TONIGHT.
THIS IS A YEAR THAT WILL USHER IN EVEN MORE CHANGE
TO WHICH LONDON, AS A FINANCIAL CENTRE, HAS
ALREADY SHOWN ITSELF READY TO ADAPT.
FROM NEXT YEAR, THE EURO WILL BE A NEIGHBOURING
CURRENCY AND A COMPETITOR CURRENCY. BUT I AM
PLEASED TO SAY THAT THE SLOGAN "LONDON IS READY
FOR THE EURO" IS ACCURATE. SO TOO WILL BE THE
UNITED KINGDOM.
NOW FOR ALMOST A HUNDRED YEARS, AT ALMOST EVERY
LORD MAYOR'S DINNER THEY HAVE ATTENDED, MY
PREDECESSORS IN OFFICE HAVE BEEN TELLING YOU HOW
THEY ARE GRAPPLING WITH THE PROBLEMS OF BRITAIN'S
RELATIVE ECONOMIC DECLINE IN THE 20TH CENTURY. A
MATTER WHICH, BECAUSE WE ARE NOW IN THE SECOND
LAST YEAR OF THE CENTURY, SOMEWHAT TO MY RELIEF
CAN SHORTLY BE LEFT TO THE HISTORIANS.
SOME SAY THAT FIRST GOVERNMENTS MANAGED DECLINE.
THEN GOVERNMENTS MISMANAGED DECLINE. THEN
GOVERNMENTS DECLINED TO MANAGE.
BUT I THINK WE CAN ALL AGREE THAT FIFTY YEARS OF
OUR ECONOMIC HISTORY FROM 1945 WAS MARRED BY A
SUCCESSION OF STERILE AND SELF-DEFEATING CONFLICTS
BETWEEN STATE AND MARKET, MANAGEMENTS AND
WORKFORCE, PUBLIC AND PRIVATE SECTORS. AND I
BELIEVE THAT WE SHOULD NOT ONLY SET ASIDE FOR GOOD
THESE OLD BATTLES BUT THINK OF A BRITAIN WHERE
PUBLIC AND PRIVATE SECTORS ARE NOT JUST IN SOME
TEMPORARY TRUCE BUT WHERE PUBLIC AND PRIVATE
SECTORS ARE CONSTRUCTIVELY WORKING TOGETHER TO
MEET NATIONALLY IMPORTANT AND DEFINED OBJECTIVES.
FOR THE CHALLENGE FOR ALL OF US NOW IS TO PLAY OUR
PART IN EQUIPPING BRITAIN FOR THE 21ST CENTURY.
SO THIS EVENING I WANT TO CHART THE COURSE AHEAD,
NOT FOR A FEW MONTHS OR EVEN A YEAR OR TWO, BUT
FOR THE LONG TERM, AND IN DOING SO TO EXPLAIN THE
BUILDING BLOCKS.
FIRST, MONETARY STABILITY THAT ALLOWS BUSINESSES
AND FAMILIES TO MAKE THEIR PLANS FOR THE LONG
TERM.
SECOND, LONG TERM FISCAL STABILITY THAT DELIVERS
SUSTAINABLE PUBLIC FINANCES. AND I WANT TO SAY
SOMETHING ABOUT MY ANNOUNCEMENT TODAY ABOUT THE
PUBLIC SPENDING FRAMEWORK WHICH WE WILL APPLY FOR
THE REST OF THE PARLIAMENT.
AND THIRD, A DRIVE FOR HIGHER LEVELS OF
INVESTMENT, SKILLS AND PRODUCTIVITY, THROUGH THREE
MAJOR REFORM PROGRAMMES - STRUCTURAL REFORMS IN
LABOUR MARKETS, PRODUCT MARKETS AND CAPITAL
MARKETS. AND FINALLY A COMMITMENT TO OPEN TRADE
AND POLICIES FOR CONSTRUCTIVE ENGAGEMENT IN THE
DEVELOPED WORLD'S LARGEST MARKET, THE EUROPEAN
UNION.
THROUGH OUR COMMITMENT TO STABILITY, PRODUCTIVITY
AND TO EUROPE WE CAN, IN MY VIEW, FORGE A NEW LONG
TERM DIRECTION FOR OUR COUNTRY, A REINVIGORATED
SENSE OF NATIONAL ECONOMIC PURPOSE.
