Harriet Harman – 2008 TUC Conference Speech


Below is the text of the speech which was made by Harriet Harman at the 2008 TUC Conference, 10th September 2008.

 It is a great honour and a real privilege for me to be here with you this morning and to take part in your debate.

We all know that the background to this conference is very important indeed and that whilst we have made big steps forward on the things that we care about, we face difficult economic times. We know that whilst these economic problems are not homegrown, they are certainly hitting home and they have hit hardest at those who can least afford it. That is why the job of the Government and the determination of the Government is to see the economy in this country through the difficult times, make the right decisions to do that and also to protect those who are hardest hit and most vulnerable to the economic difficulties.

There are some people who step forward quickly and say, “Because the economy is seeing difficult times, you will have to put issues of tackling inequality on the back burner, that it is a luxury that we cannot afford when the economy is hard pressed, that we will just have to take a raincheck on that and revisit it later”.

However, we are not going to do that and I want to say why. If you are discriminated against, treated unfairly, subjected to prejudice because you are a woman or because you are black and Asian or because your face does not fit or they say you are too old, that is unacceptable at any time, but it is even more objectionable when you feel times are hard for you and you feel that your back is against the wall. So we are not going to step back in our quest for equality. Quite the opposite. Just as Gordon Brown led the economy to strengthen it with more jobs and our quest for fairness, investing more in public services and helping people better off, so Gordon Brown, as our Prime Minister, will lead the country as we take the economy through these difficult times and we step up our determination to have more fairness and social justice.

These are shared values between the trade union Movement and the Labour Party. It was the trade union Movement and the Labour Party that together worked to deliver the National Minimum Wage; it was the trade union Movement and the Labour Party which introduced new rights for working parents and protected older people against discrimination and it was the trade union Movement and the Labour Party which together have worked to set up the really powerful now Equality and Human Rights Commission.

Together we have worked to make a lot of progress and together we have worked to see that even more progress will be made. So, having already increased maternity pay and leave, we are going to see maternity leave increase to a full 12 months. Having extended rights to working mothers, we are now going to ensure that fathers can take more time off when their children are young. We are going to bring in a tough new Equality Bill and we are going to make all of our work more effective by strengthening the work of trade union equality reps in the workplace.

But we all know that inequality is not just a matter of unfairness between black and white or men and women or people with disabilities. It is also a question of the gap between rich and poor and the gap between the north and south. Although we do know we have made a lot of progress, let me just give you two examples of how inequality can be stubborn and can be persistent. It used to be the case that women could expect to live longer than men. Now a rich man can expect to live longer than a poor woman. We all expect children to be able to achieve their full potential in school, but it is the case that by the time they reach the age of six, a less able child from a wealthy family will have overtaken a more able child from a poor family. These are inequalities that we must tackle and we must root out.

That is why I am announcing to conference this morning that I am setting up the National Equality Panel which will chart where we have made progress during the past 10 years and where we need to make much more progress. We could not have anybody better to chair it than Professor John Hills. I know that he is already working with the TUC and will expect the trade unions to be playing an important part in his work. He will report to Government after 12 months and then that will be able to lay the basis for even stepping further forward on the important work to tackle inequality and to bring forward social justice.

Whilst I am talking about inequality and social justice, of course, I have to mention the Conservatives who are now posing as the new friends of equality. On all the causes of Labour and the trade union Movement that we have campaigned for and worked so hard on during the last decade and that they have attacked so viciously and persistently, they have now whipped round and said: “Oh, we are in favour of it all; we are the new friends of equality”. However, they are the false friends of equality and fairness because, although they are now sidling up to trade unionists, fawning over equality campaigns and lurking around women’s organisations, they are still false friends of fairness because the Tory Party which bought this country back to basics now says it recognises that families come in all shapes and sizes. But look at their policies, their tax policies, the so-called tax break for married couples which would penalise couples who have separated or lone mothers. It would actually make their life harder. The Tory Party, the party that decried our concern for more childcare as the ‘nanny state’, now say they too want to see more nurseries, oh, but they would cut back on Sure Start. The party that decried our quest for more women Members of Parliament as political correctness gone made now say that they want to increase the number of Tory women MPs they have. By the way, we have 96 Labour women MPs and they have only 17 Tory women MPs. They say they now want to increase the number, but they would never take the positive action and the steps that we actually did to make that a reality. I always say about David Cameron that he wants women for one thing and one thing only, and that is their votes.

It is no surprise, if you look at the pattern of equality legislation, with Labour Governments in the 1960s and 1970s pioneering new legislation to tackle race discrimination, unfairness in pay for women and sex discrimination, then the Labour Government again coming in 1997 extending our equality laws for people with disabilities, older people on grounds of sexual orientation. So Labour Governments have always championed equality. And what did the Tories do when they were in power for 18 years? Can anybody remember the equality laws they brought in? Not one. Not one during 18 years unless, of course, you count clause 28.

So the Tories have always been against tackling inequality and Labour has always been for tackling inequality and so it remains. We have made progress. We do face difficulties. We will get through those difficulties and we will make further progress. But, remember, Congress, that though we have made progress, we all know there is further work to be done. That is why we need to work together to win a fourth term for a Labour Government. Thank you.

Nick Ramsay – 2008 Speech on Local Government in Wales

Below is the text of a speech made by Nick Ramsay on 29th January 2008. The speech is in Welsh and English below.


I am pleased to be able contribute to this important debate. Today, we have reached the end of the long road that we have travelled over recent months, during which we have had many debates and discussions, not only on the local government settlement, but on the other aspects of funding that various services will receive in this year and coming years. During that debate, we have thrashed out many reasons why we felt that local government should receive a much higher share of the budget.

I thank the Minister for involving me in meetings and in the Chamber in his thinking about where we were going. I am also pleased that he consulted the WLGA, but I do not think that he has taken on board my concerns or those of the WLGA, which only recently described the Assembly’s final budget as ‘tinkering at the edges’.

We welcome the extra funding and the fact that Conwy, Powys and similar authorities will not receive as low an increase in their revenue settlement grant as they were initially going to receive. However, let us be frank; it was unbelievable that Powys and Conwy ever faced increases of 1 per cent.

The rise to 2 per cent for those authorities is a marked increase, but it is still far short of what they will need to provide statutory services and to meet the responsibilities placed upon them.

We are looking at an RSG increase of 2.4 per cent. I hear what the Minister says about that being 3.3 per cent if you include all of the other elements. However, you know as well as I do that the key figure is the RSG, and it has not increased in line with inflation as it should have.

Listening to the Minister, I am reminded of what the Minister for Finance and Public Service Delivery said in last week’s debate about what local government is receiving being equitable, given the overall amount from Westminster and given what authorities across the border are receiving. I take issue with both of those assertions.

The fact remains that the Assembly budget has almost doubled over the past decade, while the increase on the local government side is far smaller. I do not think that he has provided an answer to that. As for the argument that our local authorities receive far better funding than authorities over the border, I can provide him with a list of 10 authorities across the border that receive more per head of population. Therefore, I look forward to the Minister answering some of those points.

Look at what local authorities are being expected to deliver: provisions in the Childcare Act 2006 and the Climate Change and Sustainable Energy Act 2006, rights of way improvement plans, and flood defences. Local authorities must deal with these issues over the coming years, but the money is not being provided to enable them to do that.

Yes, more money has been made available, and I am not going to be a total killjoy; we are pleased about that and the fact that local authorities are not going to receive the dismal settlement originally proposed. Let us be realistic, and let us listen to the WLGA.

On your point about council tax, we welcome, as does the council tax payer I am sure, the fact that we will not see huge increases, as was first feared. However, if you are going to cap council tax increases you must accept that it is almost like a deadly game of dominoes, because the need for capping is as the result of the settlement that you gave to local authorities in the first place.

Let us make no bones about that. I have probably been incorrect when I said during the last few debates on this issue that local authorities in Wales will have to choose between how much they give to local services, and what they do with council tax. It is clear to me now that you are saying to local authorities that the axe will have to fall squarely on local services. I cannot see how that can be avoided if you are telling authorities that they can only spend a certain amount, and no more.

Let us be realistic about this. Yes, we can bandy figures about, and it is interesting to see in the finance report the amount that the Assembly Government has given to support local authorities that are carrying heavy amounts of debt. Such measures are necessary up to a point, but let us make sure that the replacement for the performance incentive grant, the new improvement agreement grant, delivers not only what the performance incentive grant delivered, but more support for efficient councils, and that it rewards efficient councils rather than inefficient ones.



Yr wyf yn falch o allu cyfrannu at y ddadl bwysig hon. Heddiw, yr ydym wedi cyrraedd pen y ffordd hir yr ydym wedi teithio ar ei hyd yn y misoedd diweddar, gan gael sawl dadl a thrafodaeth, nid yn unig ar y setliad i lywodraeth leol, ond ar agweddau eraill y cyllid y bydd amryfal wasanaethau’n ei gael yn y flwyddyn hon a blynyddoedd i ddod.

Yn ystod y ddadl honno, yr ydym wedi gwyntyllu sawl rheswm pam y teimlem y dylai llywodraeth leol gael cyfran lawer uwch o’r gyllideb.

Diolchaf i’r Gweinidog am fy nghynnwys mewn cyfarfodydd ac yn y Siambr yn ei feddyliau ynghylch i ble’r oeddem yn mynd. Yr wyf yn falch hefyd ei fod wedi ymgynghori â Chymdeithas Llywodraeth Leol Cymru, ond nid wyf yn meddwl ei fod wedi derbyn fy mhryderon na phryderon y Gymdeithas, a ddisgrifiodd gyllideb derfynol y Cynulliad yn ddiweddar fel ‘chwarae o gwmpas ar yr ymylon’.

Croesawn y cyllid ychwanegol a’r ffaith na fydd Conwy, Powys ac awdurdodau tebyg yn cael cynnydd mor isel yn eu grant cynnal refeniw ag yr oeddent yn mynd i’w gael yn wreiddiol. Fodd bynnag, gadewch inni siarad yn blaen; yr oedd yn anhygoel fod Powys a Chonwy’n wynebu cynnydd o 1 y cant. Mae’r codiad i 2 y cant i’r awdurdodau hynny’n gynnydd sylweddol, ond mae’n dal ymhell oddi wrth yr hyn y bydd arnynt ei angen i ddarparu gwasanaethau statudol ac i gyflawni’r cyfrifoldebau a osodwyd arnynt.

Yr ydym yn edrych ar gynnydd o 2.4 y cant yn y grant cynnal y dreth. Clywaf yr hyn a ddywed y Gweinidog sef bod hynny’n 3.3 y cant os cynhwyswch yr holl elfennau eraill. Fodd bynnag, gwyddoch gystal â mi mai’r grant cynnal y dreth yw’r ffigur allweddol, ac nid yw hwnnw wedi cynyddu’n unol â chwyddiant fel y dylasai.

O wrando ar y Gweinidog, caf fy atgoffa o’r hyn a ddywedodd y Gweinidog dros Gyllid a Chyflenwi Gwasanaethau Cyhoeddus yn nadl yr wythnos diwethaf, sef bod yr hyn y mae llywodraeth leol yn ei gael yn deg, ac ystyried y swm cyffredinol a ddaw o San Steffan ac a chofio’r hyn y mae awdurdodau dros y ffin yn ei gael. Byddwn yn dadlau gyda’r ddau haeriad yna.

