Michael Howard – 2004 Speech to British Chambers of Commerce

Below is the text of the speech made by the then Leader of the Opposition, to the British Chambers of Commerce on 21st April 2004.

Thank you for asking me to speak to you today.

The British Chambers of Commerce represents more than 135,000 firms across the country. You know better than anyone else what is happening to companies at the sharp end. You are a vital voice for British business.

Business is the lifeblood of our country. You create the jobs that pay our wages. You underwrite our pensions. You generate the goods and the services on which we all depend. And you pay the taxes which fund our public services. Last year British business paid more than £100 billion in tax to the Exchequer. In effect, you paid for the National Health Service in England twice over.

Sadly, there are still people in Britain today who knock free enterprise and carp about profits. Some commentators portray the misdemeanours of a tiny minority as those of the majority. But that is far from the truth.

I know because my parents ran a small business. They started it from nothing and built it up. Firms across Britain are run by people like my parents.

They create them, grow them and nurture them. Not just for the money – though that is of course important. But also because they want to create something new, to leave a mark, to make a difference.

There is no better system for spreading the fruits of man’s labour than free enterprise. No better system for raising people’s standard of living. And no better system for advancing human achievement.

But for free enterprise to flourish it needs to be free. Not weighed down by excessive rules, regulations, red tape and tax.

We learnt that lesson in the 1980s – when the Conservative Government transformed Britain from the sick man of Europe to the powerhouse of Europe.

All of us here today are no doubt enormously proud of what business in Britain has achieved. And we all want to do even better in the future.

I for one am hugely optimistic about just how much we can achieve.

Britain is a great country. We are an enterprising, creative and hardworking people. We can take on the best and we can win.

Competitiveness

But I am genuinely concerned that many of the competitive advantages we fought so hard to win are being eroded.

You all operate in a fiercely competitive global marketplace. Marginal advantages in price, delivery dates or quality decide which firm gets the order and which creates the jobs. The extra burdens of high tax and over-regulation make it much more difficult for British business to compete.

UK competitiveness has fallen significantly in recent years, according to the World Economic Forum. Five years ago Britain was fourth in the world. Now we are fifteenth – a drop of 11 places.

The great irony is that while Gordon Brown urges his European counterparts to become more like America, he is actually making our economy more and more like theirs.

Yes, he was right to give the responsibility for setting interest rates to the Bank of England. But that loss of macroeconomic control seems to have left Mr. Brown and his mandarins with too little to do. So they have put their energies to work in micro-managing the British economy.

Survey after survey has shown that UK business is feeling the strain of increased regulation and taxation. It is estimated that the additional cost of red tape and tax to British business is £15 billion a year.

As Sir Terry Leahy, Tesco Chief Executive, said earlier in this year:

“Like a tide, the level of taxes seems to be forever rising. The water is now above our waist: Tesco National Insurance, corporate, property and employment taxes are now over 50% of our profits”.

Most independent commentators now predict that taxes will have to rise again if the Government sticks to its current spending plans. That’s the view, among others, of the IMF, the Institute for Fiscal Studies and the ITEM Club.

Indeed, Madam President, you have expressed concern that “rapidly worsening finances increase the risk that the Government will have to raise taxes in the next 2-3 years”.

Tax as a percentage of GDP has risen from under 35% in 1996 to over 36% today. It is predicted to reach 38% in 2008. Compare that with America and the Pacific – where the average tax burden is under 30% – and it is easy to see why British competitiveness is under threat.

And it’s not just the direct burden of tax that hits business. The tax system itself has become much more complex as well. As an example, it’s worth noting that Tolley’s yellow tax handbook has grown by 2000 pages since Labour came to office. So it’s no wonder the President of the Chartered Institute of Taxation has said: “People have difficulty in understanding how the system affects them. Not even MPs understand it”.

Actually, come to think of it, I’m not sure all my parliamentary colleagues deserve that implied accolade. I’m not at all sure I do!

In any event, this is a huge indirect burden for business, particularly small firms, who just cannot afford the armies of accountants to help them cope with all the new rules and regulations.

Regulation

We now have 15 new regulations every single working day. And you, the British Chambers of Commerce, reckon that the additional cost of new regulation to business has reached £30 billion.

Last year alone, British business was faced with an additional bill of £9 billion from new regulation. Your Director General has quite rightly said that British business cannot compete with this “millstone” round its neck.

Not long ago, I went to a small firm that had just been instructed to fit emergency lighting at a cost of many thousands of pounds. That cost had a real effect – they had to lay someone off. Yet the year before, at a previous inspection, no such requirement had been made. In the intervening twelve months, nothing had changed. There had been no accidents and no change in working practices to justify the new requirement. No new machines had been installed.

I mentioned this at last year’s annual CBI conference. That provoked a letter from Andrew Smith, the Secretary of State for Work and Pensions. He was extremely concerned to hear about this. Do you know why? Apparently I was wrong to blame the Health and Safety Executive for this new burden on a small business … I should have blamed the Fire Service.

And he asked me to apologise for my mistake!

Not a word about the unnecessary costs. Or about the lost job. All he was concerned about was that I’d got the wrong Department. As long as that is the mindset of this Government at Cabinet level we shall never tackle the problem of excessive regulation in this country.

The Public Sector

There is another concern. In just over five years, the number of public sector jobs has risen by more than 500,000. Yet last year, jobs in the private sector fell – by 130,000. This is unsustainable. How can we possibly continue to afford a public sector which is growing, when the private sector, which pays for it, is shrinking?

