David Gauke – 2018 Statement on John Worboys

Below is the text of the statement made by David Gauke, the Secretary of State for Justice, in the House of Commons on 28 March 2018.

With permission, Mr Speaker, I’d like to make a statement on the High Court judgment handed down this morning in the case relating to the Parole Board decision to release John Radford, formerly known as John Worboys.

This is an important and unprecedented case. The President of the Queen’s Bench Division, Sir Brian Leveson, the most senior judge who heard this case said – it is wholly exceptional. It is the first time that a Parole Board decision to release a prisoner has been challenged and the first time that the rules on the non-disclosure of Parole Board decisions have been called into question.

The judgment quashes the Parole Board’s decision to release Worboys and finds that Rule 25 of the Parole Board Rules is unlawful.

This means that Worboys’ case will now be resubmitted to the Parole Board. A new panel will be constituted and updated evidence on his risk from prison and probation professionals will be provided. The panel will then assess anew whether Worboys is suitable for release.

Those victims, covered by the Victim Contact Scheme, will be fully informed and involved in this process.

My department also has to reformulate the Parole Board’s rules to allow more transparency around decision making and reasoning.

Mr Speaker, it is clear that there was widespread concern about the decision by the Parole Board to release Worboys. As I have previously told the House, I share these concerns and, consequently I welcome the judgment.

I want to congratulate the victims who brought the judicial review and to reiterate my heartfelt sympathy for all victims who have suffered as a result of Worboys’ hideous crimes.

Mr Speaker, I want to set out, in greater detail than I have previously been able, the reasons why I did not bring a judicial review.

As I told the House on 19 January, I looked carefully at whether I could challenge this decision. It would have been unprecedented for the Secretary of State to bring a judicial review against the Parole Board – a body which is independent but for which my department is responsible.

I took expert legal advice from Leading Counsel on whether I should bring a challenge. The bar for judicial review is set high. I considered whether the decision was legally irrational – in other words, a decision which no reasonable Parole Board could have made.

The advice I received was that such an argument was highly unlikely to succeed. And, indeed, this argument did not succeed. However, the victims succeeded in a different argument.

They challenged that, while Ministry of Justice officials opposed release, they should have done more to put forward all the relevant material on other offending.

They also highlighted very significant failures on the part of the Parole Board to make all the necessary inquiries and so fully take into account wider evidence about Worboys’ offending.

I also received advice on the failure of process argument and was advised that this was not one that I as Secretary of State would have been able to successfully advance.

The victims were better placed to make this argument and this was the argument on which they have won their case.

It is right that the actions of Ministry officials, as well as the Parole Board, in this important and unusual case have been laid open to judicial scrutiny.

I have always said I fully support the right of victims to bring this action. I have been very concerned at every point not to do anything to hinder the victims’ right to challenge and to bring their arguments and their personal evidence before the court.

Indeed, the judgment suggests that, had I brought a case, the standing of the victims may have been compromised.

The Court’s findings around how this decision was reached give rise to serious concerns.

The Court has found that “the credibility and reliability” of Worboys’ account in relation to his previous offending behaviour “was not probed to any extent, if at all” by the Parole Board. And that although the Parole Board was entitled to make enquiries of the police in relation to his offending it did not do so.

These are serious failings which need serious action to address. In these circumstances, I have accepted Professor Nick Hardwick’s resignation as Chair of the organisation.

I am also taking the following actions:

Instructing my officials to issue new guidance that all relevant evidence of past offending should be included in the dossiers submitted to the Parole Board, including possibly police evidence, so that it can be robustly tested in each Parole Board hearing.

Putting in place robust procedures to check that every dossier sent by HMPPS to the Parole Board contains every necessary piece of evidence – including sentencing remarks or other relevant material from previous trials or other civil legal action.

Boosting the role of the Secretary of State’s representative at Parole Board hearings – with a greater presumption that they should be present for those more complex cases where HM Prison and Probation Service is arguing strongly against release, as was the case here.

Working with the Parole Board to review the composition of panels so that the Parole Board includes greater judicial expertise for complex, high profile cases – particularly where multiple victims are involved or where there is a significant dispute between expert witnesses as to the suitability for release.
And develop more specialist training for Parole Board panel members.
The judgment also found that blanket ban on the transparency of Parole Board proceedings is unlawful. I accept the finding of the Court and will not be challenging this.

It was my view from the beginning that very good reasons would be needed to persuade me we should continue with a law that doesn’t allow any transparency. I am now considering how the Rule should be reformulated. When I addressed the House on this matter in January, I said I had commissioned a review into how victims were involved in Parole Board decisions, in the transparency of the Parole Board and on whether there should be a way of challenging Parole Board decisions. That work has been continuing for these past two and a half months.

Given the very serious issues identified in this case, I can announce today that I intend to conduct further work to examine the Parole Board rules in their entirety.

As a result of the work that has been completed to date, I have already decided to abolish rule 25 in its current form and will do so as soon as possible after the Easter recess. This will enable us to provide for the Parole Board to make available summaries of the decisions they make to victims.

In addition, I will bring forward proposals for Parole Board decisions to be challenged through an internal review mechanism where a separate judge-led panel will look again at cases which meet a designated criterion.

I intend to consult on the detail of these proposals by the end of April alongside other proposals to improve the way that victims are kept informed about the parole process. I am grateful to Baroness Newlove for her help with this part of the review and to Dame Glenys Stacey for her helpful suggestions and review of the way that victim liaison operated in this case.

I will come back to the House with further proposals as these are developed. But in conclusion Mr Speaker, let no-one doubt the seriousness with which I take the issues raised by this morning’s judgment – nor the bravery of the victims who brought this case to Court.

I commend this statement to the House.

David Gauke – 2018 Speech on Prison Reform

Below is the text of the speech made by David Gauke, the Lord Chancellor and Secretary of State for Justice, at the Royal Society of Arts in London on 6 March 2018.

Well thank you Rachel [O’Brien] for that introduction and for the work you and the RSA do on prison reform and the important contribution you make to public policy in this area.

It is a huge privilege to have been appointed Justice Secretary and I am grateful for the opportunity to set out my thoughts, after two months in post, on our prison system.

Purpose of prison

Depriving someone of their liberty for a period of time is one of the most significant powers available to the State and must be imposed with respect for the rule of law and with purpose.

Prison is the sharp end of our justice system. By imposing this serious sanction, we must be clear about what prison is for.

I believe its purpose is threefold:

First, protection of the public – prison protects the public from the most dangerous and violent individuals.

Second, punishment – prison deprives offenders of their liberty and certain freedoms enjoyed by the rest of society and acts as a deterrent. It is not the only sanction available, but it is an important one.

And third, rehabilitation – prison provides offenders with the opportunity to reflect on, and take responsibility for, their crimes and prepare them for a law-abiding life when they are released.

It is only by prioritising rehabilitation that we can reduce reoffending and, in turn, the numbers of future victims of crime.

Getting the basics right – secure, safe and decent

And yet it’s clear that prisons don’t always achieve what they are there to do.

The reasons for this are varied and complex, but I am determined to ensure prisons can fulfil those three purposes I have set out.

As the Minister for Prisons, Rory Stewart, has made clear, for prisons to be effective, we must get the basics right.

Getting the basics right means creating prisons that are secure: with the physical integrity of the prison a priority to prevent prisoners from getting out – and drugs, mobile phones and other contraband from getting in.

It means creating prisons that are safe: with orderly, purposeful and structured regimes, free from violence, intimidation and self-harm.

And it means creating prisons that are decent: with clean wings and humane living conditions.

It is clear that some of our prisons have, frankly, fallen below the standards that we expect.

I want the prison service to have a relentless focus on these fundamentals in the months ahead.

That’s why I am giving renewed focus to our programme of prison maintenance to drive the much-needed improvements to our estate.

I will also carry on with my predecessor, David Lidington’s, important work to ensure inspection reports are acted upon.

Prison staffing

I am also continuing to push hard on improving not just the number of prison officers, but also how we deploy them.

Liz Truss, as Secretary of State, committed to raising the number of prison officers by 2,500 by the end of this year.

I’m pleased to say that we’re on track to deliver those officers, and ended last year with the highest number of officers in post since 2013.

The reason increased staffing levels are important is that they are allowing us to introduce a new ‘key worker’ model – with prison officers spending much more time, one-to-one, with small groups of prisoners.

As we introduce this new model, we should start to make a difference in the levels of violence we are seeing, which are currently far too high.

28,000 incidents were recorded in our prisons last year alone.

That figure includes 20,246 attacks by prisoners against fellow inmates….

….and 7,828 assaults against prison officers by prisoners.

The violence against prison officers is particularly shocking.

No prison officer should go to work in fear for their safety simply for doing their job.

I want to take this opportunity to thank the thousands of prison staff across the country who do incredibly important work each and every day.

By its nature, the work is often hidden from view but it protects the public and keeps our prisons secure and prisoners safe.

And I want to thank the families of prison staff.

As the son of a police officer, I know the worries they carry, and the pride they take, in knowing their loved one is performing such an important public service.

The drug problem and how it’s been exploited

Increasing the numbers of prison officers and deploying them in a more effective way will help create more positive relationships between offenders and prison officers.

But if we are to bear down on the levels of violence we are seeing, we need to deal with the biggest cause of the violence, which is drugs.

Now, the problem of drugs entering and circulating in our prison system has always been a challenge.

But the nature of the challenge has changed over the past few years, with the emergence of cheap and highly addictive new psychoactive substances, like Spice, in our prisons….

….something exploited by criminal gangs who have capitalised on the control they can exert and the money they can bring in.

After all, what better place to target than a captive market made up of some of society’s most susceptible and vulnerable groups when it comes to drug use and addiction.

The economics mean that Spice can sell in prison for many times its street value – bringing in a healthy return for the criminals.

At the same time, it is relatively cheap to buy in prison compared to other drugs – so is financially attractive for prisoners.

In exploiting the emergence of new psychoactive substances, prisons have proved a perfect marketplace for the criminal gangs.

And for our prisons, it has created a perfect storm.

And while there have always been low-level networks dealing in cigarettes or illegal contraband, the criminal networks and supply chains have recently got larger and more complex….

…..and new technologies have empowered gangs to be more sophisticated and brazen about the way drugs are smuggled in.

Many of you will be aware of the kind of things I’m talking about….

Spice, and other drugs, ordered with a ‘Deliveroo-style’ responsiveness on tiny mobile phones from prison cells and delivered by drones direct to cell windows…..

the paint used in supposed children’s drawings sent to their parents in prison laced with liquid psychoactive drugs, or the pages of fake legal letters purporting to be from a prisoner’s solicitor soaked in drugs….

gangs engineering situations where a prisoner, who has been released from prison, deliberately breaches their license conditions so they are sent back to smuggle in more drugs….

gangs enforcing control by using threats and violence towards prisoners, extorting their families and attempting to corrupt prison staff….

From the conventional to the cunning, by design or device, through fear or intimidation….

….these criminal gangs will stop at nothing to maintain their access to such a lucrative market.

We need to make prison less congenial for the modern-day Harry Grouts.

It is clear that the reason drugs are so prevalent in our prisons is in large part because gangs are fuelling demand, boosting the supply and catching prisoners in a cycle of debt and further criminality from which they struggle to break free.

As I’ve been visiting prisons, the conversations I’ve had so far with prison governors have brought home to me the scale and nature of the criminal gang activity and the impact of drugs in our prisons.

Governors tell me that it’s not just when the drugs come in that there is an issue, but a couple of weeks later, when they see a spike in violence….

….a spike caused by prisoners carrying out attacks on fellow inmates and on staff as a payment in kind to pay back debts they have accrued by taking the drugs.

And it is not just about attacks on other inmates or staff.

We are seeing a rise in the incidents of self-harm.

Last year there were 42,837 incidents of self-harm in our prisons, involving 11,428 individuals. These statistics, together with the figures for assaults I highlighted earlier, are sobering.

But they only give us half the story….

Behind all the numbers, is a catalogue of physical and mental injury, of intimidation and of abuse.

I have been shocked and sickened watching some of the videos filmed by prisoners using illicit mobile phones that are posted on social media.

They show the terrifying and debilitating impact Spice can have and the drug-fuelled violence and humiliation it unleashes.

One of these videos shows inmates laughing and joking as the Spice takes over the mind and body of a fellow prisoner. The effect is immediate and shocking. Within a few seconds they are having a fit on the floor.

Another video shows two naked prisoners believing they are dogs, with makeshift muzzles and leads around their neck, barking at and fighting each other, goaded on by other prisoners.

Another shows a prisoner climbing into a tumble dryer in the prison laundry room. Other prisoners then turn the machine on and he is spun around inside – a dangerous act of humiliation to ‘earn’ himself some more Spice.

And I’m afraid, these videos are merely a short snapshot of a grim reality.

Many of the attacks against prison officers have been linked to Spice.

Last year for example, a prisoner viciously attacked an officer with a table leg at HMP Northumberland after the officer intervened to break up a fight. The attack left him with bruising and tissue damage.

The prisoner had no memory of the attack and subsequently described the officer as being a nice man who was thoroughly decent towards him whilst he was in prison.

