Vince Cable – 2013 Speech at University of Warwick

vincecable

Below is the text of the speech made by the Business Secretary, Vince Cable, at the University of Warwick on 11th September 2013.

I am delighted to see so many serious people here from the business community. The idea of an industrial strategy for Britain is achieving significant traction.

Successive governments baulked at the concept, of course – a reaction to the 1960s and 70s when state involvement was seen as backward-looking, wasteful and meddlesome. Intellectual fashion turned towards a faith in the rationality and efficiency of markets – a consensus that lasted several decades and, in the UK, saw the virtual disappearance of a number of big industries.

Industrial strategy regains credibility

Several factors have caused that fashion to fray at the edges. The 2008 crash showed us that financial markets in particular can be irrational and inefficient. The success of countries like Germany has reinforced the value of long-term understanding between business and government on skills, technology, exports and business finance – while the long period of growth before the 2008 crash blinded many in business and government to the extent of Britain’s under performance in such areas. And, not least, there dawned an understanding that such is the weight of government spending in the economy that its purchasing decisions alone create an industrial strategy by default, if not by design.

We have progressed a long way since I first mooted the idea of a designed industrial strategy two years ago, acknowledging predecessors including Michael Heseltine and Peter Mandelson. Three simple – but, until recently, quite controversial – ideas have now been accepted and are being applied.

First, government must operate strategically over the long term. There are critically important sectors such as aerospace, energy and life sciences that have time horizons stretching well beyond a single parliament.

Second, there are some classic market failures – notably in skills and innovation – where active partnership between government and business can produce huge spill-over benefits. That partnership is a fundamental principle underpinning the entire industrial strategy, whether co-investment, breaking into new export markets or tackling skills shortages.

And third, government has to be joined up. Government procurement is one example of where we cannot operate in disconnected silos and fight just for the best price right now, without attending to longer-term economic benefits.

These insights, and commitments, have emerged against the backdrop of the severe difficulties Britain has recently faced: the UK is recovering from the most damaging financial crisis in generations, after a decade of growth built on unsustainable levels of debt. The Government inherited the largest deficit since the World War and, of the major economies, only Japan experienced a deeper recession.. The Government’s finances are being stabilised through structural deficit reduction. But the economy also needs rebalancing through a shift to exports and investment rather than debt-based consumption – specifically towards long-term investment in productive assets rather than short-term speculative property accumulation.

To succeed in this task is necessarily the work of many years. But we are seeing progress, and those who deserve the greatest credit for this are pragmatic British businesses and flexible British workers who kick-started the recovery. Government is behind them – behind you.

Achieving sustainable growth 

We announced a £1.6 billion package at Budget 2013, with matching private sector contributions, to support long-term R&D in aerospace, automotive and agri-tech.

We have extended protection for the science budget in 2015/16 – part of a Spending Round which also announced £1.1 billion for capital spending, rising with inflation to 2021, including an additional £600 million to develop eight technologies where the UK can lead globally.

As part of the Spending Round we also announced an extra £185 million for the Technology Strategy Board to expand its programmes that take ideas from concept to commercialisation. This includes increasing the number of business-focussed Catapults to nine centres – the latest two covering energy systems and diagnostics for stratified medicine.

And just this weekend, we announced further investment of £150 million through the Technology Strategy Board to support environmentally-friendly building projects.

One last example: we’ve committed £1 billion in additional funding for the Business Bank to facilitate lending to SMEs, alongside innovations to free up trade finance for exporters, and a Green Investment Bank which now has £3.8 billion to invest.

A modern industrial strategy, then, is about taking a long-term approach to growth, giving business certainty about future plans so they can invest with confidence. It means providing a spectrum of support to all firms. As well as the partnerships we have developed in 11 key sectors, we continue to work closely with other sectors where the partnership approach is useful, as with chemicals, railways and creative industries. Later this year, we’ll be publishing a small business strategy, setting out a cross-Government programme to further support start-ups and help existing SMEs fulfil their potential.

Today, I can update you on several initiatives supporting business across the economy.

Announcements

First, 39 projects – including Balfour Beatty, National Grid and Everton Football Club – have now been approved in round 2 of the Employer Ownership Pilots, for which we allocated a total of £240 million. The popularity of the pilots demonstrates employers’ appetite to direct the skills agenda. From 2015-16, we will operate a fund worth £100m annually for co-investment with business in skills.

Second, I announced plans back in 2011 to improve the global competitiveness of UK manufacturing supply chains. Today, I’m pleased to announce that five projects from aerospace, chemicals, electronics and life sciences will receive over £115 million of joint public and private investment from round three of AMSCI, the Advanced Manufacturing Supply Chain Initiative. This includes a £7 million grant to capitalise on export opportunities for printable electronics – a project which will create and safeguard almost 500 jobs. To date, more than 180 organisations have benefitted from AMSCI, the majority of them SMEs.

Third, and thanks in significant measure to companies present, we are further expanding See Inside Manufacturing, which is inspiring young people about future careers. It is growing to cover 10 sectors – with a special focus on young women and minorities, who tend to be under-represented in industry.

Now, all of this is very encouraging – but we can’t rest on our laurels. The kind of growth we want won’t simply emerge of its own volition. In fact, I see a number of dangers.

Risk avoidance

One is letting up just because we have had a few quarters of good economic data. It isn’t difficult to see evidence of confidence returning, and there are positive trends in production. Taken together with success stories like the car industry and export growth in emerging markets, we have the beginnings of a recovery story. But there are risks, not least the housing market getting out of control. Recovery will not be fully established until we see strong and sustained business investment.

Another danger. It is becoming clear that the financial crash, and the long preceding period of exchange rate over-valuations and consumer debt driven growth, did serious structural damage that will take time to repair. In some cases, there has been a semi-permanent loss of skills. Supply chains have been hollowed out, which are hard to replace. There are repeated reports that firms are anxious to buy from UK suppliers in the auto sector, say, or in textiles, as onshoring is seen as economically attractive. However, they can no longer find enough UK-based companies able to supply or willing to bid. The supply chain aspect of the industrial strategy is crucial to addressing this problem and boosting UK competitiveness.

Finally, credit conditions continue to be tighter and demand more muted, especially for start up and rapid growth companies which cannot finance themselves from capital markets or from cash flow, and which lack the collateral banks demand. There has been a 25 per cent real decline in SME lending since the 2008 peak and net lending continues to be largely negative. Gradually, this is turning around. New banks are slowly emerging, and the Government’s Business Bank will catalyse new bank and non-bank funding flows.

Prompt payment

There is one aspect of the credit squeeze which could be eased if manufacturers and retailers were to take a long-term view on the importance and resilience of their supply chains. In a credit squeeze, cash is king and there is plenty of evidence that large and powerful players in the market are hoarding cash while smaller suppliers face ever longer delays before getting paid. There is at least £500 billion provided to businesses through trade credit – making it one of the most significant sources of credit in the economy. But it is important that this system works for both customer and supplier – including smaller businesses.

I am glad that many of you in this room, and the majority of FTSE 100 companies, have signed up to the Government’s Prompt Payment Code. But all businesses should take responsibility for paying suppliers fairly and on time.

We are already setting an example in the public sector, with central government settling invoices within five days. I urge all of you to see what more you can do to get credit flowing more efficiently through your supply chains. We shall look further at what government can do on this issue by strengthening legislation and through its procurement practices.

Prospects

So I have identified three problem areas weighing against some of the positive trends starting to emerge in the real economy. At the Mansion House earlier this year, I set out a vision for the UK economy a decade hence. If we are to turn the British economy around on a sustainable basis there will have to be relatively rapid growth of exports and import substitutes. There could be rapid growth in exports of business and professional services, creative industries and education, but over half of all exports are manufactured goods.

Many people believe the decline of manufacturing is inevitable and irreversible. I don’t share their pessimism. The EEF are telling us that the number of manufacturers seeing growth in export sales rose to a two-year high in the past quarter. With a big push on emerging markets and the benefits of a competitive currency, manufacturing could potentially experience export-led growth of four per cent per annum or more.

There is also great potential for import substitution through supply chains. The Automotive Council believes it can realistically achieve an extra £3 billion of UK supply. At present, UK sources meet 40 per cent of motor vehicle consumption but this could rise to 60 per cent, as in France and Germany.

An encouraging example is today’s announcement that BP and its partners have awarded over £1 billion in contracts to UK-based companies to provide services and equipment for the major re-development of its Schiehallion and Loyal oil fields west of Shetland.

The other metric I’m looking at for big improvement is Britain’s share of research and development in GDP, especially commercial R&D. One model is JLR’s expanding R&D facilities at Gaydon, which has just created the CX-17 prototype and the new aluminium architecture. Another are the new Centres for Agricultural Innovation and the agri-tech catalyst – and we should be aiming to introduce comparable centres in other sectors.

Continuing to look ahead, one of the biggest transformations will be in finance. For a generation or more, Britain has had a world-class financial centre in London operating essentially as an enclave. Multinational companies have direct access to a sophisticated range of financial products but British SMEs make do with semi-inhospitable and – currently – highly restricted bank debt finance, with minimal access to equity finance. It is possible to see the outlines of a new structure in which specialist business lenders have developed low overhead models of delivery, complementing traditional banks with rediscovered relationship-based banking and virtual markets online for debt and equity. In any event, a generation of companies will have matured that survived the crisis through self financing and are less dependent on external finance.

But perhaps the most dramatic changes will be in the labour force. Many occupations in the greatest demand today did not exist a decade ago and the same will be true a decade hence. There are some generic disciplines based on STEM and IT skills – engineering in general and computer science – for which excess demand can be predicted a long time ahead, and there are signs that, at graduate level, the attractions of those occupational routes are being recognised. The same is true for advanced apprenticeships which will reach many more SMEs. We are also likely to see a shift towards more female participation, correcting an extraordinary gender bias in the UK, judged in comparative economic terms.

More generally, the UK has ground to make up. Our growth rate for creating advanced skills puts us 20th among the 27 OECD countries. As the industrial strategy takes hold, specific skills planning will develop. Crossrail, with support from the Skills Funding Agency, has created an academy for tunnellers – a facility which will hopefully support large infrastructure projects in future. In oil and gas, the sector strategy includes plans to re-train ex-military engineers to fill current skills gaps.

I would hope that the various sector councils are able to make tangible, practical, progress in the coming year, reinforcing government-industry partnerships. I would hope, for example, to see significant development in the offshore wind, nuclear and automotive supply chains. There will be new bidding rounds for AMSCI and the Regional Growth Fund, and further funding to support investment in skills – to maintain momentum and provide reassurance that government money is not just a “one off”. With economic news improving, we cannot lose sight of the long term-task of restructuring and rebalancing.

A year from now the politicians will be getting into election mode, yet the best test of the usefulness of our work on industrial strategy is that it is election-proof – that there is sufficient support across the business world and across party lines to maintain a long-term focus. I am now optimistic that this will happen.

Vince Cable – 2013 Mansion House Speech

vincecable

Below is the text of the speech made by the Secretary of State for Business, Innovation and Skills, Vince Cable, at the Mansion House in London on 7th March 2013.

Many thanks for your invitation to speak to you a third time.

This time last year I talked about the impact of the financial crisis on business finance and the yawning gap between sophisticated global finance markets of the City of London and the underdeveloped, malfunctioning, domestic markets – particularly for SMEs. These patterns remain – and have been amplified by the continued aftershocks of the financial crisis.

In recent months, however, we have developed a variety of positive initiatives: supply chain finance for manufacturers; more guarantees for short-term SME trade finance; new forms of non-bank finance; the launching of the Green Investment Bank; a new government-backed business bank which will act as a catalyst for SME long-term credit and for new challenger banks. I’m looking forward to the FSA announcing rule changes in favour of smaller banks – who shouldn’t face the same capital requirements as larger institutions. And the Governor of the Bank of England spoke eloquently yesterday about the reforms needed in the semi state-owned banks.

At the same time, there has been an encouraging response from the private sector, with new banks and sources of funding gradually emerging, despite the difficult environment. None of these represents a single silver bullet, but cumulatively they will change the landscape of business finance. In a decade’s time banking will – I hope – be much more competitive, more diverse and more aligned with the needs of business.

Planning for the long term

Indeed, tonight, I very much want to look a decade ahead, or further. This partly reflects my training. My stint at Shell taught me the importance of standing back from the ephemera and trying to understand long-term trends; trying to think about the business environment and business decisions strategically rather than tactically. Shell isn’t alone. The best companies – Rolls Royce, Tata, Siemens, GE, Nissan – have a capacity for long-term planning and strategic thinking which puts government to shame.