A NEW NATIONAL PURPOSE BORN OUT OF THE RECOGNITION
THAT WE NEED TO WORK TOGETHER. A NATIONAL PURPOSE
FOUNDED ON THE INNATE BRITISH STRENGTHS - OUR
CREATIVITY, ADAPTABILITY AND INTERNATIONALISM.
STRENGTHS FOCUSSED ON RAISING BRITISH LEVELS OF
EMPLOYMENT AND PROSPERITY.
FIRST STABILITY.
IN TODAY'S DEREGULATED, LIBERALIZED FINANCIAL
MARKETS, THE KEYNESIAN FINE TUNING OF THE PAST
WHICH WORKED IN RELATIVELY SHELTERED, CLOSED
NATIONAL ECONOMIES AND WHICH TRIED TO EXPLOIT A
SUPPOSED LONG-TERM TRADE-OFF BETWEEN INFLATION AND
UNEMPLOYMENT, WILL SIMPLY NOT WORK. NEITHER CAN
STABILITY BE DELIVERED IN WHOLLY DEREGULATED
MARKETS THROUGH A RIGID APPLICATION OF FIXED
MONETARY TARGETS, AS WAS ATTEMPTED IN THE 80S.
WHEN THERE ARE EVER MORE RAPID FINANCIAL FLOWS
ACROSS THE WORLD THAT ARE UNPREDICTABLE AND
UNCERTAIN, THE ANSWER IS TO ENSURE STABILITY
THROUGH ESTABLISHING THE RIGHT LONG-TERM POLICY
OBJECTIVES AND TO BUILD CREDIBILITY IN THE POLICY
THROUGH WELL-UNDERSTOOD PROCEDURAL RULES THAT ARE
FOLLOWED FOR MONETARY AND FISCAL POLICY.
STABILITY IS ENHANCED IF THERE IS AN OPENNESS AND
TRANSPARENCY THAT KEEPS MARKETS PROPERLY INFORMED
AND ENSURES THAT OBJECTIVES AND INSTITUTIONS ARE
CREDIBLE.
WE KNOW MORE THAN MOST THAT BRITAIN HAS BEEN
SUBJECTED TO THE INSTABILITY OF BOOM BUST AND
CONSTANTLY CHANGING POLICIES.
THAT IS WHY WHEN WE CAME INTO POWER LAST MAY WE
HAD TO SET OUT NEW LONG-TERM MONETARY AND FISCAL
OBJECTIVES, TO ENSURE THESE WOULD BE MET BY
ADOPTING RULES BASED ON OPEN INSTITUTIONS AND A
COMMITMENT TO OPENNESS AND TRANSPARENCY.
FIRST, THE RIGHT OBJECTIVES: PRICE STABILITY
THROUGH A PRE-ANNOUNCED INFLATION TARGET AND
SUSTAINABLE PUBLIC FINANCES THROUGH APPLYING THE
GOLDEN RULE, THAT OVER THE ECONOMIC CYCLE CURRENT
SPENDING SHOULD AT LEAST COVER CONSUMPTION. IN
OTHER WORDS A BALANCED CURRENT BUDGET, COMBINED
WITH A PRUDENT APPROACH TO PUBLIC DEBT.
SECOND, UNAMBIGUOUS PROCEDURAL RULES: A NEW SYSTEM
OF MONETARY POLICY MAKING, AT THE HEART OF WHICH,
IS THE INDEPENDENCE OF THE BANK OF ENGLAND, AND AN
OPEN
LETTER SYSTEM.
AND A COMMITMENT TO PROPER PROCEDURES IN FISCAL
POLICY BY LEGISLATING A FISCAL STABILITY CODE AND
A PRE-ANNOUNCED COMMITMENT TO PRUDENCE.
AND, THIRD, TRANSPARENCY IN POLICY-MAKING: AN OPEN
SYSTEM OF DECISION-MAKING IN MONETARY POLICY
THROUGH THE PUBLICATION OF MINUTES, A SYSTEM OF
VOTING AND FULL REPORTING TO PARLIAMENT; AND IN
FISCAL POLICY AN OPEN AND TRANSPARENT SYSTEM UNDER
WHICH GOVERNMENT ALLOWS ITS ACTIONS TO BE SUBJECT
TO FULL SCRUTINY, AND ENSURES THAT KEY FISCAL
ASSUMPTIONS ARE INDEPENDENTLY AUDITED.
