George Osborne – 2013 Speech at Offshore Europe Conference


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Aberdeen on 3 September 2013.

Good morning.

I’m delighted to be here in Aberdeen at such an illustrious gathering of the oil and gas industry – an industry that is of vital importance to Britain’s economy.

But let us first remember Duncan Munro, Sarah Darnley, Gary McCrossan and George Allison.

Four brave professionals who ten days ago, tragically lost their lives in a helicopter crash off Shetland.

Our thoughts are with their families, friends and colleagues at this difficult time – and the book of condolences here today shows the depth of feeling for those four brave professionals.

And we should also remember that 25 years ago, 167 people lost their lives in the Piper Alpha disaster.

A tragedy that leaves an indelible mark here in Aberdeen on the industry, and the whole community.

Let us pay our respects.

To the brave professionals who lost their lives last month, and on that terrible night 25 years ago.

To their families and friends in whose memories they live on.

To those who survived and the rescue teams who helped them do so.

The whole of the UK owes a massive debt to the thousands of men and women who work in what is an inherently dangerous environment – delivering enormous benefits to every family in the country.

I know that as an industry you sometimes feel taken for granted.

Well, I want you to know this: you are not taken for granted.

You are very much appreciated.

And my personal message to you is this.

First, I recognize the vital role the oil and gas industry plays in the UK economy – and will continue to play for many many years to come.

Second, I also recognize that the oil and gas remaining in the UK Continental Shelf will be increasingly difficult and more expensive to extract – but that this Government commits to play our part in delivering the investment that’s needed.

And third, I believe that the best way to support this industry and maximize the returns from this great national asset is:

– by working together across the UK;

– through mobilizing all the UK’s resources; and
by pooling our risks to provide stability across the whole UK.

On Sunday, I was on the Andrew Marr TV show.

In his book, the History of Modern Britain, he says that the oil and gas industry’s story is one of the most remarkable and under-discussed in the entire history of our country.

It’s a tale of pioneering geologists, seismologists, roustabouts and rough-necks.

He said that: “The discovery and exploitation of huge oil and gas fields far out under cold, stormy and turbulent waters … is a modern epic of technical skill, bold finance, endurance and individual courage”.

And he is right to compare the feats of North Sea civil engineering with the building of the railways by the Victorians.

I’ll never forget my first visit to a North Sea platform, the Elgin Franklin platform, six years ago.

The long helicopter flight across the bleak, open sea – and then, the pinprick in the distance of the platform looming ever larger – until you land on the enormous construction.

I remember that first, powerful emotion you get when you step out onto a North Sea platform: what an extraordinary achievement of the human spirit and ingenuity.

Later today I will travel out to Talisman Sinopec’s Montrose platform and I know I will feel the same pride in what our country can achieve when we work together.

For from the day 38 years ago, when the first oil was piped ashore in Cruden Bay, the oil and gas industry has brought huge benefits to the whole of the UK.

And it continues to do so today.

Oil and gas still meets around 70 per cent of the UK’s primary energy needs – with more than half of UK demand for oil and gas met by UK production.

The heat and light for our homes;

power for our businesses;

and fuel for the transport for our people and goods.

Directly and indirectly, the industry employs nearly half a million people – almost half of them here in Scotland.

It’s the largest industrial investor in the UK – and it’s investing more than ever before.

And while the expertise for the initial development of the North Sea was largely imported, a world class home-grown industry has sprung up on the back of it.

Over 1,000 companies in and around Aberdeen alone.

Businesses which are now leading an export charge from Azerbaijan and Russia, to Brazil and the Middle East – with international sales of nearly £8 billion from Scotland alone.

As all of you know, subsea technology is a sector where the UK is a global leader – and it’s one of our fastest growing industries.

And I’ve spoken to the subsea’s industry conference here before in Aberdeen to celebrate its success.

Today we capture more than a third of a global market – a market that’s set to double over the next five years.

Growth at home and abroad.

Growth that I want to help you deliver.