Cases like this show starkly how drugs like Spice are leading to violence and undermining efforts to create safe environments and respectful relationships in prisons.

And it’s clearly not just physical damage that drugs like Spice cause.

There is an enormous toll on the mental health of prisoners, often exacerbating existing mental health conditions and long-term issues with alcohol and drug abuse.

Prison staff have a key role to identify and support prisoners with mental health needs. That’s why we are investing more in mental health awareness training for staff.

We have also increased our grant to the Samaritans to fund the continued delivery of a peer support scheme called ‘Listeners’ which supports prisoner mental health.

We must ensure offenders have access to the treatment they need to come off drugs and support their recovery – whether that’s in prison or in the community.

That’s why we have been working with the Department of Health and Social Care and others to improve access to mental health and substance abuse services for offenders, including agreeing a clear set of standards across all the various agencies involved.

Tackling the drugs problem in our prisons and the gangs beyond prison

Every prisoner who attends one of these drug agencies will have their own story about what happened to them and it will very often involve, in some way, criminal gangs.

This government has undertaken many important reforms and cracking down on drugs and criminality has always been and remains a priority.

But the sophistication and reach of these criminal gangs into our prisons is a relatively recent development.

It is therefore right that we continue to adjust our approach to tackling it.

So, today, I am doubling down on our commitment to target organised criminal gangs and cut off their ability to do business in our prisons.

That’s why I can announce today that we are investing £14 million to tackle the threat of serious and organised crime against our prisons.

This includes creating new intelligence and serious and organised crime teams.

Working with the National Crime Agency, they will enhance our intelligence and information-gathering capability across the country to help us identify and stop the gangs’ ability to operate in our prisons.

This improved intelligence picture is already delivering major successes, including at least 30 successful convictions for drone activity following joint intelligence-led operations.

And in December, following an investigation by prison intelligence officers and police, 11 gang members were handed sentences totalling over 32 years for using drones to smuggle drugs, weapons and mobile phones into prison.

To build on that success, I can also announce today that we are installing technology at 30 prisons that will allow officers to quickly download data from illicit phones seized from prisoners.

This means officers can access information on a phone on the same day it is seized rather than having to send it away to be processed – something that can currently take months.

If a phone has details about an expected drone drop later that day, officers will be able to know where, how and when and can act on that intelligence and intercept it.

In doing so, we will be able to collect vital intelligence about the criminals’ contacts and associates, who they are buying from and selling to and the bank accounts they are using.

This will help us to stop drugs getting in and give the police the intel they need to target the source of the drugs.

But technology can’t be the only solution to tackling gangs….

Understanding and managing security risks

The fact is, there are around 6,500 prisoners who have links to organised crime.

At the moment, these offenders are spread across the estate and are helping to perpetuate the cycle of crime by drawing fellow prisoners into the clutches of the gangs.

So, I want to rethink how we categorise prisoners – that means looking again at who goes to higher security-level prisons.

Rather than just considering their length of sentence and risk of escape in determining which prison an offender goes to – or moves to – I want to look, as well, at their behaviour in prison and their risk of directing crime and violence whilst in prison.

This would ensure those ringleaders, who ostensibly behave but have others do their bidding, would be cut off from their network and prevent them from operating.

Incentives of hope over despair – the route to rehabilitation

Removing the ringleaders also means that prisons can then focus on maintaining an orderly environment and, crucially, get on with helping prisoners rehabilitate so that they don’t re-offend when they leave prison.

We have to make it absolutely clear to prisoners that the path of further criminality only leads to more punishment and less freedom….

….that there is another, better way.

We also need to recognise that there is a better way for the whole of society.

Re-offending and the cycle of crime costs society £15 billion a year.

It creates more victims.

And, it leads to the perpetuation of unfulfilled potential on the part of offenders.

If the third and final purpose of prison is for rehabilitation, then we need to look again at what works.

I believe rehabilitation starts with conformity with the prison rules and a rejection of further criminality, a commitment to change and an embrace of opportunities that help offenders to leave prison as law-abiding, and tax-paying citizens.

I want to make those the desirable and attainable choices that prisoners make.

I believe harnessing the power of incentives in our prisons is an important way to do that.

My experience and the large amount of research out there shows that ‘incentives work’.

As Secretary of State at the Department for Work and Pensions, I saw how a mixture of positive incentives, support and sanctions can influence behaviour and help people change their lives for the better.

For example, the incentive of making work always pay more than benefits is a fundamental principle of our welfare system and has helped bring about record levels of employment in this country.

I believe we can not only make prisons safer and more secure, but also help to break the cycle of reoffending….

….supporting and incentivising people to make the right choices that will prepare them to lead crime-free lives when they leave prison.

An offenders’ experience in prison is too often one of detention and boredom, which leads to drug abuse and despondency, which in turn, leads to debt and despair.

I am clear that offenders go to prison as punishment, not for punishment.

So, I want prisons to be places of humanity, hope and aspiration.

I want prisoners to know that there is a route to a better life….

….that there is a life to be had free from the clutches of gangs and free from the intimidation and abuse…

….and that the route to that better life is through purposeful activity, through education, through skills and through employment.

The way I see it is that prisoners have a contract with the state.

By serving your sentence and conforming to the rules, you are repaying your debt to society.

If you do that, you will find the State and the prison system backing you up, supporting you, and you will be able to earn greater rights and privileges.

This is beneficial for prisoners but even more so for wider society.

So, I want to reset and reinvigorate the system of incentives in our prisons so they work much more in the favour of those prisoners who play by the rules and who want to turn their lives around, whilst coming down harder on those who show no intention of doing so.

However, prisoners should be under no illusions that a failure to abide by the rules will be met with strong sanctions.

I am supportive of the steps that have been taken to improve the punishment of unacceptable and illegal behaviour in prisons.

Just the other month, we introduced a new protocol between the Ministry of Justice and CPS to ensure that, where there is sufficient evidence, we bring to justice prisoners who commit violent attacks against prison officers and other prisoners.

But for those offenders who see their time in prison as a genuine opportunity to reflect and take responsibility for their crime and to be rehabilitated, to build the skills and behaviour they need to re-join society, I want to create the incentives that will support and encourage them in that effort.

That means prisoners having the opportunity to earn rights and freedoms, an opportunity to live in a more liberal environment with greater personal responsibility, and therefore have more to lose if they fall foul of the rules.

After all, incentives are given, and they can be taken away.

I know that prison governors feel strongly that the current approach to using incentives in our prisons is not working.

I hear that.

I also know that governors want more flexibility for what and how incentives are used in their own prisons.

I agree.

I believe governors should govern.

They are the best judge for what will work best in their prison.

So this is not about me imposing a top-down system or a list of incentives.

But I do want to give a couple of examples where I think we can more effectively use incentives.

Prisons are required to provide a minimum amount of contact between an offender and their family whilst in prison.

I think we could reinforce good behaviour by offering a prisoner extra and additional time to see family members, for example by using technology like Skype, to allow contact they would otherwise be unable to have.

Another example is giving an offender a better prospect of securing a job after release by providing access to certain training and experience.

For example, I want to look at the availability and use of “release on temporary license”.

Specifically, I want to see how we can use ROTL to allow those prisoners, who have earned it, to have a routine where they, with close monitoring, leave prison each day to go to work nearby.

Work is the best route out of crime

I have seen how getting and keeping a job can change people’s lives.

The prison and probation service have an important role to help offenders build the skills and experience they need whilst they’re in prison so they can have the right attitude for work and get a job when they’re released.

To do that, prisons and probation need to act more as brokers between prisoners and the local community, employers and education and skills providers.

We will shortly be launching our Education and Employment Strategy that will set out our approach to helping offenders get the skills they need to find a job and avoid the activities that landed them in prison in the first place.

Cross-government work

Having a job after release is a crucial factor that determines likelihood of reoffending….

….but it is only one of several.

For someone coming out of prison, having a place to live and access to mental and physical health treatments are also critical.

In this sense, re-offending is not solely a justice problem for my department, but it is a wider issue about social justice and ensuring that offenders, many of whom have complex backgrounds, are not dismissed as part of society.

We need a cross-government approach to reoffending.

That’s why I can announce today that I will be convening a cross-government group of senior Ministers, with the full backing of the Prime Minister, to work across all relevant departments to reduce re-offending and the £15 billion cost of reoffending to society as a whole.

This approach means that we can target prisoners and ex-offenders with the support they need to find a job, a home, to get help with debt, or to get treatment for a drug addiction or, as I mentioned earlier, a mental health issue.

I met with my Cabinet colleagues yesterday to discuss this and I am encouraged that there is a consensus on the mission and energy to make real progress.


Now I’m clear about what purpose our prisons serve – protection, punishment, and rehabilitation.

But for prisons to do this well we must get the basics of a safe, secure and decent environment right.

Only an immediate and relentless focus on maintenance, infrastructure and staffing will allow us to make further progress, and we are acting on that.

The basics matter because organised criminal gangs have cynically and systematically exploited the rise of a drugs problem in new psychoactive substances that first reared its head on our streets and has found fertile ground in our prisons.

We are taking action to bolster our defences at the prison gate whilst also going after the organised criminal gangs.

I want them to know that as a result of the action we are taking, they have no place to hide.

Through our covert and intelligence-led operations, we will track them down….

….removing their influence from our prisons so they can become places of hope not despair, of aspiration not assaults….

…because my approach is a practical one, based on what works and what’s right….

….supporting prisoners to make the right choices and take the right path towards rehabilitation and re-joining society.

I know that incentives work, and I want to put them to work in our prisons.

By doing that, our prisons will not only be safer, more secure and more decent, but will support prisoners to do the right thing and turn their back on crime for good.

David Gauke – 2018 Lord Chancellor Swearing-In Speech

Below is the text of the speech made by David Gauke, the Lord Chancellor, at his swearing-in ceremony on 18 January 2018.

Mr Attorney, I’d like to thank the Lord Chief Justice for that warm welcome and I look forward to working with you and other members of the bench.

I’d also like to start by thanking my predecessor and Cabinet colleague, David Lidington, who I think quickly established himself as an effective Lord Chancellor and Secretary of State. I very much hope to emulate his speedy grasp of such an important constitutional role.

Being appointed as Lord Chancellor is a huge honour and deeply humbling. Dare I say, it is also a little daunting, especially when you look back at some of the previous custodians of this historic title over the centuries.

In light of such an illustrious rollcall of historical figures, I think it is only natural for a new incumbent to look for a familiar reference point.

As the Lord Chief Justice has reminded us, a former Lord Chancellor from my home town of Ipswich was none other than Cardinal Wolsey. An auspicious connection given he went on to serve as Lord Chancellor for 14 years!

My enthusiasm was however a little tempered when I recalled how Wolsey’s time as Lord Chancellor was made fraught through dealing with Henry the Eighth and his powers: stripped of his title and his wealth, he faced charges of treason after an unsuccessful attempt to negotiate a settlement with a powerful European supra-national organisation.

Thankfully, not all the duties exercised by Cardinal Wolsey continue to fall on the shoulders of the Lord Chancellor!

So, let me turn to the specific responsibilities I have affirmed to uphold today.

The Rule of Law

Defending the independence of the judiciary and respecting the Rule of Law, that is the foundation of our democracy, our way of life, and the safeguard of fairness and freedom in our society.

The pomp and the pageantry may be centuries old, but what they represent, forged from 900 years of history, remain relevant and important today.

You, the judiciary, are at the heart of the Rule of Law. You uphold and exercise that every day in the judgements and decisions you make and in being called upon to make decisions on some of the most difficult moral and technical issues of our time.

It is a job that requires expertise and deep knowledge. But your task also requires independence from the other branches of the State. You must be free to make decisions without fear or favour and without undue influence.

That’s why I take seriously the solemn affirmation I have made today to defend that independence and to respect the Rule of Law.

Efficient and effective courts

This commitment also includes ensuring efficient and effective support for courts. I want people to have confidence in every part of their justice system.

That means crimes being properly investigated. It means effective prosecutions where there is sufficient evidence and it is in the public interest. It means courts handing down sentences that fit the crime.

It also means a justice system that supports victims and ensures a smooth and efficient process for litigants, for example, through new technology and greater innovation.

I look forward to working closely with the Lord Chief Justice and senior judiciary to build on the important work that is already underway to reform and modernise our courts and tribunals system and to make this a reality.

UK legal services and English Law

Whether in criminal or civil law, the UK’s legal system is respected around the world, something that I have seen for myself having worked in corporate law.

As a trainee solicitor over 20 years ago, I was struck working on a shipping litigation case, it was an English Tribunal applying English law that was determining a dispute involving cargo being shipped across the Pacific on a Greek-owned ship with, if I recall correctly, an Indonesian crew.

The only apparent connection to the UK was that the contracts were under English Law and determined by English tribunals.

That was the case then, it’s the case now, and it will continue to be the case after we leave the EU. Because, the UK leads the way in global legal services. English Law and UK courts provide the certainty, clarity and flexibility that clients from around the world want.

I know just how important this sector is, not just for London, but for cities and regions across the UK. That’s why I want an outcome from our negotiations with the EU that is good for our legal system and good for our position as a provider of legal services around the world, one that protects and promotes a strong and successful legal services sector.