AND I BELIEVE PEOPLE NOW UNDERSTAND THAT CLEAR
LONG-TERM OBJECTIVES, WELL-UNDERSTOOD PROCEDURES
AND OPENNESS AND TRANSPARENCY ARE THE WAY TO
STABILITY FOR NATIONAL GOVERNMENTS IN A MODERN
GLOBAL MARKETPLACE.
THE NEW SYSTEM HAS IN MY VIEW ALREADY GIVEN
GREATER CREDIBILITY TO MONETARY POLICY MAKING.
WHEN WE CAME INTO POWER INFLATION WAS HEADING WAY
BEYOND ITS TARGET AND WE HAD TO ACT. BECAUSE OF
THE ACTION NOW TAKEN - DIFFICULT AS IT IS - I AM
NOW CONFIDENT THAT THE ECONOMY IS ON COURSE TO BE
BACK ON TRACK FOR STABILITY AND SUSTAINABLE LEVELS
OF GROWTH.
STABILITY RATHER THAN A RETURN TO STOP-GO IS THE
ESSENCE OF OUR POLICY.
AND THE BANK OF ENGLAND WILL CONTINUE TO SET
POLICY TO MEET THE GOVERNMENTS INFLATION TARGET OF
2« PER CENT -
WHICH I REAFFIRM TONIGHT.
AND BECAUSE PEOPLE ARE NOW COMING TO BELIEVE THAT
THE INFLATION TARGET WILL BE MET, LONG TERM
INTEREST RATES HAVE COME DOWN TO BELOW 6 PER CENT,
THE LOWEST FOR 33 YEARS, BEFORE ENGLAND LAST WON
THE WORLD CUP.
AND WITH A COMMITMENT TO PRICE STABILITY AND WITH
LONG TERM INTEREST RATES COMING DOWN, WE HAVE A
UNIQUE OPPORTUNITY TO BREAK FREE FORM THE STOP-GO
CYCLES OF THE PAST - THE SHORT BUT EXCESSIVE
UPSWINGS FOLLOWED BY THE LONG AND VIOLENT DOWN
SWINGS - THAT HAVE DONE SO MUCH DAMAGE.
WE HAVE THE CHANCE TO CREATE, FOR THE FIRST TIME
IN DECADES, A CONTINUOUS CIRCLE OF LOW INFLATION,
LOW LONG TERM INTEREST RATES AND HIGH LEVELS OF
INVESTMENT - THE BEST PLATFORM FOR GROWTH AND
PROSPERITY.
SO WHILE I DO NOT COMMENT ON THE MONTH TO MONTH
DECISIONS OF THE MONETARY POLICY COMMITTEE, I DO
BELIEVE THAT THE WHOLE COUNTRY SHOULD SUPPORT
EARLY ACTION ON INFLATION TO PREVENT THE
RECURRENCE OF STOP-GO AND TO ACHIEVE ECONOMIC
STABILITY.
AT THIS POINT IN EVERY CYCLE OF THE PAST, THE
BRITISH ECONOMY HAS BEEN PRONE TO A BOUT OF WAGE
INFLATION.
SO LET ME ADD JUST ONE THING.
IT WOULD BE THE WORST OF SHORT-TERMISM TO PAY
OURSELVES MORE TODAY AT THE COST OF HIGHER
INTEREST RATES TOMORROW AND THE LOSS OF JOBS AND
REDUCTION IN GROWTH THAT WOULD FOLLOW .
THE PUBLIC SECTOR IS MAKING ITS CONTRIBUTION. BUT
BOTH PUBLIC AND PRIVATE SECTORS MUST PLAY THEIR
PART. ALL OF US STARTING FROM THE BOARDROOM
OUTWARDS MUST NOW SHOW THE RESPONSIBILITY THAT THE
COUNTRY NEEDS .
STABILITY REQUIRES NOT ONLY LOW AND STABLE
INFLATION BUT SUSTAINABLE PUBLIC FINANCES.
I BELIEVE THAT THE PRUDENT MANAGEMENT OF THE
PUBLIC FINANCES IS THE PRIMARY RESPONSIBILITY OF
THE TREASURY AND IN SETTING OUT OUR FISCAL
FRAMEWORK AND COMMITMENTS OVER THE REST OF THE
PARLIAMENT, IN THE FIRST EVER ECONOMIC AND FISCAL
STRATEGY REPORT PUBLISHED TODAY, THE TREASURY IS
DISCHARGING THIS DUTY.