The world I inhabit as a Minister is heavily influenced by the 24-hour news cycle and daily knockabout in the Commons. Long-term financial planning is a four-year public spending review and a five-year parliament. Politicians also have a duty to go beyond the standard myopic tribalism and work together – as our Coalition is doing. We also need a sensible, civilised dialogue with opposition parties – something I attempt, even though it occasionally lands me in trouble.

But short termism isn’t just a problem for politicians. Our financial markets are also obsessively short-termist. The practice of quarterly reporting may be lucrative for successful arbitrageurs and the serried ranks of financial intermediaries but it can be crippling for companies trying to invest for the longer term. It is a depressing commentary on parts of our investor community that companies that need long-term capital for technology development and investment are being pressured into buying back their own shares.

That is why I asked John Kay, together with Sir John Rose, Chris Hitchen and James Anderson to look at the issue of short termism, and we are now following through on its recommendations. Partly as a result of changes at a European level, I hope that we will soon be bidding farewell to quarterly reporting. And our executive pay reforms, which aim to restore the link between pay and long-term sustainable performance, will reinforce a more responsible long-term approach by those running our public companies.

Above all, the essence the Government’s industrial strategy that I set out in September last year is to establish a long-term collaborative approach between business and government. This is second nature in Germany, France, Japan, Korea and even in the supposedly free-market US. Businesses investing in sectors like aerospace, automobiles, energy and life sciences think and plan over timescales of 10, 20 or 30 years. Government needs to behave more like a business, planning in a long-term and strategic way.

Prediction vs preparation

So this evening, I’m asking you to think long term – to imagine the UK a decade or more into the future.

Of course there is irreducible uncertainty. Technological progress will produce new products and new jobs that we cannot currently envisage. It will be disruptive. Economic shocks; wars; political events may fundamentally change the world.

Think back, say, to 2003. Who, then, would have seen the price of oil staying above $100 per barrel for years (when I was at Shell, it was almost in single figures)? Who would have seen 10-year government bonds yielding below 2 percent? One might say the same about the collapse of the banking system, the Arab Spring, a twice-elected black President in the States.

Predicting, of course, is a mug’s game – virtually guaranteeing an undesired notoriety. It’s rather embarrassing for Einstein that he declared in 1932 that “There is not the slightest indication that nuclear energy will ever be obtainable” – worse for the late 19th century US commissioner of patents who urged President McKinley to shut down his own department because “Everything that can be invented has been invented.”

But predicting is different from being prepared and vigilant. And it is possible to see through the fog of uncertainty and envisage both bad and good circumstances for the UK.

Bad scenarios are easily recognisable in the prolonged stagnation of present-day Japan, for example, or in European countries loathe to address their longstanding competitiveness problems. The key lesson is that without sorting out and recapitalising damaged banks, without undertaking necessary reform, growth is very difficult. The Prime Minister made all that very clear in his speech earlier this afternoon.

The UK in 10 years’ time

So let me look at the more positive story and see where it takes us. Imagine a situation where recovery gradually gathers momentum. Growth is centred on exports and in particular on the rapidly growing emerging markets which we have neglected in the past, and whose growing middle classes will add trillions of dollars to world demand. Our advanced manufacturers, education and professional services industries overtake Italy and France in markets like Brazil and China and offer serious competition to Germany.

Our energy sector booms in the wake of opportunities created by a simultaneous upsurge in investment in gas and low-carbon electricity, including nuclear. Parts of north-east England and Scotland are thriving, with offshore contracting work and growing manufacturing businesses like Alstom. They take the methods they have honed in Britain around the world.

Britain is also a world leader in some of disruptive new IT based technologies and – outside the US – the UK is the go-to country for entrepreneurs wanting a supportive environment for innovation. Fenland is our Silicon Valley, with other strong clusters spreading in London’s Tech City, in Bristol, and other prominent cities.

Indeed, we see a revival of the British city, liberated by ‘city deals’, with advanced manufacturing reviving in Birmingham, Sheffield and Glasgow; media industries in Manchester, Liverpool, Newcastle and Dundee; biological sciences in Nottingham; financial services in Leeds and Edinburgh, the latter catalysed by the Green Investment Bank.

A decade from now, our banking system is largely repaired from the damage of the crash in 2008, and is unrecognisable. There are numerous small banks; the domestic and SME market is populated by mutuals like the Nationwide and the Co-op, overseas banks from Scandinavia, China and India, and innovative new channels like peer-to-peer finance.

British Universities, along with top US institutions, continue to dominate the world rankings as Chinese and other competitors fail to match the creative intellectual freedom linked to research and business which we can offer. Not just the usual suspects in HE, but Huddersfield’s work with SMEs reviving textiles, Plymouth’s in oceanography and Cranfield’s in aerospace. The world’s biggest university in South Asia is managed by the University of Central Lancashire – biggest, that is, if we exclude the Open University’s online distance learning platform, the standard mode of delivery for future university teaching.

Even a decade hence, there will be grumbles from business about the shortage of skilled workers, but there has been a revolution in apprenticeship training, increasingly the favoured career route for teenagers. Now it’s no longer just the likes of BT and Rolls Royce with first-rate apprenticeship programme. SMEs like London jewellers Jason Holt are creating their own training academies graduating hundreds of apprentices – and, as we now sit on the cusp of National Apprentice Week, the Government is continuing to provide funding SMEs to create bespoke apprenticeship programmes to help them grow.

There’s been a similar revolution in the supply of engineers, increasingly dominated by women. As I told the EEF on Tuesday, we’ve allowed a criminal waste of female talent. I’d compare manufacturing today to the NHS before female doctors began properly to fill its ranks; in the past 40 years, the number of male doctors has doubled, but female doctors have increased tenfold. This is what needs to happen in engineering. Some businesses, of course, already avoid this trap – Babcock International, for example, the engineering support services company, has shifted its recruitment to universities with a healthier gender mix, with more female graduates joining them each year.

Indeed, the transformation of the workplace in the wake of shared parental leave and flexible working gives rise to a male movement seeking quotas to prevent women from beginning to dominate the upper echelons of business, the professions, politics and the civil service. I glad that half of the BIS executive board are women, and I’ve recently written to the remaining FTSE100 companies with no women serving on their boards. I’m asking every company I meet what they’re doing to improve their recruitment practices, their retention of women and their plans to get able women to the top.

We also witness a triumph for the British view of Europe: open, flexible and outward looking. Facing the pressure of ageing populations and declining workforces, such openness will gradually be seen as a solution not a problem, just as it has always been an historic strength for the UK. All this in the context of a comprehensive trade deal achieved between the EU and the US, widened out to all comers through the WTO.

You may think I am getting carried away. But all these trends are recognisable in today’s world. Unless we think the unthinkable, we shall be overwhelmed by the pace of change.

Causes for optimism

Overall, I take a positive view of the UK’s prospects. Our core virtues as a country – our openness, willingness to change, our respect for the rules, our inventiveness – are well suited to the challenges of a fast-changing world.

And while in the short term the prolonged stagnation is painful, I can see encouraging signs in three areas. One is the falling rate of unemployment: lower than when we came into office; lower than in the US; record numbers of people in private sector jobs. Our labour markets are flexible and are working. The squeeze on real wages is not pleasant for those families affected but it is a lot better than 1930s-style mass unemployment. I have great respect for the pragmatism of employees in industry, whose willingness to work shorter shifts has kept businesses going. Unlike previous recessions, we are not heading towards a generation on the scrap heap.

A second cause for hope is the rapid growth of Britain’s export earnings in the major emerging markets, particularly Russia, China, Brazil and India. We started from a low base after a decade or more of serious underperformance. But a combination of better support from UKTI, a competitive exchange rate and some superb British companies with great products – shoemakers Loake and Royal Crown Derby, the fine china manufacturers among them – is working.

And third, there is an upsurge in entrepreneurship. Business start ups are at record levels. Communities and students run numerous entrepreneur societies, like the ones I encountered recently at Nottingham University. The number of people engaged in entrepreneurial activities has increased from 6 to 9 per cent in the last three years. This is one of the easiest places in the world to set up a business, and more and more people are taking advantage of that.

The role of government

But to provide a supportive environment, the government needs to make a clear commitment to long-term stability. As I stated earlier on, our financial horizons are extremely short-term by the standards of any large business, seldom committing to more than a couple of years ahead. In some areas this is unavoidable, of course, but for economic policy it represents a big missed opportunity. And while the number-one ask from business when this government came together was to sort out the chronic uncertainty caused by our huge deficit, it makes no sense to do this only by exporting instability into the private sector – nor other parts of the public sector.

As an illustration, the extraordinary performance of British science, which owes so much to individual genius and endeavour, has benefited from this government’s far-sighted commitment. We have maintained ring-fenced spending at the level we inherited from the previous administration and allocated significant amounts for capital investment. For example, public funding for the new Crick Institute, alongside universities and charities, will enable future generations of scientists to conduct path-breaking medical research – allowing time for the fruits of basic science to emerge and then benefit both patients and the economy.

In a similar fashion, my chief political project last year was to establish a firm case for an industrial strategy – words previously banished from Whitehall. That case has been won – and I think is now broadly accepted on Right and Left. Work is now well underway with industry to develop long-range strategies for 10 important sectors by this summer. As they emerge, it will become clear that they are not all about extra money, but rest on a structure of cooperation with industry: in procurement, regulation, export and trade policy – indeed, every area where government interfaces with business. But, as with science, the spending element is still important.

In the coming weeks, I’m confident that the government will demonstrate its commitment to long-term industrial investment – investment which pulls in a private sector commitment many times larger; which supports essential areas of industry; which proves to business and to investors that our strategy is no flash in the pan and that Britain intends to deliver on its promise to rebalance its economy. Compared to the often haphazard and ad hoc way such support has been given in the past, this will deliver far better value for money.

Conclusion

I say again that there is nothing to prevent Britain reasserting itself as a highly skilled, innovative, exporting nation. And just as business success requires planning and agility, so does effective government. Hoping for the best won’t cut it.

Vince Cable – 2012 Why Africa Matters Speech

vincecable

Below is the text of a speech made by the Secretary of State for Business, Innovation and Skills, Vince Cable, on 8th October 2012 at Lagos Business School in Nigeria.

It is a real privilege to start my visit in Lagos – a city which provides an impressive example of the entrepreneurship and the vibrancy of Nigerian/Sub-Saharan African economics.

Perhaps I should start on a personal note, so that you know where I come from and also to reassure you that I am not just repeating the mantras of a visiting Minister but speak from conviction.

I was last in Lagos on business visits in the mid 1990’s during the dark days of military rule, preparing a series of Nigerian scenarios for Shell as part of long-term planning. It hardly needs saying that the political and economic environment and outlook are now vastly better.

One of my scarier episodes was making a presentation of these scenarios to General Abacha and his military high command at an economic summit in Abuja. One of my stories I called the Road to Kinshasa: essentially a parable of how Nigeria could end up if it continued in its, then, trends (and which would inevitably lead to Shell and the investors disengaging from the country). My scenario also described an altogether happier outcome in which political and economic reform unleashed a period of sustained growth – which I estimated at 6% per annum: perhaps a little conservative seen a decade and a half later.

To be fair to the late President he listened politely and even burst into laughter when one of his Ministers – the finance minister – angrily interrupted me to say “there is no such thing as corruption in Nigeria”.

These visits saddened me since I could see the wasted potential. Indeed, I have always been an optimist about African development since I first worked in post-colonial Africa in the mid 1960’s, in Jomo Kenyatta’s Kenya as a civil servant in the Finance Ministry. Africa then, had – to say the least – plenty of challenges. South Africa and Rhodesia were still under racist governments; Portugal’s colonial engine was intact; the Congo was a disaster area; Nigeria was beset by civil war; shiny new regimes in Ghana and Guinea were badly tarnished. A book by the French agronomist Rene Dumont, A False Start in Africa, captured the spirit of the time. Yet it was clear that there was also vast entrepreneurial energy amongst smallholder farmers and businessmen as a rapidly growing, young, educated generation wanted change.

I later worked closely with people like Chief Emeka Anyaoku the inspirational and greatly respected Commonwealth Secretary General on the problems and potential of African development. In the last decade that potential has begun to be realised in many parts of the continent including Nigeria. One statistic alone would make any future investor sit up and take notice. There are over 40 million mobile phones in Nigeria.