That means ensuring close and comprehensive arrangements for civil judicial co-operation with the EU after Brexit. It means a legal services sector that benefits from and serves as a catalyst for future trade.

I want to see London continue to be an international hub for finance and legal services, but also see legal services continue to grow and thrive in regional centres serving as specialist hubs.

I look forward to working with the legal services sector and the judiciary to build on our ‘Legal Services are GREAT’ campaign launched last year to promote the UK’s legal services on the world stage.

A final word on the judiciary

The reputation of our legal services is underpinned by our world-leading judiciary, respected for its expertise and its independence.

As Lord Chancellor, I look forward to working with you, Lord Chief Justice, and other senior members of the judiciary, to ensure we continue to attract exceptional and talented people in order for it to remain strong, free from improper influence and truly independent – indeed, to remain the envy of the world.


I mentioned that Cardinal Wolsey managed 14 years as Lord Chancellor. With seven years at the Treasury, seven months at DWP and having just completed my first seven days at the Ministry of Justice, that may be an ambitious record to match.

Although, I have read on Twitter and elsewhere that I may have set a record of my own by being the first solicitor to be appointed Lord Chancellor. I’m pleased that, so far at least, this record remains intact even after such careful and scrupulous deliberation from you, Lord Chief Justice! They do say that the law is an iterative process, so, I await to be revised.

But what I can commit to today is that during my time as Lord Chancellor I will be ambitious for our country’s legal services. I will be steadfast in my commitment to defend the independence of the judiciary and respect the Rule of Law, and I will be determined in our work to create a justice system that is open to all, a justice system that everyone in the country can have confidence in, and one that lives up to the deep-rooted sense of justice and fairness the United Kingdom is known for around the world.

Thank you.

David Gauke – 2017 Speech on 75th Anniversary of the Beveridge Report

Below is the text of the speech made by David Gauke, the Secretary of State for Work and Pensions, at the LSE in London on 8 December 2017.

Seventy-five years ago, in the depths of war, William Beveridge produced the report that became the foundation of the modern welfare state.

Seventy five years on, it is still at the centre of discussions on welfare. It is that rare thing – a government command paper which seized the imagination of the nation, and became a focus of hope for the post-war future.

The principles he set out – and the challenges he identified – remain an important part of the system we have today. Much has stood the test of time. But the world Beveridge knew has changed in some profoundly important ways.

We need to celebrate the strengths of the system we have, which day-in and day-out, provides essential support to millions of people.

But we need to be ready to think – as he did – about new solutions to new challenges. To test the system of today against the needs of tomorrow.

I will be arguing that the future welfare state must continue to hold work at its heart, while becoming ever more personalised and holistic, in order to meet the needs of future populations.

Above all, we need the confidence to change and adapt, to build a welfare system for the 2020s and 2030s – as Beveridge did for the 1940s and 1950s.

Beveridge’s principles

Beveridge wanted a system which was universal for those in work. He recognised, as we do today, that the state should provide support – but should never be the whole answer. He wrote:

The State should offer security for service and contribution. The State, in organising security, should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than the minimum for himself and his family.

And those words also remind us that Beveridge’s system was fundamentally based on contributions – it was, above all, a national insurance system.

Beveridge in practice

Beveridge’s proposals were hugely popular. I can tell you with some confidence that a policy with 86% popular support, and only 6% opposition, is one of which politicians’ dreams are made.

But political and economic realities intrude even on the most popular of policies. The post-war welfare state differed in some important ways from Beveridge’s vision. The country never got the contributory system that he quite envisaged.

It would have been politically unacceptable to defer the introduction of the new retirement pensions until the contributory fund had matured, necessitating the pay-as-you-go approach we still see today. We have always had a national insurance system in name only; since its foundation, it has been supplemented by taxpayers.

Perhaps more fundamentally, Beveridge didn’t, and probably couldn’t have anticipated, the profound social and economic changes of the second half of the last century.

75 years on

Seventy-five years on, the social, economic and political context has been transformed.

Real disposable income per head has almost quadrupled.

Life expectancy at birth has risen by almost 15 years.

Life expectancy at age 65 has risen by over 8 years.

Child mortality has fallen from over 55 per 1,000 live births in 1931, to just 3.7 by 2015.

And the proportion of people who own their homes has more than doubled.

Those changes are closely linked to changes in patterns of employment.

Today, more than 70% of women are in work – up from just over a quarter in 1939.

Fifteen percent of all workers are now self-employed – almost double what it was in 1950. A further 4% are estimated to work in the gig economy – something which did not exist a decade ago.

And there has been increasing recognition in recent decades of the need to support people in low-paid work, in addition to those who are without work altogether.

So the context for welfare has moved a long way since Beveridge, as have our expectations of it.

So, where are we now?

Our vision for welfare is one with work at its heart.

One that is personalised, using professional work coaches and modern digital tools to provide tailored, holistic support.

One which recognises and supports progression within work, as well as the initial move into work.

And one which balances that support with clear expectations of the claimant.

The new contributory principle

Beveridge’s principles, however, remain a good starting place for thinking about the modern welfare system. He recognised the importance of putting something in, as well as taking something out.

His was fundamentally a contributory system: you were insured because you paid your stamp – quite literally for many people. That’s still true today – though the stamps are long gone.

But our expectation now is that people also contribute in a broader sense – where they are able to do so.

That may be by looking for work.

It may be by building-up hours in work.

It may be by developing skills and earning potential.

We have a right to expect people to support themselves whenever they can, and to the full extent of their capability.

We have built these expectations into the Claimant Commitment, where welfare recipients agree to a specific set of actions to ensure that they move towards and enter work. The Commitment – and the work-focused approach behind it – is in fact the embodiment of the new contributory principle.

In other words, for many, the financial support provided by benefits is conditional upon demonstrating their determination to eventually support themselves from their own earnings.

But at the same time, we also recognise that some people will always need support from the state, and from society as a whole.

Welfare attributes

A modern welfare system should support aspiration, helping people to fulfil their potential.

It should be focused on work, enabling success in the labour market.

It should be based on evidence, continuously learning and building on the approaches that achieve its aims.

It should be both affordable and sustainable, supporting economic growth.

And it should be personalised. People are not all the same – they have different needs. So we should offer different support, with tailored expectations that reflect individual circumstances.

This mirrors changes in the wider environment. We increasingly expect personalised services in other aspects of our lives. We should expect no less of our welfare system.

Because, of course, welfare always operates within a wider economic and social context. Beveridge designed his welfare system for the world of his time, and we must do the same for ours.

Future challenges

We are now facing the challenge of what some have called the fourth industrial revolution.

The first industrial revolution harnessed the power of water and steam for mechanisation. The second brought electric power and increasing mass production. The third was about automation driven by computers.

And now the fourth heralds the arrival of a range of new technologies, which bring both great opportunities and enormous changes.

Each of the first 3 revolutions brought huge increases in productivity and in standards of living. We are immeasurably better off because of them.

But each of those revolutions also disrupted many people’s lives. Jobs which had looked secure from generation to generation vanished – sometimes with great speed. Each revolution has created many more jobs than it destroyed – but that does not mean that it was always easy for those affected.

The fourth industrial revolution brings the same challenges, and the same opportunities.

We are already seeing impacts on the pattern of jobs, as well as their content. The gig economy matches people and tasks much more dynamically than we have been used to. Communications technology allows people to access services not just here, but from the other side of the world.

There is a real opportunity though – as Matthew Taylor has argued in his report to the Prime Minister – to focus on ‘good work’. Work organised to be fulfilling in itself, as an enriching part of our lives.

We need increasingly skilled workers to deliver increasing value – for themselves, for their employers, and for the wider economy.

And good employers know how to unlock that value by investing in their people through training and development – and by being flexible in helping employees manage the balance between their work and wider lives.

Every past industrial revolution has created jobs which were unimagined – and unimaginable – from the perspective of the old world. In 1900, 13% of the workforce was employed in agriculture. That proportion is now 1%. But we are not surrounded by unemployed farm workers. The descendants of those farm labourers of a century ago work in an economy with unemployment at historically low levels, doing jobs their great-great-grandparents could not have dreamed of.

The transition will undoubtedly be challenging. For some, it will be personally stressful and painful. For others it will be a time of enormous new opportunities. But I strongly believe that the fourth industrial revolution will deliver the same positive step change in our collective wealth and wellbeing that resulted from the first 3.

We need new technologies to be spread more widely, in order to improve productivity and make jobs better. Our mission is to best position the workforce to take advantage of these new opportunities. Automation promises to liberate us from dull, dirty, difficult and dangerous jobs – to free us to work with technology to create new products, new work, and new roles – the like of which we have yet to imagine.

The fourth industrial revolution presents so many new opportunities. In our Industrial Strategy, we set our sights on making the UK a global centre for artificial Intelligence and data-driven innovation. We are determined that this country should be among the world leaders in adopting the next generation of technology. And we are determined that everyone should benefit from the changes it brings.

Universal Basic Income isn’t the answer

Of course, there is an alternative, gloomy view: that the future will be worse, that work will wither away. That a significant proportion of the workforce will become effectively unemployable, and that others will live in fear that their job will be next to go.

This leads some to conclude that the most we can do is pay out cash to everyone to compensate for this state of affairs. In other words, a Universal Basic Income.

The more positive case, I suppose, is that technology does the work, and we humans can relax and enjoy ever greater leisure time.

There’s a seeming simplicity in having no forms to fill in, no conditionality, no jobcentre to go to, no one trying to advise you. The security of knowing that you would have a stable, predictable income, indefinitely, without effort.

I have to say I am far from convinced. The arguments against a Universal Basic Income are formidable; in my view, technological and economic change is making the case weaker, not stronger. Some jobs will disappear. But work will not.

Work matters now and will matter in the future. Not just because of the income it provides, but because of the place that it gives people in society. Work can give the worker self-respect, dignity, and the confidence that they are involved, that they are contributing – that what they do matters.

We cannot give up on this.

Those receiving support have a right to expect that the government will be helping them to find work and to adapt to economic change. That is not something to be ashamed of.

A Universal Basic Income would be a retreat from the future. It would mean that we give up on this effort, that we give people a hand-out, not a hand-up.

And we shouldn’t give up on the principle of something for something. Those who can contribute, should do so.

I have talked about the importance Beveridge attached to contributions, and how we have carried that principle forward into the modern welfare system.

Payments are conditional on making a contribution – either financial, or in terms of effort to get into the labour market.

An unconditional Universal Basic Income is completely at odds with that principle.

It requires that hard-working people subsidise those who have chosen not to work. That there is no need to contribute. And human nature being what it is, we should be concerned at the prospect of legitimising the decision to simply to opt out, creating whole communities of workless dependents.

Moreover, a true universal income is – by definition – poorly targeted. The same payment, given to everyone, will not take account of disability or caring responsibilities.

It requires that we ignore the specific needs of those who most deserve our collective support.

An affordable basic income would be inadequate, and a basic income that’s adequate for all would be unaffordable.

Major welfare reforms

I have already said that the future lies in support that is increasingly tailored to the needs of the individual, not a crude single-serving for everyone. It should help the working-age population to make the most of a changing economy, not turn away from it.

This approach is already underpinning the reforms that we have introduced since 2010.

Take Universal Credit.

Universal Credit reinforces the huge practical advantages of a single, integrated support system.

It is designed so that support is withdrawn gradually, as people become more self-sufficient. The transition from unemployment into work is no longer abrupt, with far less financial disruption and uncertainty.

And it is designed to help people progress further once they are working.

It is no surprise that poverty rates are higher in families where no-one works full time. This is why we must continue to use Universal Credit, to support more people, in more households, to work full-time where they are able to do so.

A similar situation arises for those who are self-employed but on low pay. Again, we must use our integrated system to help people build-up to greater self-sufficiency.

Our pensions reforms – and our approach to Fuller Working Lives – demonstrate our response to the need to adapt – in this case, to an ageing society.

Auto-enrolment has used behavioural science to increase the number of people saving into workplace pensions.

The steps to introduce the new State Pension, and to end contracting-out, have also let people know what they can expect from the state.

This means that we are getting the right balance between the contributions people make during their working lives, and the support they receive in later life.

These measures have simplified the pensions saving journey for individuals; a clearer offer from the state allows people to plan and save for their retirement more easily, with more certainty.

Looking to the future

Implementing these current reforms is at the heart of my role. But it is also important to think about where we will go next.

Our relentless focus on helping people to get into work has delivered results. When unemployment fell to 5% early last year, many people thought it couldn’t get much lower, and yet it now stands at 4.3%.

This achievement should not make us lose sight of the need to support people still further, especially those on low incomes, to get into work and progress once in work.

We know that the jobs of the future will be different. So we should help people to benefit from the new opportunities that the coming change will bring. People will need to gain new skills to secure meaningful and productive employment throughout their lives.

In the Budget we announced a unique partnership between employers, unions and government – a new National Retraining Scheme to help people adjust to the changing world of work.

We also know that new ways of working can enable those with caring responsibilities to work flexibly, and those with health conditions to stay in work. We should seize these new possibilities too.

It means we need to build on a work coach’s ability to connect with people – to provide encouragement and support, build resilience, and develop potential. Just last week I announced a new programme of mental health awareness training for work coaches, in order to further these aims.