SUSTAINABLE PUBLIC FINANCES HAVE ELUDED
GOVERNMENTS FOR DECADES.
IN THE LAST ECONOMIC CYCLE THE AVERAGE DEFICIT ON
CURRENT SPENDING WAS 1« PER CENT OF GDP, A œ12
BILLION DEFICIT EVERY YEAR, AT TODAY'S PRICES.
IT WAS CONTROVERSIAL IN 1976 WHEN ONE LABOUR PRIME
MINISTER SAID WE COULD NOT SPEND OUR WAY OUT OF A
RECESSION.
I SAY TONIGHT WE CANNOT SIMPLY SPEND OUR WAY
THROUGH A RECOVERY EITHER.
SO PRUDENCE WILL BE OUR WATCHWORD.
AND OUR FIRST RULE IS TO BALANCE THE CURRENT
BUDGET OVER THE ECONOMIC CYCLE.
WE HAVE ALREADY DEMONSTRATED A COMMITMENT TO
PRUDENCE WITH OUR TWO YEAR CEILING ON PUBLIC
SPENDING.
LAST YEAR PEOPLE SAID WE WOULD NOT MEET OUR
TARGETS. IN FACT WE MET THEM AND WERE ABLE TO
BECAUSE OF OUR PRUDENCE TO DEVOTE MORE RESOURCES
IN MANY AREAS INCLUDING THE NATIONAL HEALTH
SERVICE AND TO EDUCATION.
AND THE DISCIPLINE WE HAVE SHOWN IS NOT A ONE-OFF
EFFORT TO DEMONSTRATE THAT WE CAN BE TOUGH. IT IS
PART OF A CONTINUING AND ROCK SOLID DETERMINATION
TO HAVE SUSTAINABLE PUBLIC FINANCES.
THAT IS WHY AT THIS STAGE IN THE CYCLE ARE
PLANNING FOR SURPLUSES ON THE CURRENT BUDGET FOR
THE COMING THREE YEARS OF 7, 10 AND 13 BILLION
POUNDS.
AS A RESULT OF THE PLANS I ANNOUNCED TODAY WE WILL
LOCK IN THE FISCAL TIGHTENING I ANNOUNCED IN THE
MARCH BUDGET NOT JUST FOR THIS FINANCIAL YEAR BUT
FOR THE NEXT FINANCIAL YEAR AS WELL.
OUR SECOND RULE IS A PRUDENT AND STABLE DEBT GDP
RATIO FALLING BELOW 40 PER CENT.
THE PLANS WE PUBLISHED THIS AFTERNOON SHOW THE
DEBT RATIO FALLING FROM 45 PER CENT WHEN WE CAME
INTO GOVERNMENT TO 40« PER CENT NEXT YEAR AND IN
THE FOLLOWING YEAR DOWN AGAIN TO 39« AND 38¬ PER
CENT.
PUBLIC SECTOR NET BORROWING WAS OVER 3 PER CENT OF
GDP IN THE LAST CYCLE. AS A RESULT OF THE
MEASURES WE HAVE TAKEN, IT WILL AVERAGE 0.2 PER
CENT FOR THE PARLIAMENT. SO WE ARE LOCKING IN
FURTHER OUR LONG TERM COMMITMENT TO SUSTAINABLE
FINANCES.
JUST AS WE SET CLEAR RULES FOR MONETARY POLICY SO
WE HAVE SET RULES FOR FISCAL POLICY AND SHOWN HOW
WE WILL ACHIEVE THEM.
THE BACKGROUND IS DECADES OF SHORT TERMISM, A
FAILURE TO CONTROL SPENDING, AND A NEGLECT OF OUR
PRIORITIES.
THERE HAVE BEEN TWO PRESSURES ON PAST GOVERNMENTS
WHICH THEY HAVE FOUND DIFFICULT TO RESIST.
THE FIRST IS A FAULT OF PREVIOUS LABOUR
GOVERNMENTS, TO SPEND IN THE FIRST TWO YEARS AND
THEN TO HAVE TO CUT BACK IN THEIR REMAINING YEARS
WITH ALL THE INSTABILITY THAT THIS CAUSES.