The Economist newspaper ran a cover story with the title ‘Africa – The Hopeless Continent’. That was 10 years ago. Today, this has been replaced by ‘Africa Rising’ (last December’s issues). During this time six of the world’s 10 fastest growing countries were African. In 8 of the past 10 years Africa has grown faster than east Asia. Nigeria has managed 8% growth recently. The IMF expects Africa and Nigeria specifically to grow by nearly 6% this year, even allowing for the knock on effect of the northern hemisphere’s slowdown. This is about the same as Asia. Looking beyond 2012 there is every reason to believe that these rates of expansion can be sustained despite the lingering effects of the 2008 global financial crisis and weak growth in richer countries.

In contrast to past global downturns Africa has proved resilient this time around, experiencing both a smaller dip in growth and faster recovery. Indeed economic performance and prospects in sub-Saharan Africa have undergone a fundamental change since the mid 1990’s. Following a period of negative per capita growth between 1980 and 1995, sub-Saharan Africa has recoded an average increase in per capita GDP of close to 3% since 1995.

Several factors explain this turnaround. The wave of democratisation has been accompanied by more coordinated economic policies, leading to more market-orientated, business-friendly economies and more budget discipline. This in turn has resulted in significantly lower debt burdens. Nigeria’s reforms to the budget especially have undoubtedly made a difference – it has one of the world’s lowest debt to GDP ratios in marked contrast to the debt crisis three decades ago which led to rescheduling and the IMF.

As a result, Africa and Nigeria specifically have been better able to withstand the impact of the volatility we have seen in the global economy. High commodity prices and fewer links to the financial sector have certainly helped. Until recently resource rich countries likes Nigeria suffered from the so called ‘Dutch disease’ or ‘resource curse’ as oil wealth was wasted, and productive farming and industry were undermined by an over valued exchange rate. These problems remain but are less acute.

Clearly western markets are facing uncertainty at the moment and it is possible that even the Asian markets may have peaked for now. Africa stands to benefit and Nigeria, if recent growth trends are maintained, will be Africa’s largest economy before 2020.

 

The Business Enviroment

Nevertheless, there is no room for complacency. As you are well aware the problems are vast. In Nigeria 100 million out of 160 million are still ‘extremely poor’ on any international comparative basis and unemployment is endemic. And while the entrepreneurial energy of at least this part of Nigeria is palpable, Nigeria ranks 133rd in the world for the ease of doing business. All this requires actions to boost infrastructure, increase transparency and strengthen legal protections, in order to expand trade and attract inward investment.

The positive actions taken across Africa in response to the World Bank’s ‘Doing Business Index’, encompassing a number of areas such as business registration, land acquisition and tax reform are powerful symbols of that commitment.

I welcome the Nigerian Government’s commitment to reform. Our government is also committed to working with Nigerian authorities to make the business climate here more attractive to investors. Improvements in power supply, transportation and legislation that protects business investment can make a real difference to Nigeria’s already impressive growth rates.

The Petroleum Industry Bill is of particular significance for Nigeria. The bill has the potential to enhance transparency and accountability in the oil and gas sector. This would send out the strong message to international investors about Nigeria’s willingness to do business. It would also ensure that the Nigerian people can see how the natural wealth of their country is managed. However, this will only be achieved by a well-crafted bill that sets robust and transparent legal frameworks in place. The issue here is not what is good for the oil companies but what best helps the country maximise its potential. At present, even with recent recovery to 2 million barrels per day it is operating well below sustainable production levels.

The Nigerian Government has also signalled its willingness to take a tough stand on corruption – the collaboration between our two countries to bring about the prosecution of James Ibori sent out a strong message that corruption will not be tolerated. The recent communique agreed between Nigeria and the UK reinforces our joint work in this regard.

But the UK understand its responsibilities too: the UK bribery act sets out a zero tolerance policy on corruption and in part this is a message to UK investors that they must play by the rules in Africa and elsewhere.

 

UK/Nigeria Bilaterial Relations

This work is creating strong foundations that will enable Nigeria and the UK to build on the relationship that we already enjoy – politically, economically and culturally. Indeed in 2011 the UK’s exports of goods and service to Nigeria increased by 13% and trade overall grew by 35%. We are on track to meet our shared commitment to double trade to 8 billion by 2014 from 2010. Key sectors include petroleum and its associated product, industrial machinery, education, transport equipment and natural and manufactured gas. The business delegation that is accompanying me is active in these sectors.

The UK wants to work with Nigeria and form productive partnerships. The Nigeria/UK supply chain engagement programme has brought together UK and Nigerian companies to grow local capacity and to support development of Nigeria’s hydrocarbon resources.

This initiative has been successful as it was fully supported by Government and trade organisation stakeholders; Nigerian National Contact and Monitoring Board and PETAN (Petroleum Technology Association of Nigeria). UK companies have been able rapidly to expand the value and range of contracts by combining UK experience with local Nigerian capability. Larger UK companies including Wood Group, Invensys, Swagelok, Aker Solutions, Bel Valves, Fugro, have found main partners and supply chain companies to provide essential local sub contracting services and commodity supply to deliver expanded contracts. Many of the UK companies that have successfully located partners are SMEs that would otherwise find the time and cost to develop a market presence in Nigeria too challenging. So far, there have been 47 new partnerships between UK and Nigerian companies.

In addition, there are other areas where we can build new links for our mutual benefit. These include agriculture, ICT and security.

 

International Students

One area where the UK has a particular expertise and long association with Africa is in the area of education and skills. I would like to say a little more about education, in particular, as it is important to emphasise that the UK is keen to welcome international students to study at our universities – and the UK university degree is a sound investment for discerning students. I want to disabuse anyone of the idea that Britain does not welcome Nigerian students. We do.

The UK is the second most popular nation worldwide for students deciding to study abroad. According to the QS University rankings 2012, the UK is home to 4 of the world’s top 6 best universities – Cambridge, UCL, Oxford and Imperial College London – and more than 30 of the top 200. Once in the UK over 80% of all students rate their teaching and learning experience as good or excellent.

Furthermore, UK educated graduates achieve higher average salaries than those who study in their home country – not just because of the quality of our degree programme but through the process of improving their English language skills.

Perhaps most importantly, the UK offers a warm welcome to international students. We know that people can get a decent education in any number of countries. This is a competitive market and we will not take overseas students for granted. I was pleased to learn recently that Nigerian citizens are the third largest contingent of overseas students at UK universities.

Whilst student exchanges are important, opportunities for collaboration between Nigeria and the UK extend significantly beyond that. UK institutions can offer expertise in Governance models, professional development and curricular design, construction, management or financing. Many education systems, whether in emerging or developing markets, have complex needs. For them, we are adopting a new approach which we are calling system-to-system, facilitated and coordinated by the UK Government. The collaboration could be in any area of education, be it higher education, further education and skills or a range of non-education specific services such as consultancy, technological expertise or architecture.

Our countries are forging closer academic links in a number of other ways such as the education partnerships in Africa funded by my department and managed by the British Council, which has supported 72 projects involving 40 universities and 15 further education colleges in the UK, and 69 and 16 further education institutions in sub-Saharan Africa. Over the 18 months of the scheme, 388 African academics and students have visited the UK and there have been 305 visits from the UK to African partner institutions.

The UK’s Open University is leading an initiative to develop the distance learning skills of a group of academics from 7 universities in Nigeria. The ‘train the trainers’ is designed to help the 7 universities to expand their own distance learning activities and expand open distance learning capacity in Nigeria. The Universities are the Federal University of Technology (Yola), the University of Abuja, the University of Lagos, the University of Ibadan, the University of Maiduguri, the Obafemi Awolowo University, and the National Open University of Nigeria.

Professor Steve Swithenby, who is leading the initiative, explained, “each year there are about 800,000 qualified students who can’t find a place at a Nigerian university. Distance learning can provide a way forward for these young people. It will allow them to study while earning a living and will allow Nigeria to develop its economy from its present resource extraction and agricultural base.”

Last year more than 400,000 international students enrolled at UK universities. For the first time this was exceeded by the record 500,000 people who benefited from British higher education while living abroad.

To return to the point I made earlier, there have been suggestions that the UK is reducing the number of student visas it issues. I want to make it clear that in reality there is no cap of any kind. If an individual has the potential to benefit from a UK education and the ability to learn in English, our universities will look at their application with real interest.

 

Conclusion

We are committed to a relationship based on openness, equality and friendship, with Nigeria and with other nations right across the continent.

I have every confidence Nigeria will only enhance its position in the global economy and its reputation for dynamism in the years ahead. I wish you every success.

Vince Cable – 2012 Mansion House Speech

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The below speech was given by the Secretary of State for Business, Innovation and Skills, Vince Cable, on 7th March 2012.

I would like to thank the Lord Mayor for inviting me to speak for the second year in succession at this event: an annual coming together of the City and rest – and best – of British business.

I would like to pay tribute to you, Lord Mayor, for your unstinting efforts to promote British business around the globe. During your term of office you will be visiting many of the most important emerging markets in South East Asia, Central America and the Middle East, showcasing what London and the UK has to offer. You do an outstanding job and I am grateful.

Until this Government, Secretaries of State seemed to rotate more frequently than Lord Mayors of London. We are taking a more settled and long term view. Some of you may regret that in my case and feel you are stuck with me longer than you would wish. But the advantage is a consistent approach and learning by experience.

I will start as I did last year and will in future years, by reminding everyone of the underlying and unifying purpose of the Coalition: to cut the deficit and sort out the country’s finances. In the case of my own department’s contributions to that difficult and painful task that means taking a 25% cut, while still delivering the science, skills and business support this country needs. We are doing that.

And across government, through similar efforts in every department, we are succeeding – the deficit is falling, and our interest rates well below where they were when we took power.

But we cannot emerge from this fiscal crisis without growth. This is the other overriding concern of the Coalition. And here we have just as strong a story to tell. Within BIS, we prioritised apprenticeships – record numbers over the next few years. We have defended the Science resource budget, despite all the fiscal pressures. We have launched the first Catapult centres that will drive technological innovation. We are setting up a Green Investment Bank to catalyse billions of pounds of low carbon investment. We have refocused UKTI on the emerging economies. We are gradually putting in place a strong industrial policy to reverse years of decline in manufacturing and position ourselves well for the growth opportunities of the future, be they in low carbon technology, creative industries and design or aerospace.

Elsewhere we are simplifying the planning system, putting business taxes on a downward trajectory, and lifting millions out of tax.

None of these steps are easy, but over the long term I am confident they will pay off.

In the short term, we know things are difficult. Soaring energy prices; chronic uncertainty in the EU; our country still recovering from an historic debt binge. No-one says it more often than I do: there will be nothing easy about this recovery. But with the government getting its own house in order, and backing business every way it can, I am confident that we are well placed for the future.

However, I am concerned that there is a missing piece of the puzzle.

It is well known that growth requires the lubrication of private finance. That is my subject tonight: the relationship between the global financial services industry of the City on the one hand and on the other the financing needs of what I loosely call the “real economy” of the UK: the tens – hundreds – of thousands of firms which together generate the goods and services which make up our national economy.

You, yourself, in your speech made an essential point when you said the relationship should be close and complementary: financial institutions hoovering up savings which are then deployed by business in productive uses. It sounds simple. But it isn’t working as it should, at least outside the world of the big corporates.

I would go so far as to say that we have a financial services industry in London that plays in the Champions League, with overseas owners to match, and a British business finance system which struggles in the second division. We have some of the world’s smartest, most creative, financiers, doing brilliantly in the City or Canary Wharf while there are also smart creative British entrepreneurs – or even run-of-the-mill smaller businesses – still struggling to raise finance to operate and expand. They depend, as one put it to me the other day, on the three ‘Fs’: friends, family and fools – shunned by banks, unable to access equity markets.

Let me try another colourful metaphor. I am struck by a parallel between the world I am describing and the world of the oil industry I left to go into Parliament. The upstream oil industry deploys the world’s best geologists and petroleum engineers: there are high standards of professionalism – and also high pay – but outside the perimeter fence in many countries there is a shortage of petrol, power supplies are intermittent and there is only a tenuous connection between the enclave of a global excellence and the local economy.

Many in the industry would (and did) say: that’s nothing to do with us. We pay shedloads of money to the Government in tax; why should we worry about what happens to the money and the country in which we operate? I exaggerate, obviously, for effect, but some of you will recognise some similarities, a similar disconnect, between the global financial markets of the City and our local economy in the UK.

The rational response is not to reject the oil industry – or London’s global financial centre. Indeed I regard the internationally traded activities of the City as a major plus for the UK. Like the oil industry, it is volatile, but properly managed and regulated it is a major revenue source for Government and a valuable export. Lord Mayor, you are absolutely right to talk about the City being a ‘unique selling point’ for UK PLC. Indeed, when I have been involved in trade diplomacy on behalf of UK PLC, in India, China, Brazil, Russia, Turkey, Vietnam, Indonesia and Japan in my capacity as President of the Board of Trade, I speak for City banks and insurers, lawyers and accountants, as well as manufacturers.