New technology will provide us with additional opportunities. Increased automation, machine learning and big data will provide ways of tailoring our services.

This offers huge potential to improve the customer experience, identify those most in need of help, and to successfully target the important support that only work coaches can provide. We are exploring new ways of providing support online, using a ‘test and learn’ approach to see how people respond, and making adjustments as we go along.

We are also testing new data sources, including online vacancy data. This data has the potential to help us to understand changing job and skill demands, enabling us to better signpost people to the opportunities that are out there.

We are also learning from other countries. Just this week my officials met their Dutch and Belgian counterparts. They shared insights, and built on their pioneering use of data to identify those people who need different kinds of support, so it can be better targeted towards them.

In early 2018 we will publish our Areas of Research Interest, to increase collaboration with academics in putting evidence at the heart of our decisions.

Public expectations are changing. Our own data tells us that people access their online benefit claim accounts 24 hours a day. In the rest of our lives, we are all coming to expect services – from online shopping to social media – that respond and develop to suit us and our lifestyles. The welfare state needs to be able to keep up.

We must not forget, though, that we also need to do more to support those who face the greatest barriers to work, including people with disabilities; mental health issues; lone parents with young children, and others with caring responsibilities; and those experiencing several barriers in the same household.

We will explore how to improve access to occupational health services, as well as improving interaction between people and health and welfare services

We are keen to make the best use of technology which can provide crucial support to removing barriers to work.

We will support and encourage employers to confidently recruit and retain those with health conditions.

Most importantly, we will continue to build our offer of personalised employment support.

Beyond Beveridge

More personal, more tailored, more holistic. That is the welfare state that I envisage.

Over the 75 years since Beveridge produced his report, the welfare system has constantly adapted to changing circumstances, to new priorities and to expectations.

Today’s welfare state, work, economy and society all look vastly different from those of the 1940s. The fourth industrial revolution brings with it fresh new challenges.

The best welfare systems help to ensure that societies can embrace change.

To enable people to make the most of the opportunities created by a new and fast-moving economy.

To build on new technologies to improve the support we give.

To keep hold of the principle of support for those who need it, in exchange for a commitment to contribute.

And to keep work at its heart – adapting to help those who can, while supporting those who can’t.

If we are optimistic about the future, as Beveridge was; if we take the opportunities presented by a changing world, as Beveridge did; then we can look forward to the next 75 years with confidence.

David Gauke – 2017 Speech at Conservative Party Conference

Below is the text of the speech made by David Gauke, the Secretary of State for Work and Pensions, at the Conservative Party conference held in Manchester on 2 October 2017.

In 2010, our economy faced a crisis.

We were borrowing more than at any time in our peace time history.

Unemployment had risen by nearly 850,000 in the previous two years, we had just under 4 million workless households.

Our welfare system had become much more expensive, increasing in real terms by £82 billion over 13 years. But we still had a dysfunctional benefit system that failed to properly reward work and left too many trapped in a life of dependency.

And where are we today?

Youth unemployment down by over 400,000
Long term unemployment down by 400,000
600,000 more disabled people are in work

Today, do not let anyone forget, there are over 3 million more jobs in this country than seven years ago.

And only a very small minority of those jobs have been filled by George Osborne!

This country’s remarkable jobs story is one of the reasons why it is such a privilege to have been appointed Secretary of State for Work and Pensions, to build on the work of Iain Duncan Smith, Stephen Crabb and Damian Green.

Helping millions into work is not the only way the department supports those in need:

We have established auto enrolled pensions. By the end of August, over 8.5 million people had been automatically enrolled into a workplace pension.

We are giving employers the tools they need to recruit, retain and support disabled people. Almost 5,000 employers have signed up to the Disability Confident scheme so far, and this number is growing rapidly.

And I’d like to thank my excellent ministerial team. Penny Mordaunt, Damian Hinds, Caroline Dinenage, Guy Opperman and Peta Buscombe. I’m fortunate to have such a strong team and I would like to thank them – and all the department’s frontline staff up and down the country – for all that they do.

The work that we do touches on the lives of millions of our fellow citizens.

We know that to improve the living standards of the poorest in society, we need a strong economy and a job creating economy. Without the tax receipts that a strong economy provides, we cannot support those that need it most. And we also know that it is through work that people have a chance to progress and to provide for their own economic security.

As Conservatives we do not believe, we have never believed, that we can turn our backs on those most in need.

As Conservatives we believe in a strong and compassionate welfare state that helps everyone fulfil their potential.

In truth, the strength and compassion of a welfare system should not be measured just by the money you spend, but by the lives you transform.

Among the people that need more support are those with mental health conditions.

Helping them has rightly been a priority for the Prime Minister. The UK is increasingly a world leader in treatment and Jeremy Hunt is doing great work here. We understand more than in the past that mental health conditions are a barrier to work but, if we can help people into employment, for many, work can be part of the solution.

That’s why we have trained 1800 Universal Credit work coaches in how to support claimants with mental health issues. To further support Jobcentre work coaches, we have developed an enhanced mental health training programme. Following testing, I can therefore confirm that by the end of the year, it will be made available to all those work coaches who would benefit from it.

Of course, there are some people who suffer from such severe disabilities that they will never be able to work. Last year, my predecessor, Damian Green, announced that we were looking to exclude those with severe lifetime health conditions from any requirement to be reassessed for out-of-work benefits. After early tests of this approach, it has now been implemented and I can tell you that around twice as many people are expected to benefit from this reform than were originally thought.

It is right that we focus our disability benefits on those that need it most. We will support those who are unable to work, while helping those who can work to maximise their potential.

And this is consistent with our approach to the welfare system. An effective welfare system is about eliminating the barriers to work. And it is working, with an employment rate higher than the US, and an unemployment rate half that of the Eurozone.

Of course, we should acknowledge the importance of the job creators in this country. The entrepreneurs, the businesses that have created opportunities, taken on staff and given people the chance to earn a living, and support themselves and their families.

And we should celebrate the determination of the so many of the British people to get in work and to stay in work, so often showing an ability to adapt and be flexible.

The phrase ‘hard working families’, is sometimes seen as a bit of a politicians’ cliché. (And, frankly, it is.) But it is also a fair description of so many people in this country.

Our job-creating businesses and our hard-working people. They are the real heroes of the British economy. And the Conservative Party will always value them and always be on their side.

But let us not hide our light under a bushel. Even with all the excellent businesses out there and our industrious workforce, the British jobs miracle would not have happened without the measures we have taken in government.

The cuts in income tax that meant the low paid could keep more of what they earnt.

The cuts in corporation tax that have encouraged investment.

And the welfare reforms that have put work at the heart of our system – ensuring better results for claimants, and fairness for the people whose taxes pay for it.

All of this has meant that every day we have been in office, 1114 jobs have been created. A remarkable achievement.

I talk about work a lot. After all, it is in my new title.

But we should all talk about it – we have a great record.

I have given you the statistics, but these are not abstract numbers. These are lives transformed, prospects raised, economic security provided. We should be proud of that.

And let us be very clear. None of that would have happened had Labour been in power. And all of it would be put at risk if Jeremy Corbyn and John McDonnell got their hands on the British economy.

The unreconstructed socialism they offer has failed every time and in every country it has been tried.

Let me tell you who would pay the price if they got the chance to inflict their failed ideology here. It wouldn’t be the super-rich – they’d just up sticks and move abroad. But it would be:

– those struggling to get by
– the hard pressed worker who couldn’t afford higher taxes
– the person who lost their job when a business pulls out of the country
– the young person who can’t even get on the jobs ladder because of higher unemployment.

There is nothing compassionate about destroying the public finances, driving out businesses and passing on huge debts to future generations.

And remember, unemployment always increases under a Labour government. Even when the relatively sensible ones were in charge!

We have achieved much, but there is more to do.

We inherited a welfare system that puts in place barriers to people fulfilling their potential.

The person working part time, worried about working more than 16 hours a week because they will move from one set of benefits to another – and then will have to move back again if there is a fall in their hours.

The worker reluctant to take on more responsibility because they’ll lose almost as much from reduced benefits as they gain in pay.

The person who just wants to do all they can to provide for themselves and their family.

Too many lives have been held back by a complex benefits where progressing in work is seen as a risk not worth taking.

That is why Iain Duncan Smith came forward with Universal Credit, the most radical reform to our benefits system since the Second World War. Scrapping six benefits and replacing them with one and ensuring that work always pays. And, a point that should be appreciated more, we are giving claimants the increased personalised support of work coaches. They are working with claimants to help eliminate their barriers to work.

It is the right vision and I want to pay tribute to Iain for having the courage and determination to pursue this transformative change.

In 101 job centres up and down the country, it is already in operation. The evidence is already clear. It is helping more people into work and it is helping more people in work to progress to better jobs.

Delivering a simpler system that encourages work and supports aspiration.

I understand the concerns that have been raised that, when people first claim, they have to wait six weeks or more before they receive a penny.

It is the case that what you get in Universal Credit depends on what you have earned over the previous month, so payments are made in arrears.

But I am determined to ensure that those who need support earlier in the month will get it. It is already the case that if people need help before the first full benefit payment, they can quickly get an advance to help tide them over.

Increasing numbers of people now claim this – since June, the majority of claimants did so. However, I can announce today that we are refreshing the guidance to DWP staff to ensure that anyone who needs an advance payment will be offered it up-front. Claimants who want an advance payment will not have to wait six weeks. They will receive this advance within 5 working days.

And if someone is in immediate need, then we fast track the payment, meaning they will receive it on the same day.

Universal Credit is working. So I can confirm that the rollout will continue, and to the planned timetable. We’re not going to rush things – it is more important to get this right than to do this quickly, and this won’t be completed until 2022. But across the country, we will continue to transform our welfare system to further support those who aspire to work.

Universal credit is the next step on our journey. A journey to a welfare state that gives people the help that they need but does not trap them in dependency.

A welfare state that believes we have to support the vulnerable but that simply signing a cheque is not enough.

A welfare state that is on the side of all of those who aspire to fulfil their potential.

It is a vision of the welfare state that is compassionate, practical and aspirational. It is, in short, a Conservative vision for a modern welfare state

David Gauke – 2016 Speech on Digital Tax


Below is the text of the speech made by David Gauke, the Financial Secretary to the Treasury, in Carlisle on 18 February 2016.

Good afternoon – it’s very good to be up here in Carlisle with you.

I am very grateful to Karen Thomson for inviting me to this event. Karen has been an influential voice on payroll matters for many years: a real expert, and one who I know is highly respected and widely listened to in the industry and beyond.

I’d also like to thank John Stevenson for hosting me in Carlisle. John has been a highly effective voice for Carlisle, particularly for small businesses, highlighted by the excellent work he has done for the community following the recent floods. And later on today, I’m looking forward to meeting some of Carlisle’s small businesses and residents.

This is now my 6th year as minister responsible for tax. It’s been quite a ride!

I occasionally cast my eye back to 2010 – when the economy really was in a bad way, when the global markets were beginning to doubt us, and when we were spending too much and earning too little.

It’s been a long journey back from the brink. Plenty of tough decisions along the way. And plenty of real achievements too.

Every decision we have made in the Treasury has had one goal: to secure the UK’s long term economic prosperity.

That means finding efficiencies in what we spend; modernising how we run the country; helping the private sector create jobs and deliver economic growth, all over the country; opening ourselves up to the world’s fastest-expanding economies, and making sure that we are as internationally competitive as we can be.

Tax lies at the heart of that.

There are a lot of ways in which the tax system can help support growth – and a lot of ways in which, applied in the wrong way, it can do enormous damage to a nation’s economy.

And I could talk at quite some length about what we have done since 2010 – our cuts to the corporation tax rate, for instance, or our increases to the investment allowance, or the work we’ve put in to make the international tax system fit for the 21st century. I’m of course very happy to answer questions on those topics!

But today, I’d like to focus on an aspect of tax which is perhaps closer to home: about how we are modernising the system by which taxes are paid.

I’m sure that the memory of filling in this January’s tax return will be fresh in your minds. You’ve almost certainly had more pleasurable experiences! Nobody enjoys paying tax; that’s one of the things I don’t think any government can change.

But what we can do is make it easier.

The system now has, quite simply, not kept up with the march of technology.

You have taxpayers taking out 18-month old records, staring at them for a while as they try to figure out what they were doing back then, and then tentatively use them to fill in a lengthy HMRC form.

Or they can go to their accountants, drop a large carrier bag of records on their desks, and get them to work it all out. Then they pay their final tax bill on money made up to 21 months previously.

It’s a system designed for a world of paper, ledgers: book-keeping in a literal sense.

Now compare that to the way we carry out other activities.

Shopping for groceries online … making a GP appointment online … sorting out your road tax from the DVLA website in just minutes … paying your invoices off a smartphone at 4am if you want to!

Business are harnessing the opportunities of the digital age too, fundamentally transforming their operations and the services they provide. It’s the customers that reap the benefits.

That is the context of our reforms to HMRC.

It is only right that the government keeps pace with the world around us. That is why we are seeking to transform HMRC into one of the most digitally advanced tax administrations in the world. Making tax digital is at the heart of these plans.