OUR TOUGH DECISIONS HAVE ENSURED THAT WE HAVE USED
OUR FIRST YEARS NOT TO SPEND IMPRUDENTLY BUT TO
PUT THE PUBLIC FINANCES ON A SUSTAINABLE FOOTING.
BUT THERE IS A SECOND TEMPTATION FOR POLITICIANS -
ANOTHER FORM OF STOP-GO - TO RAISE SPENDING IN AN
ELECTION YEAR SO THERE IS MORE PUBLIC SPENDING ON
WHAT IS ELECTORALLY ATTRACTIVE. DECISIONS MADE
NOT AS A RESULT OF THE ECONOMIC CYCLE BUT OF THE
ELECTORAL CYCLE.
IT HAS BEEN SUGGESTED THAT THIS IS MY PLAN FOR THE
YEARS TO COME, THE ELECTION WAR CHEST THESIS,
NOTHING CAN BE FURTHER FROM THE TRUTH.
OF COURSE POLITICIANS ENJOY WINNING ELECTIONS.
FROM MY OWN ADMITTEDLY LIMITED EXPERIENCE I FIND
THAT I LIKE WINNING ELECTIONS.
AND FROM RATHER MORE EXPERIENCE I CAN TELL YOU I
HATE LOSING THEM.
BUT I HAVE TO SAY THAT OUR FISCAL RULES HAVE BEEN
SPECIFICALLY DESIGNED TO PRECLUDE PARTY POLITICAL
MANIPULATION OF THE PUBLIC FINANCES FOR ELECTORAL
PURPOSES.
WE HAVE TODAY LOCKED IN STABILITY FOR A WHOLE
PARLIAMENT AND WE HAVE DONE IT TO CREATE THE BEST
ENVIRONMENT FOR INVESTMENT AND FOR HIGH AND STABLE
LEVELS OF GROWTH AND EMPLOYMENT.
AND TO REINVEST IN OUR FUTURE WE HAVE PLANNED A
SERIES OF SALES OF HOLDINGS WE DO NOT NEED, AND
NEW PRIVATE PUBLIC PARTNERSHIPS WHICH CAN INVEST
BETTER IN THE FUTURE.
WE WILL PLAN EFFECTIVE PRIVATE PUBLIC PARTNERSHIPS
FOR THE NATIONAL AIR TRAFFIC SERVICES AND THE
COMMONWEALTH DEVELOPMENT COMMISSION AND EXAMINE
THEM FOR THE TOTE AND THE ROYAL MINT.
AND THAT BRINGS ME TO THIRD BUILDING BLOCK OF
ECONOMIC SUCCESS - HOW, IN BRITAIN, WE CAN
MODERNISE TO ACHIEVE, ALONGSIDE RISING EMPLOYMENT,
THE HIGHER PRODUCTIVITY ON WHICH LASTING GROWTH
DEPENDS.
SINCE I ARRIVED AT THE TREASURY I HAVE BEEN
SEEKING TO UNDERSTAND THE EXTENT OF AND THE
REASONS FOR OUR PRODUCTIVITY GAP WITH OTHER MAJOR
ECONOMIES.
THE LATEST FIGURES SHOW A PRODUCTIVITY GAP WITH
FRANCE AND GERMANY OF AROUND 20% AND A GAP OF 40%
WITH THE UNITED STATES.
THERE ARE GREAT BRITISH SUCCESS STORIES, WORLD
CLASS FIRMS THAT ARE BEATING COMPETITION ALL
AROUND THE GLOBE IN WHOSE ACHIEVEMENTS WE ALL HAVE
PRIDE. BUT IN MANUFACTURING AS A WHOLE UK
PRODUCTIVITY IS LOWER THAN IN OTHER MAJOR
ECONOMIES. IN THE UNITED STATES, PRODUCTIVITY IS
TWICE THAT IN THE UK IN THE FOOD AND BEVERAGES
INDUSTRY AND IN THE MACHINERY INDUSTRY. EVEN IN
THE SERVICE SECTOR WE FAIL TO LEAD THE OTHERS IN
ANY MAJOR INDUSTRY.
I BELIEVE THESE DISAPPOINTING FIGURES CAN NO
LONGER BE IGNORED.
THE CHALLENGE IS TO WORK TOGETHER AND CLOSE THE
GAP IN PRODUCTIVITY, THE GAP BETWEEN WHAT BRITAIN
IS TODAY AND WHAT WE CAN BECOME IN THE FUTURE.