What does concern me is a disconnect with the rest of the economy.

And this cleavage between the financial sector and other businesses isn’t a new concern. Winston Churchill’s first big job in government was doing what I currently do, a hundred years ago, in the great liberal reforming administration in which he worked alongside the Chancellor, Lloyd George. Later, as Chancellor himself, Churchill’s frustration with a business environment that was proving devastating to traditional industry saw him make his much quoted comment about a desire to see industry content and finance less proud.

I suppose, actually, this could be described as an early form of ‘banker bashing’. But this Churchillian prose was a more eloquent description of what we today call rebalancing – and a recognition that these two great sectors are not separate but intimately linked.

What we face today is a modern version of this imbalance between the world of finance and the real economy, made many times worse by the 2008/9 banking crisis and its aftermath. Let me try to disentangle the two issues. The longer term problem is the big gap between small enterprises – which normally function on the basis of the owners’ equity and credit from banks – and the big quoted companies which can raise equity capital from stock markets and debt from capital markets. The gap – which was described in the interwar period as the Macmillan Gap after the Macmillan Commission which was set up to study it – relates to thousands of midsized but high growth companies which could not access equity and capital markets.

As the CBI has recently argued very forcefully, the problem remains. It is especially acute for innovative firms who find themselves trapped in a “valley of death” unable to raise funds to develop a proof of concept and cover the risks of early stage growth. These firms are often the ones most effective at producing growth and jobs. Last year saw the launch of the Business Growth Fund promoted and financed by the UK banks to the tune of £2.5bn, and it is now starting to invest: a laudable welcome initiative but modest in relation to the scale of the problem.

These problems have been overshadowed by the fallout from the banking crisis. As with every other banking crisis throughout history a period of exuberant, reckless lending is being followed by a period of deleveraging and credit restriction – a problem particularly acute in the UK where the size of our banking sector was – and is – vast compared to the underlying economy.

So, several years after the crash, we still have a big headache. The Governor of the Bank of England warned only last week that lending to small companies was the one piece of the puzzle missing for recovery. And although the approval rate of bank loans is high – 75% for SMEs – business remains frustrated by lack of access to capital of all kinds. The small number who actually get rejected are outnumbered by those who never try, perhaps scarred by recent experience, or simply scared of what might go wrong. For those who do get a loan, the frustration is often about cost and conditions.

This leaves a yawning mismatch between the needs of productive business and the finance available. Banks are trying to reduce risk. But business lending, especially to SMEs, is risky. Exporting to emerging markets is risky. Innovation is risky. I hardly need to tell a room full of successful business people that a flight from risk is a flight from business.

The clash between these two contrary aims is what has caused such frustration. I would urge you to listen and understand the frustration which is out there. Wherever I meet groups of business people around the country I am given fresh anecdotes about how hard it is to deal with the banks, how few choices there are, how swift and arbitrary the treatment can seem. I hear this weekly in my constituency surgery. I hear it from academics, business titans and even the right wing tabloid press, usually the first to scold politicians like me for interfering in business.

And quite apart from anecdotes, the regular analysis of lending trends by the Bank of England shows the seriousness of the position. The message is a simple one: Britain’s recovery is being imperilled by the parlous state of the very institutions that caused the crisis in the first place.

Policy makers have been grappling with this problem now for several years but there are no easy answers. Let me review the options.

First, we can sit patiently waiting for normality to return – markets to return to their senses and new good banks to emerge – the 19th century laissez faire solution. The problem is that, meantime, the recovery is held back.

Second, some argue that we should soften, for the moment, tough capital requirements on SME lending – adopt the “counter cyclical” regulatory standards that are often being discussed. A sensible idea, although one rendered legally difficult by our need to keep to international standards.

Third we can browbeat and beg the banks to lend more to business when they don’t want to. That is why we negotiated the Merlin agreements last year. It was criticised as naive and ineffectual, but I think it did have some beneficial effects in prompting more SME lending than would otherwise have occurred and has genuinely prompted a change back to business relationship banking in some banks. It has, in any event, run its course.

Fourth we are often urged to toughen up the Merlin approach for the partially state owned banks. As the Daily Mail puts it, “make the banks lend.” I have been an advocate of this approach; indeed it is embedded in the Coalition Agreement. But I recognise there are major consequences. There has been a lot of interest in an option I floated in a private letter to the PM and DPM about creating a British Business Bank out of RBS. Indeed a lot of businesses I speak to have been supportive of such an idea but this would not be straightforward. It would almost certainly be necessary to lengthen the period in public ownership. It may well mean state-controlled banks being able to lend at cheaper rates than new commercial banks, thereby affecting the development of more diverse finance. And even if they did these things, we would run into problems with EU state aid clearance.

Our focus at the moment is on credit easing where the government uses its own access to currently cheap bond finance to support cheaper and hopefully more plentiful bank credit. The Chancellor spoke about this yesterday to the EEF and confirmed that the scheme would be up and running by the Budget.

And last, the government can try to absorb some of the risk of lending. There is a variety of small schemes, led by the Enterprise Finance Guarantee Scheme, under which the government underwrites a share of the loan where, for example, there is insufficient security. We have venture capital funds that co-invest with the private sector; various measures to support export credit; schemes funded by the Regional Growth Fund to give firms the equity strength to borrow.

So no-one can deny that the Government is taking this problem seriously! We feel that we have shown our commitment, but also recognise that we cannot do it alone.

A different and longer-term approach to this whole problem is needed: one that harnesses the positive qualities of a premier league financial sector down to ordinary businesses; that provides British businesses with finance they need to survive and thrive. To bring UK business finance up to the higher divisions

That is why I have asked Tim Breedon, CEO of Legal and General, the Chairman of the Association of British Insurers, to lead a Taskforce to examine this question. How do we re-shape the finance landscape to make it serve better the needs of British businesses.

The arguments for diverse sources of finance are strong. We have seen the risks of over-reliance on bank lending. The UK needs a well-functioning non-bank ‘safety valve’.

Tim’s approach has been very wide-ranging. He has led an industry Taskforce bringing together businesses, investors and advisers. They have mobilised many experts, across the UK, to provide evidence and ideas. I applaud this level of co-operation and believe it essential to deliver the changes needed. Making it work depends substantially on business, and particularly the financial community, being positive and creative. The problems are not intractable, but will take positive thinking and creativity to solve.

The Taskforce is looking at ways to allow more businesses to raise finance directly or indirectly from capital markets. It is looking at how individuals are already finding ways to invest directly in businesses, through new and innovative channels. It is looking at how businesses themselves can fund other businesses, perhaps through their own supply chains. It is learning from what happens around the world; in the US, where trade finance is four times more significant than the UK; in Germany, where I’m told the state bank KfW provides a ‘Heineken Effect’, reaching the parts of business that other markets don’t reach.

I greatly look forward to receiving the Taskforce recommendations. I have encouraged them to be bold. I hope their work will represent a turning point in UK business finance.

My objective is clear and straightforward: to improve Britain’s finance landscape for the benefit of businesses and investors. I believe we need to seize the opportunity created by the crisis, to make a big difference; to tackle the long-term as well as short-term problems. Our government has an opportunity created by the crisis environment in which we operate, to make a big difference and tackle not just the immediate problems of the credit crunch but -with your help – to narrow the divide between finance and productive business which has existed for generations. To do that, we need your ideas, creative thinking and practical support.

Vince Cable – 2010 Speech to Liberal Democrat Spring Conference

vincecable

Below is the text of the speech made by Vince Cable to the Liberal Democrat Spring Conference on 13th March 2010.

I have a very simple message.

We, the Liberal Democrats, were right about the financial crisis.

We warned of the dangers and we led the debate when the crisis came.

And now we have a clear vision for the future of the British economy.

The Queen is said to have asked why no one warned about the crisis in the banking system. Actually, we did.

Ten years ago a group of us, Lib Dem activists, fought the demutualisation of building societies: a consequence of Conservative legislation which led to the disasters of Northern Rock, Bradford and Bingley and HBOS.

We told Gordon Brown to curb the excess profits of banks which were dependent on a taxpayer guarantee.

We warned him for years that he was in denial about the build up of household debt and the bubble in property prices. He took no notice; nor did the Conservatives.

But we were right.

And when financial disaster struck we insisted that there must be no nationalisation of losses and privatisation of profit: a point belatedly grasped by the government and even more belatedly, and reluctantly, by George Osborne and the Tories.

The government’s economic record speaks for itself: remember the phrases ‘no more boom and bust’, ‘prudence’, ‘Golden Rules’ – all abandoned.

And standing amid the wreckage of the economy Gordon Brown sounds more and more like Mr Ashley Cole saying – give me another chance.

What the public wants to know is who can guide the country out of the present morass: the broken, discredited, banking system; the deepest and longest post war recession, whose effects are far from over; and levels of government borrowing which are not sustainable.

We can.

We have deep, long term problems: an overdependence on banking; an obsession with property over productive investment; a yearning for high, Scandinavian levels, of public spending financed by low US levels of tax; and a financial aristocracy which regards tax paying as something for little people not themselves.

Let me make no bones about it – the challenges are enormous.

I start with the banks since they have been at the root of our recent problems.

Not all bankers were greedy or stupid, but plenty were and they have caused immense economic damage.

The damage continues because the banks have swung from the reckless over-lending which fuelled the boom to conservative under-lending deepening the slump.

Thousands of sound and solvent small and medium sized companies are being slowly throttled because they can’t get credit or it costs too much.

Banks do have a funding problem: all the more reason not to squander what they have on bonuses.

Banks, bailed out by us – the taxpayer – are also building up their balance sheets in readiness for an early re-privatisation instead of supporting British business.

RBS has fallen short of its legally binding lending target to British business.  Lloyd’s won’t even tell us.  That’s simply arrogant.

I challenge them to give us the figures and Alistair Darling to force them to if they refuse.  Many thousands of British jobs depend on it.

The need for radical reform doesn’t end there. Banks with global ambitions that are guaranteed by the British taxpayer cannot be allowed to run excessive risks again.

The Governor of the Bank of England has to be supported in his constant warning that banks that are too big to fail are simply too big. They have to be broken up, to increase competition and protect the taxpayer.

The banking collapse and recession have dug a deep hole in the government’s finances.

The next government will have to deal every single day with the consequences. The growing worry about sovereign debt means that there is no hiding place. Nor should there be.

It grates to have the economy held to ransom by currency speculators and the clowns in the rating agencies who missed the Icelandic crash and so badly misjudged the safety of banks. But any Government, of any hue, will have to depend on the markets to finance its deficit.

We must and will be fiscally responsible.

Unlike the Tories and their cronies who want to create a financial panic and run on sterling to frighten people into voting for them on May 6th.  Playing fast and loose with the financial stability of this country for political gain – destabilising the markets – is dangerous, irresponsible and wrong.

It is also irresponsible to engage in a phoney war over cuts weeks before an election that will affect the lives of millions of people.

The Government is trying to present itself as the party of spending and public investment but growing numbers of government scientists, FE college and university staff are currently being sacked.

The Tories were trying to project their economic team as ‘Slasher’ Osborne and the Hard Men – until David Cameron executed a giant slalom down the Swiss ski slopes and announced that cuts are off the agenda this year. For now.

Or at least that’s what I think they said.   I’d love to attempt a critique of the Tories budget plans but I have no idea what they are. I think the present line on the budget is: trust us and we’ll tell you after the election. Well I’m sorry but that simply isn’t good enough.

We have to be frank with people about the difficulties ahead.

Spending cuts must not be forced through too soon, making the recession worse. That is not just my view – Sir Alan Budd, the Conservatives’ designated head of fiscal policy thinks the same.

The timing and speed of cuts must reflect the state of the economy, not political dogma. But cuts there will be. We have spelled out some of them.

Serious public sector pay restraint for the next two years: no one with a pay rise over £8 a week and no bonuses at all.

Ending government contributions to the Child Trust Fund and cutting tax credits for high earners.

Axing unaffordable defence contracts such as Eurofighter, and the Trident replacement.   And others, subject to a rapid defence review.

Scaling back programs like HomeBuy, cutting back RDAs. Taking out tiers of burdensome regulation of local authorities, and scrapping undemocratic regional government.

Slashing a bloated central bureaucracy – kicking the consulting habit – and ending illiberal and costly government data bases: like ID cards and Contact Point. And we continue to look across all government departments for further savings. There can be no ring fencing if we are serious about getting the public finances back on track.