At the Spending Review, the Chancellor announced a £1.3 billion investment in HMRC to make this vision a reality. This will see the end of the annual tax return, and, in its place, will introduce simple, secure and personalised digital tax accounts for businesses and individuals.

Importantly, these changes deliver what businesses and individuals have told us they need.

In particular, many businesses have said they want more certainty over their tax bill, and don’t want to wait until the end of the year, often longer, to find out how much they have to pay.

Businesses have also said they want tax to be more integrated into the way they run their business, rather than something done separately, and many months later.

The use of digital tools – accounting software or smartphone apps – will, for the first time, create this desired integration.

Importantly, taxpayers would have 24/7 access to digital accounts, as well as having a complete view of all their tax liabilities and entitlements, allowing them to send HMRC information and payments simply and efficiently.

Businesses will be able to see in their digital account what each update means for their tax position as the year goes by.

This will also make it easier for business to understand how much tax they owe, giving them far more certainty over their tax position, helping them budget, invest and grow.

Unnecessarily bureaucratic form-filling will be eradicated – taxpayers will not have to tell HMRC information it already knows.

And unnecessary time delays will also be eliminated, because the tax system will be operating much more closely to ‘real time’. This will keep everyone up to date, removing the risk of missed deadlines, unnecessary penalties, debts arising and errors in the tax system being carried forward from one year to the next.

Beyond helping businesses get their taxes right, making tax digital will also help them improve and develop their business. Targeted guidance and alerts will make them aware of relevant entitlements and reliefs, or wider government services to support business growth.

Apart from the modernisation of business practices, there is another important prize – one we cannot ignore. Each year around £6.5 billion of tax goes unpaid because of mistakes made by small businesses when preparing and filling in their tax returns.

These reforms will improve the quality of record keeping, reducing the likelihood of mistakes and contributing £920 million to the Exchequer in additional revenue by 2020, then £600 million a year thereafter.

This is good news for businesses – and good news for the Exchequer too.

But with big changes come challenges and concerns. So I would like to take this opportunity to address some of these concerns; because I do not underestimate the scale of these changes, and it is important that we get this change right.

First of all, this transformation does not – repeat, not – mean four tax returns a year.

What it means is that by 2020, most businesses will be keeping track of their tax affairs digitally, updating HMRC at least quarterly via their digital tax account.

Importantly, these quarterly updates will not involve the complexity of a full tax return, where the business, or their agent, has to gather together and manually input data onto an electronic or paper form, and then perform various calculations.

Instead, updates will be generated from digital records and in most cases, little or no further entry of information will be needed. It will be much quicker, easier and far less burdensome than the current process. The agony of the annual tax return will be a thing of the past.

Second, I make no apologies for the scale of our digital ambition.

With the government and local authorities investing £1.7 billion to bring superfast broadband to over 95% of the UK by 2017, this is possible.

And the Prime Minister announced at the end of last year that we are looking to implement an updated broadband Universal Service Obligation for those not covered by the superfast plans.

Some have said that it is overly ambitious to rely on digital as the primary channel. The fact is that we are going with the grain of the way small businesses are already moving. The benefits of digitisation are readily accepted by the majority of small- and medium-sized organisations.

And whilst there has been plenty of debate on the challenges – a lot of that online – I am heartened see that many businesses, and their agents, are already forging ahead. Already, 2 million small and medium-sized businesses are using software for their payroll and their VAT.

We’ve also seen the rise of companies providing digital accounting services, using exactly the sort of technology and processes that will be needed when we make tax fully digital.

Just last week, I met FreeAgent, one such company, whose software is already being used by 45,000 customers. And we are working with other innovative firms, such as Intuit and Xero. That is where the market is heading.

HMRC, too, stands ready to deliver the digital agenda.

The HMRC performance figures for this year bear repeating.

This year saw a reduction of almost a quarter in the number of people submitting a paper tax return – that’s over 340,000 fewer people doing things the old way.

Meanwhile, the percentage of people using online filing has increased once more – from 85% to 89%.

More than 825,000 customers accessed their Personal Tax Account as they completed their tax returns.

Over a quarter of a million customers used HMRC’s virtual assistant in the last 3 weeks of January.

Over that period, HMRC staff assisted in more than 114,000 webchats.

And because of these digital advances, the number of phone calls to HMRC in January from people seeking assistance to complete a Self-Assessment return has fallen by over 50% in the last two years.

As our society increasingly looks for new, more convenient, ways of doing things, HMRC is well placed to meet – and to manage – these demands.

Third, I acknowledge the concerns raised about the pace of these reforms. There were similar concerns around online filing and real-time information. However, HMRC’s impressive track record in implementing those changes speaks for itself – working with interested parties we can match this success.

Fourth, I have heard concerns about these reforms being mandatory, rather than on a voluntary basis.

We examined this proposal very carefully at the start of the process.

We concluded that a voluntary approach would cost the same, but deliver only a fraction of the benefits for business and the Exchequer.

In the current fiscal environment, without the additional revenue generated by closing the tax gap, we couldn’t have provided the £1.3 billion investment required to transform services for all taxpayers.

Fifth, there have also been concerns raised about the fact that we risk leaving some customers behind.

So let me be clear. It is vital that support is there for those who need it, and that is what we have committed to do.

For instance, we have already said we will ensure that free software products will be available to businesses with the most straightforward tax affairs.

We accept that some – a very small minority – will be unable to adopt digital tools due to geography, personal disability or other circumstances. In those cases, help will be provided. There is absolutely no question of forcing those who cannot go digital to do so.

We will consult business and representative bodies to fully understand who cannot get online and what support they need; and we will ensure we provide alternatives – over the phone, through face-to-face visits or through partners in the voluntary and community sector.

Implementation will, of course, be vital. It is important we get this right – so that, as well as transforming the way millions of people pay tax, these reforms can provide the maximum benefit for business and the UK.

We are already talking to a wide range of business, agents, software developers and professional bodies.

There will be a wide-ranging consultation exercise starting in the spring, in which I would urge you all to get involved.

We are introducing these reforms gradually – not phasing them in fully until 2020, because we know how important it will be to give taxpayers time to adapt.

We are using volunteers to stress-test new services, so we can be confident these new services work before we roll them out.

Because the benefits – if we get this right – are considerable. We will reduce burdens on business, reduce the tax gap, and bringing tax administration well and truly into the digital age.

These reforms are an important part of our wider tax policy:

Taxes which are internationally competitive, so that our country continues to attract the brightest and the best;

Taxes which are paid in full and on time, helping provide the public services we all depend on;

And taxes which are simple to pay and manage. Because the less time businesses spend working out what to pay, the more time they have to do what it is they do so well:

Innovate … expand … create jobs … create growth … create profits … and contribute to Britain’s economic recovery.

That’s the system that, with your help, we are creating.

Thank you – and I’ll be delighted to take some questions.

David Gauke – 2012 Speech on Tax Avoidance


Below is the text of the speech made by David Gauke, the then Exchequer Secretary to the Treasury, on 23 July 2012.

Good morning. I am delighted to be back again at Policy Exchange to discuss an aspect of tax policy. On this occasion, the important and topical issue of tax avoidance.

At a time of economic difficulty, when tough decisions have to be made on public spending and when the burden of taxation remains high, there is little sympathy for those who do not make their full contribution. For those who work hard and pay their taxes, it is galling to see others shirk their responsibilities on either front.

But for there to be a sensible public debate on this complex issue, it is crucial that we understand the facts and the UK’s position. Tax avoidance is not a recent problem. In the fourth century AD, the Roman Emperor Valens had to make it illegal for individuals to sell themselves into slavery to avoid tax. And while this particular ruse seems to have fallen out of fashion, there will always be some who seek to shirk their civic duty. Just like every country at any time in the history of government, there is still work to do to ensure every pays what they should. But it is important to get a sense of perspective on our position – both in the context of recent history, and internationally.

While there is reason to be more optimistic and more grateful than headlines suggest, we are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bill. Today, I can announce a consultation on proposals to crack down further on those that seek to push abusive tax avoidance schemes and make it easier for taxpayers to identify such schemes when they are on the end of a hard sell by a dodgy promoter.

First, it is important to recognise the scale of the problem. Last year, HMRC collected £474 billion in tax. The tax gap – the difference between what is owed and what is collected – is about £35 billion. Tax avoidance (as opposed to tax evasion, the hidden economy, criminal attacks and other aspects of the tax gap) accounts for just 14 per cent of this gap – around £5 billion or about 1 per cent of total liabilities. While that may be too high – being as it is more than zero – evidence suggests it’s probably one of the lowest in the world. That’s because, contrary to some claims, the vast majority of UK taxpayers do not aggressively avoid tax; and yes, that includes the vast majority of wealthy individuals and multinational corporations, as well as the vast majority of ordinary working people and small businesses.

If anyone is tempted to believe that tax is optional for the wealthy, remember that The top 1 per cent of individuals by income pay 26 per cent of all income tax, and the top 0.1 per cent (just 30,000 individuals) pay around 11 per cent. Large businesses pay around 60 per cent of all taxes in the UK, but account for around only a quarter of the estimated the tax gap.

And where HMRC finds tax avoidance, it takes action – many who have been investigated have been disappointed when the false claims that it is soft on the rich and powerful turn out to be unfounded.

For those not immersed in matters relating to tax, the debate on tax avoidance can be a confusing one, not least because the term ‘tax avoidance’ can be used somewhat loosely.

Legitimate use of reliefs is not tax avoidance:

Claiming capital reliefs on investment is not tax avoidance – when those reliefs were introduced precisely to encourage the investment in question.

Claiming reliefs against double taxation is not tax avoidance – when the alternative would be taxpayers paying tax twice on the same income.

Claiming back tax on legitimate charitable donations is not tax avoidance – any more than ticking the ‘gift aid’ box is.

Not paying tax on your pension contributions is not tax avoidance.

Taking out a tax free ISA is not tax avoidance.

Clearly, the examples I have listed represent perfectly reasonable tax planning – making use of reliefs for the purpose they were intended, and ensuring one pays only what one is liable for.

Now I would hope this would be obvious to anyone who understands the purpose of reliefs. Yet some estimates of the tax gap count use of these reliefs as ‘avoidance’.

That is what avoidance is not. But artificial structures that aggressively exploit reliefs contrary to parliament’s intended purpose through contrived, artificial schemes fall very clearly into the definition of avoidance.

Buying a house for personal use through a corporate entity to avoid SDLT is avoidance.

Channelling money backwards and forwards through complex networks for no commercial reason but to minimise tax is avoidance.

Paying loans in lieu of salaries through shell companies is avoidance.

And using artificial ‘losses’ deliberately accrued to claim back tax is avoidance.

These kinds of schemes are where we are focussing our efforts, and they are all, to borrow a phrase from the Chancellor, ‘morally repugnant’.

These schemes damage our ability to fund public services and provide support to those who need it. They harm businesses by distorting competition. They damage public confidence. And they undermine the actions of the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride.

Now those who have engaged in tax avoidance have received their share of public scrutiny recently, to say the least. But often it is the firms that market such schemes that are the root of the problem. Some firms will adopt tactics that border on mis-selling – promising large tax savings, and saying the arrangement is unlikely to be challenged. Those who enter into the schemes are often shocked to find that HMRC pursues them relentlessly. Often they lose a lot of money, a lot of time, and their right to confidentiality due to the resulting tax tribunal. Just this month HMRC won a long-running legal challenge against a large avoidance scheme first marketed ten years ago by a ‘big four’ accountancy firm that ultimately gave nothing for the substantial fees that those participating paid for it.

There are those who may argue that “if it doesn’t involve lying to the Revenue, it’s OK” regardless of how artificial or contrived the arrangements may be. But for most people in the tax world, there has always been such a thing as a “smell test”. Where the tax consequences of an arrangement are so clearly contrary to the intentions of Parliament, where the nature of the arrangements so clearly lack a commercial, non-tax rationale and where the result looks “too good to be true”, most reputable advisers would say that the arrangements stink – and stay well clear.

But for the taxpayer, there may be times when it is not clear if an arrangement is legitimate tax planning or contrived avoidance. It is up to us as Government to make clear the features of dodgy schemes so that taxpayers can take ownership of their affairs and know that HMRC will challenge aggressive tax avoidance in all its forms.

Today we consult on ways to improve the information available to the public on avoidance. Publishing warnings for all to see, and making it easier for taxpayers to see if their adviser has promoted failed avoidance schemes in the past.

The tax avoidance landscape is changing, and it is important that we adapt as it does. I am glad to say that the mainstream view within the tax professions is that contrived avoidance schemes are bad and have no place in an honest, reputable firm. I welcome the recent comments from senior figures in the industry that confirm this – Michael Izza’s statement, on behalf of the Institute of Chartered Accountants, that there is no place in the profession for those involved in egregious schemes; the warning from the Solicitors Regulation Authority, that SDLT avoidance can damage a professional reputation; and the denunciation of those who push abusive schemes by Patrick Stevens of the Chartered Institute of Taxation. Through today’s consultation, I hope we can continue to work closely with professional organisations to ensure that together we stamp out practices that harm the reputation of the industry, as well as the pockets of the honest majority of taxpayers.