Mae’r ffaith yn aros fod cyllideb y Cynulliad bron wedi dyblu dros y degawd diwethaf, tra mae’r cynnydd i lywodraeth leol yn llai o lawer. Nid wyf yn meddwl ei fod wedi rhoi ateb i hynny. O ran y ddadl bod ein hawdurdodau lleol ni’n cael cyllid llawer gwell nag awdurdodau dros y ffin, gallaf roi rhestr o 10 awdurdod iddo dros y ffin sy’n cael mwy fesul pen o’r boblogaeth. Felly, edrychaf ymlaen at gael ateb gan y Gweinidog ar rai o’r pwyntiau hynny.

Edrychwch ar yr hyn y disgwylir i awdurdodau lleol ei gyflenwi: darpariaethau yn Neddf Gofal Plant 2006 a Deddf Newid yn yr Hinsawdd ac Ynni Cynaliadwy 2006, cynlluniau gwella hawliau tramwy, a mesurau amddiffyn rhag llifogydd. Rhaid i awdurdodau lleol ddelio â’r materion hyn yn y blynyddoedd a ddaw, ond nid yw’r arian yn cael ei ddarparu i’w galluogi i wneud hynny.

Oes, mae mwy o arian ar gael, ac nid wyf am fod yn surbwch llwyr; yr ydym yn hapus ynghylch hynny a’r ffaith nad yw awdurdodau lleol yn mynd i gael y setliad symol a gynigiwyd yn wreiddiol. Gadewch inni fod yn realistig, a gadewch inni wrando ar Gymdeithas Llywodraeth Leol Cymru.

Ynglyn â’ch pwynt am dreth gyngor, croesawn, fel y gwna’r trethdalwr mae’n siwr, y ffaith na welwn godiadau anferth, fel yr ofnwyd ar y dechrau. Fodd bynnag, os ydych yn mynd i osod cap ar godiadau treth gyngor rhaid ichi dderbyn ei fod bron fel gêm ddominos farwol, oherwydd mae’r angen i gapio’n ganlyniad i’r setliad a roesoch i awdurdodau lleol yn y lle cyntaf.

Gadewch inni ddweud hynny heb flewyn ar dafod. Mae’n debyg y bûm i’n anghywir pan ddywedais yn ystod yr ychydig ddadleuon diwethaf ar y mater hwn y bydd yn rhaid i awdurdodau lleol yng Nghymru ddewis rhwng faint a roddant i wasanaethau lleol, a beth a wnânt gyda’r dreth gyngor.

Mae’n amlwg i mi’n awr eich bod yn dweud wrth awdurdodau lleol y bydd yn rhaid i’r fwyell ddisgyn yn union ar wasanaethau lleol. Ni allaf weld sut y gellir osgoi hynny os ydych yn dweud wrth awdurdodau mai dim ond hyn a hyn y cânt ei wario, a dim mwy.

Gadewch inni fod yn realistig ynglyn â hyn. Gallwn, gallwn daflu ffigurau o gwmpas, ac mae’n ddiddorol gweld yn yr adroddiad cyllid y swm y mae Llywodraeth y Cynulliad wedi’i roi i gefnogi awdurdodau lleol sy’n cario dyledion mawr.

Mae mesurau o’r fath yn angenrheidiol i ryw raddau, ond gadewch inni wneud yn siwr y bydd y grant cytundeb gwella newydd, sy’n disodli’r grant cymell perfformiad, yn cyflawni nid yn unig yr hyn a gyflawnodd y grant cymell perfformiad, ond hefyd yn rhoi mwy o gefnogaeth i gynghorau effeithlon, ac yn gwobrwyo cynghorau effeithlon yn hytrach na rhai aneffeithlon.

James Purnell – 2008 Speech to Employers Conference


Below is the text of the speech made by James Purnell, the then Work and Pensions Secretary, to the Employers Conference on 28th January 2008.

It’s a pleasure to be here to give my first speech as Secretary of State for Work and Pensions. People keep on telling me there’s no such thing as a job for life any more. With four ministerial positions in less than three years, I’m starting to take that personally!

In this job, you rarely get the opportunity to think reflectively about the nature of your task. It might seem strange therefore that I should offer any reflections at all when my period for reflection has been precisely four days.

But, in truth, I’ve had welfare policy on the brain for a long time. So to be appointed as a Labour Secretary of State for Work and Pensions is a great privilege.

My title is more than an honour. It also embodies an ideological break with the past. It is not all that long ago that my predecessor was called the Secretary of State for Social Security.

What a telling name: security as something handed down; welfare as bureaucratic transfer; people as recipients of funds. The title said nothing about people’s actual lives and ambitions, nothing, in fact, about the best way of securing their welfare.

The new title, Secretary of State for Work and Pensions, tells a wholly different story. It tells you that work is the best route to personal welfare and well-being : it tells you that if you work hard and contribute then you deserve your retirement to be free from anxiety about money.

For a long time we lost sight of these common sense truths. If you’d ever said to William Beveridge that work could be divorced from welfare he would have been astonished. Yet, until this government put the two back together again, that was exactly the cul-de-sac we were in.

For Beveridge, the very notion of welfare was bound up with the idea of independence. That was what was so depressing about the debate that ran, and in some quarters still runs, about welfare dependency.

The welfare state was conceived as a way to support human flourishing. To foster independence, to give people the support they need, not so that they became dependent but precisely so that they would not.

To foster that independence will be my main aim. I am fortunate that I inherit a radical policy framework from John Hutton and Peter Hain. I will accelerate those reforms and deepen their reach to build on what has been achieved over the last decade.

Over those ten years, we’ve shown full employment is achievable on the old definition – those who want work have been able to find work.

But getting people into work isn’t enough. People also want to get on. That’s why the Prime Minister has made clear we need to improve the skills of our workforce. And that’s where you come in.

Thank you to all of you for your commitment. Your commitment to helping people into work. Your commitment to helping them raise their skills. Now, we need more employers to offer jobs to those out of work. To invest in apprenticeships. To boost our economy by giving everyone who can the chance to work.

And as for people who can’t work, for them the maximum independence too – with more support, and control over the care that they receive. I want to work with Alan Johnson to expand the principle of individual budgets, so that people who can’t work still have the dignity of controlling the support that they get.

Our goal is a welfare state that is a way out of worklessness and a way up the career ladder, but not a way of life.

And that means tackling inactivity. Our goals are ambitious. 1 million people off incapacity benefit.  300,000 more single parents at work. 1 million more older workers.

To get there, we will need major reform of inactive benefits.

Incapacity Benefit is a test case. We do not think of people as incapable. We think of them as being perfectly capable, with the right support. That’s why IB will go, replaced by the Employment and Support Allowance with the emphasis on what a person with a physical or mental health condition can do rather than cannot do.

The Employment and Support Allowance will recognise that some people face greater barriers to work. But for the rest, we will require them to look for work. We will start with new claimants and with existing claimants under 25.   But our ambition must be to help everyone in this group look for work, with special attention given to those who face problems of mental illness and alcohol or drug abuse.

To that end, we will follow through on David Freud’s groundbreaking report on reforming the welfare system. That means using the best provider, whether they are from the private, public or voluntary sectors. I want to create an effective and growing market for these services – because we shouldn’t be ideological about who provides the service we should just work out who is best at providing it. I’m glad to announce that David has agreed to come back to advise the department on implementing his ideas.

We also need to think hard and honestly about our policy for the socially excluded. We don’t fail for lack of spending. But the return on our efforts can be poor. This is where our radicalism is most needed.

We need to rewrite the terms of the welfare contract. On one side: a decency floor to wage rates, making work pay through in-work benefits, tax credits, a credible ladder of opportunity from low paid jobs to higher skills and better pay.

Dynamic market societies cause friction and change. A civilized welfare state makes the change as smooth as possible. And it gives societies confidence to welcome globalization rather than turn to protectionism.

In return those who can work will be obliged to look for work or train for work and if they do not then they will face sanctions. There should be no free riding on the welfare state. It is an insult to people who have contributed.  And it is an insult to the people who deserve help.

Of course cash transfers will remain part of a modern welfare state. But the Beveridge model lost its way when we began to think of welfare recipients as people who were done to by the state. We began to accept that maybe they needed our support in perpetuity. That mentality is the enemy of social justice and fair life chances for all.

People who live independent lives tend to flourish. The economist would say they experience an increase in welfare. That is the idea of welfare that, as Secretary of State, I will seek to promote. Social justice through independence, not a socially regressive culture of dependency.

Jim Knight – 2008 Speech on ICT in Education

Below is the text of the speech made by Jim Knight on Thursday 3 July 2008 which was pre-recorded on the previous day.

Hi, I’m Jim Knight, Minister for Schools. I had hoped to be here in person, but parliamentary procedure unfortunately prevented me. Sadly the technology for me to vote remotely has not yet been developed. Perhaps that is a good thing…

So my apologies for not attending in person. But at least I can use the technology to appear before you virtually.

If anyone was in any doubt, it is a visual illustration of technological developments and the positive benefits for society: traders can conduct business with anyone from anywhere across the globe, doctors and nurses can diagnose and cure more patients with state of the art machines, and I can be in two places at once.

And it is that society of constant communication and instant information in which our children are growing up.

In the age where a blog is created every second, 90% of UK teenagers have a home computer, a mobile phone and a games console. 1.4 million UK pupils have their own web page.

Now, you don’t have to go to visit an office of a major corporate company to see state of the art technology – the majority of children have got it in their own front rooms.

And classroom learning looks very different compared to 10 years ago – now 97% of schools have got a broadband connection, over half of classrooms have an interactive whiteboard, and the ratio of computers to pupils is 1 to 6, compared to 1 to 19 a decade ago.

We need to harness that natural interest and talent that young people have in ICT, and the almost instinctive ability to pick it up and just start using it, learning from your friends as you go.

And we need to make sure that education both gives them the basic skills, and takes them further, so that the ‘plug and play’ generation of today can turn their skills to the job they want and run with it, adapting to new technology as they go.

Harnessing that talent ought to be easy, given the popularity of technology and its widespread use.

So it is important that we continue to invest in technology in schools, to ensure that all children and young people have access to it to enhance their studies.

But we must also look at access in the home, where a million children still don’t have access to computers and an internet connection.

That means that they don’t have access to the same information, learning materials, and support for homework and private study that other children do.

And they are not exposed to that vital immersion in the technological world that sets children up so well for the world of work.

We must work hard to remove any barrier to learning. To grant fair and equal access. So that all children benefit from a good education.

So it is imperative that we break down the digital divide.

And not just for pupils, but so that parents can become more involved in their child’s learning, access support services online, and perhaps develop their own ICT skills.

Some schools now have a home access scheme in place, so that pupils can borrow equipment for their studies outside school. But still around 15% of homes with children do not have access to a broad-band-connected computer.

That’s why I set up the Home Access Taskforce last year, to explore how every learner can reap the benefits of ICT, and I am currently considering their recommendations.

So that every young person develops the confidence to work independently, gains a deeper understanding by working at their own pace, and becomes more involved in learning through exercises that are interactive, and which show and demonstrate things to pupils rather than just tell them.