Of course, I understand that your industry has changed hugely since the early days of North Sea extraction.

Then, the North Sea was dominated by a handful of ‘majors’ – the BPs and Shells, the Occidentals and Exxons.

Now, there are over 50 oil companies operating in the North Sea – with smaller independents and national state-owned oil companies rubbing shoulders with the original ‘majors’.

New names to conjure with: Apache, KNOC, Petrofac, Talisman, Sinopec, JX Nippon.

While the pattern of ownership today has changed from 30 years ago, the nature of the development opportunities is different too.

Companies are operating in a mature basin.

And that brings me to my second point.

The fact is that the oil and gas remaining in the UK Continental Shelf will be increasingly difficult and more expensive to extract.

You know well that the ‘big’ strikes are fewer and farther between.

The opportunities are often smaller, technically challenging or both – with the oil either in deeper waters or just harder to reach and extract.

In the central North Sea, companies are drilling at water depths of 100 metres.

In the planned Rosebank field West of Shetland, Chevron will be operating at 1,100 metres in waters more than ten times deeper.

New entrants are bringing fresh thinking and impetus, making viable even the most marginal fields.

Normally when politicians visit platforms, they visit the newest field.

But the Montrose field I’ll be visiting is one of the oldest in the North Sea.

I’ve deliberately chosen to go there because I want to see how Talisman Sinopec and Marubeni Oil and Gas’s £1.6 billion investment is extending the life of five fields by 14 years – which means that these fields will be producing the equivalent of an additional 100 million barrels of oil until 2030.

This project alone will be creating and securing 2,000 jobs throughout the UK supply chain. But there are also challenges.

We need to develop a North Sea regime that keeps pace with the changing structure of the basin.

The Montrose project is a case in point.

Its economic viability depends on a complex mix of factors: targeted tax breaks, and bundling a number of older fields with two undeveloped ones.

So, as we think about the future of the North Sea, what can we be certain about?

We can be certain that:

– our reserves aren’t infinite;

– the costs of extraction are rising;

– and North Sea tax revenues are in long-term decline.

But we can also be certain that the ingenuity of the industry will secure its long-term future and that we’ll still be recovering oil from the North Sea and West of Shetland in the 2050s.

We can’t know the precise level of recoverable reserves.

The future is about volume and value.

So nothing can – or should – be taken for granted – and we know that.

The British government’s objective is simple: we want to work with you to maximise the North Sea’s recoverable reserves.

So we’ve put in the place the first ever national Oil and Gas strategy.

The PILOT programme is identifying ways to remove barriers to development.

And, working through the Fiscal Forum, we’re putting in place tax reliefs to support the industry as extraction becomes more difficult.

In my Budgets, I’ve doubled the value and extended the scope of the small field allowance.

I’ve put in place a £3 billion allowance to support investment in and exploration of large and deep fields like those West of Shetland.

And I’ve introduced a £500 million allowance for large shallow-water gas fields and a brownfield allowance to encourage incremental investment in older fields.

Perhaps most important of all, I’ve provided the industry with long-term stability, by providing certainty on tax reliefs – worth upwards of £20 billion over a 30-year period – on future decommissioning costs.

Funded by the whole of the UK, that’s equivalent to £3000 pounds for every man woman and child in Scotland – being used to support investment in the North Sea.

The UK government will enter into contracts with industry setting out what relief companies can expect to receive in future when decommissioning assets.

And if the actual amount turns out to be less, the government will make up the short-fall.

This means assets will be easier to transfer and the climate for investment improved.

I can tell this Conference today I’m unveiling the final decommissioning deed.

A concrete example of the tax certainty this government is providing.

Never before has any government entered into legally binding contracts with individual companies to guarantee the tax relief they can expect decades into the future.

No other place in the world provides such a guarantee.

And your industry – not the Treasury – estimates that this decommissioning certainty will drive at least £17 billion of increased investment, extending the life of the North Sea basin with an additional 1.7 billion barrels extracted.