The Chancellor urged you all this morning to exercise wage restraint in the year ahead. And he said he would not tolerate irresponsibility in the public sector. That would certainly be good news for Britain.

But Gordon Brown’s record in constraining the public sector is not one to be proud of. In the last two years earnings growth in the public sector has outstripped the private sector by more than a third.

So I am absolutely clear about this. We are following the wrong path.

The Conservative Approach

The British economy needs to become more flexible again. We need to get a grip on regulation, cut back on waste, and over time reduce the burden of taxation. That is the Conservative approach.

First, spending. We will ensure that, over the medium term, public spending does not grow as quickly as the economy. Under a Conservative Government the State would consume a smaller share of GDP than under Labour.

Second, we will cut waste. We have appointed David James, the man brought in to tackle the fiasco of London’s Millennium Dome, to look at where we can cut waste. And how right we were. Because suddenly – lo and behold – the Government has discovered potential savings of between £10-15 billion. And that’s without really trying. I’m very confident David James will find more than that and we will root it out when we return to government.

Third, regulation. Civil service recruitment is currently running at 511 new officials a week. On day one of the next Conservative Government we will freeze it. Fewer officials will mean fewer regulations. We will introduce sunset clauses in new regulation. And like America, we will exempt small businesses from many regulations. The result? The total regulatory burden imposed by government will fall each year.

EU Constitution

Of course, not all regulation comes from Britain. The single most expensive regulation for British business in the last few years has been the Working Time Directive. According to your calculations, it has cost business more than £10 billion – so far.

More than 40% of new regulations start in Brussels. And be in no doubt – if Europe were to adopt the proposed European Constitution that burden will go on rising.

Don’t for a moment imagine that the European Constitution is an esoteric issue about sovereignty – important though that is. It would have a real and practical impact on your business. As Martin Wolf wrote recently in the Financial Times the Constitution “is a machine for ratcheting upwards an already excessive regulatory burden”.

The Constitution, for example, incorporates the Charter of Fundamental Rights. The rights under the Charter are loosely drafted. They include the right to strike, the right to so-called social protection, and the right for workers to have information and consultation within business.

It will be up to the European Court exactly what these rights mean in practice. And if past experience is anything to go by, they will lead to yet more burdens on business – burdens British politicians would be powerless to stop.

There may well be a case for some of these rights. You don’t have to argue for a free for all to be opposed to more regulation at the European level. You can simply take the view that it’s better to argue the issues out here, in Britain, than have them imposed upon us by the majority vote of other countries in Brussels.

The Conservative Party has consistently demanded a referendum to give the British people the right to say “yes” or “no” to the proposed European Constitution. Yesterday, after days of spin and counter-spin, the Prime Minister came to the House of Commons to announce that, finally, he agreed with us. But do you know what? He was so shame-faced that in a statement lasting some 10 minutes, he couldn’t bring himself to utter, even once, the word “referendum”.

But in accepting the need for a referendum, Tony Blair has blown apart his ludicrous argument that a “no” vote on the Constitution means Britain would have to leave the EU. So I hope we will hear no more of it. As he finally confirmed in the House of Commons today, rejecting the Constitution would not affect our position as full participating members of the European Union. To pretend otherwise is to distort the argument and deceive the electorate.

If the British people were to vote “Yes” a Conservative government would accept the Constitution. If the British people were to vote “No”, a Conservative government would veto the Constitution: and we would not agree to any new treaty which establishes a constitution for the European Union. Countries have constitutions and Conservatives do not want to be part of a country called Europe.

In the House of Commons today Tony Blair clearly implied that if the British people were to vote no in a referendum while he was still Prime Minister, he would follow the precedent set by the Irish Government after the Irish people voted no to the Nice Treaty. Labour would renegotiate the Constitution in some minor way and then force the British people to vote again in a second referendum.

In other words, if the British people did not vote the way he wanted, Tony Blair would make them vote again until they did.

The European Union has achieved a great deal. Together we have created a single market of 380 million people. But the EU is failing to face up to the realities of the twenty first century.

If the Constitution is passed, it will mean business as usual for Europe – greater centralisation, more regulation and less flexibility. It is the exact opposite of what Europe really needs. Far from solving problems it will create yet more.

Conservatives have an alternative vision for Europe – a positive vision. We want Europe’s member states to have room to breathe. If some countries want to integrate more closely then that is fine – as long as they do not force countries who do not want to, to follow them. Our policy is simple. Live and let live. That is a modern and mature approach – one which will allow Europe to succeed in the twenty first century.

Conclusion

Many of you, like me, have probably spent time in America. A love of enterprise is at the centre of American society and I admire many aspects of American life.

In America, they talk about the American Dream. They talk about the ability of someone born in a log cabin to make it to the White House. As it happens, in America this is the exception, not the rule.

In Britain it actually does happen. There are countless examples of people from humble beginnings who make it to the top: who live the British Dream.

So we should talk about it. We should embrace it. We should celebrate it. I want everyone to live the British Dream.

Britain is a great country full of talented and creative people. We could and should be doing so much better.

We need a government that does less, but does it better.

That provides a framework in which people can do the best for themselves and their families.

That allows them to keep more of the money they work so hard to earn.

And that does not constantly interfere and regulate and get in the way.

That is the challenge we set ourselves.

That is my vision for Britain.

I hope that it is one that you share and I now look forward to answering your questions.