Embedding ICT as far as we can – in schools and at home – is absolutely crucial.

That’s why we published our ‘Harnessing Technology’ strategy 3 years ago, to help schools make the most of the potential ICT holds for learning.

But a lot happens in 3 years.

And although we are one of the leading countries in the world for the use of technology in learning, it is essential that we continue to adapt to developments in technology, society, and education practice.

That’s why we asked BECTA – on behalf of the Departments for Children, Schools and Families, and Innovation, Universities and Skills – to update the strategy.

So that every educational institution can harness technology’s potential, every teacher can use it confidently, and every student can explore the digital world of opportunity.

I am delighted to be able to launch that strategy today.

I believe that copies are available for you to take away, and I urge you all to do so. Stephen Crowne – Chief Executive of BECTA – will be speaking to you in more detail in a moment.

Above all, the renewed strategy will clarify the learner’s entitlement to technology, it will help to secure better quality teaching and leadership in this area, and it will secure universal support for family and informal learning.

Technology is no longer optional.

Some are already excelling, such as St Dunstan’s School in Sutton which, today, is the 1,000th school to be awarded the ICT mark.

They are using their ICT resources to support learning across all levels of the National Curriculum, they have professional development in place for staff, and they are extending ICT beyond school for learning, and in communication with parents.

I want to see consistent access and achievement right across the board.

We need to ensure that all children are trained in the basics: using a word processor, managing a database, editing a website.

In this culture of collaboration and co-production, those skills are as relevant – and as vital – as good spelling and grammar.

So we have asked Jim Rose to include ICT as he looks at the primary curriculum, to ensure that younger children get the grounding they need, and so that they have access to all parts of the curriculum through ICT. I look forward to his conclusions.

So that by the time they reach secondary school, they will have the basic skills they need, make a smooth and easy transition, and be ready for a higher level of learning and taking their talents as far as they can.

The new learning options at 14-19 will be a great outlet for that creativity, and an excellent opportunity for young people to take their learning into exciting new areas, such as creative and media.

There’s a real challenge here for teachers to be as creative as they can.

A whiteboard is not just a white blackboard, but a tool for real interactive learning.

And I think we need to face up to the fact that, when it comes to the younger generation and technology, it’s very likely that they know more than we do.

A teacher is the guardian of their subject, not necessarily an expert in technology. Using creative ways to get pupils involved in their subject – and able and willing to discover it for themselves – is the mark of a great teacher.

We can’t predict how technology will develop, but we need to understand and harness the cultures around technology, to make sure that young people get the most from it.

It can feel like a daunting task – preparing students for jobs that don’t yet exist, using technologies that haven’t been invented, to solve problems we can’t even imagine.

But technology is a vast resource, full of potential. So are our pupils. And they are the ones that will come up with the answers, if we give them what they need to get on with the job.

I am looking forward to working with BECTA and our partners to fulfil the vision that we have outlined in the Children’s Plan – and through the updated Harnessing Technology strategy – for every child to have fair and equal access to a good education, so that they can go as far as their talents will take them.

And I also urge you to consult the strategy carefully, and consider what more you can be doing to give young people those opportunities, and to make the most of the resources available to you.

It has been good to talk to you and I wish you every success for today’s conference.

Thank you.

Michael Fallon – 2008 Budget Response


Below is the text of the speech made by Michael Fallon in the House of Commons on 13th March 2008.

What a disappointing Budget. I thought that the new Chancellor would emerge from the shadows as his own man through the Budget, but we ended up with a Chancellor who dithered over Northern Rock and capital gains tax and cannot even decide whether the plastic bags levy should be voluntary or compulsory.

Let me begin with the public finances and our problems. Five years ago, in the Budget of March 2003, we were promised that we would be in surplus by March 2006. Each subsequent Budget and pre-Budget report postponed that. Yesterday, we were told that we would not be in surplus until 2010-11, exactly five years later than originally planned.

Let me put it another way. In the financial year that we are completing, we were supposed to have a surplus of £9 billion. Instead, we have a deficit of £7.9 billion. That is a turnaround of £17 billion—half the defence budget—because the Government failed to keep to their original plans.

Alternatively, let us look at net borrowing. Five years ago, we were told that net borrowing in the year that we are about to start would be £24 billion; yesterday, it was admitted that it would be £43 billion, almost twice as much. Worse still, for the first time that I can see in 11 consecutive Budgets and pre-Budget reports, the borrowing figures will be higher in the next two years than they were in the last two. The figures will increase to £43 billion and £38 billion, both of which are higher than the figure for borrowing in the year just ended. Not until 2012-13 will we get back to the borrowing level of £23 billion that we last saw as an outturn in 2002-03—a decade of binge borrowing.

Finally, there is overall public sector net debt. That will rise, according to the Red Book figures, to £731 billion in 2012-13, which is almost double what it was 10 years earlier. This comes at a time when we are already paying almost as much in debt interest, at £31 billion, as we are on the entire defence budget, at £33 billion, as we can see in chart 1.1 of the Red Book. Indeed, debt interest is now our fourth biggest spending programme. We on the Conservative Benches do not need to take any more lessons about unfunded tax promises, because that scale of collapse in the public finances is simply unfunded Government spending.

To put it another way, the Treasury got the growth that it expected from the economy last year, so why does public sector borrowing need to jump from £36 billion to £43 billion? Why do we need to force the motorist, the drinker and the small business to pay more taxes? Growth was around 3 per cent., as forecast and above its historic trend, but we are spending 45 per cent. of our national income while tax receipts account for only 41 per cent. Why? Because the then Chancellor failed to prepare during the stronger years. The Government failed to control spending or pay down debt. That is not just sloppy forecasting; rather it shows clearly and conclusively that the Government, and especially the former Chancellor, cannot plan their public finances properly. Therefore, we cannot trust the current Chancellor when he tells us that everything else will be okay. That is the failure in our public finances.

Secondly, I want to address the question of who really pays for that failure. It is not the public sector, which now faces relatively smaller increases in its growth. There will of course be fewer additional police community support officers and fewer additional NHS physiotherapists. However, we know that public sector pensions are still protected and that some pay restraint in the public sector is already being breached by the more and more widespread use of bonuses. For instance, one third of HM Revenue and Customs staff received bonuses last year.

It is not the public sector that will pay. The real losers from the collapse in our public finances are the people at the bottom. The first group are the lowest- paid of all. An unmarried person without children who earns only £11,500 year, on the minimum wage or just above it, pays tax and national insurance at 16 per cent. of their earnings. Someone in Ireland in exactly the same position would have to earn almost twice that amount—more than £22,000 a year—before they paid tax at 15 per cent. Why should single people starting their working lives be hit the hardest? Why should they be discriminated against by the myriad rules against part-time working, which make it less worth while to work between four and 16 hours a week, for example, because of the interaction of income support, working tax credit and child tax credit? The tax credit system is fine in itself, as we on the Conservative Benches have accepted. However, because it goes so far up the income scale, it simply does not give enough help to those who need it at the very bottom.

The second category having to pay for all the mistakes is our pensioners, particularly those on fixed incomes and those facing year-on-year real increases in council tax of around 4 or 5 per cent. Let me give an example from Sevenoaks district council, which is one of the southern district councils that has been worst treated by this Government. My constituent, Ms Earnshaw-Whittles, keeps a careful record, going all the way back, of the exact amount that she pays. In 1998-99, the first year for which the Government made the allocation, she paid £90 a month in a band G house. Had that amount been increased with inflation, she would now be paying £115.63. In fact, she has to pay £171, which is 48 per cent. higher. We are talking about people on fixed incomes paying half as much again in council tax they would as if the figures had been indexed. They are the people paying for the Government’s mistakes.

We know, too, that every council has had to plug the gap in its pension funds caused by the then Chancellor’s disastrous raid on pensions in 1997. Every local authority has had to cope with all the extra legislation passed through the House and the multitude of directives issued by Whitehall, but on a reduced grant.

Finally, small businesses are paying the price for the failure to control our public finances. Not only are they over-regulated, as Conservative Members have pointed out time and again, but they are constantly forced to act as the Government’s agents, by operating the tax credit system, checking on immigrant status and sorting out graduate loan repayments. As thanks for that, this year of all years, corporation tax will be increased by 2 per cent. We have been asking why since the last Budget, but we have not received an explanation. Rather than putting the burden of their mistakes on to those who simply cannot pay, the Government should look much harder at putting their own house in order.

I want to conclude with some remarks about the waste and inefficiency in central Government. There was not much in the Chancellor’s speech yesterday about the efficiency savings programme. We have had the Gershon savings and it is claimed that the £30 billion is on course to be realised. However, we know from the work of the National Audit Office and the Public Accounts Committee what a small proportion of those savings have been fully realised, fully audited and cashable. I understand that the NAO has endorsed only about a quarter of the current savings as real, in terms that the private sector would understand.

Secondly, there is the period after the Gershon review, post 2010-11. We were told yesterday that we would have to wait until the 2009 Budget before we saw the details of those savings, although yesterday we were promised something called the “public value programme”. It is not immediately clear to me how the public value programme differs from the current value-for-money delivery agreements. We have learned from bitter experience that changing the labels does not mean that we will get real cost-cutting in the administration of government, better ways of working, a reduced rate of absenteeism and an improvement in the efficiency of the back office systems. Those are all things that the private sector has had to cope with and implement over the past 10 years, but which still seem so difficult in the public sector.

Then there is pay, of course. I welcome the suggestion in the Red Book that Whitehall wants an increasing number of multi-year agreements, but I have warned before, including earlier in my speech, about the ever-widening use of bonuses to circumvent pay ceilings instead of adopting the performance-related pay measures that are now common in the private sector.

There are also asset sales. The Government have another £12 billion to go before they realise their 2010-11 target, and only two years left to get on with it. It seems to be taking them an awful lot of time even to sell the things that they have said for years that they wished to sell, such as the Tote. They have been playing around with that for years. A couple of weeks ago, the Department for Culture, Media and Sport announced that it intended to appoint financial advisers. If the Government are to realise their intended gains from asset sales, they must get on with it.

As I said on Monday, this country is in a financial crisis. We see that in the lack of confidence in commercial banking, the deep-rooted problems in the bond markets and the serious downturn in the United States. I suspect that we are nowhere near the end of that crisis. Just because this business cycle has run twice as long as previous cycles, that does not excuse the Government for not having prepared properly for its end. That is what Governments are for. Instead, just as our constituents face rising food and fuel prices, we find the Government being caught out. They have unfunded spending commitments, which are being met each year only through higher taxes and increased borrowing. They failed to prepare and have now been found out. Next year, they must prepare to fail.

George Osborne – 2008 Speech on the Credit Crunch


Below is the text of the speech made by George Osborne, the then Shadow Chancellor of the Exchequer, on 8th April 2008.

Last Friday I was in New York City meeting some the heads of the major investment banks who are on the front line of the current financial turbulence.

Today I am honoured to be here at Harvard, where I want to learn from those who are at the cutting edge of current economic thinking.

And I’m particularly pleased to be here for the centennial of Harvard Business School.

But my journey between the two cities took me on a detour via a museum in upstate New York.

Hyde Park was the home on the Hudson River of Franklin Roosevelt and today it is the site of his presidential library.

