Below is the text of a speech made by the then Chancellor of the Exchequer, Alistair Darling, to the CBI Annual Conference on the 27th November 2007.
It is a pleasure to address the CBI Conference.
And first of all I would like to acknowledge the advice and support given by Richard Lambert and his colleagues. Both at the DTI and now at the Treasury I have worked closely with the CBI. From the working time directive to reducing burdens on business your views matter. And your staff speak up for your interests. Believe me they don’t pull their punches. They serve you well.
This year’s conference is taking place at a time when the reality of the global economy is clearer than it has ever been.
The problems that started in the American housing market have quickly affected countries across the world. There are reasons to be cautious. We don’t yet know the full effects of this uncertainty.
But there are good reasons too to be optimistic.
This year world growth will again be around five per cent – above its thirty year average for the third year in a row.
Britain has a strong economy.
We have highly successful competitive businesses, many here today. We have seen over ten years of uninterrupted growth.
And as I said in the Pre Budget Report whilst that growth will slow next year, the economy will continue to grow next year and the year after.
It is the Government’s job to work with you as we deal with the present uncertainties. But there are also huge opportunities ahead as many of your members will testify. You are winning orders here and across the world in every sector competing with the best.
Supporting and sustaining businesses remains central to everything we do and I know that we have worked well together over the past decade and we will continue to do so.
Our shared priorities must be
- to maintain stability and flexibility in the face of financial uncertainty,
- to break down barriers to trade in the face of increasing calls for protectionism,
- to respond to the global challenges of competition and climate change.
And that means taking decisions that may be difficult – just as you do every day. And having made those decisions we see them through.
Over the past ten years Britain has been the only major economy to enjoy continuous growth.
Indeed in that time Britain is the only major economy to have grown continuously.
Our determination to take the difficult decisions means that even in today’s uncertain times – with turbulence in international financial markets and record oil prices – we can be confident of the resilience of the UK economy.
Now, economic stability depends on financial stability.
In the financial markets, it is clear that both here and internationally we need to strengthen surveillance and supervision to head off problems before they arise.
We are working with the IMF and the Financial Stability Forum to provide far greater transparency so that institutions understand the risk to which they might be exposed.
And here at home there are lessons to be learned. I have made it clear our response has to be proportionate and appropriate, but that we will strengthen the regulatory system where it is needed.
And let me tackle head on those who now say that we should not have provided financial support for Northern Rock.
This was a bank that depended on being able to raise billions of pounds on the money market. When that was no longer possible, we had a choice.
We could have let it go down. But I believe that the consequences for the banking system, including the likely knock-on consequences for other financial institutions in which confidence would inevitably have been shaken, and for Britain would have been extremely damaging.
That is why I authorised the Bank of England to provide support. At the time that intervention was widely supported, even by some who now imply that it was the wrong thing to do and who are not prepared to accept the consequences of that support.
I believe it was right to intervene; that it was right to put in place guarantees arrangements to savers. And it is right to see it through.
It was never going to be an easy decision. There were always going to be critics when the going got tough.
But that is not the point. Far worse would have been to have done nothing, to have allowed that bank to have gone under. I believe this would have had very serious consequences for the banking system and for the British economy.
On Monday, Northern Rock announced that it had decided to take forward discussions on an accelerated basis with a consortium led by Virgin.
I am very clear that any proposal for the future of Northern Rock must be consistent with the principles I have set out, namely protecting the vital interests of the taxpayer, depositors and wider financial stability.
I welcome Northern Rock’s decision to work with Virgin to turn its proposal into a hard agreement with Northern Rock and the authorities. Discussions are now proceeding urgently.
Governments will never succeed in avoiding the unexpected and the unwelcome and this episode certainly answers to both descriptions.
But Government should also be judged by how it responds to these difficulties when they arise. That response must be open and measured; perhaps not always the stuff of headlines but certainly the best basis of solutions.
Take the loss of the child benefit data. It is a huge problem, but one that has to be dealt with. That is what Government has to do in the face of problems like this. It is difficult but we have to get on with it and sort it out.
But it is also the job of Government to set out its long term vision for the country.
A vision of a strong and successful nation with its businesses competing with the best in a fast changing global economy.
And maintaining Britain’s stability is my priority because it is the precondition for the long term prosperity of this country. And I have set out more details on this today.
So too is the need for Government and business to work together.
It is for business to win orders for goods and services.
But business rightly looks to Government to create the conditions for this success.
If we are to compete we must ensure that Britain remains a good place to business:
- flexible enough to adapt to change, with the right tax and regulatory approach,
- and able, because of the strength of our economy, to make long term investment from education and skills to science and transport, supporting business at every stage.