That is the view of the mainstream. But we face a problem with a minority – the ‘cowboy tax advisers’. Small, niche firms peddling crude schemes that are unlikely to be successful once they are brought to HMRC’s attention. There has been some excellent coverage in the Times of the sort of thing I am talking about; the so called ‘K2’ scheme, for example, in which a shell company gives out payments described as loans in lieu of salaries.

These firms behave differently to the well-established, reputable advisory firms. They change name frequently to avoid detection; they include ‘fighting funds’ in their fees – pre-empting an inevitable clash with the authorities, and often do not comply in full with HMRC’s disclosure rules.

It is these organisations in particular that we need to raise public awareness of. If I find out my builder has changed trade names three times, avoids informing the planning authorities, and includes in his fee a ‘litigation fund’, I might be tempted to find another builder. But all too often there is not the same awareness around tax advisers.

If there is one lesson to be learnt from the cases exposed in recent newspaper reports, if a tax adviser tells you something that sounds too good to be true, it probably is too good to be true.

So one of the major parts of our consultation looks at how we can make people aware where a company has previously peddled schemes that have been successfully challenged – so that they know there is a strong chance that no good will come of it.

And we are also consulting on how we strengthen our disclosure regime, looking at how the descriptions of schemes covered might be reformed to ensure we capture more, and that we can crack down on those who flout the rules. The Disclosure of Tax Avoidance Schemes regime, DOTAS, has assisted HMRC greatly over the years – closing off around twelve and a half billion pounds in avoidance opportunities. But as the avoidance landscape changes, so must it

We have already extended DOTAS to make it stronger and more effective. In 2010 and 2011 we implemented a number of improvements to the system requiring promoters to provide client information. And this year we legislated to allow HMRC to flush out users of certain SDLT avoidance schemes more effectively.

And the major reforms to the system we consult on today can, informed by our responses, place DOTAS once again at the forefront of anti avoidance measures globally. These and other proposals consulted on will:

Strengthen our descriptions to ensure we close the net around the few schemes that are not already captured.

Clarify what needs to be disclosed.

Require higher quality information on how schemes work.

Require a named individual to take responsibility as promoter for the scheme.

Demand better disclosure of those who use suspect arrangements.

Take further steps to inform the public of the genuine dangers of entering into such arrangements.

Ensure taxpayers know it is in their interests not to go near them.

And tighten the screw on those who refuse to co-operate.

I am confident that we can work with those parts of the industry that act with honesty and integrity, and with everyone else with an interest in promoting fairness and transparency in the tax system to bring about the change we need. We welcome views from representative bodies, tax agents, businesses and individuals, and I would encourage all of you with an interest to offer your thoughts.

There are some who might say that consultation documents on tax administration are often an effective cure for insomnia, but this is one consultation that will keep the promoters of aggressive tax avoidance schemes awake at night.

And while we look at how to strengthen the regime, we will continue to tackle aggressive avoidance wherever it occurs.

Reinvesting money to make sure we stay on top of the fight – £917 million in additional resources committed towards tackling evasion and avoidance over the spending review period, which will bring in around £7 billion per year in additional revenue by 2014.

And last month, we issued our consultation on a General Anti-Abuse Rule, aimed at deterring and tackling abusive schemes with a new rule that is effective against the most egregious arrangements.

It will act as a further deterrent to those engaging in abusive schemes, and improve our ability to secure payment of the right amount of tax.

But it’s important to realise that there is no tax avoidance ‘magic bullet’. No single rule can ever wipe out avoidance completely. The benefits of a GAAR will be considerable but its full effects will take time to be realised, and we should remain ever vigilant against wider forms of avoidance that do not fall within its scope.

Through the steps we are taking, we will build on the excellent compliance record that HMRC has:

Moving swiftly to advise ministers to close 7 tax avoidance schemes successfully in the last year alone -schemes that exploit loss reliefs, or claim relief twice for the same expenditure, for example.

Establishing the High Net Worth Unit in HMRC, to manage the affairs of individuals where the most tax is at stake, ensuring that those who can most afford to pay contribute what they should.

Compliance yield doubling in 6 years

And this month’s closing of the ten year-old scheme I mentioned earlier, used by around 200 wealthy individuals, which will mean recovery of around £90 million of tax at risk. This is the latest in a long line of successful challenges – including a scheme closed in April saving £117 million, and one last year involving allowances of around £1.8 billion.

It is this kind of activity that ensures that avoidance does not pay – upholding the wisdom of the vast majority of those – rich or not, who do not engage in it.

As a result, our compliance record is one of the best in the word. The tax gap in the U.S. is around 14 per cent, compared to 8 per cent here.

It is unfortunate that HMRC’s achievements are sometimes not only under-acknowledged, but undermined by ill informed criticism.

There are those who claim that HMRC is soft on big business. But this ignores the facts that:

£29 billion in additional compliance revenue has been collected since 2006-07 through the Large Business Service, excluding some exceptional items.

Over eleven and a half billion pounds of this was saved through the High Risk Corporate Programme in the last six years.

And, as was demonstrated in February when an aggressive debt buyback arrangement was closed down, HMRC takes decisive action when large corporates engage in contrived tax avoidance.

Instead, the press coverage tends to focus on accusations of ‘backroom deals’ which allegedly cost the exchequer billions. One such accusation in a magazine resulted in the formation of UKUncut. There were protests and arrests and increasingly hysterical accusations as others joined the bandwagon.

HMRC’s strict statutory duty of taxpayer confidentiality meant that it was very constrained in what it could say publicly about the affairs of specific taxpayers and had limited ability to defend itself.

But on this occasion, the NAO commissioned a review, led by Sir Andrew Park, of tax settlements with large businesses. Sir Andrew concluded that all the settlements reviewed were reasonable and the overall outcome for the Exchequer was good. The NAO went on to say that ‘the resolution of the issues by HMRC with the companies in question is welcome’. In the case that has attracted most publicity, Sir Andrew suggested that there may have been grounds for the taxpayer not to be liable for £6 billion, as is routinely reported, nor £1.2 billion (as was the amount settled) but nothing. It is a shame that the media coverage of the positive findings of the report has not been as prominently or as widely reported as the discredited claims that a business was let off billions.

Companies must pay tax in accordance with the law, just like individuals. But it must also be accepted that the tax affairs of companies are often more complex than the tax affairs of individuals. Companies – especially large multinational companies – will have profits and pay taxes in many jurisdictions. As a matter of policy decided by Parliament, our tax system contains characteristics, such as capital allowances, R&D tax credits and interest deductibility that will mean that a company will often pay tax at an effective rate lower than the headline or statutory rate. The fact that that happens is not in itself evidence of avoidance on the part of the company, nor incompetence on the part of HMRC. Parliament can change those characteristics, although in doing so it would have significant implications for the UK as a place in which to do business.

Of course, HMRC tailors its responses to different taxpayers, based on their needs and behaviours and the risks they pose. So it’s inevitable that HMRC needs to take a hands-on approach in some cases, and doing so saves the public millions in legal fees and lost revenue. But let me be clear – when they do so, they are nothing but even handed. HMRC’s aim with any taxpayer is to ensure they each pay the tax they owe and receive the reliefs to which they are entitled, minimising compliance costs and uncertainty through early and open dialogue where there are issues to resolve.

This government has led the charge on ensuring that we keep the UK competitive with lower tax rates for everyone who contributes. That purpose, and the debate around it, is often obscured by unsubstantiated claims and wild accusations from the political fringes. Anyone who thinks that we happily pass up the opportunity to raise revenue while increasing our popularity has probably never met a Treasury minister – or perhaps even a politician. And they’ve certainly never met an HMRC tax inspector!

But we are still determined to do more to maintain a level playing field for all taxpayers, and stop those who seek to game the system at the expense of others. The actions we are taking and our consultation today should reaffirm our determination to ensure that everyone pays their fair share, whether companies or individuals. I hope that with the co-operation and input of all who have an interest in seeing a fair and transparent tax system, we can deliver a system that is robust to those few who might exploit it.

Thank you.

David Gauke – 2016 Speech on Economic Security


Below is the text of the speech made by David Gauke, the Financial Secretary to the Treasury, in London on 20 January 2016.

Good evening. It’s a pleasure to be here with you tonight.

In my office in Whitehall there’s a framed cartoon, showing a man leaving the house in the morning to go to work. His son calls after him: “Have a great day at the Treasury, Dad. Be brave. Try not to cry.”

Well, I can assure you that as a lifelong Ipswich supporter I’ve had to build up a fair bit of bravery over the years.

But I think that cartoon is illustrative of two aspects of my job as a Treasury Minister since 2010.

First, that the Treasury is a department which has been … how shall I put this … not always the most loved department, within as well as outside Whitehall.

And second, that the past six years have seen us operating under exceptionally difficult conditions.

The reasons for this are relatively simple. Even in good economic times, it tends to be the Treasury who says “sorry, no, we can’t afford to do this”.

That’s part of the normal tension of government. If you have the power of the purse, then it’s also you who has to exercise restraint in using that purse.

But the situation in May 2010 was anything but good economic times. We were a country living well beyond our means, borrowing one pound for every four we were spending, and lacking a credible plan to turn that situation around.

Because we had not been sensible during the boom years, the 2008 financial crisis caught us unprepared. The tide went out and it turned out that we were the ones who were skinny dipping.

It fell to the Treasury to sort it all out.

Today, I will talk about how we went about that task. But before I do that, I’d also like to talk a little about the philosophy behind our actions.

A defence of the free market economy

When I became an MP in 2005, there was a certain degree of consensus about the right way to run an economy.

We had moved away from the polarised arguments of the 70s and 80s and had, more or less, agreed on certain fundamentals.

For instance, that the big state doesn’t have all the answers.

That in normal times, a country shouldn’t spend more than it earns.

That excessive tax acts as a disincentive.

That it’s businesses who drive national growth.

That more power to the centre doesn’t necessarily mean greater efficiency.

That before distributing wealth, you have to create it.

And that the free market has, by and large, been an overwhelming force for progress.

It seemed, for a while, as if the planned economy versus free market argument had been won – and I’m sure that the very visible collapse of the Soviet Union hammered the final nail in the coffin.

I’m not so sure that’s the state of political discourse today.

We’ve seen a lot of people in recent years come out against those fundamentals.

We’ve started hearing the old calls for greater taxes on the highest earners, renationalisations, and trade protectionism.

Now of course, it’s legitimate – indeed important – for all policymakers to take a step back and ask themselves “are our policies delivering for the people of this country”.

But there is a reason why we study history: to learn from the follies and successes of the past.

Time and again, it has been proven that the free market, and private-sector driven growth, and taxation which encourages ambition, and a State which accepts it can’t do everything, does lead to national prosperity.

We have the system we have because it works. Other systems, to put it bluntly, historically haven’t worked. And in the modern, interconnected world we live in, they are even less likely to work.

If you remove the disincentives for doing well – whether that’s for individuals or companies – then those individuals or companies will simply move away and take their aspirations elsewhere.

And when a country stops doing well, it is only a matter of time before the people living in that country begin to suffer. Inevitably, those who have the least are hit the hardest.

In other words, it’s not a game. Livelihoods – and indeed lives – depend on the government of the day getting the economy right. Aside from the defence of the realm, there is no more important task for a government to do.

What that means is that you cannot use the economy as some sort of a safe space in which to try out abstract theories. That is for the university debating society. We have the fifth biggest economy in the world to run.

When I entered the Treasury in 2010, alongside George Osborne and the rest of the ministerial team, we had one ambition: to pull Britain’s economy back from the brink, and to set it on a path to recovery.

That meant restoring stability; reining in excessive spending; and putting in place the right policies and incentives for growth.

So I’d like to talk a little more about how we created, and implemented, our strategy for economic success.

In the 1970s, one of the then Chancellors’ private secretaries casually remarked to a journalist that “I have no idea what a deficit is”.

These days, I can assure you that everyone in the Treasury knows what a deficit is!

Reducing the deficit is the task we were asked by the British electorate to do – and it’s the task we have to keep a relentless focus on.

Back in 2010, we inherited a deficit of £153bn, which was around £5900 for every household in Britain.

We’ve made a huge amount of progress since then; but even this financial year, we are still having to borrow £3,300 for every household in the land.

That’s simply a reflection on the size of the ship we’ve had to turn round.

The good news is that we are succeeding. We have a credible path for deficit reduction, backed by the independent Office for Budget Responsibility, which will take us into running a surplus in the 2019/2020 financial year.

Perhaps equally importantly, public sector net debt is set to fall every year, from 82.5% of GDP this year to 71.3% in 2020-21.

That’s important for two reasons:

First, because it gives us room for manoeuvre in exceptional economic times. If the situation is such that an additional stimulus is required from Government spending, then we’ll be able to afford it.

And second, because servicing the interest on debt diverts funds from where they could be better used.

It’s an experience familiar to anyone who has put too much on a credit card!

Servicing our public sector debt cost us over £45 billion in the last financial year. That is more than we spend on schools or defence. And that’s in an era of extremely low interest rates.

It won’t come as a surprise to many in this room that making cuts in public spending is never a pleasurable activity.

Even if you do believe there are things the state shouldn’t be doing…

Even if you do believe that subsidies can cause harm as well as good…

There is little fun in standing up and announcing spending cuts!