Visiting that library this weekend I was reminded that the first and most immediate of the economic crises which the new President Roosevelt had to confront in 1933 was a banking crisis.

And the foundations of the current US regulatory structure which is trying to deal with today’s credit crunch was laid down as a response to the credit problems of the Depression era.

The creation of the FDIC to protect the savings of the American family.

The split between commercial and investment banking enshrined until recently in the Glass-Steagall Act of 1933.

And the powers granted to the Federal Reserve to preserve financial stability in the 1930s which were invoked over seventy years later to preserve stability again by the rescue of Bear Stearns.

The bankers, economists and politicians of the great Depression era had to confront problems that few had foreseen and shape a whole new set of answers.

Today’s generation of bankers, economists and politicians across the western world are also confronting problems that few had imagined possible even a year ago.

The fact that wholesale debt and credit markets would simply freeze.

The fact that everyday financial products from mortgages to student loans to auto finance would be withdrawn from thousands of families.

The fact that in Britain the Government would end up nationalising a $200 billion retail bank and that in the United States the Federal Reserve would intervene with taxpayer guarantees to save a major investment bank.

And the fear that this financial turbulence on Wall Street and the City of London heralds economic misery on Main Street and in the high streets in Britain.

It is incumbent on us to think through what the long term implications of these events might be, not just for our system of financial regulation, but for the way governments and central banks seek to manage the economy.

Not to rush to rash judgements or premature solutions. Not to assume that every problem needs a new law and a new piece of regulation. But to acknowledge that we have not reached the end of economic history.

Many people thought we had. Economic policy seemed to have reached a consensus on independent central banks, inflation targeting and floating exchange rates.

Some politicians went so far as to boast that they had ended ‘boom and bust’. They now look ridiculous.

Of course, there were those who pointed out that the build-up of debt could not continue, that the current account could not grow for ever, and that an economy built on such levels of debt was unsustainable.

Their worries have been largely ignored – indeed many of the most advanced macroeconomic models barely have a role for money or balance sheets.

Macroeconomic policy over the last fifteen years or so has been focused on the need to control inflation and the demand cycle.

This is particularly true in the UK, where we finally settled in 1992 on a policy of inflation targeting, cemented in 1997 by the independence of the Bank of England.

Bank independence was an idea whose time had come. I welcome it and in office we would strengthen it.

But it was designed to deal with the old challenges: of persistent inflation and excess demand.

The credit crisis demonstrates starkly that controlling retail inflation is not enough. Recent threats to stability have come not just from the demand cycle but from the credit cycle.

Over the past decade both the UK and the US have seen in rapid rises in the liabilities of households, companies, and banks. But under the terms of the former economic consensus, all looked well: retail price inflation was low, and growth was positive.

With the addition of the deflationary power of China and the rest of the developing world to the global economy, the debt and the deficits were ignored.

We could, we were told, survive with increasing leverage for ever. Yet we are discovering – as Milton Friedman might have predicted – that the link between money and inflation has not in fact been broken.

Inflation expectations have been held down by the knowledge that the central banks were mandated to keep inflation low. But we are now all discovering that the extra liquidity has flowed not into retail prices, but into asset prices and unsustainable increases in household balance sheets.

For a long time this has been good news for home-owners and investors, but it is at the core of the problems we now face.

An unsustainable rise in asset prices relative to retail prices can only unwind in one of two ways. Either asset prices fall. Or retail prices rise. Both are disruptive to the economy, and to millions of families in America and Britain. Both are happening now.

In the UK house prices are falling and consumers are witnessing a steep rise in the cost of living.

Harvard’s own Ken Rogoff, the former IMF Chief Economist, summed it up with a quote from Robert Frost: “Some say the world will end in fire, some say in ice.” I look forward to meeting him tomorrow to find out which it will be.

What would be quite wrong is simply to reflate the bubble, and imagine our problems would be solved. Instead, the short term priority is to manage the unwinding of asset prices rises and increased leverage, while keeping a firm grip on retail price inflation.

But the question of how we get ourselves out of this mess in the short term, is tied to the question of how we make sure it doesn’t happen again.

In the medium term, we need to recognise that the cycle of easy money and easy credit is a function of the financial markets and macroeconomic policy and it’s there we need reform.

And finally, this crisis reveals the weaknesses in our economies that we have to fix in the long term.

So let me set out my thinking on what the policy response should look like in the short, medium and long terms.

The priority in the short term must be to weather the current crisis and prevent the emergence of a vicious spiral of restricted credit, falling asset prices and falling demand.

But in doing so we mustn’t lose sight of controlling inflation and undoing twenty years of hard work.

The Fed’s dramatic action to prevent the collapse of Bear Sterns was necessary to stop counterparty risk becoming a generic issue across markets.

As we discovered, interconnected banks are not just normal companies, or indeed just providers of money in the financial system. Increasingly, banks have become part of the infrastructure on which the system relies.

But this implicit Government insurance brings with it problems. Bear Sterns’ creditors were paid for the risk they took lending to the bank. Now that risk has been shouldered by the taxpayer.

We had the same problem in the UK with Northern Rock, one of the largest mortgage lenders. The Government guaranteed not just retail deposits but wholesale deposits.

So there is now an implied Government guarantee on any bank that can’t fail. But even the Government’s balance sheet isn’t big enough to guarantee the whole banking sector. There must be a concern that risk will be mispriced once again.

There are some solutions to these difficult problems.

We need considered and proportionate reforms to the systems of financial regulation and oversight that failed.

I know that a vigorous debate has been started here in the US by Secretary Paulson’s proposals.

I have been impressed in New York by the leadership shown by the Federal Reserve and the authorities in managing the crisis. The attitude appears to be: we will do what it takes.

If that means selling an investment bank over a weekend then that is what will be done.

In the UK the system set up by Gordon Brown in 1997 to ensure financial stability failed its first real test with the run on Northern Rock.

There was five months of dithering before the British Government was forced to put through the nationalisation they had tried for so long to avoid.

In Britain, we argue that the Bank of England should be given new powers to step in quickly to rescue failing financial institutions.

We should also look carefully at the way new credit and debt products on both sides of the Atlantic have grown on the back of tenuous bilateral agreements rather than any system of central clearing.

The result is that counterparty risk can threaten the whole system, as we saw with Bear Stearns. We need to avoid that.

An idea raised with me last week both at the New York Stock Exchange and by George Soros is that we should create much more transparent and independent clearing houses for these new debt and credit products like CDOs. Others have suggested to me that we should look carefully at the prime broking role of hedge funds too.

Another immediate lesson of the credit crunch is that we need to remain open to other sources of capital, including from the sovereign wealth funds that operate on a commercial basis.

And, away from the financial markets, we need to make sure that our public finances are sufficiently robust to be able to help families and businesses who are on the sharp end of the current problems.

The lesson could not be clearer. We should use the good years to set aside something to help in the difficult years.

In the US the bi-partisan fiscal stimulus package means that millions of households around the country are about to receive cheques for hundreds of dollars to help them through difficult times.

In the UK, by contrast, our Government is raising taxes on the lowest paid, on small businesses and on capital gains. They are adding to the cost of living instead of easing it.

This is a function of the UK having the largest budget deficit in the developed world. We have been reminded again of the consequences of not fixing the roof when the sun was shining.

And finally, even without the crutch of fiscal support, it helps no-one to see a spiral of repossessions and fire-sales, so we have called on all mortgage lenders to follow best practice and support those borrowers in difficulty.

These are all part of the immediate responses to the immediate problems we face on both sides of the Atlantic.

But I believe there is also a broader lesson to be learned for the medium term. Because the truth is that we cannot and must not separate financial policy from the macro-economic framework within which it operates.

Imagine for a moment that the last five years had been characterised by better regulation and tighter controls aimed at producing fewer sub-prime loans that will never be repaid and less investment in the complex financial products that have played such a fundamental role in the current crisis.

One intended result would have been lower aggregate demand in the economy, probably accompanied by lower inflation.

But the monetary response on both sides of the Atlantic would almost certainly have been lower interest rates, and as a result the financial system would have found other ways of expanding credit.

Because the reality is that while we may have successfully controlled inflation, this has largely been accompanied by disregard for the current account, asset prices, the rate of growth of credit or household balance sheets.

Fundamentally, a macro-economic policy that overshoots the sustainable rate of growth by encouraging millions of households to borrow more than they can afford is not going to be made safe through financial regulation.

In the UK we have gone further than the US in using monetary policy to target a single narrow measure of inflation.

But the problem with all defined policy targets is that they only work so long as they maintain a consistent relationship with the longer term goal they are designed to achieve – in this case sustainable economic growth.

As has happened repeatedly before in economic policy, while the targeted variables behaved, the information they contained about the rest of the economy became less useful.

Goodhart’s law has been proven once again.

In particular, the UK system was not designed for a situation in which excess domestic demand was combined with downwards pressure on inflation from elsewhere.

And it has not proved easy to integrate concerns about other economic signals into the formation of monetary policy – the deterioration in the trade and current accounts, and in particular the unprecedented increase in household debt.

We have warned for several years that the boom in household indebtedness was unsustainable – as I said two years ago “an economy built on debt is living on borrowed time”

But the British government ignored this warning because their economic policy refused to see it as a problem.

The result is that household debt stands at 175 per cent of incomes, higher even than the 140 per cent in the US.

Of course debt is not a bad thing in itself – for millions of people it is the means to their dream of home ownership. But the debt has to be sustainable.

The new economic challenge of our time, then, is to tame the credit cycle without damaging the dynamic financial sector that is so vital to the success of both our economies. That is the way to ensure real economic stability.

I’m not going to propose a quick fix solution – the right answer will only emerge from a thoughtful and measured debate. But there are some ideas beginning to emerge that might point us in the right direction.

It is clear that better regulation and risk management alone will not solve the problem – important as they are.

And the traditional instruments of monetary policy – interest rates – are not well suited to controlling asset and credit bubbles.

The IMF recently added its voice to calls for central banks to pay greater attention to housing markets when setting interest rates, particularly in countries where sophisticated mortgage markets appear to create a powerful “financial accelerator”.

But as Ben Bernanke has argued convincingly, the danger is that by targeting asset prices as well as retail prices with just one policy instrument the real economy may become less stable not more.

An alternative is to use the other tools at the disposal of central banks to target the credit cycle while keeping the focus of interest rate policy on the demand cycle and inflation.

This idea has been suggested by Professor Charles Goodhart amongst others, and was raised recently by Paul Tucker, the Director of the Bank of England responsible for markets.

At the core of this approach is the insight that financial crises are born during the financial booms that precede them – the only way to prevent the bad times is to stop the good times getting out of control.

The proposed solution is to vary the capital requirements that control the amount an institution such as a bank can lend.

Currently these requirements vary across institutions to reflect the amount of risk they are exposed to.

There is an emerging view that one lesson of the credit crunch is that these capital requirements need to be higher, and the opportunities for avoiding them by going off balance sheet with special investment vehicles should be curtailed.

Last month David Cameron, the Conservative Leader, rightly argued that we need to look again at the Basel accords that govern capital rules at an international level.

But what if the capital requirements could be varied not just between institutions, but also over time in order to target the credit cycle?