And we must also maintain our commitment to free and fair trade, resisting calls for protectionism, wherever they come from.
In each, we need to make the right long term decisions and see them through.
First, maintaining Britain as a good place to do business means ensuring we have a tax regime that is competitive, fair and simple.
That is why in the Budget earlier this year we announced we are cutting the corporation tax main rate to 28p and simplifying the allowances for investment. The basic rate of income tax will be reduced to 20p, helping not just the self-employed but small businesses too.
Simplification of the tax system is important. Because complexity brings increased costs.
I know that my proposals to introduce a single rate of capital gains tax have been controversial. That was inevitable.
We are working with the CBI and other business organisations to listen to what you have to say. I expect to publish final proposals in the next three weeks.
But many have long called for a simplified tax system and have long complained about the complexity of the tax system.
And we have to recognise that one person’s tax exemption is another’s complexity – simplification is not the easy option. But it is the right one wherever it is possible.
Let me say this on the principle: capital gains like any other profits ultimately come from the strength of the economy.
So I believe it is right and fair that they pay their share in tax as a contribution to the economy’s future strength.
But because we want to reward investment, we are right to now tax gains at a lower rate than income – and the new single rate is among the most competitive in the world, is less than half the top rate for income, and is also less than half what it was ten years ago.
It is also right to make the system more straightforward and sustainable, with a tax that is easier comply with.
I am listening to what you say and will report to Parliament very shortly.
Britain has 800,000 more businesses set up in the last ten years and OECD says UK has lowest barriers to entrepreneurship of all its countries.
I am determined to do everything I can to keep it that way and keep Britain as a good place to do business.
So in the run up to the Budget, I want to continue to work with the CBI and other business organisations to ensure that encouraging enterprise remains at the heart of this approach.
That is also why we need to continue to improve the way we regulate so our approach is proportionate, competitive, and principled.
What is needed is genuine cultural change. If you don’t need to regulate, then don’t. And if we do, do what’s necessary – no gold plating.
All of us know that effective regulation can help business.
All of us appreciate that it is right to help new mothers and fathers by giving them some time off at the birth of their children. Many of us would have liked that ourselves.
And proper regulation to protect employees against exploitation from the unscrupulous.
But that regulation has to be proportionate. Take health and safety, we have cut the number of forms by 50 per cent, my colleague John Hutton is reviewing what more we can do for small business, and the Health and Safety Executive is publishing practical suggestions that will reduce the paperwork burden firms face while protecting their staff.
Or take the risks and procedure relating to industrial tribunals, where I set out proposals for reform when I was at the DTI, which have now been agreed and will save businesses over £100 million a year.
Britain is a good place to start up and maintain a business. And creating the right conditions for success depends on sustained investment.
For decades Britain’s problem was because of its inherent weakness it was never able to sustain investment in science or transport. It would start and then stop.
As a result of ten years of sustained growth, of only making promises on tax and spend that were costed and based on what we could afford, we have been able to maintain investment year on year. We will continue to do that.
Investing in skills and making the reforms necessary to raise our educational standards and levels of innovation, as the Prime Minister said yesterday.
Britain is now investing as much in the intangible assets that are essential for our future – in innovation and intellectual property, in software and skills – as we are in more traditional physical assets – and as much as the United States. We will continue to support R and D through tax credits.
And we will continue to match public sector with private sector investment. We will continue to expand the role of the private sector providing a greater diversity of supply, creating new opportunities for committed, innovative business and third sector organisations, as my colleague Peter Hain is announcing today in the jobs market.
In transport, where public and private sectors work together, committing to investment over the long term also plays a critical part.
Which is why in the spending review I extended the long term funding guideline for transport of annual growth of 2¼ per cent above inflation for the next ten years.
Putting right decades of underinvestment, providing the roads and railways we need.
I introduced the Bill to build Crossrail in 2005. I have now approved the financing package – essential for the competitiveness of not just the City of London but for the whole country.
In 2003 I published a White Paper setting out the need for an expansion to our airport capacity.
Last week the Government launched the consultation on the expansion of Heathrow.
Provided the environmental and access conditions can be met, the right thing for the growth of the economy and prosperity of our country is to build a third runway. And proposals for a second runway at Stansted are already underway.
And this is one of the tests that any Government has to meet. Has it the strength of purpose to see through difficult decisions, often ducked in the past, but which are essential for our economic success.
There is a simple choice. Other countries are making plans for the future. So must we.
So too in energy supply. Today’s record oil prices simply underline the challenge we face, but also that in addressing it our economic and environmental objectives are increasing at one.
We need increased stability and security of supply from a greater diversity and cleaner sources of energy.