I WANT THE PERIOD FROM NOW UNTIL THE NEXT BUDGET
TO BE USED CONSTRUCTIVELY TO EXAMINE WHAT MORE WE
CAN DO, FOCUSSING ON MODERNISATION IN LABOUR,
PRODUCT AND CAPITAL MARKETS AND ON ANY TAX AND
SPENDING REFORMS THEY IMPLY.
WE MUST TURN IDEAS MADE IN BRITAIN INTO PRODUCTS
MADE IN BRITAIN, MAKE OUR STRENGTHS COUNT WITH OUR
TEAM WORK AND INNOVATION IN INDIVIDUAL BUSINESS
AND COMPANIES, AND WE MUST BE SUFFICIENTLY
CONFIDENT ABOUT OUR VIRTUES TO MAKE COMMITTED LONG
TERM INVESTMENTS IN OUR FUTURE.
WE HAVE MADE A START IN THE LAST YEAR.
WE HAVE MADE TAX CHANGES TO CREATE THE RIGHT
ENVIRONMENT FOR INVESTMENT, CUTTING CORPORATION
TAX RATES TO THEIR LOWEST LEVEL EVER, AND
INCREASING INVESTMENT INCENTIVES FOR SMALL AND
MEDIUM SIZED COMPANIES.
WE HAVE SINCE WE CAME TO OFFICE REALLOCATED MONEY
TO EDUCATION AND TRAINING ALLOWING AN ADDITIONAL
œ2.5 BILLION TO IMPROVE STANDARDS AND FACILITIES
IN OUR SCHOOLS, AND TO IMPROVE SKILLS œ100 MILLION
WAS MADE AVAILABLE IN THE BUDGET TO HELP REDUCE
THE SKILLS GAP IN I.T. AND HIGH TECHNOLOGY.
AND I SAY TONIGHT THAT WHERE IT IS NECESSARY
MODERNISATION, WHOLESALE MODERNISATION AND NOTHING
BUT MODERNISATION WILL BE MY POLICY.
ON PRODUCT MARKETS THE WAY FORWARD IS NOT STIFLING
COMPETITION BY OVER-REGULATION OR PURSUING A FREE-
FOR-ALL DEVOID OF ANTI-TRUST, ANTI-MONOPOLIES
LEGISLATION. IT IS TO VIGOROUSLY PURSUE A PRO-
COMPETITION AGENDA THAT INVOLVES OPENING UP
COMPETITION IN FINANCIAL SERVICES,
TELECOMMUNICATIONS, ENERGY REMOVING BARRIERS THAT
STILL THWART OPEN TRADE.
WE ALSO NEED TO CONSIDER MODERNISING OUR CAPITAL
MARKETS.
LET ME GIVE AN EXAMPLE. IN THE FIRST HALF OF THE
1990S NASDAQ IN THE UNITED STATES RAISED SEVEN
TIMES MORE CAPITAL THAN ALL THE EUROPEAN
EQUIVALENTS TOGETHER. ITS LISTED COMPANIES
EMPLOYED NINE MILLION PEOPLE AND CREATED 16 PER
CENT OF ALL NEW JOBS.
THE CHALLENGE FOR BRITAIN IS TO CREATE A STRONGER
VENTURE CAPITAL INDUSTRY AND TO HELP VENTURE
CAPITAL DO MORE TO ENCOURAGE THE HI-RISK, EARLY
STAGE AND START-UP COMPANIES.
SO WE NEED A NEW APPROACH IN BRITAIN TO RISK-
TAKING THAT WILL INCREASE THE NUMBER OF
ENTREPRENEURS AND RAISE THE GROWTH AND SURVIVAL
RATE OF SMALL BUSINESSES. WE MUST DESTROY THE
BARRIERS THAT HOLD US BACK - FISCAL, REGULATORY,
ECONOMIC, CULTURAL - AS A MATTER OF URGENCY. AND
WE WILL CONSIDER THE MEASURES WE MUST TAKE.