Under such a system a bank’s capital adequacy ratio would comprise of an element set by the prudential supervisor, specific to that bank as now, combined with an element set by the monetary authorities across the whole financial system.

Counter-cyclical capital requirements could also help to dampen the unhelpful pro-cyclical tendencies built into the Basel accords – which tend to encourage risky lending during a boom and to discourage lending when times are difficult.

This idea is still at an early stage but I believe it deserves serious consideration.

The difficulties are considerable, and in a globalised world we need to look at a global solution. But the potential rewards are so great that we should carefully consider all of the options available to us.

So the medium term challenge is a macroeconomic framework that can deliver real economic stability and sustainable growth – both on the fiscal side so that we are never again so badly prepared for an economic slowdown, and on the monetary side so that we can reduce the severity of credit cycles.

But over the long term, for all the problems of the free market, let us not forget that the responsibility we are fulfilling is quite simply to improve the best instrument even invented for improving the condition of mankind.

The credit crunch will be used by some to make the case against capitalism itself, to regulate anything that is risky, and to cut each economy off from the rest of the world.

But far from undermining the case for capitalism, the credit crunch makes the case for improving the way our global free markets works.

In the United States, your flexible economy means that you have bounced back quickly from past recessions.

We in the UK need dynamic supply side reform, to reduce taxes sustainably, and to improve the skills and build the infrastructure business needs.

For as the tide of debt-fuelled growth recedes in the UK, we are now seeing rocks exposed: the rocks of an economy that will find it increasingly difficult to compete against the emerging giants of China, India, and Brazil.

We must resist the siren calls of protectionism, here in America and in Britain. For whatever the depth of the current problems, all the evidence shows that cutting yourselves off from the world is surely worse.

Every generation must make its case for free markets. Not just free markets at home, but free trade overseas.

For what else, could over a generation lift two billion people – a third of the world’s population – out of grinding poverty and connect them to the world economy?

What else could have brought so many opportunities to so many of our fellow citizens?

Yes, globalisation brings with it new challenges.

Yes we must work tirelessly to make globalisation work better.

But globalisation has been the greatest driver of prosperity the world has ever seen.

And as we work together, to improve our understanding of the world we live in, and to solve the great intellectual challenges of our age, we should never forget that powerful truth.

George Osborne – 2008 Speech at Policy Exchange


Below is the text of the speech made by George Osborne, the then Shadow Chancellor of the Exchequer, to the Policy Exchange on 14th April 2008.

I am grateful to Policy Exchange for once again providing me with this opportunity to speak to you.

Last week I visited Wall Street and Harvard. I went there to speak to the heads of the leading investment banks about the problems in the financial markets and to learn from the leading economic thinkers about what this means for our world and for Britain’s place in it.

This week the Prime Minister is in America. He has also added Wall Street and Boston to his trip. I wonder about the reception he’ll get.

For everywhere I went, people kept asking: “What’s happened to Gordon Brown? Why has it gone so wrong for him? What are you going to do differently?”

Today I want to try to answer those questions. For to understand the Conservative alternative, we must first understand why Gordon Brown has failed.

Of course, it is tempting to start with what Americans call the ‘character issue’.

That’s apparently what the new marketing men drafted into Downing Street to help seem to believe, judging by the private briefings we hear reported. Gordon needs to show a ‘bit more personality’ we are told. His speeches are ‘too stilted’ says another. Stephen Carter merely observes that working with the Prime Minister is like living in a ‘surreal cartoon’.

It is ironic that the politician who once said of his opponents that they ‘could do the PR, while he would concentrate on being PM’ should have the decline and fall of his premiership chronicled in the pages of the magazine PR Week.

And what started in the heart of Downing Street has now spread. Labour MPs are queuing up to attack the man they elected unopposed to lead them less than a year ago. Some of them think too that Gordon Brown’s problems are all about style. One ministerial aide told the Prime Minister at the now infamous meeting of the Parliamentary Labour Party that the problems would be solved if he appeared on the sofa on Friday Night with Jonathan Ross. I suspect that’s the last we’ll be hearing of that ministerial aide.

Now I am no fan of Gordon Brown’s character. I shadowed him in the Commons for over two years, saw the worst of it, and I know why his closest advisers worry about it. But they are missing the central point.

The striking thing about the divisions in the Labour Government is that they are not merely arguments of style but ones of substance. That makes them much more lethal and destabilising. For how can a Labour Party fighting itself be expected to fight for the country?

The Justice Secretary Jack Straw no less is lobbying against the Prime Minister’s criminal justice plans for detention without charge. When he is not fighting the Justice Secretary, the Schools Secretary Ed Balls is waging a war against the government’s own education reforms to further his own leadership ambitions.

Perhaps most damaging of all, over 70 Labour MPs have come out against the centre-piece of last year’s Budget – the 10p tax rise on the incomes of the lowest paid. They know this will hit the very families who thought Labour was supposed to be on their side. Sadly, I suspect many Labour MPs will lose the courage of their convictions by the time parliament votes on the tax rise next Monday.

In one respect, this great Tax Revolt in the Labour Party is a massive political failure by the Prime Minister. I am always amazed that Gordon Brown still carries a reputation in some circles as the great master strategist. Even a cursory look at the last three Budgets and Pre-Budgets would surely make people think twice. One was exposed within hours as a giant tax con when the 10p tax rise was revealed; the next lost Labour the support of the business community and ceded the intellectual agenda to the Conservatives; the third and most recent sent Labour to new lows of unpopularity as Mondeo Man saw his car and his pint and his small business all hit with new taxes.

But the root of the problem is not political strategy but economic strategy. Governments should be there to help people when they need it. They should set aside money in the good years so it can make life easier for families in the difficult years. So we shouldn’t be seeing taxes rise in a downturn. The lowest paid shouldn’t be targeted by the Exchequer when they already struggling with a rising cost of living. This speaks to a wider point.

Gordon Brown rested his reputation on a three-pillared economic strategy. He said he should be judged against its success. The three pillars were:

– Stability: that he had brought “an end to boom and bust”

– Prudence: that he would only borrow to invest

– Productivity: that he would improve the underlying performance of the economy

Stability, prudence, and productivity.

For a while, the remarkable period of low inflation and global growth driven by the emergence of China and India masked the cracks. Yet now, as global growth slows and inflationary pressures grow, we can see how each pillar of Gordon Brown’s economic framework is now broken.

Let us examine each pillar in turn.

First, what Gordon Brown called ‘stability’ but the rest of us know as monetary policy.

The decision to give the Bank of England independence built on the regime of inflation targeting introduced by the previous Conservative government.

Inflation targeting was straightforward but radical. Fiscal policy – tax and spend – would be set for the long term, while monetary policy – interest rates – would be used to stabilise the economy and hit an inflation target set by democratically accountable politicians.

This was a system designed to address the old problems of managing the demand cycle and the persistent inflation that had been the core weakness of the British economy.

Once inflation targeting was institutionalised by the Bank of England Act, everything else in the economy – the exchange rate, the current account, debt levels, and the structure of the economy itself – were all left to find their own balance.

Politically, the system focussed attention on the targeted variable: inflation. And that was how it remained for many years.

Because our inflation was low, thanks in large part to the import of deflation from an emerging Asia, anyone who raised concerns about imbalances in other areas – the current account, debt, or the odd fact that our growth was becoming more and more concentrated in a few limited areas of the economy – was told to stop worrying, that the world had moved on.

Since asset prices – houses, property, and shares – are not part of the inflation target, the massive inflation in asset prices was allowed to go unchecked.

David Cameron, myself, and many others warned that the growing level of consumer debt that went hand in hand with this inflation in assets was unstable. As I said two years ago, “an economy built on debt is living on borrowed time”.

Of course many of these problems also occurred elsewhere in the developed world, but what is striking when you look at the figures is just how great the scale of these problems has been in Britain.

Gordon Brown’s said “I will not let house prices get out of control”. But our housing market increased faster than any other developed economy, twice as fast as in the United States. Our personal debt is the highest in the G7, at 175% of income, compared for example to 140% in the United States.

The Prime Minister says the subprime issue is an American one. But the IMF declared last week that, judged by the size of our economy, our banking system is the most exposed to low quality sub-prime lending in the world.

So the problems were more acute in Britain and, of course, nowhere else did the Government so publicly announce that that the problems of monetary policy had been solved for ever – that we had reached the end of economic history.

I do not know of any other country in which the head of the finance ministry declared that the economic cycle had been tamed – and that boom and bust had been abolished. It now looks like the high water mark of hubris.

Now the debt bubble is bursting, and banks are cutting back on their loans. What is the result of this policy failure for millions of households?

The Council for Mortgage Lenders expect the supply of mortgage lending to fall short of demand by £30bn this year unless conditions improve. That means that 200,000 people risk being shut out of the mortgage market.

That’s almost exactly one hundred times the 2,000 people who will be helped by Gordon Brown’s latest package to help homebuyers. Let me tell you what the Chairman of the Council of Mortgage called that latest Downing Street initiative: “an inaccessible irrelevance to most first time buyers”.

The Government has no answers to the bursting of the debt bubble, either for homeowners immediately affected by higher mortgage costs or for a country that wants to know why we were so badly prepared for events.

The question of how badly prepared we are leads us directly to the second pillar of Gordon Brown’s economic reputation – what he calls ‘prudence’ but the rest of us know as fiscal policy.

The centrepieces of tax and spend policy were to be the fiscal rules – the golden rule and the sustainable investment rule. Set out when he was still Shadow Chancellor, and then enshrined in office, they were supposed to be the guarantee to the public that Labour would not repeat the mistakes of its past and create a mess of the public finances.

We can now see that the fiscal rules have failed on almost every level.

They lack independent credibility. In opposition, Gordon Brown wanted the rules to be independently verified. In government he refused and appointed himself judge and jury over his own rules, so that no one else could declare them broken, and by changing the date of the economic cycle he was could fiddle them repeatedly when they started to bite. The result is that no serious economic commentator now uses them as a measure of the health of the public finances.

And for good reason. Because far from stopping pre-election give-aways at the expense of economic stability, they have allowed Gordon Brown to spend and even cut taxes just before each election and then raise taxes massively afterwards. According to the independent Institute for Fiscal Studies, taxes have gone up by more than £7 billion since the last election alone.

Yet even with the highest tax burden in our peacetime history the pursuit of prudence somehow left us with the largest budget deficit in the developed world. Turn to the tables at the back of this week’s Economist magazine and you’ll see that the only countries with a bigger budget deficit are Egypt, Hungary, and Pakistan.

Gordon Brown failed to fix the roof when the sun was shining, and the consequence for millions of families up and down the country is that taxes are going up just when the family finances are getting tighter. At the same time spending growth has been halved.

The contrast with the United States is stark. There the Government is now literally posting tax rebates worth hundreds of dollars to American families to help them with the rising cost of living. American business is being boosted by tax reductions to help them through this year.

In Britain last week taxes rose on the low paid, on small businesses and on capital gains. Next spring they will rise on family cars.

Instead of using fiscal policy to help families, fiscal policy is now pro-cyclical not counter-cyclical – the very opposite of what was promised.

What this means in plain English is this Government isn’t on your side. It is on your back.

And that brings me to the third pillar of economic strategy.