Yet it is necessary. That is why in the first year of Government we carried out a comprehensive spending review. We followed that up in 2013. And, following the election last May, we repeated the exercise.

“Do more with less” has been the mantra.

A significant part of the savings were simply due to making better use of our existing resources – pooling functions, harnessing technology, cutting down on our use of external consultants wherever possible.

Part of the savings came from reducing the cost of government – in particular, making the Civil Service a more cost-effective organisation.

Some of the savings came from reductions to the welfare bill – which, under the Blair and Brown administrations, had been allowed to expand to unsustainable levels.

And some of the savings came from reviewing capital projects which weren’t providing adequate value for money.

I chose the word “review” specifically, because it’s easy to categorise spending cuts as simply saying “take this off the shopping list”.

In reality, it is much more complicated than that. The conversation will typically be along the lines of “Are we doing this project in the most cost-effective, joined up way? Is it the most important thing to be doing right now? Could we be more innovative about how we fund or design it? Is there a cheaper option that could achieve the same outcome?”

In many ways, that is the point of what we do in the Treasury. Believe it or not, the first guide to how to run the UK economy was written over 800 years ago, in 1178. It says: “The highest skill at the Exchequer does not lie in calculations, but in judgements on all kinds”.

The central “judgement” involved in public spending is where to cut – and where to invest.

Everyone knows that if you don’t water a plant enough, it will wither away.

Conversely, give it too much and it won’t do very well either.

But what works in the desert doesn’t work in the paddy field.

The same rules apply when it comes to government spending.

There have been significant areas where we have maintained spending or actually increased it.

Health and schools are the most major areas in terms of cash – but there are many others. National security. Police. Science and research. Energy innovation. Transport. Overseas aid. Pensions.

We’ve made it a priority to improve the quality of our infrastructure, and reverse the decades of underinvestment our roads and railways suffered from.

Above all, we have never shied away from investing in things that will improve our national growth.

If keeping hold of the purse strings is the first function of the Treasury, then the second is pulling the levers for economic growth.

So today I’d like to talk about three specific levers.

The first of these levers is the taxation system.

That’s my particular field, as Minister responsible for tax.

Our policy is extremely straightforward. We know that one of the best ways of attracting talent to your economy is through competitive taxes. And that one of the best ways of making sure that talent goes elsewhere is by making your taxes too high.

It’s not rocket science – but it’s astonishing how often people forget this basic principle.

Further to competitive, low taxes, there’s one other things which helps businesses prosper, drives job creation, and supports economic growth: the certainty of having a fair and properly working tax system in place.

Low taxes; fair rules which are followed. Those are the two principles we’ve followed since 2010.

Back then, our rate our rate of corporation tax was 28%; and it was a fact that one of the factors pushing businesses away from the UK was our tax regime.

So, even at a time of deficit reduction, we made it a priority to cut the corporation tax rate.

Since 2010 we have cut it from 28% to 20%. These cuts will save businesses £10 billion a year from 2016.

This was part of a range of pro-business reforms, including the introduction of the Patent Box, and reform of R&D credits to make them more generous.

We’re going further along the same route, so that by 2010 the rate of corporation tax will be 18%, the lowest in the G20.

These cuts will benefit over a million businesses.

They will help attract more overseas investment.

And they will help support UK businesses, allowing them to retain more of their profits and use that money to invest in plant and machinery or to hire more people.

We’ve increased the level of the Annual Investment Allowance to eight times what it had been previously.

And, to provide the stability and certainty that businesses need, we have committed to publish a Business Tax Roadmap in March this year, setting out the government’s tax plans for the rest of the parliament.

The second lever you can pull is more of a diplomatic one: opening yourself up to some of the world’s fastest growing and most exciting economies.

Over the years, this has been a nation that has reaped the rewards of being open to the world around us.

The benefits of free trade have been proven time and again. And it’s not just businesses who benefit: the evidence suggests that an increase in our trade to GDP ratio is associated with an increase in per capita income.

So if we want to secure our economic success, then it’s important to be active all over the world – with the fastest-growing economies in Asia; with the United States; as well on our doorstep, with the nations of the European Union.

That’s what we’ve been doing over the past six years: building partnerships and signing deals with India, China, and the Far East; making London a Western hub for renminbi and Islamic finance; and helping our world-leading financial services sector gain business worldwide.

And, closer to home, we’ve consistently called for, and proposed, measures to improve the EU’s competitiveness: from a Capital Markets Union to a free trade agreement between the EU and the US, giving British businesses improved access to a market six times the size of our own.

The third lever is putting in place policies to improve our national productivity, one of the key drivers of a nation’s prosperity.

For too long, we have had a so-called “productivity gap”, between our economy and that of countries such as Germany and the United States.

There are no easy solutions to the productivity gap. It is due to a large number of factors – some of them negative; some of them, such as our record levels of employment, positive.

But there are actions we can take to resolve the problem – and, for the first time, last year we published a Productivity Plan setting out precisely how we do that.

I’ve already mentioned our national infrastructure, and the problems caused by the fact that for several decades, we failed to invest enough in it.

We’re now turning that around – indeed, we’ve committed to spend £100bn on infrastructure over the course of this Parliament…

We’ve set up a National Infrastructure Plan with an infrastructure delivery pipeline…

We’ve published a specific plan for the skills we need…

And, so we can look more clear-sightedly at the future, we’ve also set up the National Infrastructure Commission, to take a long-term, depoliticised approach to major projects. It will set out its initial ideas in time for the March Budget.

Improving our national infrastructure will also help deliver a key part of our long-term economic plan: regional rebalancing.

London and the South East has been an enormous economic success story over the past few decades. But as the cricketers in this room will know, you can’t rely on just the one batsman if you want to field a world-class side.

Our ambition is therefore to enable cities outside London and the South East to display equally impressive growth – and help the country’s economic recovery.

Michael Heseltine showed the way forward back in the 1980s, when he said government policies for cities such as Liverpool needn’t be one of managed decline.

Today, that’s what we mean by the Northern Powerhouse: a combination of more funding and greater devolution, to help cities in the North reach their fullest potential.

We’re particularly interested in developing capability in areas where a competitive advantage can be created.

One example is science and innovation, where some of the most exciting developments are happening in Northern cities. Manchester, for example, is home to the new supermaterial graphene – and we’ve supported the National Graphene Institute in Manchester with almost £40 million of funds.

Great transport created the first Northern Powerhouse nearly 2 centuries ago. And it can create the second one today – which is why we’re investing £13billion in transport in the North over the course of this Parliament, including the creation of Transport for the North, a new, dedicated body.

Alongside that, we’re putting in place a new and exciting programme of regional devolution – not just in the North, either, but across the country.

As a government, we wholeheartedly believe that the best decision making often happens at the regional or even the local level.

That shouldn’t come as too much a surprise, perhaps; because when local decisions are made at the local level, they tend to be made by people who know the area extremely well, and have the greatest incentive to implement policies effectively. It is, after all, their patch. We should work with that rather than against it.

So the offer we made to local leaders was as follows:

If you want that greater responsibility, if you can live with that greater accountability, if you have an ambition for what your city can achieve, then we will look at giving you those powers.

These powers could be quite significant: control over major budgets; managing housing, health, and skills; running city-wide transport networks.

Giving those levels of powers away carries a risk, of course. That is why we asked leaders to demonstrate that they were are capable of implementing that ambition, and could live with the increased responsibility.

So if a large city wants control over major powers and budgets, it must have a directly elected, executive person covering the whole metropolitan area, in the form of a Mayor – just like many of the world’s greatest cities, including London.

Already, we’ve signed some exciting deals with a host of regions including greater Manchester and Cornwall, and many more discussions under way.

We’re clear that this is not just a programme for the North. There should be no monopoly on Powerhouses – we want a Western, Midlands and Southern Powerhouse too.

Because if all regions can mirror the tremendous success of London and the South East, then that will be a long-term gamechanger for the British economy.

So there is still a lot to do over the course of this Parliament. But we shouldn’t forget quite how far we have come over the past 5 ½ years.

With growth leading the G7, record levels of people in work, living standards and wages rising, our economy is truly delivering for the British people.

We made the tough decisions and we’ve been getting the results.

But good times in the future aren’t a given. Worldwide, there are still plenty of risks out there.

They are risks we have to insulate ourselves against – and the best way we can do that is to make sure we have our own house in order, start running a surplus and reducing our debts, and continuing to create economic security.

The worst thing to do, right now, would be to throw away the fruits of our hard work.

I spoke earlier about the resurgence of voices asking us to do exactly that.

We’re not going to – because this country’s economic security is much too important.

What we will do is continue down the path we took in 2010:

One which gets us living within our means as a nation;

One which helps people and businesses prosper, expand, and create growth;

And one which will make the UK fundamentally stronger, and more able to withstand any storms in the global economy.

It hasn’t been an easy path in the past, and it may not be an easy path in the future either.

But that makes it all the more important to stick to it.

Thank you – and I’d be delighted to take some questions.

David Gauke – 2015 Speech on Digital Tax


Below is the text of the speech made by David Gauke, the Financial Secretary to the Treasury, at HMRC on 14 December 2015.

Good afternoon, and welcome to HMRC’s first-ever Christmas conference.

It’s been quite a year – two Budgets, a Spending Review, an Autumn Statement, and of course a General Election.

Lots of work has been done, lots of changes have been put in place, and I suspect that many of you, like me, are now looking forward to some time away from the office.

I certainly have one eye towards the upcoming Christmas festivities, as I’m sure many of you do. And as the father of three boys, I’m currently in the process of managing expectations around presents.

We’re having mixed progress on this in the Gauke household, but it’s fair to say that digital expectations are high and will remain high. And as a government minister, I have to take some responsibility for that.

Because the government has similarly high digital expectations for HMRC, albeit expectations that must – and will – be met, and not just for Christmas! I am confident will be met.

In every walk of life, people are embracing the digital revolution. From banking online to doing their food shopping, from advertising a business to paying invoices, millions of individuals and businesses are benefiting from the convenience and simplicity of digital services.

But businesses and service providers are going further than simple digital interaction with their customers – they are harnessing the opportunities of the digital age to transform how their businesses work, and how they provide their services.

And it’s the customers who are reaping the benefits.

If businesses can do this then so should government. Our ambition is bringing the digital revolution to Whitehall – ensuring that the services it provides are similarly transformed. Last year for example, more than 27% of people renewed their tax credits online, almost doubling the previous year’s figure. This online renewal service has been welcomed by users with customer satisfaction rates for the service reaching over 80%.

Life should be made easier for the customer

The tax system is no exception.

My ambition is to make fundamental changes to the way the tax system works, transforming tax administration to make it more effective, more efficient and easier for people and businesses to pay their taxes.

And we have made it a priority to invest in making that a reality.

Last month the Chancellor announced, as part of the Spending Review, a further investment of £1.3 billion to transform HMRC into one of the most digitally-advanced tax administrations in the world.

This includes access to digital tax accounts for all small businesses and individuals by 2016-17, delivering an additional £1 billion of tax revenue by 2020-21.

And today I have published ‘Making Tax Digital’. This sets out the overall vision to achieving this transformation, the steps needed to get there over this Parliament, and details of the consultations to follow in the coming months.

‘Making Tax Digital’ is structured around four foundations:

First, ‘Tax simplified’ – All taxpayers will receive the data and services relevant to them and, for those who have difficulty going online or who need extra support, help will be available through other channels.

Taxpayers shouldn’t have to give HMRC information that it already has, or should be able to get from elsewhere – for instance, from employers, banks, building societies and other government departments.

Taxpayers will see the information that HMRC holds through their digital tax accounts, and be able to check at any time that their details are complete and correct.

Better data means fewer mistakes, fewer delays, and a better outcome for all parties. This is an important development both for individuals and businesses, which Jim [Harra] will talk about in greater detail in the next session.

HMRC will use this data to tailor the service it provides, according to each taxpayer’s individual circumstances. In 2016, HMRC will consult on how information from more third parties might reduce the reporting burden on taxpayers.

Second, making tax digital for businesses. By 2020, most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.

We will expect businesses to keep digital records and to update HMRC on a quarterly basis. But these updates will be done through software or apps and will be integrated into business’ digital record keeping.

And I want to stress that this is the end of the tax return – this is not going to feel like doing four tax returns a year. Indeed, we expect these reforms to ease the admin burdens on businesses and to help them plan their cash flow more easily, by providing greater certainty about what they will owe.

Updating HMRC directly in this way will be secure, light-touch and far less burdensome than the tax returns of today.

In a real-time economy we should match tax more closely with the related transactions – many taxpayers have told HMRC that they want more certainty over their tax bill, and don’t want to hold on until the end of the year or even longer to find out how much they have to pay.

Many businesses already use tools like these, but sometimes we need a catalyst to energise change. The requirement to use software or apps is this catalyst; it gives business certainty in terms of direction and allows full benefit from their use to be realised.

Over the next year, HMRC will be undertaking a wide-ranging consultation exercise, and I want to work with you in ensuring that these reforms provide the maximum possible benefit for business.