WE MUST ALSO ENGAGE IN FAR-REACHING REFORM OF OUR
LABOUR MARKETS NOT JUST IN EMPLOYMENT POLICY BUT
IN WELFARE, EDUCATION AND TAXATION AND SOCIAL
SECURITY POLICY. THE WAY FORWARD IS NEITHER OLD
STYLE REGULATION OR A CRUDE FORM OF DEREGULATION,
WHICH LEAVES THE UNSKILLED WITHOUT THE TRAINING OR
EDUCATION ESSENTIAL FOR EMPLOYABILITY. THE WAY
FORWARD IS ONE THAT RECOGNISES THAT BRINGING OUT
THE BEST IN PEOPLE BY POLICIES THAT ENSURE
OPPORTUNITIES FOR ALL IS THE BEST ROUTE TO
PROSPERITY IN THE MODERN WORLD.
SO WE NEED A MODERN EMPLOYMENT POLICY THAT DOES
NOT OFFER WELFARE IRRESPECTIVE OF WORK, BUT IS
BUILT ON A SYSTEM OF MATCHING RIGHTS WITH
RESPONSIBILITIES, AN ACTIVE WELFARE STATE WHICH
PROVIDES NEW OPPORTUNITIES FOR WORK AND A TAX AND
BENEFIT SYSTEM THAT MAKES WORK PAY.
AND TO CREATE THE RIGHT INCENTIVES TO WORK AND TO
CUT THE COSTS OF HIRING, WE HAVE ALREADY ANNOUNCED
RADICAL CHANGES TO THE CURRENT TAX AND BENEFIT
SYSTEM. CHANGES IN EMPLOYERS AND EMPLOYEES
NATIONAL INSURANCE AND A NEW WORKING FAMILIES TAX
CREDIT WHICH, UNDERPINNED BY A NATIONAL MINIMUM
WAGE IS THE MEANS TO ENSURE THAT WORK PAYS MORE
THAN BENEFITS.
SO STABILITY, LONG TERM PRUDENCE, AND A DYNAMIC
SUPPLY SIDE ARE KEY BUILDING BLOCKS FOR PROSPERITY
BUT THERE IS ANOTHER BUILDING BLOCK THAT FOR TOO
MANY YEARS WE HAVE UNDERVALUED STRONG AND LASTING
TRADING RELATIONSHIPS WITH EUROPE. WE ARE NOT
ONLY ONE OF THE MOST OPEN ECONOMIES IN THE WORLD
TRADING 25 PER CENT OF OUR GDP. BUT, IN ADDITION,
NEARLY 60 PER CENT OF OUR EXPORTS ARE TO MAINLAND
EUROPE AND ASTONISHINGLY HIGH LEVELS OF US AND
JAPANESE INVESTMENT INTO EUROPE, 40 PER CENT OF
IT, COMES TO AND THROUGH THE UK.
FOR THE FIRST TIME WE ARE AS A COUNTRY COMMITTED,
IN PRINCIPLE, TO EUROPEAN MONETARY UNION.
AND HAVING DECLARED FOR THE PRINCIPLE WE WILL
ENSURE THAT THE PREPARATIONS ARE MADE.
ALL NECESSARY STEPS ARE BEING MADE TO ENSURE
BUSINESS WILL BE ABLE TO USE THE EURO HERE FROM
1999 FOR A WIDE RANGE OF BUSINESS ACTIVITIES, FROM
FILING COMPANY ACCOUNTS, TO PAYING TAXES AND
ISSUING SHARES.
AND LOW CORPORATE TAX AS WELL AS OUR FINANCIAL
EXPERTISE AND OUR COMMITMENT TO FREE TRADE AND
OPEN MARKETS WILL FURTHER UNDERPIN BRITAIN'S
POSITION AS THE MOST PROFITABLE PLACE IN EUROPE
FROM WHICH TO EXPLOIT NEW BUSINESS OPPORTUNITIES
AFTER 1999.
AND I BELIEVE THAT A NEW NATIONAL CONSENSUS ON
EUROPE THE VERY CONSENSUS THAT HAS ELUDED US FOR
YEARS IS NOW WITHIN OUR GRASP.
MY THEMES THEREFORE: OUR ECONOMY FOUNDED ON A
PLATFORM OF MONETARY STABILITY. SOUND FINANCES
THROUGH PRUDENCE AND INVESTMENT IN REFORM. A
NATIONAL DRIVE FOR HIGHER PRODUCTIVITY THROUGH
ECONOMIC REFORM AND A NEW PURPOSE IN EUROPE.