Just as Gordon Brown failed to prepare the public finances, so he has failed to prepare the supply side for the unprecedented competitive challenge coming from Eastern Europe, India, and China.

Alongside an independent bank to guarantee monetary stability, and fiscal rules to guarantee fiscal prudence, the third pillar of Gordon Brown’s economic policy was the pledge in the 1990s to raise the sustainable growth rate of the economy by increasing productivity.

Indeed, Gordon Brown said that “productivity is the fundamental yardstick of economic performance”.

OK. So let’s examine his performance against his own chosen fundamental yardstick.

Using the Government’s own measure of productivity, the average annual growth rate of output per worker has been less than 1.8% during the eleven years since 1997, down from 2.0% during the previous eleven years. That’s a 10% fall in the average rate of productivity growth.

And on all the international comparisons, our competitiveness has declined.

The causes are obvious.

– Billions of pounds spent on public services without reform, with the result that productivity in the health service has actually fallen.

– Higher taxes and constant tinkering with the tax system that has given us the longest tax code in the world.

– And a total failure to tackle poor skills and the scourge of worklessness through radical reform of education and welfare.

Far from raising the sustainable growth rate of the economy, the evidence suggests that the last ten years have if anything reduced it.

The fastest growing areas of the economy over the last ten years have been financial services, housing, and the public sector. All three drivers of growth are now curtailed.

And again, we can see the consequence for millions of families.

Rising productivity is ultimately what underpins rising standards of living – that is why Gordon Brown was right to call it the fundamental yardstick of economic performance.

Yet once you strip out the rising cost of living, real take home pay has been falling for more than two years. That is the longest sustained fall since records began in the early 1990s.

Families across Britain are feeling the pinch and it is a direct consequence of our falling competitiveness.

So we can now see that the three pillars of GB’s economic reputation have collapsed in a heap of rubble.

Monetary policy to guarantee stability. Collapsed as the bubble in debt and asset prices went unchecked.

Fiscal policy to guarantee prudence. Collapsed as Brown spent more than we could afford, and borrowed in a boom to pay for it.

And supply-side policy to generate growth. Collapsed as our competitiveness and productivity growth has fallen.

So, to answer the question I was asked repeatedly in America, that’s what’s gone wrong with Gordon Brown. His economic reputation is in tatters.

Today’s FT survey confirms that. He is the least trusted of all the major Western leaders to steer the economy through difficult times.

So what is the alternative? That’s the second question people are asking.

Of course, given the disarray in the government, there is unlikely to be a general election any time soon – much to my regret. The responsible thing is to wait to see the economic conditions at the time of the election before we can set out our final economic plan for the country.

The country understands that. But it is already clear that there is a Conservative alternative.

First, on monetary policy and the banking crisis.

The immediate priority must be to ease the credit crunch and re-open the market in mortgage backed securities. I support the actions taken so far by the Bank of England but there is clearly scope to go further. A broader collateral swap programme supported by the Treasury could help. This would allow banks to swap their illiquid mortgage backed securities for liquid government bonds.

Of course, such a significant step would have to be accompanied by cast iron guarantees for the taxpayer, and that must be priced into the deal – not least to minimise moral hazard. And of course any intervention must not exacerbate inflationary pressures in the longer term.

This is something the Government could do now and should be discussed at tomorrow’s banking summit.

But we also need to think about longer term reforms. I support the independence of the Bank of England, and in office we would strengthen it by giving the Governor a single, longer non-renewable term.

It is not helpful to have the Prime Minister playing games with the reappointment of the head of the central bank in the middle of a financial crisis, as we saw earlier this year.

And we will give the power to rescue banks to the Bank of England, instead of the FSA as Alistair Darling wants to do. I am glad that we agree with the all-party Treasury Select Committee on this.

For most bank collapses follow regulatory failure, so the regulator cannot make the call on the rescue. Since taxpayers’ money is involved, the Government will set the conditions under which a bank will be rescued. Then the independent Bank of England can take the lead on executing individual decisions.

But we need to think about going further than these important reforms if we want to ensure stability.

We have seen how the build up of a bubble in asset prices and debt can damage millions of people. As house prices fall, and the threat of negative equity looms for hundreds of thousands of people, we must try to construct our monetary policy framework so that it will never again ignore an unsustainable build up of debt.

Because the only way to avoid the damage of a bursting bubble is to make sure it doesn’t get pumped up in the first place.

We need to look carefully at what tools we can use, internationally if necessary, to slow the explosion of debt during the good years.

David Cameron first raised the role of capital requirements for banks last month in a speech in the City. He argued that they would need to rise and that we had to stop liabilities being concealed off balance sheet.

Last week at Harvard Business School I took this idea a stage further by suggesting that we look at whether capital requirements could alter during the cycle to control credit in times of boom and expand it in times of contraction.

Under such a system a bank’s capital adequacy ratio would comprise of an element set by the prudential supervisor, specific to that bank as now, combined with an element set by the monetary authorities across the whole financial system.

We have heard absolutely nothing from either Gordon Brown or Alistair Darling about these ideas. They apparently have no answer to the challenge of controlling the credit cycle.

But this weekend the international Financial Stability Forum recommended to the G7 that it should look at raising capital requirements and tackling off balance sheet liabilities, while the Basel Committee on Banking Supervision is looking at the how they might be applied counter-cyclically.

It is another example of the Conservative Party engaging in new ideas while the Government is stuck in the failed thinking of the past.

It is further evidence of a clear alternative in British politics.

Let me turn to the second pillar: fiscal policy.

David Cameron and I are both fiscal conservatives, with a small ‘c’. We will govern by the principles of sound money.

We will reform the fiscal rules so that they are independently verified. The next Chancellor will not judge his own performance against his own rules.

Never again should the Government be able to borrow recklessly in a boom, and still claim it is guided by prudence.

And over a cycle, we will share the proceeds of growth, and so reduce the proportion of the economy taken by the state. Government will grow more slowly than the economy does.

For those who question how meaningful a commitment this really is let me remind you that it took eight years for Margaret Thatcher’s government to reduce the share of national income taken by the state below the level which she inherited.

For those who want a solution tomorrow to Britain’s bulging deficit let me warn you that there is no quick fix to the dismal state of our public finances. Sharing the proceeds of growth is the serious, sustainable way to restore them to health and build the foundation for lower taxes.

And finally we will we improve competitiveness through dynamic supply side reform.

Lower taxes are part of the answer, and, as I have just said, our pursuit of sound money will make that possible. But we will not disappoint people with undeliverable promises.

If David and I had given way to the siren voices of recent years calling for upfront commitments to unfunded tax reductions, we would rightly be under pressure now to explain how they could possibly be delivered with a rapidly rising budget requirement.

But we didn’t.

What we have demonstrated is that within the existing tax burden it is possible to make significant reform. I established the independent Tax Reform Commission to start the long term argument in Britain on tax reform.

A remarkable number of its recommendations have already found their way, in one shape or another, into our tax code.

Last October, everyone noticed our costed plan to raise the inheritance tax threshold to one million pounds.

But it is our commitment within that plan to abolish stamp duty for nine out of ten first time buyers that looks prescient now. The figures from the Halifax last week not only showed house prices falling; they also revealed that the number of first time buyers was at its lowest level since the 1970s.

Getting rid of stamp duty would help enormously as mortgage arrangement costs rise, and it would inject some support into the housing market at a difficult time.

We have also set out plans to boost the competitiveness of British business by cutting the corporation tax rate to 25p by reducing the complex allowances, and by reversing the increase in small business tax.

And in the longer term, with the advice of Geoffrey Howe, we will fundamentally reform the way we make tax policy, so that we can begin to undo the stifling complexity created by Gordon Brown.

But an economic strategy for the new global economy doesn’t just mean Government doing less. Laissez faire is not a serious answer to many of the challenges we face.

Government should be doing more where it’s needed, like improved transport infrastructure, better skills, and more active support for businesses. I want the attitude of the Government to be a service to business, not a burden.

Part of this is getting more from what we spend, so we will return the Treasury to its most important role – getting value for money for taxpayers.

We will reform education to create more good school places, allowing good schools to expand and new ones to be created.

We will build on the most successful international experiences to reform our welfare system and get hundreds of thousands of people back into work.

That is our alternative. The Conservative alternative.

On the three pillars of economic policy we will offer fresh thinking. We will learn the lessons of Gordon Brown’s failure.

And we will make sure that next time Britain is confronted with a difficult economic challenge we are well prepared.

We will fix the roof whether or not the sun is shining.

George Osborne – 2008 Speech to the Annual CPS Lecture


I’d like to thank Jill Kirby and the Centre for Policy Studies for inviting me here today to give this Annual Lecture.

The CPS helped to lay the intellectual foundations for the arrival of a transforming Conservative Government in 1979.

I hope that you can do the same for us today.

After all, many of the immediate problems we face are eerily reminiscent of the late 1970s.

Rising inflation – which hit an eleven year high today – rising oil prices, and a deteriorating fiscal position, to take just three examples.

David Cameron this morning set out the Conservative Economic Recovery Plan that we have developed to address the immediate challenges of the economic slowdown and the credit crunch.

This evening I want to talk about our long term economic goals.

I want to argue that fixing our broken society is integral to building a strong economy.

Listen to our Prime Minister and you get the impression that social problems and economic problems are entirely separate.

One day the Government is talking about knife crime – the next it’s about the banking system.

One Minister delivers a speech about school discipline – another has an announcement about the housing market.

We need to bring these different threads together.

Labour came to power promising to deliver both social justice and economic efficiency.

After 11 years, the evidence shows that they have fundamentally failed to deliver on either.

We Conservatives understand that they are really two sides of the same coin.

Of course we know that you cannot improve social conditions without economic success.

But the crucial insight for modern Conservatives is that in the new global economy you cannot have economic success without social success.

The formula for economic success in this new global economy is no mystery.

Low tax rates and a simple tax system to attract and retain mobile capital and talent – an area where Britain used to be strong but is losing ground fast.

Light touch regulation to keep down costs and avoid stifling innovation.

A flexible labour market that allows employers to respond to fast changing market conditions.

Reliable and cost effective energy and transport infrastructure.

An efficient system of government support for investment in science and technology.

And, probably most important of all, a motivated and educated workforce that can adapt to new technologies and working practices.

But while other countries have used the last decade of global economic growth to improve their competitiveness, our Government failed to use the good times to prepare us for tougher times ahead.

Where they have cut their tax rates, improved their fiscal positions and reformed their public services, our corporate tax rate has fallen from 4th lowest in the EU to 19th lowest, our budget deficit is the largest of any major economy, and Gordon Brown has blocked the necessary reform of our public services.

So it will fall to the next Government to restore our competitiveness.

Some of the necessary reforms can be implemented immediately – and we are doing the hard work now on building a simpler tax system, reducing regulation, reforming our public services and improving our infrastructure in the broadest sense.

But some of the most important changes will require us to tackle the deep rooted social problems that are holding us back.

So we know that we have to improve the quality of Britain’s education.

Because educational failure doesn’t just hold back the potential of millions of our children, it also undermines our country’s ability to compete in the age of the knowledge economy.

We understand that it’s our job to bring about a revolution in our welfare system.