And as I made clear when I published the Energy White Paper in the summer nuclear power potentially has a role to play in tackling climate change and improving energy security.
So our preliminary view is that, subject to the outcome of our consultation, it should be part of the mix of future energy options. We will announce our final decision early in the New Year.
And if it is to be part of the mix, it can’t be the last resort – if that was to be the case, because of the time it takes to build new power stations, by the time you have decided you need them, it would be too late.
And, as the Prime Minister said last week, there are huge business opportunities in new markets, products and jobs here as well. Sir Nicholas Stern recognised this.
Your report published yesterday and debated this morning did too. The value added of the low carbon energy sector could be as much as $3 trillion worldwide by 2050.
I want to see our British Energy Technology at the cutting edge of environmental innovation and London as the centre of the global carbon market.
There are difficult choices to be made as we seek to secure our prosperity and the environment. But ultimately there cannot be any long term trade off between strong and sustainable growth.
Modernising our infrastructure will require difficult decisions too, as we balance our environmental and economic priorities, and national and local needs.
The Planning Bill before Parliament is a critical part of this.
It is a test for all political parties. Seven years to get planning permission to build terminal 5. Six and a half years for the North Yorkshire power line application. The present system doesn’t work and it needs to be reformed.
Our proposals will mean greater debate on energy or aviation policy, the opportunities for individuals to be heard in a process that isn’t drawn out month after month year after year, and greater certainty in decision making.
The Bill deserves support.
It is by making these decisions we can be confident of our success in a more open global economy. And I am committed to making our economy open to trade and investment. Our future depends on it.
The fact that over the past ten years world trade has grown nearly twice as fast as world growth is a demonstration that that those economies which are open to trade are most likely to succeed.
And the fact that Britain is a world leader in capital markets, already the most open part of the world economy, is a demonstration that Britain is well placed to succeed.
Our financial services trade surplus is the largest in the world, twice that of our nearest rival.
Indeed our openness has defined our history and our past successes.
And I am determined it defines our future and our continued success.
It is essential that Europe too becomes far more competitive. Last week the Commission published proposals for reform of the Single Market, which we called for earlier this year.
We must continue to argue against restrictions and unnecessary regulation which damage our competitiveness and which are holding back growth in the European economy.
Reducing agricultural tariffs, opening up completely the energy and communications and utilities markets, and properly completing the creation of the single market for services.
We will push for closer EU-US trade ties, including in financial markets.
We will do all we can to help secure a global trade deal.
We believe in breaking down trade barriers, securing free and fair trade across the world. We will continue to lead by example. But to secure the full benefits of openness for the global economy, others must follow.
We welcome inward investment. Indeed our country depends on it. Britain wins more inward investment as a share of its economy than any other major country.
But I also believe that all investors not only have to behave commercially but also be seen to behave commercially.
For sovereign wealth funds, I welcome the IMF and OECD proposals to establish the international guidelines including high standards of governance and appropriate transparency.
Just as we welcome investment here, there needs to be a level playing field for investment across the world: it benefits everyone if we all are open.
So when I met the Competition Commissioner Neelie Kroes yesterday, I agree that where a Member State fails to open the markets it has agreed to, there must be strong enforcement action by the Commission.
It must be made easier for individual businesses to overcome artificial and illegal barriers are erected that prevent them doing their legitimate business.
When I attend the G7 Finance Ministers meeting in Japan next year, business priorities will be the top of my agenda, I will argue that the G7 can no longer just be open amongst ourselves, but I want the G7 to become an advocate for openness between all countries.
And when I visit China next year, I will invite British business leaders to join me, in promoting greater trade between our two countries, and working with the Chinese Government to encourage more investment, including through tackling infringement and promoting adequate enforcement of intellectual property rights.
I will continue to do everything I can to break down barriers to trade and promote British trade.
There are difficult issues that need to be confronted if we are to maintain our competitiveness and secure our prosperity.
- Whether it is maintaining our stability in response to financial uncertainty,
- promoting free trade and open markets in response to protectionism,
- adapting in response to climate change,
- making the difficult choices – planning reform, aviation capacity, energy generation – in response to competitive challenges,
- these are issues that have to be tackled. If we are to seize the opportunities available to us in the new global economy
People rightly expect governments to confront these issues and have the commitment and determination to take the right long term decisions.
We will continue to respond and deal with the unexpected and difficult decisions that confront any government from time to time.
We have the strength of purpose to see through the current international uncertainty, backed by one of the strongest economies in the developed world.
And we have a vision of a successful Britain underpinned by successful British businesses competing with the best across the world.
I am determined that we keep it that way.