And there will be a levy on the profits of banks.

So far we have identified over £15bn per year of savings, most of which are to reduce the structural deficit and which we will be setting out in full at the time of our manifesto.

But again, we need to do more.

A Liberal Democrat Government would conduct an urgent public spending review. Not Tory butchering behind closed doors.

We will identify priorities and then debate them publicly.

It’s right and fair that the people who are going to be affected by these changes get to have their say.  That’s Democratic.  That’s open. That’s Liberal.

Cynics say to me: how can you possibly talk about making economies when the voters want to be promised lots of freebies?

But it is a massive mistake to underestimate the British people.

They don’t want to be insulted and patronised by politicians they don’t trust telling them that two plus two equals five, because five is a bigger number than four. Or that all of our problems will be solved by painless ‘cutting waste’.

Our programme is different not just because it is more transparent but because it offers two things our rivals can’t: hope and fairness.

The hope derives from a commitment to invest part of the savings more productively in sustainable forms of growth which creates jobs.

Without growth there is no new money to pay down government debt. But it must be sensible growth which doesn’t depend on consumer spending sprees, destroying the environment or the roller coaster of financial gambling.

We want a Green New Deal. Investing in jobs by improving our homes and building more social housing. And we will set up an infrastructure bank to invest in big projects like railways and renewable energy.

And fairness is crucial.

The public will accept austerity for a time if the burdens are fairly shared.

They will not accept it from a government that imposes hardship on the majority while rewarding rich cronies, grovelling to tax exiles and non-doms and ignoring the widening inequalities in income and wealth.

So we will change our unfair tax system.

3.6 million people who earn less than £10,000 will no longer pay any income tax at all.

Pensioners will be £100 better off and the average person’s income tax bill cut by £700.

We will pay for the tax cut by blocking tax loopholes that favour the wealthy and taxing their wealth in their mansions worth over £2 million: in other words the people who profited from the boom.

People are desperate to see the back of this Labour government. But they don’t want the same old Tories. And make no mistake they are exactly the same.

There is an alternative.

In just over 50 days there will be a general election.

We know that people want to vote for a party that will radically change our economy, for the better in a financially responsible way.

Our job is to show them we are that party.

Our job is to make sure that on May 6th they vote Liberal Democrat.

I know we can.  With Nick’s leadership, with your help and work – and your passion and your belief – we will.

Vince Cable – 2010 Speech to the Green Alliance

vincecable

Below is the text of the speech made by Vince Cable, the then Liberal Democrat Shadow Chancellor, to the Green Alliance on 1st March 2010.

Thank you for the kind invitation to speak to you.

The fact that you have invited me I take as a challenge to demonstrate that the Liberal Democrats see the environment in holistic terms: not as a separate set of concerns but connected to mainstream economic policy. I am also aware that I am following in the footsteps of Mr George Osborne. I see that, since that meeting, the Tories have deleted the environment from their list of 10 Reasons to Vote Conservative. I don’t know what you did to him but I can assure you that I won’t react in the same way. The environment – defined as part of a sustainable economy – will be a major plank of our election message.

When you mark your card after the beauty parade of political parties may I suggest that depth of commitment is not measured only, or even mainly, by the number of boxes which the parties tick in terms of policy statements. To explain the Liberal Democrat position on the environment, I go back a generation to the late 1970s. At that time, I wasn’t involved in Liberal politics; I worked for a Labour Minister, John Smith. I was however intrigued by an earnest group of people who came round my local streets in Twickenham collecting bundles of paper for recycling. In truth, I think I regarded them as rather loopy. But they weren’t a joke. A few years later they wiped out the local Labour Party, defeated the Conservatives and, having taken over the council, launched a pioneering drive in municipal recycling which we now regard as a basic function of local government. And twenty years ago when climate change was still a subject confined to the scientific journals Paddy Ashdown asked me – I had just become the candidate for Twickenham – to set up a group looking at the issue, out of which came the ideas for green taxes on which we have continued to build. The Green Fiscal Commission we regard as the best source of new thinking on the subject.

Perhaps I could indulge in a few more personal recollections: not to personalise the arguments but so that you are clear where I am coming from. My starting point is that of a fairly hard-nosed economist whose formative years were spent working in or with developing country governments in Africa, South Asia and Latin America. I had a pretty negative view of conservationists who seemed obsessed by preserving animals and views for rich, white, people to look at while keeping the local population in a romanticised traditional lifestyle. I saw my job as identifying ways of helping an expanding population of poor people to improve their living standards. And I regarded as economically illiterate the Club of Rome, anti growth, theorists whose obsession with raw materials running out took no account of prices. I confess that I continue to trail various environmental heresies with mixed results. Some years ago I was ranting about the fallacy of the concept of ‘food miles’ at a public meeting and seriously annoyed a farmer in the audience, a lady with strong, green, views. The argument continued after the meeting but it was resolved; we are now very happily married.

But my first encounter with serious environmental thinking was as part of the small team which worked with Mrs Brundtland to produce Our Common Future in the mid-1980s and which first launched the concept of ‘sustainable development’. ‘Sustainable development’ has become a mantra we all now use. But it emerged from fierce debate between those, mainly from developed countries, who wanted economic growth slowed down to take account of environmental damage and limits, and those with a developing countries standpoint, including me, who wanted economic growth speeded up to reduce poverty. ‘Sustainable development’ was an ideological compromise – a plea for growth which respects the environment. The underlying tension remains and is reflected in the way different views of the EU on the one hand and China and India on the other at Copenhagen. ‘Converge and contract’ – the compromise formula for climate change – is designed to resolve that tension but agreement is a long way off. And both sides are right. The continued growth of greenhouse gas emissions threatens serious consequences for the next generation. But the rapid growth achieved in China , especially, and India in the last three decades has lifted hundreds of millions out of poverty and there is an enormous, understandable, appetite to continue.

I moved from Brundtland to work on the first of the major intergovernmental reports on climate change to Commonwealth Prime Ministers and worked with the East Anglia scientists and others who were trying to raise awareness of the issue over two decades ago. I was persuaded of the need to take climate change seriously – as was Mrs Thatcher, one of the Heads of Government to whom the report was presented – by the rigour of the climate scientists: stating that there was a problem but always acknowledging uncertainty and the range of error; never overstating the case.

No one could now complain about lack of awareness of the climate change issue. But I worry about the damage done by failure at Copenhagen and the process of rapid political retreat now taking place, particularly in the USA. The underlying problem is that climate change is an elite project with a narrow and thin political base. It depends critically on public trust in science and scientists. That trust has now been dented. I know that the sceptics are employing every dirty trick in the book and are wildly overstating the significance of a few pieces of slipshod work and exaggerated claims. But much damage has been done to trust in climate science. I don’t agree with a lot of George Monbiot’s work but he was absolutely spot on in his tough response to the slippage of scientific standards. Scientists complaining about emails being stolen and the burden of FOI requests are behaving like the more obtuse MPs during the expenses crisis.

What is now required to restore trust is to reassert the importance and values of science: making it clear that man made global warming is not a fact but a scientific hypothesis with strong evidential support; that there is a lot of uncertainty about magnitudes and impacts; but that the costs of preventive action are likely to be much less than the cost of climate change if it materialises. Climate science must be open to challenge, like all good science. It is not a religion. And critics, however tiresome, have to be treated with courtesy not abused (I can’t be the only person who takes deep offence at the term ‘climate change deniers’, equating sceptics with neo-Nazi holocaust deniers). Those of us who are still convinced that climate change is a major challenge have to reflect that humility if the arguments are not to be lost, irretrievably. What I can assure you is that the Liberal Democrats will continue to give prominence to climate change as a crucial issue we must address.

But let me turn to our approach to policy. Where economics and environment come together is in recognising that the costs of environmental pollution should be captured in the price. A proper marriage of economics and environment would sweep away the array of subsidies, protectionist trade policies and tax breaks which disguise the costs of farming, water extraction, fishing, timber production, waste disposal, energy production, mining and manufacturing. Pollution costs would be taxed as the rather dry pre-Keynesian economist Pigou argued almost a century ago. There has been some progress at least in the developed world to tackle that agenda. The Liberal Democrats bring together environmentalism and liberal market economics and are comfortable promoting sustainable economics; while our sister parties, in Canada and Germany for example, have a track record of delivering on the ground.

That is also the rationale for carbon taxes which are clearly the best way of setting a carbon price for consumers and producers. Liberal Democrats support the concept. But in practice we are starting from somewhere else: a complicated system of national taxes bearing quite heavily on motor vehicles but hardly at all on domestic heating or aviation, with a modest industrial – climate change – levy and an EU carbon trading regime (which has so far had minimal impact on the carbon price because permits have been issued too liberally and grandfathered rather than auctioned).

We suggest that one useful step forward is to introduce realistic pricing for aviation in ways that circumvent the treaty restrictions on taxing aviation fuel. Aviation is a rapidly growing source of emissions and the last redoubt of the old idea that polluters don’t and won’t pay. Aviation has unfair, distorting tax advantages over competing modes of transport, notably long distance rail, because there is no tax on fuel, no charge for landing rights which, in a sensible world, would be auctioned (and in contrast to the track charges imposed on rail operators) and with subsidised landing charges (cross-subsidised by shopping in the bizarre, Alice in Wonderland world of aviation regulation). As a result aviation does not pay for carbon, or localised – nitrogen dioxide – pollution or the disamenity of noise, especially at night. We suggest as one – modest – first step: changing the tax base, and increasing tax, by applying it to flight take-offs in a way which captures the emissions generated by the engines and flight distance and scrapping the current ticket tax which penalises the efficient use of aircraft and doesn’t tax air freight. We would aim to raise £2.6bn from this green tax which would contribute towards cuts in direct taxation on the low paid. We are also opposed to the current ‘predict and provide’ approach to airport expansion in the South East. We hope that the Conservatives will be as good as their word in working with us to stop Heathrow expansion in particular.

Road transport is already taxed relatively heavily in the UK by international comparison – a fact which encourages road hauliers to dodge British tax by filling up with diesel on the continent. But despite unpopular tax indexation, the cost of motoring has risen less rapidly than the cost of bus or train travel. Moreover, petrol duty and VED make no distinction between travel on congested roads where there are alternatives and remote rural areas where there is no congestion and no alternative. We should be moving towards a proper road user pricing system for which the technology is now available. Tax is however only one way of changing behaviour. A more direct route is a tightening of energy efficiency standards – miles per gallon – for new vehicles along the lines advocated by my former boss at Shell, Mark Moody-Stuart.

Tougher standards – for insulation in new building are likely to work better for domestic heating than the price mechanism – higher taxes – which would cause fuel poverty with only a very blunt incentive to invest in energy efficiency. And in parallel there has to be a concerted drive to improve the existing housing stock, street by street, rather than the current fragmented, shambolic, set of programmes.

There are big strategic choices to be made in power generation. At present, progress on new renewables in the UK is pitifully slow and the opportunities for changing the basic model of energy delivery to local, distributed, power systems is being missed, though feed in tariffs will help in future. The government has effectively shelved the 2003 White Paper which set out a strategic framework based on energy conservation, new renewables and – transitional – gas. Intensive lobbying has led to agreement for a new generation of coal-fired power stations as at Kingsnorth and more importantly support for a new generation of nuclear power stations. I appreciate that nuclear power has attractions to many in the green movement because it is an – almost – zero carbon fuel. Its proponents have also cunningly exploited public anxieties about energy security with wildly exaggerated stories about disruption to gas supplies which, in the case of the UK, are very diverse and safe. The hidden costs of nuclear waste storage and decommissioning are vast. When I spoke in Parliament against the bailout of British energy in 2003, some of the best analysis I encountered came from Greenpeace.  The Liberal Democrats oppose new nuclear power not from some theological opposition to the principle – it would be ludicrous to declare war on physics – but because of the potential hidden cost – the blank cheque needed from the taxpayer – and the potential which nuclear power has to ‘crowd out’ new renewables. A traditional, grid based, system gets in the way of more innovative, distributed, localised systems.

But the whole environmental agenda is in danger of being derailed by the current economic crisis. Economic necessity concentrates the mind. The environment has plummeted down the list of the electorate’s priorities.

Much of the established green approach, resting as it does on environmental taxes and a more general approach to frugality, assumes that there is a large appetite for self flagellation. For those people who clamoured for a zero growth world – well, here it is and it isn’t very nice.