Because not only do persistent worklessness and the poverty it brings blight too many people and too many of our communities, they also deprive us of the motivated workforce that our companies need in order to compete. In a global economy that puts a premium on the highly skilled, Britain cannot afford to be held back by the drag anchor of millions of people who lack skills or aspirations.

And we recognise that we have to mend Britain’s broken society.

Not just because social breakdown causes misery for millions of families, but because we will never achieve the low tax economy that international competitiveness demands unless we reduce the long term demands on the state.

We have pledged to share the proceeds of growth, so that government grows more slowly than the trend rate of the economy over the cycle.

That means that government spending will fall as a proportion of GDP.

That’s the only way to restore our public finances to health and build the headroom for sustainably lower taxes.

Of course we can make Whitehall more efficient and streamlined, and we must.

But to get government to live within its means we have to tackle the real drivers of the growing state at source.

So those who say that the Conservatives spend too much time talking about society and not enough time talking about the economy don’t understand that this is a false choice.

Reducing educational failure, tackling worklessness and poverty, mending our broken society – these are all progressive social goals that we have rightly put at the very centre of our agenda.

And the failures of the last decade to achieve these goals give us the opportunity to demonstrate that they can only be achieved through Conservative means.

But they are also essential economic goals.

And so achieving these progressive goals through Conservative means will be at the heart of our long term economic strategy.

Let me explain how.

First, the progressive goal of reducing educational failure.

The last eleven years have been a huge missed opportunity in our schools.

Despite big increases in spending, this country has one of the highest levels of educational inequality in the Western world.

The attainment of our lowest achievers has not improved significantly since 1998.

And educational inequality is getting worse – the proportion of pupils in the most deprived areas gaining five good GCSEs fell from 28% in 2005 to 25% in 2007, while the proportion in the least deprived areas increased from 56% to 68%.

What’s progressive about that?

If we are really serious about ending child poverty and reducing inequality we have to end the educational poverty trap that is deeply embedded in some of our poorest areas.

But educational failure is also holding back our economy.

All the academic evidence tells us that skills are one of the most important drivers of economic growth in the global economy.

Of course that means more scientists, more engineers and more world class universities are crucial.

We are constantly told about the hundreds of thousands of scientists and engineers being trained each year in China and India, even if some of the qualifications they are getting are of questionable quality.

The numbers sound overwhelming, but as any economist will tell you, it’s not quantities on their own that matter, it’s prices. And in this case that means wages.

The really important implication of globalisation for our education system is that the returns to education and skills are rising, as is the penalty for educational failure.

It’s those with a good education and the right skills who are best placed to share in the rewards of the new global economy, while those with low skills face an increasingly uncertain future of falling relative wages and competition from the developing world.

Yet international comparisons show that where Britain lags furthest behind our competitors is in a long tail of educational underachievement and low skills.

The proportion of adults in the UK without the equivalent of a basic school-leaving qualification is double that of Germany and almost three times that of the United States.

Children leaving school without a good grasp of basic literacy and mathematics are increasingly ill-equipped to succeed in the new global economy.

Our school system is still producing too many of them.

For all their fine sounding rhetoric, Labour’s top-down approach has failed.

Increased spending has not produced results and too many parents are still denied a real choice of schools.

So how will we use conservative means to achieve the progressive goal of reducing educational failure?

By focusing on standards – with synthetic phonics to eradicate reading failure.

By getting a grip on school discipline and focusing more on what goes on inside the classroom.

And crucially, by breaking open the state’s monopoly on the provision of state education to create more good school places.

The Green Paper published by Michael Gove has set out detailed proposals to create over 220,000 good school places in new Academies run by educational charities, companies, philanthropists, teachers and parents.

These will be targeted at the poorest pupils, with more money made available for children from the poorest background through a ‘pupil premium’, which will make sure that extra funds follow those pupils to the school that educates them.

That means schools will be actively incentivised to seek out and accept pupils from more challenging backgrounds.

This completely turns the current situation on its head.

Under our system, schools will be competing for the most disadvantaged pupils, not trying to keep them out.

What’s more, any maintained schools that are deemed to be persistently failing will be taken out of local authority control and handed over to an independent, voluntary or co-operative provider.

As we’ve seen from Sweden, empowering parents in this way can have a huge impact when it comes to raising standards and tackling inequality.

This is the perfect example of how to achieve progressive goals by conservative means – not the dead hand of government control, but breaking open state monopolies and allowing innovation to flourish.

It’s what we mean by the post-bureaucratic age – not top-down but bottom-up.

The second progressive goal I want to discuss is reducing worklessness.

We should never forget that getting people off state benefits and into work is a fundamentally progressive goal.

The evidence is now overwhelming that worklessness and benefit dependency are at the very core of the cycle of poverty that blights so many of our communities.

No wonder idleness was one of the five evils that William Beveridge spelled out in his defining work on the case for a welfare state.

And Beveridge himself made it clear that he did not see state handouts as the answer.

As he put it: “Idleness is not the same as want, but a separate evil, which men do not escape by having an income.”

These words are just as relevant today as they were sixty years ago.

Yet Britain has a higher proportion of its children living in workless households than any other EU country.

One in five grow up in households dependent on out of work benefits

And as the OECD confirmed last week, youth unemployment is higher than in 1997.

Let’s just focus on this stunning fact – after all Gordon Brown’s boasts about the New Deal and his pledges on youth unemployment, the unemployment rate for 16 to 24 year olds in Britain is now above the OECD average, having been well below it in 1997.

Know that one fact and you know why Labour has failed.

The same is true for the proportion of the age group who are not in education, employment or training – the NEETs.

What’s more, as the independent Institute for Fiscal Studies has found, the indirect effect of Gordon Brown’s reliance on means-tested benefits to tackle poverty “might be to increase poverty through weakening incentives for parents to work.”

There’s nothing progressive about that.

But this social failure is also an economic failure.

Of course worklessness is a huge burden on the public finances.

David Freud’s excellent report on welfare reform calculated that every person who moves off benefits and into work saves the exchequer more than £5,000 a year, and that’s even before taking into account the taxes they will pay on their income.

But worklessness is also a huge waste of economic potential.

It robs individuals of their chance to participate in the global economy, and it robs employers of the motivated workforce that they need in order to compete.

It is, frankly, just not good enough that after fifteen years of global economic growth almost five million people are on out-of-work benefits – more than 15% of the labour force.

That’s why the radical plans for welfare reform that Chris Grayling has set out are both a social and an economic imperative.

We will mobilise the energies of civil society by paying competing private and voluntary providers according to the results they achieve.

Instead of relying on the old-fashioned mechanisms of bureaucratic top-down state intervention, we will back the modern mechanisms of civil society: the social entrepreneurs, the community organisations and the responsible businesses that will drive social progress in the post-bureaucratic age.

We have seen how this radical approach has proven so effective in countries like Australia and the United States.

Because providers will be paid not only for finding people work, but keeping them in jobs, they will be incentivised to offer proper training to claimants, giving them skills that will not only help them to get a job, but also to stay in that job and progress in the labour market.

And because we will not prescribe exactly what support the providers must provide, they will have the freedom to offer innovative and individualised services.

If you look at Australia and the United States, you find providers offering mock interviews, personalised advice and work experience schemes.

And of course, all this goes hand in hand with a focus on full-time activity for those potentially able to work and much tougher sanctions for those who are not willing to participate in the return to work process.

Introduced in Britain, these changes would constitute the biggest change to the modern welfare state since its creation.

They will provide ladders of opportunity to millions of people, and combined with our commitment to use the savings to end the couple penalty in the tax credit system we believe they will directly lift almost half a million children out of poverty.

At the same time they will start to reduce the burden of worklessness on the public finances and help to provide the workforce that businesses need to compete in the global economy.

Combined with the ideas on reforming our insolvency regime that David Cameron set out this morning, this system will also provide us with a strategy to deal with any increases in unemployment over the coming months and years.

The third goal I want to discuss is the most ambitious – mending our broken society.

There’s no doubt that this is a progressive goal.

Because the link between family breakdown and the risk of poverty is well established, yet Britain has one of the highest rates of family breakdown in Europe.

Because alcohol and drug abuse destroy lives and families, yet alcohol consumption by children has doubled in the last fifteen years, and we have the highest level of problem drug use in Europe.

And because families in poverty often suffer the most from Labour’s failure to tackle crime, especially violent crime.

But mending our broken society is also an economic imperative, because we will never achieve the low tax economy that international competitiveness demands unless we reduce the long term demands on the state.

Of course we can make Whitehall more efficient and streamlined, and we are developing the plans to do exactly that.

But that won’t be enough – the long term public finance projections published at the last Budget show that on the basis of current policies, government spending is forecast to grow by almost 5% of GDP over the next fifty years.

That’s £70 billion in current prices, or 14 pence on the basic rate of income tax – when what our economy needs in the face of fierce global competition is lower taxes not higher.

To get government to live within its means we have to tackle the real drivers of the growing state at source.

But make no mistake, reducing the long-term demands on the state will not happen overnight.

There are no shortcuts.

Our welfare and education reforms will obviously play an integral role.

By tackling worklessness and giving people the opportunities and skills they need to succeed, they will help us tackle the long-term causes of dependence and poverty.

Our rehabilitation revolution in prisons will use the same Conservative means to tackle the cycle of re-offending – not top-down control from the centre, but giving private companies and charities the freedom to innovate and paying them by the results they achieve.

But we won’t make a lasting difference unless we also make Britain more family friendly.

Iain Duncan Smith’s Social Justice Policy Group estimated that the cost of family breakdown is now well over £20 billion a year.

In fact, I genuinely don’t think we’ll ever get to the heart of the big problems we face, from crime and anti-social behaviour to welfare dependency and educational failure, from debt and drug addiction to entrenched poverty and stalled social mobility, if we don’t do everything we can to support Britain’s families.

Of course, every family is different, and every family has different needs and different pressures at different times.

So we need a sensible, practical range of family centric policies.

For a start, we need to sweep away Labour’s policies that actually make it pay for families to break up.

That is why we will end Labour’s couple penalty in the tax credits system, giving 1.8 million couples up to £1,800 more a year.

This will be delivered as savings are generated through our radical programme of welfare reform.

And we are committed to introducing a recognition of marriage into the tax system.

But of course, there’s more to families than money.

It’s a startling fact that parents are more likely to split up in the first year after their child’s birth than at any other time.

So we need to provide targeted support to help families cope with the unique stresses and strains of parenthood.

We’ve already set out our plans to offer all parents flexible working.

And we’ve announced that we will use savings from existing budgets to provide a universal health visiting service, with the health visitor acting as the trusted gateway to other services that a family might need – including relationship support.

Supporting families, then, is another Conservative approach that will help us achieve progressive goals where Labour has so clearly failed.

So this is our strategy for building a strong economy.

In the short term we must tackle the immediate problems that rising inflation and the credit crunch are causing families and businesses, as David Cameron set out this morning.

And in the long term we must restore our flagging competitiveness.

That means a simpler tax system, lower regulation and rebuilding our infrastructure.

But it also means tackling the deep social problems that are holding us back.

So, a schools revolution to reduce educational failure and equip our children with the skills they need in the knowledge economy.

A welfare revolution to reduce persistent worklessness and provide our businesses with the motivated workforce they need to compete.

And mending our broken society so that we can tackle the drivers of state spending at source.