TAKEN TOGETHER THIS REFORM AGENDA OFFERS A NEW AND
RADICAL WAY FORWARD THAT HELPS EQUIP OUR COUNTRY
FOR THE NEW CENTURY, ONE THAT REALISES, FOR A NEW
WORLD, THE GREAT BRITISH QUALITIES - THE VIRTUES
OF HARD WORK, CREATIVITY, FAIR PLAY AND OPENNESS -
AND DOES SO IN A MODERN NON-DOGMATIC WAY.
IT IS A NEW WAY FOR OUR COUNTRY THAT CREATES A
SOCIETY THAT HAS BOTH SOUND FINANCES AND GOOD
PUBLIC SERVICES. NO LONGER A FALSE CHOICE BETWEEN
THOSE WHO SAY YOU CAN HAVE PRUDENCE BUT ONLY AT
THE COST OF RUNNING DOWN PUBLIC INVESTMENT AND
GOOD PUBLIC SERVICES AND THOSE WHO SAY YOU CAN
HAVE PUBLIC SERVICES BUT ONLY IF YOU PAY OVER THE
ODDS. NEITHER SHOULD WE THROW MONEY AT PROBLEMS
NOR WALK AWAY FROM THEM. IT IS BY BREAKING WITH
THE PAST AND BY MODERNISING OUR APPROACHES THAT,
AS WE SHOWED TODAY, PRUDENCE AND INVESTMENT IN
REFORM CAN BECOME THE FOUNDATION FOR GOOD
EFFICIENT PUBLIC SERVICES AND A MODERN
INFRASTRUCTURE.
THERE IS A NEW WAY FOR OUR COUNTRY'S ECONOMY TOO
THAT CREATES AN ECONOMY THAT IS BOTH ENTERPRISING
AND FAIR. NO LONGER A FALSE CHOICE BETWEEN THOSE
WHO SAY THAT IF YOU HAVE ENTERPRISE IT IS AT THE
COST OF FAIRNESS, OR THOSE WHO SAY LET US HAVE
FAIRNESS EVEN IF IT KILLS OF ENTERPRISE. INSTEAD
BY A MODERN APPROACH TO OPPORTUNITY TO ALL THAT
DRAWS ON THE BEST OF BRITISH VALUES, WE HAVE
ENTERPRISE AND FAIRNESS TOGETHER.
AND THERE IS A NEW WAY FOR BRITAIN IN THE WORLD.
NO LONGER THE FALSE CHOICE BETWEEN SUGGESTING
PRIDE IN OUR COUNTRY MEANS CUTTING OURSELVES OFF
FROM EUROPE OR AN INTERNATIONALISM THAT CAVES IN
TO EUROPE AT THE EXPENSE OF BRITISH INTERESTS. BUT
A BRITAIN CONFIDENT IN EUROPE FIGHTING FOR OUR
NATIONAL INTERESTS AND REFORMING AND MODERNISING
EUROPE AT THE SAME TIME. A MATURE PATRIOTISM THAT
IS OPEN OUTWARD LOOKING AND INTERNATIONALIST.
AND THIS NEW WAY AHEAD FOR BRITAIN - AN ECONOMY
ENTERPRISING AND FAIR, A SOCIETY PRUDENT AND
COMMITTED TO LONG TERM INVESTMENT IN BRITAINS
FUTURE, WITH A MATURE PATRIOTISM THAT IS OUTWARD
LOOKING AND INTERNATIONALIST - GIVES US A RENEWED
SENSE OF NATIONAL PURPOSE AND A LONG TERM
DIRECTION AS A COUNTRY.
A MODERN BRITAIN, FOUNDED ON LASTING BRITISH
VALUES, THE VALUES OF THE BRITISH PEOPLE. BUILT
ON A DETERMINATION TO MAKE BRITAIN A MORE
PROSPEROUS COUNTRY FOR ALL ITS CITIZENS. DRIVEN
FORWARD BY THE ENERGIES OF A NEW GENERATION
WILLING, LIKE OUR PREDECESSORS, TO REJECT FAILED
DOGMAS AND TO MODERNISE AND REFORM. A BRITAIN
READY TO FULFIL ITS ROLE IN THE NEW WORLD AND
TO REALISE THE POTENTIAL OF ITS PEOPLE.
THAT IS OUR TASK, OUR CHALLENGE AND THAT IF WE
WORK TOGETHER CAN BE OUR ACHIEVEMENT.
# = pounds sterling