Fortunately there is a growing recognition that the current economic crisis presents opportunities as well as threats to environmental thinking. The key issue is jobs and where they come from. Britain has a major short term problem of cyclical unemployment or underemployment arising from the banking collapse and recession and a longer term structural problem of generating jobs and growth out of an economy which can no longer rely on consumption driven by household debt, inflated property prices and the high octane economy of the sharks and young bloods in the City.

The short term problem cries out for classic Keynesian public works based on ‘shovel ready’ projects. The construction sector has been the worst hit by the recession and arguably has the richest potential for job creation directly and through supplier industries from timber frames to ceramic fitting. There is massive pent up demand for social housing, and supply is seriously constrained by lack of funding. Improvement of empty and substandard property for rent is one – relatively cheap – way forward. The Liberal Democrats have also been arguing for a concerted programme of home insulation.  Since we acknowledge that there is a major fiscal contraction ahead and no scope for enlarging deficit financing we identify savings from government spending which can be redeployed in this way. Environmental goals can be neatly reconciled with job creation. I shy away from the term ‘green jobs’ since it implies that non-green jobs like being a car mechanic or a gas fitter are somehow less worthwhile which is not right or sensible. Indeed I note with some amusement that the centrepiece of President Obama’s ‘green’ public works programme is road building.

Liberal Democrats are anxious to ensure that the baby of environmentalism is not thrown out with the bath water of unsustainable public spending. We are, for example, seeking to use some of your ideas on carbon spending for saving money.

The term Green New Deal also captures the convergence of economic and environmental aims. The term suggests a short term, recession, programme but it has been better described to me by Colin Hines, one of the authors of the idea, as creating a ‘green spine’ for the economy from which many diverse activities will branch. It is already possible to see some of the activities around which future employment and growth will occur – creative industries; pharmaceutical and biological science; specialist IT based services; health and education services; and financial services disarmed of their destructive potential.

Environmental services and industries are another and could be a leading sector with encouragement. Much will happen spontaneously led by market demand. But this new economy will require infrastructure, preferably a green one. There is a potentially vast demand for digital infrastructure, new and improved public transport, renewable power production and transmission systems plus the education and training of a new generation of scientists, engineers and skilled workers to operate this new economy. The Government is not going to be able to finance much of the infrastructure because the public sector balance sheet is so weak. The funding will have to come from the private sector and I have been promoting the idea of an Infrastructure Bank tapping into the hundreds of billions in annuity funds of pension and insurance companies looking for a home in the UK or retail investment in what could be ‘green bonds’. Part of its remit would be environmental but it would clearly have a broader infrastructure role. It could also mobilise private, retail, investors looking for an attractive, long term productive use of their savings. Colin Hines has coined the term ‘savers and saviours’ – what is needed is the imagination and leadership to link employment growth, environmental imperatives and the self interest of entrepreneurs and investors.

The Liberal Democrats want to work with like-minded people to develop that vision. We must take these ideas forward on all fronts: national, international and local.  Birmingham City Council which we run in joint administration with the Conservatives has advanced plans for a municipal green new deal.  Given our traditions of localism, we have more confidence in bottom up than top down initiatives. A sustainable future will require both.

Vince Cable – 2009 Speech to the Liberal Democrat Spring Conference

vincecable

Below is the text of the speech made by Vince Cable to the 2009 Liberal Democrat Spring Conference on 7th March 2009.

Good afternoon Conference.

I will ignore the usual plesantries and jokes because we have a national economic emergency.

The economic position of the country is dire.

It is deteriorating fast.

It dominates every political conversation.

In the coming months we face unremitting bad news about factory closures, job losses and home repossessions.

There has never been a time in our lifetime when there was a greater need for politicians to give clear, honest, economic, analysis combined with a realistic message of hope.

Yet the current political debate across the Tory-Labour divide is as depressingly predictable as the Christmas pantomime,

‘It’s all your fault, Gordon’.

‘No it isn’t’.

‘Oh, yes it is!’

‘Oh, no it isn’t!’

Sterile, Puerile and Childish.

The Government claims that this is an international crisis.

And of course it is.

We are living with the consequences of the collapse of a giant international pyramid selling scheme.

But it isn’t only an international crisis.

Liberal Democrats have long warned that the British economy was unbalanced and over reliant on a consumer borrowing spree and fantasy house prices.

That the mountain of personal debt would come crashing down and that the housing bubble would burst.

That a heavy price would be paid for the Thatcherite destruction of mutual building societies and the weakness of bank regulation.

I don’t claim that we got everything right; but, unlike the Tories, the Liberal Democrats consistently identified the structural weaknesses of the house that Gordon built.

For their part, the Tories give the impression that they are absolutely loving every minute of this crisis.

They calculate that the worse it is, the easier it will be to obliterate the memory of the two Tory recessions and the easier it will be, once in office, to make savage cuts in public services.

Britain does have deep problems, for sure, and the Government has messed up big time.

But the Tory narrative is feeding the downward spiral of fear and lack of confidence.

And they offer no convincing alternative.

What the public wants, instead, is a balanced assessment of where we are, and practical, positive, serious proposals to get our country out of the mire.

This is a crisis for us all.

None of us knows all the answers.

The immediate problem is that demand has dried up; people are hoarding cash, because they are afraid.

The Liberal Democrats were the first party to call for deep cuts in interest rates to stop us getting into a deflationary downward spiral.

That said, we need to acknowledge the anger of millions of savers who resent paying for other people’s profligacy and now receive nothing on their bank deposits.

And the savers are needed since Britain needs a strong personal savings culture for retirement, personal care and higher education and to prevent a reversion to the debt fuelled boom and bust cycles.

The Conservatives are offering standard rate tax relief on savings interest which is superficially attractive to the better off savers.

But, in the present context, 20% of nothing is nothing.

It would be much better to concentrate on removing the outrageous confiscation of savings under means tested benefits like pension credit.

The heart of the crisis is in banking.

The Government had no alternative to save the leading banks from collapse.

That is not the same as saving Woolworths or steel or car makers.

If the banks collapse – and in October they almost did – almost every other business goes down with them and we go back to barter.

But we argued from the outset that we cannot have the taxpayer taking all the risks and losses and the banks continuing to be run by bankers in their own interests or hoarding capital.

Lloyds/HBOS has now joined the list of effectively nationalised banks.

But only after prolonged damaging dithering.

Rather, those banks which have failed and been rescued should be taken over and run in the public interest.

The purpose of control is clear:

– to stop jobs haemorrhaging as sound companies run out of cash;

– to identify and manage the ‘bad debt’; to deal with abuses like large scale tax avoidance;

– to deal with remuneration scandals;

– and to split off low risk high street banking from the global, casino-type operations – in other words, run the banks on safe, traditional lines.

British taxpayers must never again guarantee gambling by our banks.

Once this is sorted, the Government’s stake can be sold, hopefully at a profit to the taxpayer.

The Government is clearly terrified of being accused of nationalising the banks.

We have an extraordinary situation where John McCain, the right wing Republican candidate for the US Presidency recognises the need for bank nationalisation and our own supposedly Socialist government won’t face up to its responsibilities.

I am proud that the Liberal Democrats have been clear and consistent on this issue from the outset.

This is a moral as well as a financial crisis.

The shocking stories coming out of banks reveal a deep corruption of values which has now spread into government and society.

A decade ago Brown and Blair made a pact with the Devil.

In order to bolster New Labour’s reputation for economic competence they got into bed with the financial aristocracy.

They turned a blind eye to massive salaries and bumper bonuses, the large scale use of tax havens and tax dodging and dangerous high risk activities of some investment banks – ultimately underwritten by the British taxpayer.

In return they were showered with compliments and party donations and enough tax revenue to spend more on public services.

The pact is now breaking down and we can see in all their ugliness the characters to whom Labour bartered its soul.

We all now know about Fred Goodwin and Adam Applegarth.

Less well known is Roger Jenkins whom Barclays pay £40 million a year – £40 million! – to find ways of dodging taxes and Peter Cummings whose bad deals destroyed the 313 year old Bank of Scotland and is in line for a £6 million pension pot.

It isn’t just the extreme greed of the super-rich who gloried in success but still expect to be massively rewarded for failure.

The bonus culture has become all pervasive.

I understand the annoyance of bank employees who do not get the pay they were expecting.

But without the taxpayer, they would not have a job, let alone a bonus.

Many in other industries have not been so lucky.

And it isn’t just the private sector.

Civil servants now expect big bonuses if they meet their targets, and if they don’t bonuses to encourage them to try harder.

Although the scale of greed is smaller the self-serving instincts of the public sector aristocracy are fundamentally no different from the bankers.

We can wave our arms about Sir Fred’s pension but the practical question is what we do about the extreme, obscene, inequalities of reward which bear so little relation to performance.

One modest step is full public disclosure.

So the Fat Cats have nowhere to hide.

Public companies should publish the full pay package for all highly paid employees as well as directors.

The starting point for disclosure could be the Prime Minister’s pay: £194,000 a year.

Of course, those entrepreneurs who want to risk their own money should still be free in a liberal society to make their fortune.

Alas, this country does little to encourage any British Bill Gates; and too much to featherbed top dogs in big organisations.

We must also remember that while most of us have reasonably secure jobs or entitlements well over a million British families will be plunged into hardship this year as workers lose their jobs.

Job Seekers Allowance – for those entitled to it – is the grand sum of £60.50 a week, not much more than a tenth of average income.

Families who are not rich are seeing their incomes slashed.

And they have to keep their mortgages going or they will become one of the 75,000 who will be repossessed.

There are many little cruelties and indignities which will befall many of these families.

Let me just mention one: the vicious action of a Labour government giving powers to bailiffs to force entry to debtors homes using sledgehammers and to use force to hold down people who resist.

Labour is taking us back to the pre-Victorian morality of the debtors’ prison.

To restore a sense of fairness to such a divided and distorted society will be a massive project.

Our proposed tax reforms make a start.

They would establish the principle, revolutionary in itself, that companies and high net worth individuals are not free to decide that paying UK taxes is discretionary, like tipping the waiter.

We have to crack down hard on corporate tax avoidance and tax havens, made easier by the fact that the US and the EU are determined to do the same.

Nor can we continue to offer Sir Fred Goodwin and his ilk top rate tax relief on their pension contributions or, to private equity investors, CGT rates which are less than the tax rate paid by their cleaners.

These loopholes should be closed.

And the revenue should be redistributed in a progressive way to cut taxes on the low paid and those on average incomes putting cash into the pockets of people who need it and will spend it.

A tax cut financed by taxes on the very wealthy and a clampdown on tax dodging will be at the heart of our election offering.

The spirit of our alternative budget will be the same which inspired the People’s Budget 100 years ago – when liberal radicals led by Lloyd George laid the foundations for progressive politics in Britain.

I make that renewed commitment in the full knowledge that the public sector finances are getting rapidly worse and will need to be sharply corrected once the recession is abating.

Our tax cutting plans will be fully costed and fully affordable.

It is also right, in the short run, for the government to sustain the economy; to borrow to keep people in work rather than borrowing to pay them to be unemployed.

But instead of the VAT cut we would have carefully targeted public investment aimed at providing more social housing, environmental improvements to the housing stock and better public transport.

At a time when there are massive unemployed resources in the construction industry there has never been a better time to fight worklessness and homelessness simultaneously.

There will be economic recovery.

But the Government cannot continue for long to borrow a staggering 10% of GDP.

There is no imminent threat of bond markets drying up and a sterling crisis but there will be one unless there is a clear route back to public sector spending discipline.

As a credible political force we accept these realities.

We cannot and should not make unrealistic spending commitments.

There are two ways of approaching this looming challenge.

One is the traditional way: salami slicing key services; using councillors as butchers for central government; abandoning necessary public investment.

There is a better way.

Setting priorities.

To govern is to choose: knowing when to say no.

We have argued already that an axe has to be taken to wasteful IT programmes and ID cards must go; that tax credits must be chopped back; that new motorways should not be built; that we cannot take on the liabilities of new nuclear power.

There are bigger questions looming.

Do we seriously believe a Britain in dire financial straits can afford a new  world-wide military role?

How long can we continue the pretence that we can sustain generous pensions for public sector ‘fat cats’?

This year hundreds of thousands of university students will join the dole queue.

Perhaps half of all new graduates.

They will have to be helped.

But how much longer can we pretend that it is sensible or affordable to chase the government’s target of half our population studying full time at university?

These are enormous issues.

We must be bold and under Nick Clegg’s leadership we are being bold.

People are crying out for a believable explanation of the mess we are in and a credible message of leadership on how to get out of it.

Labour has dominated the progressive side of British politics for 80 years.

But no more.

Labour has lost its moral authority.

And Economic failure has killed the New Labour brand.