It’s the culmination of 18 months of hard work and close collaboration between you and government.

Thank you for that.

Now let’s get the deeds signed and get the investment.

And we’re already seeing results from this new tax regime.

Oil & Gas UK are forecasting record levels of investment of £13.5 billion for 2013, helping to stem the decline in production of recent years.

And look at the projects already announced.

Statoil are investing £4.3 billion in the Mariner heavy oil project, creating 700 jobs.

EnQuest, the UK’s largest independent oil producer are investing £170 million in the Thistle field, safeguarding 500 jobs and creating nearly 1,000 more in the supply chain.

CNR International are investing £300 million to extend the life of Ninian field and produce 5 million additional barrels.

And following the introduction of the large shallow water gas field allowance, GDF Suez, Centrica and BayernGas UK are investing £1.4bn in the Cygnus gas field, creating 1,200 jobs.

We want to build on this success.

Sir Ian Wood is currently reviewing how we can improve future economic recovery of oil and gas from the UK Continental Shelf.

He is looking at what further powers the government should have to ensure the North Sea remains a prime location for new investment and that government ensures companies are operating their licences effectively.

Government and industry have a shared interest in maximizing the economic production of the UK’s oil and gas reserves.

I want to see far greater collaboration from industry on production and exploration.

Because the fact is, production efficiency is down.

When ownership of North Sea assets is more widely spread than ever before, collaboration is often the only way to improve the economic viability through economies of scale.


Access to critical infrastructure.

Keeping in play older infrastructure hubs, so that recoverable reserves aren’t lost forever.

Sharing the benefits of new technologies and extraction methods.

Above all, deploying the best talent to the North Sea so the basin can flourish.

Government and industry pulling together to maximise both of our returns from the North Sea – volume and value.

Let me turn to the bigger picture on energy.

Your message, which we’ve heard and listened to, is the need for predictability so you can plan for the long-term.

That’s what our decommissioning tax certainty is all about.

But this is just one part of our support to the energy market.

We are seeking, from companies like yours and others, tens of billions of pounds of investment to secure Britain’s energy in the decades to come.

And we want a mix – oil and gas are vital, but so too are renewables and nuclear.

My ambition is that when you look across the western world, you see the UK as the best and most stable place to invest – and we’re creating the tax and regulatory regime to achieve it.

Last year, we published our Gas Strategy which set out our expectation that gas generation will be an essential part of our energy supply.

In June, we published draft strike prices for renewable energy generation – providing the certainty needed to make investing in new technologies less risky and more attractive.

We’re introducing ambitious and radical reforms to the electricity market – a new way of paying for generation will bring forward up to £110 billion of private sector energy investment.

We’ve set up a Green Investment Bank to invest in green energy projects and leverage further investment from the private sector.

We’ve already committed to invest up to £3.8 billion through the Bank.

On Shale, let me say this, because I know it’s an issue that has been in the news a lot recently.

Of course, we want exploration of our shale resources to be safe, to avoid environmental damage, and be done in a way where communities get the benefit of what’s happening in their backyard.

That’s why we got the industry to commit to generous community benefits.

But let me also say this.

Britain led the way in finding new sources of energy – coal in the 18th and 19th centuries, oil in the 20th century, and renewables at the turn of the 21st century.

If we turn our back on new sources of energy which countries like China and the US are exploiting, then:

– we’re saying to British families: you pay energy bills that are higher than those paid by families elsewhere;

– we’re saying to British companies: you’ll face costs higher than companies face elsewhere;

– and we’re saying to our country: we’ll have fewer jobs, less investment and higher costs of living – and I’m not prepared to say that to the British people.

Britain is not going to turn its back on the energy sources of the future.

So we’ve set out a generous new tax regime for shale gas and removed the bureaucratic obstacles to its use onshore and offshore.

And when I talk about Britain I mean a United Kingdom.

I’ve talked about predictability in this speech, but I know that one issue that has created uncertainty is the possibility of Scottish independence.

We determined to end that uncertainty by holding a referendum that will reach a decisive outcome next year.