In each case using Conservative means to achieve progressive ends.

And in each case by achieving these progressive ends we will help to create the strong economy on which we all depend.

William Hague – 2008 Speech on Iran’s Nuclear Programmes


Below is the text of the speech made by William Hague on 3 November 2008.

Tomorrow, the people of the United States of America will choose a new President.

He will very quickly have to grapple with the urgent need to head off Iran’s dash towards nuclear weapons capability.

The stakes are considerable: If Iran acquires a nuclear weapon, we are likely to face a nuclear arms race in the Middle East, the shattering of the Nuclear Non-proliferation Treaty which has been a cornerstone of our collective security for the last four decades, and the rise of a new era of insecurity in the Middle East.

We know full well that Iranian support of Hezbollah enabled it to rain down missiles on Israeli cities in 2006. If Iran acquires a nuclear weapon, its ability to destabilise the region will be dangerously enhanced.

Iran has paid no serious penalty for its defiance of the Security Council and its abuse of the NPT. It is isolated, but only marginally. It has revelled in high oil revenues. It faces sanctions, but they have not yet bitten into the finances or freedom of movement of those responsible for Iran’s actions. Whatever anyone says, the fact that the Security Council failed to agree a single new sanction on Iran in the last seven months sends a terrible signal of weakness and disunity.

A successful policy towards Iran cannot be achieved by either Europe or America acting in isolation. The experience of past years suggests that America alone can offer the incentives to form a long-term settlement with Iran – Europe has tried, but without success. But no American President can do this unless European countries muster the will to back diplomacy with meaningful sanctions. Direct US engagement with Iran has the potential to be a decisive factor in bringing Iran to the negotiating table. But it is not a panacea. Unless we can demonstrate to Iran that it has to come to the table or else face serious consequences, the offer of talks will probably attract a derisory response from Tehran and encourage it to think that the world is caving into its demands. To succeed, negotiations must take place from the strength that a truly united strategy would bring, one based on the exertion of peaceful but meaningful pressure.

European countries must summon the will to impose new sanctions, and do so quickly. There should be a ban on new investment in Iranian oil and gas, an end to European export credit guarantees which subsidise trade with Iran and a freeze on those Iranian banks which have abused the international financial system.

We will be encouraging Britain to work with the new American President to join up the European and American approaches to Iran’s nuclear programme, and to bring our other vital partners on board. Because the strategy of western nations is currently drifting, there is a danger of fissure between governments about what approach to pursue, and divisions amongst the Security Council members are once more coming to the fore. Many in Europe appear to be sitting back, hoping for a dramatic initiative by America that will take this difficult problem from our hands. This is wishful and irresponsible thinking. Nuclear proliferation threatens all countries. It is imperative that all countries recognise this and act.

William Hague – 2008 Conservative Party Conference Speech


I begin by thanking the Prime Minister of Georgia, a democracy which only two months ago came under direct military attack. It is not easy for many western Europeans, separated as we all are by many years from the threat of imminent invasion, to recall how that must feel. But it should not be difficult for all the nations of democratic Europe to say this to the people of Georgia: that your right to live in peace and freedom was long-awaited and hard-won, that your democracy has every right ultimately to join the alliances of the world’s democracies, and that the bullying of you or your neighbours must never be allowed to pay.

In Britain we do not seek quarrels with Russia, but in dealing with any nation that turns its back on the peaceful resolution of disputes, history has taught us that weakness can never be the way. Russia has already paid a price for its flouting of international law in Georgia, in loss of business confidence and diplomatic support. The best chance of avoiding such conflicts in the future is for western nations to show what we have advocated: the strength of united resolve.

We have heard too from Nana Addo, whom I thank not only for speaking to us so well but for demonstrating, with our sister party in Ghana, that there is no reason why the people of African nations cannot enjoy freedom, democracy and prosperity.

The difference between the people of Zimbabwe, who have endured so many years of despotism and dictatorship, and the free people of Ghana comes down to the quality and wisdom of their leaders. It is a lasting reminder to all of us that politics has a purpose and that leaders make a difference, and we all hope that Nana Addo will go on to lead a country that’s an inspiration to its neighbours, shining out across Africa as a beacon of hope and freedom.

We have heard at this conference of the many challenges a Conservative Government will face. In foreign affairs we have the exceptionally strong team of David Lidington, Mark Francois, Keith Simpson and Lord Howell. I say to you very bluntly, that all their talents will be needed, for in foreign policy the challenges may be the most serious for any incoming government since the end of the Second World War.

Last month, David Cameron and I visited our troops in Afghanistan. And make no mistake about this: our soldiers, in their patience in winning over the local population, their stamina in fighting for weeks at a time in extreme conditions of dust and heat, and in doing their job despite equipment shortages which should have been remedied long ago, are still the best of our country and the best military professionals on earth.

We regard progress in Afghanistan, and in the closely-related problems of Pakistan, as the single most urgent focus in foreign affairs for our work as a new government. Failure there would leave the world, ourselves included, much more open to terrorist attack. We will call upon the new President of the United States to intensify the efforts to turn tactical successes into strategic victory, requiring as that does a functioning, non-corrupt government in Kabul, the better co-ordination of international aid and a unified military command. It requires too, allied nations to make, alongside our magnificent soldiers, the military effort necessary for the peace and security of all.

Terrorism, as Pauline Neville-Jones so ably reminded us, remains the greatest single threat to the security of our citizens. That is why, at our meeting with the new President of Pakistan in Islamabad last month, we said that Britain and Pakistan must co-operate closely at all levels to turn people away from terror.

It is vital to conduct an unrelenting global pursuit of terrorist networks and their finances, and to be tougher at home in banning organisations which breed terrorism. But it is also vital, at all times, to uphold our own values of respect for the rule of law, which, after all, is what we are fighting for in the first place. Prisoner abuse scandals in Iraq, however isolated, have done as much damage to the western world as any battlefield defeat. The society we live in, which seeks dignity for all, freedom from arbitrary power, and the promotion of political freedom and human rights, must always be our inspiration, and we betray that inspiration if even for a day we turn into our enemy.

Our liberal conservative beliefs mean we will approach foreign affairs with the strength and purpose to keep our people safe today but also with the humility and patience to make them safer tomorrow. That means learning from mistakes that have indeed been made, for instance in Iraq. We supported the decision to remove Saddam Hussein, but we all know that an occupation of Iraq that was better conceived and implemented could have spared so many the agony and bloodshed of the last five years. I call again on ministers to establish a full privy council inquiry into the origins and conduct of the war so that all can learn from its mistakes and apply the lessons as soon as possible, and I make it clear today that if they do not establish such an inquiry, one of the first acts of a Conservative Government will be to do so.

Our combination of strength with patience means too the freshening and deepening of our alliances. Alongside our partnership with the people of Pakistan, we have called for an intensified special relationship between Britain and India, by far the world’s largest democracy. We have established constructive working relationships with China, a country with which we have many differences but whose partnership will be essential in tackling climate change and nuclear proliferation. And we have argued for an elevation of our political, financial and cultural links with the many friendly Muslim nations of the Middle East, among them the fastest-growing centres of economic activity and wealth on the globe.

And we will refresh too our most important alliance of all, with the United States of America. David Cameron has struck up an excellent relationship with both John McCain and Barack Obama. Indeed, it his ability to impart a frank message within a warm relationship which has added to my conviction that he is the man to lead our country. We have said our relations with America will be solid but not slavish, and every bit of that solidity, and that frankness, will be necessary to push forward a peace in the Middle East which gives real statehood for Palestinians alongside real security for the people of Israel, and above all to face up to the danger which may well within a decade take over from terrorism as the prime threat to free people: the proliferation of nuclear weapons.

Iran’s defiance of the UN Security Council and evident intention to develop nuclear capability could ignite a nuclear arms race in the Middle East and leave the non-proliferation treaty, the cornerstone of world security for 40 years, in ruins. Unless Iran responds positively in the coming weeks to the latest proposals, we call for EU nations to adopt progressively tougher measures against Iran, including a denial of access to Europe’s financial system and a ban on new investment in Iranian oil and gas fields.

And at the same time we call on our Government, ahead of the crucial review conference of the non-proliferation treaty in 2010, to build now the international consensus to make far harder the illicit production of nuclear weapons and the trading of their components. This, looking ahead, is one of the great global challenges, a challenge to which the next Conservative Government will rise.

Yet as we face this and other challenges, we will find on coming to office that many of the world’s key institutions are struggling or out of date. That is why we advocate reform of NATO, to share more equitably the costs and risks of mutual defence, and reform of the UN Security Council to reflect the 21st century instead of the middle of the 20th. And it is also why we call on the European Union to lead the way in responding to global competition, global warming and global poverty, the agenda of today, rather than building more centralised power in Brussels, which is the agenda of the past.

We believe in a Europe where nations can work together to achieve goals they cannot attain on their own. We are proud of the progress the EU has made in widening the freedom to do business, to travel and to find work. We applaud the agreement on climate change which EU nations must now implement. We are firm in our view that it is EU membership or its prospect that has helped to entrench democracy in many nations of central and eastern Europe, and that prospect must be there for people across the Balkans, the Ukraine, Turkey, and indeed Georgia if they wish to attain it.

But we are equally clear that while all this work requires will and determination, none of it requires more centralised power. We are clear too that all three political parties said at the last election that the treaty aimed at creating more centralised power, once called a constitution and now the treaty of Lisbon, would be subject to a referendum of the people of Britain.

Few events in recent years have been more revealing about the duplicitous nature of the Labour Government, or more corrosive of public trust in the entire political process, than the spectacle of Labour MPs trooping through the lobbies to deny the referendum they promised to the people, while Liberal Democrat MPs summoned up the courage to turn up and abstain.

Only the Conservative Party has remained true to the commitment to a referendum. We congratulate the people of the Irish Republic on having the courage to vote no to a treaty they did not want. In doing so they spoke for many millions across Europe who were denied any vote of their own. That result should be respected and we deplore the fact that Gordon Brown and David Miliband went ahead with British ratification despite the Irish vote, conniving in the attempt to bully the Irish into voting again. How undemocratic it would be if the people of Ireland were made to vote twice when the people of Britain have been denied the chance even to vote once.

Our position rests on the basic truth that in a democracy, lasting political institutions cannot be built without popular consent. If in the end this treaty is ratified, by all 27 nations of the EU, then clearly it would lack democratic legitimacy here in Britain, political integration would have gone too far, and we would set out at that point the consequences of that and how we would intend to proceed.

But we say to the Irish people – you are not alone, and if a Conservative Government takes office while the Lisbon Treaty remains unratified by Ireland or any other nation, we will hold the referendum the British people want and deserve and we will recommend as their government that they vote no.

And in next year’s European elections, we will campaign for that referendum and for the open, free enterprise Europe we believe in, and we will form in the next European Parliament a new group of like-minded parties to campaign for that for many years to come.

This then, is the Conservative approach, learning from the past but always preparing for the future; extending our alliances and standing by our friends; making the most of the world’s opportunities and seeking to pre-empt its great dangers; showing the patience to understand others but placing Britain, with our special links to America, Europe and Commonwealth, at the forefront of world affairs. It is an essential part of our preparation for government; a task, which now, we are ready, to take on once again.