We, the Liberal Democrats not Labour, are the future of progressive politics.

In these difficult and uncertain times the Liberal Democrats under Nick Clegg’s leadership have the ideals, the policies and the competence to meet the national need.

Vince Cable – 2008 Speech to Liberal Democrat Conference

vincecable

Below is the text of the speech made by Vince Cable at the 2008 Liberal Democrat Party Conference in Liverpool.

I don’t want to overdo my Stalin joke.

But I did, I think, capture the pathos of Gordon Brown’s sad decline: from ruthless to rudderless: bully to bumbler; from Brezhnev to Black Adder.

He genuinely saddens me.

After Blair was obsessed by image and positioning.

We hoped Brown would be a serious man with serious ideas and a serous commitment to social justice.

No chance.

Within weeks he was dressing up in a Penguin suit to grovel to a Saudi king who presides over the execution of women for immorality and corruption which makes the late President Mobutu look like a small time pick pocket.

The nuclear power lobby, the airport expansion lobby, the arms dealers all know they have a true friend in Downing Street. And, as for social justice, he stands ready to copy whatever regressive, badly thought out wheeze the Tories dream up on a boozy night out at the Bullingdon Club.

But the real issue is competence. Gordon Brown’s list of disasters is becoming as long as the list of Don Giovanni’s lovers:

Northern Rock; lost data on 15 million families;

mismanaged reforms to CGT and non-dom taxation;

Metronet and the disastrous London Underground PPP;

tax credit overpayments;

the QinetiQ sale;

Railtrack;

IT mismanagement in HMRC;

the collapse of occupational pensions;

Equitable Life;

Individual Learning Accounts;

Film Tax Credit:

U-turns on SIPPs and Company Incorporation

and

Operating and Financial Reviews.

That’s just for starters.

In fact, the Conservative’s should be benefiting more than they are from the government’s serial incompetence.

They have a problem.

Their own history. Black Monday.

15% interest rates.

3 million unemployed.

Record repossessions.

All that.

Cameron and Osborne have an Alzheimer’s strategy: a fervent hope that the country will lose its collective memory of Conservative government.

These days the Tories simply don’t seem to know what they stand for.

They don’t even seem to believe in tax cutting any more.

Or perhaps I am being a little unfair.

They do have a programme of targeted tax cuts.

Top priority target is a further inheritance tax cuts designed to favour dead millionaires.

Dead millionaires are clearly at the heart of the Tory core vote strategy.

We, on the other hand, have been consistent and right in our analysis of the UK economy.

I warned Gordon Brown almost 5 years ago that there was a growing problem of personal debt, much of it secured against a dangerous bubble in the housing market.

Since then, inflation and house prices have reached levels, in relation to income, unsurpassed in our history and the highest in the western World.

The truth is that just as binge drinking has become one of Britain’s main recreational activities, binge lending has now become the mainstay of the economy.

Banks have become the financial equivalents of a Wetherspoons pub – but with even less of a sense of responsibility.

They make their money by getting people to borrow more than they can handle.

The mess afterwards is someone else’s problem.

The binge in lending has fuelled the house price boom.

Housing has become unaffordable for millions of young first time buyers.

Borrowers are struggling to maintain their debts.

Too much unsustainably cheap credit created an unsustainable ratcheting up of house prices.

People have been duped into believing that acquiring property is better than saving and a more reliable store of value than a bank account, shares or a pension.

Yet this is a market that is, and always has been, dangerously volatile.

After the binge, there is inevitably a hangover.

It is just starting.

House prices are now falling month by month across the country.

Debt arrears are mounting.

Repossession orders and repossessions are rising rapidly back towards levels last seen in the mid 1990’s.

Negative equity is back.

Serious economic analysts worry that our home grown problem of asset deflation will interact lethally with the global credit crunch.

And also global inflation in energy and food prices could combine to create a perfect economic storm.

If there is an economic storm the public will want to know that the ship is being steered by people who know what they are doing.

During the Northern Rock crisis the boat was drifting listlessly.

Captain Brown was hiding in his cabin.

And Midshipman Osborne was jumping excitedly in and out of a lifeboat.

We knew what had to be done.

But the Government only finally listened after months of indecision.

The delay caused untold damage to Britain’s reputation and cost a fortune in legal and accountancy fees.

Now the Government has seen the benefits of listening to the Liberal Democrats perhaps they can make it a habit – to tackle the dangers of our slowing economy.

The Bank of England has to be freed up to use interest rates more aggressively by making sure that its inflation target reflects the fluctuations in house prices.

We cannot and should not try to stop lenders adjusting to higher standards of risk management.

But the binge lenders have to accept some of the pain they happily inflict on their borrowers.

There will have to be a check on repossessions so that we do not have a massive fire sale of homes and a pandemic of homelessness.

No one should face repossession until there has been an opportunity for independent financial advice.

The bank must be required to offer a range of alternative properly regulated options, including shared ownership.

The vultures who are exploiting the situation must be brought within mortgage regulation.

These are, necessarily, palliatives.

We also need to think ahead to a different model of growth.

It should not depend on a debt financed, unsustainable, short term splurge in consumer spending.

It should instead draw on long term investment in this country’s human resources of skill and science, respecting environmental limits and repairing a fractured sense of social solidarity.

But the truth is that in the immediate future there are hard times ahead.

There will be financial casualties.

Neither I nor anyone else can offer a pain free solution as the excesses of the last few years are purged from the system.

What we must insist on however is that everyone contributes according to their means.

We cannot tolerate a two nation society divided between the tax payers and the tax dodgers.

The extent of tax avoidance amongst many rich people has become a national scandal.

The super rich are complaining because our spineless government decided to tinker with capital gains tax.

But they will still pay far less than their cleaners – 18% versus 20% plus 10% NICs.

They will still pay less than half the tax rate they paid under Mrs Thatcher and Nigel Lawson.

But all we hear is a whine of self pity.

Let me be clear.

I have no problem with people making serious money through hard work building businesses and creating jobs.

There have to be realistic incentives in a market economy.

But the idea that the super rich should be elevated above taxation is immoral and deeply insulting to those on modest incomes who pay their full whack of tax.

Then we have the so called non-doms. These are people who, on the strength of having no more overseas connection that a foreign father, can choose not to pay any tax on their overseas income and capital.

And they can avail themselves of a battery of off-shore tax loopholes which enable them to avoid tax on UK income and capital. Probably 5 million people – many in this room – are eligible.

Growing numbers are taking advantage.

After ten years of dithering Gordon Brown has decided to act.

As a veteran of the struggle against Mrs Thatcher’s poll tax, he has decided – you’ve guessed already – to introduce a poll tax.

Billionaire Lakshmi Mittal is to pay the same tax as a non-dom shopkeeper.

Not surprisingly, the Tories agree that this is fair, indeed, they claim to have thought of it first.

Yet there has been an almost hysterical reaction from the City.

How dare British politicians query the tax privileges of the rich?

If we are not careful, they say, Russian and Ukrainian oligarchs living in £80 million houses will no longer feel welcome.

They might go somewhere else.

That’s tough.

Let them go.

We say that foreign expatriates are welcome to live and work in Britain.

But when they have been here seven years, they pay British tax like the rest of us.

Pay up or pack up.

And it isn’t just rich individuals who dodge tax.

Companies are at it as well.

There are only two reasons for British companies to operate from Caribbean tax havens: secrecy and tax.

I salute the journalists who are running the gauntlet of libel lawyers by exposing the tax affairs of leading British companies who use Caribbean bolt holes to avoid tax.

Tesco admitted last week that it had organised itself to avoid £250 million in stamp duty this way, £10 for every UK taxpayer.

While the super rich and corporate Britain uses every dodge in the book to avoid paying tax, those on low pay face higher taxes.

The one certainty about next week’s Budget – because a commitment was made last year – is that 23 million workers and pensioners will pay 20% on their first slab of taxable income, instead of 10%.

5.3 million people will pay more tax.

The Lib Dems don’t want higher overall levels of tax.

We want to see fairer taxes making sure that the tax dodgers are brought to book.

It means that the very well off pay a bit more in capital gains and income tax so that low and middle income families get a tax cut – 4p in the pound of national income tax.

We also believe that tax can be used, albeit carefully, to change behaviour.

That is why we argue for green taxes, particularly on polluting aircraft, raising revenue for our package of tax cuts elsewhere.

The evidence, from the Government’s Climate Change Levy, is that environmental taxes do change behaviour.

And they raise revenue – which we would use to cut taxes in a progressive way.

We should also be using taxes to discourage binge drinking.

There is massive evidence of the damaging effects of alcohol on health and crime.

Yet the Government has cut taxes in real terms on highly alcoholic beverages.

Many will wonder why a government which has raised income taxes on the low paid and Council Tax on pensioners is helping to promote cut price Bacardi Breezers and vodka shots.

Tax should be raised on drinks with high alcohol content – raising £225 million.

We would use the money to cut VAT on healthy, 100% fruit juice from 17.5% to 5%.

This will complete the transformation of the Lib Dems from being the party of beards and sandals to the party of Smoothies.

If I were to be self critical, I would say that we haven’t been radical enough.

I would like to see a much stronger commitment to cutting the taxes of low and middle income families.

And I would like to see a much tougher approach to the windfalls on property and land values enjoyed by the super rich.

Liberal Democrats represent the millions of families ignored by this Government.

Yes we believe in enterprise.

Yes we believe in an open economy.

But we don’t have to go down on our knees to the rich and powerful.

We will stand up for fair taxes.

We will stand up for green taxes.

And we will fight for a more equal Britain.

Vince Cable – 1997 Maiden Speech in the House of Commons

vincecable

Below is the text of the maiden speech made by Vince Cable in the House of Commons on June 11th 1997.

Thank you, Madam Speaker, for giving me the opportunity to make my maiden speech. As this is a debate of substance, I shall try to keep the maiden speech formalities to a minimum. That should be easy, as I represent Twickenham, which I hope that most hon. Members will have heard of, so I need not make an extensive Cook’s tour of the constituency.

My predecessor, Mr. Jessel, served on the Back Benches for 27 years. It was never entirely clear to his constituents whether that was conscious career planning or merely the result of oversight by a succession of Conservative leaders. Whatever the reason, he applied himself assiduously to the duties of a constituency Member. He worked hard on his constituents’ behalf, and many people have spoken warmly of his contribution in solving their individual problems.

Mr. Jessel fought hard on particular constituency issues. Hon. Members of long standing will remember the case of the Kneller Hall Royal Military school of music, which he fought hard to save. It was said in the 1980s that Ministers and officials in the Ministry of Defence were spending more time worrying about the problem of military music than about the future of the North Atlantic Treaty Organisation, largely at his insistence. His campaign was successful, but if officials in the MOD are relieved at his passing, I must tell them that I intend to fight equally hard for that institution and others, if they are threatened by the Government.

I disagreed with almost everything that the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) said, but she deserves credit for having brought an important issue—probably the most important decision that the Government have yet made—to the attention of the House.

I shall briefly rehearse the central arguments why central bank independence is important and why so many Governments have followed that policy. The first is the need for an institution that is clearly and unambiguously committed to low and stable inflation. We take low inflation for granted, but we forget the corrosive effect of cumulatively high rates of inflation.

If I can revert briefly to the game with the round ball rather than the oval one, back in 1966, German football supporters visiting this country for the world cup required DM12 for every £l. Those who came back last year for the European cup required less than DM3, despite some appreciation of the pound in previous months. That is a measure of the experience of monetary incontinence under Governments of both major parties.

Inflation is a corrosive phenomenon that has continually undermined the competitiveness of British industry and has required endless and often humiliating devaluations to recoup the loss of competitiveness. I have never understood why people on the left feel that inflation is unimportant, because all the evidence suggests that the main victims of inflation are the poor. They do not have the resources or capacity to hedge against inflation, they do not have people to bargain on their behalf and they suffer more than anyone else.

That is not only a British experience: the countries of south America, such as Argentina and Brazil, that have reverted from high inflation to low inflation with the help of independent banks had previously suffered high levels of inequality produced by inflation. It is now universally accepted, in Europe and the Anglo-Saxon world, including New Zealand and the United States, and in south America and Russia, that Governments need a bulwark against inflation. Independent central banks provide that.

The reason why it is important for central banks not to suffer day-to-day political intervention is that it is difficult for such intervention to be successful, because of the long lags in economic policy. It is usually necessary to raise interest rates long before inflation appears. We know that politicians can be courageous in making difficult decisions about monetary austerity. Lord Jenkins and Lord Healey have, in the past, forced through many painful decisions to bring down inflation, but they always acted too late. They—or, rather, their predecessors—should have acted in advance of inflation appearing. That is what a technically based, independent central bank can do.