Third, making tax digital for individual taxpayers’. By April 2016, every individual and small business will have access to a digital tax account which will be simple, personalised and secure, offering an ever-wider range of services. Individual taxpayers will be able to interact with HMRC digitally and at any time that suits them.

Fourth and finally, tax in one place.

At the moment, many taxpayers have to contact different parts of HMRC to find out their financial position relating to different taxes. A business may pay income tax, VAT, National Insurance or Corporation Tax; an individual may pay income tax, National Insurance contributions or student loan repayments, and receive Child Benefit; some people run a business as well as being an employee or having a pension.

In the next five years, all taxpayers will be able to use their digital accounts to see a single, up-to-date and easy-to-follow overview of their tax affairs, just like they do in their online banking.

Together, all these elements will ensure that, by 2020, HMRC will have moved to a fully-digital tax system.

So I’d like to share with you what that system could look like.

Needlessly bureaucratic form-filling will be eradicated – taxpayers will not have to tell HMRC information it already knows.

Unnecessary time delays will also be eliminated, because the tax system will be operating much more closely to ‘real time’. This will keep everyone up to date, removing the risk of missed deadlines, unnecessary penalties, debts arising and errors in the tax system being carried forward from one year to the next.

Importantly, taxpayers would have 24/7 access to digital accounts, as well as having a complete view of all their tax liabilities and entitlements, allowing them to send HMRC information and payments simply and efficiently.

And for those who have difficulty going online or who need extra support, help will be available through other channels. These taxpayers will be offered alternative means of support – over the phone, through face-to-face visits or through partners in the voluntary and community sector. We will also ensure free software is available for those with the simplest affairs.

These reforms will quite simply transform the experience of millions of taxpayers.

You’ll hear more about these plans this afternoon, including how these will be implemented and how some aspects of their design will be the subject of further consultation.

And I would urge you all to get involved in shaping these plans – we want them to be the best they can possibly be.

As we make tax digital, we will need to make sure that the new plans work for you, for the taxpayer, and for the UK. So we want to hear your voice and your views. Today I have also published a discussion document on payment, and we’d welcome your comments on that.

We very much hope that events like today, as well as our more formal consultations, will give you and the people and organisations you represent the opportunity to contribute to this work, and shape tax administration for a generation to come.

So – before I hand back to Edward [Troup] – thank you for your work so far, have a relaxing Christmas break, and let’s continue our conversations in the New Year.

David Gauke – 2015 Speech to the ABI biennial conference


Below is the text of the speech made by David Gauke, the Financial Secretary to the Treasury, at the ABI Biennial Conference held in London on 3 November 2015.

Good morning – I’m very pleased to be here with you today.

UK insurance has a long and proud history, stretching back to the London coffee houses of the 17th century. But there is nothing old-fashioned about today’s industry. It is a great UK strength and an industry we are proud of.

It is good news for everybody – your shareholders, your customers, and the wider economy – that British insurance is the best in Europe. Our ambition, as a government, is to do our utmost to keep it that way.

The insurance industry has a dual social role.

First of all, it is vital in helping businesses and individuals manage risks and plan for the future.

But it is also a key contributor to national prosperity. You employ 300,000 people. You sell £20 billion a year in exports. In 2014, the industry held £1.9 trillion in invested assets and contributed £29bn to the country’s GDP.

The past few years have had important developments on both fronts.

We all remember the floods of 2012 and the winter of 2013-14.

Flooding is a stark example of the importance of insurance, and I would like to thank the insurance industry and the ABI in particular, for their hard work and commitment to successfully progress Flood Re.

It is a great example of government and the private sector working closely together. It will ensure available and affordable insurance for those at high flood risk and will make a real difference to people’s lives.

I am delighted that the regulations introducing Flood Re have now been approved by both Houses in Parliament and that Flood Re will soon be designated. This means that Flood Re will shortly receive its powers and duties. Subject to Prudential Regulation Authority (PRA) approval, it will then have the legal authority to start operating.

We’ve also had the most fundamental change to how people can access their pension savings in nearly a century. Adapting to these changes has required a great deal of work from the industry, and I have been impressed by the many providers that have stepped up to make these reforms a success.

Over 200,000 people have taken advantage of the new flexibilities and I’m pleased that already over 90% of customers are being offered flexible options, and that a quarter of the largest providers are planning product launches in the next six months.

The ABI has found that £5 billion was accessed by savers in the first six months of the freedoms. That represents a major step forward in creating a climate where individuals can take control of their own hard-earned savings, and enhance their retirements as they see fit.

These are truly historic reforms, and the government will work closely with industry to ensure that they deliver real freedom and choice for consumers.

We’ve also had major steps forward on the prosperity agenda.

The Insurance Growth Action Plan tasked UK Trade and Investment to develop target market strategies for China, India, Brazil, Turkey, Indonesia – that is, some of the most rapidly growing markets in the world.

These strategies were designed to sell the UK insurance markets’ comparative advantage in these emerging markets, and are already helping UK insurers to access those markets.

Which means more revenue, more jobs, more growth.

So there’s been no shortage of good news stories. But there are also important challenges ahead.

Our changing society and our rapidly developing technological landscape means that there is a lot for the industry to adapt to.

With challenges, of course, come opportunities. UK financial services are nothing if not adaptable – so I know that the industry will adapt to the changing environment, spot new opportunities – and continue growing, and serving their customers.

So what are the key areas of change – and of opportunity – for the future?

I would suggest three:

The first, keeping up with a changing society;

The second, making the market even more effective;

And the third, staying competitive in the global race.

Pensions are a vital part of the insurance industry. And it’s no secret that, as our society enjoys ever-greater longevity, the pensions system will require a new approach.

We have two principles here:

First, that people who have spent their working lives saving money into their pension pots should have the freedom to decide how to spend that money.

And second, that pension products should meet the needs of different types of pensioners;

The government’s policies are transforming retirement savings for the long-term, from top to bottom. The pension freedoms we have introduced mark an unprecedented shift of power, away from government and industry, and towards the consumer.

Good progress has been made to date. But it is important that industry continues to innovate, and introduce new products that are tailored to consumers’ changing needs.

In light of the recent reforms, this is a great time for the industry to reflect and consider what it can do to provide a better service and encourage more people to think about saving for retirement.

Now that customers have more choices, they will also want more advice. And it is clear that new and emerging technologies have an important role to play here.

New digital models to provide high-tech, low-cost, user-friendly advice are emerging in the industry all the time. These new technologies could have a significant role to play in meeting customers’ needs around financial advice.

The Financial Advice Market Review, launched in August, is considering the opportunities and challenges presented by such technologies to provide cost-effective advice services. In particular, the review seeks to understand how the regulatory environment can support technology-based advice models. The review will report back at Budget 2016 and I would encourage all of you to engage with it.

Looking to the future, the pensions tax consultation was an opportunity for insurers to take stock and consider how the industry can adapt and provide a better service

It’s been really positive to see the ABI, who have been a key stakeholder, working closely with government to ensure pension provisions are improved.

The consultation closed at the end of September, and we’ve already picked up on some of the key themes:

  1. the need for more effective communication around the importance of saving for a pension;
  2. the significance of having a stable system;
  3. the need for consistency in the system to tackle perceptions of unfairness.

The ABI will be a great support to us in developing our policy over the coming months, and we look forward to working with them.

But, of course, it’s not all about pensions. And the second area I’d like to touch on today – making the market even more effective – touches on all aspects of the insurance industry.

Effectiveness comes from security.

Insurance fraud is a significant problem, which comes at a great cost to consumers and industry. It’s a particular issue with motor insurance – and the government has taken a number of steps to tackle this problem.

Earlier this year, the government set up the Insurance Fraud Taskforce. The group, made up of consumer and industry representatives, has been asked to investigate the causes of fraudulent behaviour and recommend solutions to reduce the level of insurance fraud. We hope to achieve a set of robust and ambitious proposals by the end of the year, ultimately aimed at reducing the cost of insurance fraud for consumers.

We have also set up MedCo, which became operational in April 2015. It will facilitate the independent sourcing of medical reports in soft tissue injury claims, helping tackle fraudulent and unnecessary whiplash claims. And we’re reviewing the MedCo Portal, to make sure it’s meeting its objectives and tackle teething problems.

Effectiveness also comes from making the most of new technology.

I’ve already touched on how automated advice systems can help provide low-cost but high-quality advice on pensions.

But there’s much more it can do. Financial technology helps the customer and – as a driver of innovation – it helps the industry’s competitiveness.

That’s why we’re pulling out all the stops to foster the best investment environment, the right tax system, the appropriate regulatory framework and the best infrastructure for Fintech companies to flourish across the UK.

We now have a “Special Envoy for Fintech” in the shape of Eileen Burbidge, whose role will be to promote the UK as a global Fintech hub and help develop our strategy.

We’re launching an international benchmarking exercise to look at how we perform compared to other countries.

And we’re working closely with the regulators to explore how we allow innovators to experiment with novel ideas early on, without having to worry about getting regulatory authorisation.

It’s an exciting, rapidly growing area – so I look forward to your ideas on how we can make the most of it.

To make the market work more efficiently, we also need to take action on tax measures where appropriate.

I know, for instance, that concerns have been raised by several UK insurers that misuse of the EU status of Gibraltar by other UK insurers to avoid VAT was impacting on their ability to compete fairly.

So at the Summer Budget we took action, and changed the VAT rules so that the supply of these insurance repairs services is deemed to be where the service is used and enjoyed – i.e. in the UK. The measure will level the playing field and deter possible expansion of this avoidance.

And while we’re on the subject of tax, I would like to say a few words about the insurance premium tax – IPT for short.

As you know, the UK standard rate of IPT remains lower than many other EU states, including Germany where the standard rate is 19%.

As part of the Summer Budget, it was announced that the standard rate would be increased from 6% to 9.5% as of 1st November.

We recognise the challenges insurance businesses have faced in implementing the IPT rate change this summer. I can assure you that HMT officials are in close communication with industry representatives, to see whether the HMG/ABI agreement on amending the rate needs to be reviewed.

In addition, as part of a major exercise in digitalising the UK tax system, we are making operational changes to make it easier for insurers to submit their IPT returns.

We would like to thank you for the cooperation we’ve had so far and hope that you will agree that the government’s work on e.g. tackling insurance fraud and VAT tax avoidance will help keep premiums down in the long run.

The third area which I would like to talk about today is global competitiveness.

We have made real progress in showcasing what we have to offer internationally. Already, we’re reaping the rewards.

But we also have to be constantly on the lookout for opportunities to keep us one step ahead. And where we risk falling behind, we need to act.

One such area is alternative risk transfer.

Through Insurance Linked Securities (ILS), new ways have been found to share insurance risk with capital markets. ILS has helped to increase the capacity of the reinsurance sector, particularly for specialist or extreme types of risk, and investors have benefited from high performing assets which diversify portfolios.

This is now a $60 billion market and growing fast. ILS looks here to stay.

But crucially, the UK does not currently have the right framework to support the growth of ILS in the London market. So there is the risk that the expertise which ILS business requires could be drawn elsewhere.

That is why the Chancellor announced in the March Budget that Treasury and the UK regulators, working closely with the London market, would design a regulatory and tax framework to support the domicile of ILS business in the UK.

And as well as constantly refocusing ourselves, we also have to ensure we remain competitive within Europe.

Europe, at its best, can bring good benefits. Put simply, our insurance firms tend to do very well in Europe.

Our industry’s use of technology and experience of online sales gives us an edge in European markets where a large number of UK insurers already operate. And our continued role in the EU has helped us influence regulation to protect UK interests, such as the long-term guarantees package in Solvency 2.

A few weeks ago, the commission launched its action plan for Capital Markets Union (CMU), a flagship project for the new commission. Its primary objective is to create deeper and more integrated capital markets in the EU, by breaking down the barriers to the free movement of capital.

The action plan recognises that Europe requires significant long-term investment in assets such as infrastructure. Insurers, who often have long term liabilities, are the largest institutional investors in Europe and natural investors in such assets.

So the CMU is good news for insurers, good news for the City, and good news for the UK.

Having said that, there is a balance to be struck between regulation and competitiveness.

We have been supportive of Solvency 2, for example, as it represents a major improvement on the patchwork of European insurance legislation under the previous Solvency 1.

Solvency 2 is the global gold standard in insurance regulation and will bring opportunities for UK firms to expand to new markets, to innovate and to provide new products.

We firmly believe Solvency 2 will help support financial stability across the financial system, while securing insurers’ central role as a stable, long term provider of finance through the “matching adjustment”.

We recognise Solvency 2 will need time to bed in, and we will be monitoring its impact closely. In particular, we have pressed for consistent and proportionate implementation to ensure a level playing field across Europe. We will also be keeping a close eye on how Solvency 2 affects the competitiveness of UK firms outside the EU.

So as can be seen, it’s been a busy time for the industry!

But, I hope, also an exciting time.

As the UK economy continues to go from strength to strength – and just last week, we had the news that we are now the top G7 country in terms of the ease of doing business – that will create fresh opportunities for UK businesses.

We look forward to working with you to make the most of those opportunities.

No doubt, there are challenges ahead; but I firmly believe that with a savvy approach and a flexible outlook, the UK insurance industry can continue to be a world leader for many years to come.

Thank you.