The second basic reason why independence is important relates to interest rates. We know from long experience that markets always discount inflation. Long-term interest rates in Britain are consistently higher than those in other European countries, notably in Germany, and people pay a price for that. Companies pay a higher price for long-term capital. Individuals suffer, and the national debt is inflated unnecessarily by high interest rates. An independent central bank should get those down, as we saw from the market reaction to the Chancellor’s announcement a few weeks ago.

We need to achieve a climate of long-termism in British industry. I am sure that that is an issue that is close to the heart of the Minister who will reply to the debate. It is important.

I have left British industry from a company that engaged in 25-year planning. Industry often has a long-term outlook, but I was fortunate to work for a company, Shell, that was in a strong financial position, with very little debt, and that was internationally diversified so that it did not have to worry about exchange rate fluctuations. However, British companies that are highly dependent on bank debt and the value of sterling can be destabilised by erratic monetary policy. British industry’s outlook has been so short-term because of the way that monetary policy has been conducted. It is not in the nature of capitalism to be short-term: it is the way that our policy has been conducted.

Independent central banks have a general problem with accountability, which was the core of the argument by the hon. Member for Hackney, North and Stoke Newington. How do Governments ensure democratic control over one of the core elements of economic policy? That is a genuine dilemma, and different countries have struggled with it in different ways. The analogy I choose is with the military. Clearly, the military have to be under political control, but no Government in their right mind would insist that battlefield commanders should be directed in their tactics in the field. We have to separate broad political control from day-to-day management.

The model that the Government have chosen, which is based on American experience rather than German, is correct, and the Liberal Democrats fully support it. Although we agree with the Government’s broad approach and the model that they have chosen, we are critical of some aspects of the Government’s approach.

The Government have not consulted much, and the decision was sprung on the country, industry and the City. The decision could have been taken with more consultation. My hon. Friend the Member for Gordon (Mr. Bruce) has shown how that could be done. Some time ago, he prepared a statement of the possibilities for a UK reserve bank. He discussed his proposals with the City and the Governor of the Bank of England, and received feedback. That is the model that the Government should have followed. They will have time to do so when the legislation is considered, but the decision was taken very peremptorily.

Another of my criticisms relates to the way in which the members of what is now called the Interim Monetary Committee are chosen. The people who have been chosen are undoubtedly of high quality, and congratulations are due on that. I can vouch for at least one, who was a predecessor of mine at Shell as chief economist. That person is technically competent and, to the best of my knowledge, politically independent. She is able to draw on the experience of the United States and British industry.

My predecessor, Charles Goodhart and Willem Buiter have high technical standards, but the way they were chosen could be improved. For example, members of the monetary committee could be interviewed by the Treasury Select Committee, as they would be in the United States, their views exposed, and their experiences examined and approved by the House. That would add to the democratic content of accountability.

Another measure that could, and probably should, be taken is to extend the members’ periods of office. They are presently vulnerable to political interference. Their contracts will expire before the life of this Government, but extending their contracts to five or six years would give them the necessary security and political independence.

I have another criticism, which is apparently trivial, but has important substance—the name of the Bank of England, which sends the wrong signals. I spent the early part of my political career in Scotland, and I have some sensitivity to the fact that we are a United Kingdom. 1063 We are a country of differing regions. Scotland has a different level of house ownership from England, and levels of unemployment differ greatly from one part of the country to another. Those regional experiences should be reflected by the people who make decisions on monetary policy. We would like a regional system of directors, as well as those with outside academic expertise.

The Liberal Democrats strongly support the Government’s decision, both its principle and the model that they have chosen. However, it is important to stress that it is a necessary rather than a sufficient condition for good economic policy. If the Government were to allow the Bank of England to operate independently and to pursue an austere approach to the management of money while not disciplining their fiscal policy, we would quickly experience high interest rates, appreciating sterling and considerable damaging side effects. A necessary corollary of the Government’s actions on the monetary front is a similar discipline on fiscal policy. We shall see in the Budget whether that commitment is there.

Paul Burstow – 2012 King’s Fund Speech

Below is the text of the 2012 King’s Fund speech made by Paul Burstow.

Thank you for the invitation to take part in your conference today.

Just seven days have passed since the publication of the Care and Support White Paper and draft Bill.  And of course the progress report on reform of how care is paid for.

I think social care can be described as Beveridge’s or perhaps Bevan’s orphan.  What was left after the birth of the NHS in 1946.

Social care has suffered ever since.  Hidden behind its favoured sibling: the NHS.

For most people social care is out of sight until life takes a turn that tips us into a crisis.

I call it an orphan because social care is not the product of Beveridge’s universalist vision or Bevan’s determination to deliver an NHS.

Social care looks back.  It looks back to older less egalitarian principles.  The mark of the Poor Law rests on the 1948 National Assistance Act.

Not universal.

A safety net for the needy.

Last week that began to change.

Although if you followed the media reporting you could be forgiven for thinking that it was all about who pays for care.

Drawing the line between personal responsibility for meeting our care costs and the State. Deciding where the boundary should fall.

Of course reform of how care is paid for in this country is important. It is something I care deeply about.

It is social care’s nasty little secret: it’s not free.

A secret that is beginning to be more widely understood.

But redrawing the boundary between personal responsibility and State support is not enough.  Not by a long way.

It scratches the surface of a broken system.

So let me say something about that broken system and what we plan to put in its place.

Let me start with a proposition.

I believe morbidity not mortality is the biggest challenge facing our health and care system. Failure to prevent or at least postpone the onset of morbidity, especially co-morbidity, is a huge driver of cost to the individual and to the taxpayer.

And failure to manage morbidity well can tip people into more costly crisis interventions.

So last week the White Paper and the Bill signalled a radical shift in policy and practice. Away from a system that stutters into life only once the crisis has arrived. To one focused on wellbeing, prevention and early intervention.

So the challenge is not just how we support people with co-morbidity.  It’s how we tackle the causes themselves.  Those wider determinants of health and wellbeing.

It is that convergence between public health, social work and health that is the really exciting opportunity.

A new paradigm that looks to the assets people and communities have – not just their deficits and gaps.

The talents, the networks of mutual support.

This asset based approach is at the heart of the White Paper and the Bill.

It is also part of the draft JSNA guidance that we are consulting on.

Let me illustrate what I mean.

I have talked a lot recently about loneliness.

I’ve called it a hidden killer.

There is mounting evidence of the impact on a person’s wellbeing and health of loneliness. The absence of connectedness.

Put simply, relationships matter. They are critical to personal resilience. They confer a health benefit.

Tackling those wider determinants of health and wellbeing are exactly why I successfully made the case for public health coming home to local government and for the establishment of Health and Wellbeing Boards.

And this central idea of wellbeing is at the heart of the Care and Support Bill.

The idea that the system is the servant of the individual. That decision-making should be centred on the person with needs: whether service user or carer.

And that idea of ‘no decision about me without me’ is crucial. The response should be co-produced and about meeting the personal goals of the individual.

And for the first time the draft Bill creates the framework for a universal social care offer from local authorities.

Information and advice so that people can plan and prepare.

Prevention

Sufficiency and quality of service to support choice

Integration and co-operation – going beyond the NHS and social care to include housing too.

And the Bill goes even further than that.

It clarifies the point at which the state will start to offer support by setting a national minimum eligibility threshold for the first time.

It does something no Government Bill has ever done before.  It recognises the role of family carers.  Establishing for the first time an entitlement to support for eligible needs.

A major milestone.

30 years ago the Carers National Association, now Carers UK, was denied charitable status because it was thought there was no such group of people.

The Bill also provides protection from disrupted care, either when moving from one part of the country to another or for young people as they transition to adult services.

And as I have already said the Bill enshrines the idea of person centeredness.  That idea is given further substance with the provisions for personal budgets.

Indeed since I first set the ambition of everyone eligible for a personal budget receiving one in 2010 I can report that the number of people receiving a personal budget has increased from 168,000 to 432,000.  Over half over people eligible for a budget.

So a Bill full of reform.

Let me return to reform of who pays for care.

Let me be clear.  The Government has made significant progress on funding reform. We have accepted the principles of the Dilnot Commission’s model and a number of the Commission’s other recommendations. Many of those recommendations are translated into the draft Bill.

That was an important milestone on this long road of funding reform.

Something else important happened in the past week.

Liberal Democrat, Conservative and Labour all endorsed the Dilnot model of a cap on life time care costs and an increase in the means test threshold to £100,000.

There is now a consensus about the principles of the reform.  We now must move from consensus to settlement.

There are design questions still to be considered.  Trade-offs to be weighed.

Would a higher cap offer similar benefits at lower cost?

Could a voluntary or opt-in scheme ensure that those who benefit most pay?

But with all public spending hemmed in by the economic situation it is right that final decisions will be made in the next Spending Review.

In the meantime we are pressing ahead with the introduction of a universal deferred payment scheme.  A scheme we will consult on.  A scheme we will fund.  A scheme that will come into operation in 2015.

That leads me to the question of funding.

Before the 2010 spending review the Dilnot Commission urged the Government to protect baseline funding for social care.

We did just that.

In October 2010 we confirmed an extra £7.2 billion of support for adult social care which together with a programme of efficiency was sufficient to protect access to support.

This included an unprecedented £3.8 billion of NHS resources to support social care to promote integration and service transformation.

So how are Councils coping?

It’s easy to simplify – to oversimplify.  To caricature even.

The truth is the picture is complex.

Are Councils struggling with a tough budget settlement.  Yes.

Are some Councils coping better than others.  Yes.

I want to acknowledge the difficulties.  I also want to applaud the ways some Councils have risen to the challenge and are protecting vulnerable people.

I won’t tar every Council with the same brush, as crude cutters of social care.

Different Councils are responding to the pressures in different ways.  Some are being smart, others are resorting to easy, short-sighted cuts.

The smart ones are working with service users, carers and providers to innovate and redesign services.  Using the investment in reablement.  Looking to integrate.  Sharing back office functions.

Such as in Greenwich where they have redesigned their care management system, creating integrated teams with the local NHS Community Health partners, care managers, occupational therapists, district nurses and others. They manage the care pathways around hospital admissions, reducing emergency admissions, and delivering better discharge planning into intermediate care and reablement. The service has not only created £800,000 of efficiency savings but has also won the HSJ Award for Staff Engagement for 2012.

Another is Wiltshire, who have transformed their provision of domiciliary care. They have managed to reduce delivery costs by 20-25% through tighter geographic organisation of provision, the integration of housing support, reablement and low level preventive services, and the introduction of automated billing. As part of the new contracts the council has introduced a payment by results system. The results must improve independence and quality of life, delay deterioration or prevent harm.

The examples of Greenwich and Wiltshire, and there are many more, show what is possible, and show how services can improve despite tough economic times.

The latest budget survey from the Association of Directors of Adult Social Services reveals Councils protecting frontline care.  In 2011 for every £1 saved 69 pence came through greater efficiency.  This year that rose to 77 pence.

Overall, the latest budget data from the Communities and Local Government Department point to a planned reduction in spending on adult social care of around 1 per cent this year.

At no point have we publicly or privately suggested that the Government would reopen the 2010 Spending Review or bring forward the next Spending Review.

So it should have come as no surprise to anyone, that a little over a year into the Spending Period the Government has not embarked on a mini spending review for social care.

Nonetheless, we have been able to secure £300 million more NHS support for integration and innovation in 2013/15.

This sum of money is more than sufficient to meet the costs of our reforms in their early years.

Before I draw my remarks to a close, I want to say a few words about integration.

The Health and Social Care Act creates a legal framework that promotes and enables integration.  Every part of the system has it hardwired into itsDNA.

The draft Bill gives Councils a matching duty.

The White Paper sets out our intention to measure people’s experience of integrated health and care; align incentives to support integration and focus on delivering person centred co-ordinated care for older people.

But just as our genes don’t determine everything we do.  We know leadership counts too.  Which is why the White Paper signals a major drive to support collaborative leadership.

There is still a huge amount that I have not covered today.

Action on quality:

Greater provider transparency.

Tackling care billed by the minute.

A new vision for care homes.

Doubling the number of care apprenticeships to 100,000.

The first ever national minimum training standards for care workers.

Action on safeguarding.

Action on end of life care.

Action on housing:

£200 million to support the growth of specialist housing.

New opportunities for home improvement agencies.

The White Paper contains a rich agenda of action and reform.

Taken together with the draft Bill, with or without funding reform it amounts to the most comprehensive overhaul of social care for 60 years.