The question of whether Scotland’s future lies within the UK or without needs to be answered.

As an Englishman, I passionately hope people in Scotland vote to stay within the UK in just over a year’s time.

This hope is, I know, shared by the great majority of people living in England, Wales and Northern Ireland.

The reason is simple: we’re better together.

For those tempted to think that the rest of the UK would be better off without Scotland, let me be clear.

Separation would bring consequences for not just Scotland.

We would all suffer.

The rest of the UK is by far the most important market for Scottish goods and services.

Scotland’s trade with the rest of the UK is almost double its entire trade with the rest of the world – and it’s a share that’s growing.

This trade benefits companies and employees the length and breadth of Scotland.

And it’s a two-way street: Scotland benefits from being a strong part of the UK, and the UK also benefits from Scotland’s place within it.

As our economy recovers, I want Scotland to lead the way.

All achieved within the UK, not outside.

So let’s lay to rest some myths once and for all.

Independent European countries of similar size don’t out-perform Scotland.

In fact, Scotland performs well against comparable European States.

Introducing an international border between Scotland and the rest of the UK would reduce business and trade across the border.

You don’t need passport controls and customs officers for there to be a negative effect.

It’s the gradual growing apart of institutions, policies and regulations;

It’s the slow unpicking of the unified labour market, an integrated infrastructure and a single tax system – the possibility of different currencies.

Today, we’re publishing clear analysis that shows the value of Scotland being part of the UK, in terms of extra trade and economic activity over the coming generation.

As the paper says: Scottish GDP could be 4 per cent higher in 30 years if it is part of the UK. £2000 for every family in Scotland.

Put it another way: separate from the UK, create an international border, and the loss to every Scottish household will be £2000.

So, we should think very hard before Scotland exchanges a UK domestic market that works well for a new foreign export market that won’t work as well.

If it ain’t broke, don’t break it.

Your industry is a great example of how we’re better together when we work together, when we are together.

Oil & Gas UK talk about the “need for fiscal predictability and long-term planning to optimize recovery of the country’s offshore oil and gas resource”.

Today all of the major tax revenues, whether it’s from oil, or retail, or consumption, or income or duties are pooled across the UK.

This provides Scotland with secure and stable funding; the Scottish government with budgetary predictability and Scotland’s public services with the stability to plan for the long-term.

As part of the UK, Scotland doesn’t have to cope with the challenge of managing volatile oil revenues.

This is no small challenge – Scottish tax revenues from oil can fluctuate from year to year from £2 billion to £12 billion.

They are the most volatile tax revenues that exist.

Finance ministries are always at risk of being over optimistic about how much revenue they’re going to get in.

That’s why we created the Office for Budget Responsibility.

It is totally independent.

And it now provides for us independent estimates of tax revenues – including from oil and gas.

So when you hear big numbers bandied about that aren’t impartial, and it sounds too good to be true – it probably is.

The UK government can provide the oil and gas industry with a long-term commitment to decommissioning relief.

This commitment represents around 1 per cent of UK GDP.

It would represent around 12 per cent of Scottish GDP.

It’s for the Scottish government to explain how they would pay for that.

The UK’s approach looks at the wider economic contribution of oil and gas, not just at tax revenues.

We’ve been prepared to take the long-term decisions needed to unlock investment.

We accept that’s cost us in lower tax receipts in the short term – but its worth it for the benefits over the long haul.

We’ve been able to pursue this course because the UK has broad shoulders – a big domestic market, a diverse economy, a wide tax base and a broad energy mix.

Look at the facts.

Oil and gas is an important national asset, but revenues from oil and gas are just 2 per cent of our total tax receipts.

Renewable energy is an increasingly important part of the energy mix.

Many of the companies represented here today are also leaders in renewable energy.

Last year over £1.5 billion was invested to develop Scotland’s abundant sources of renewable energy, which now supports over 11,000 jobs and generates nearly 40 per cent of Scotland’s electricity.

This is made possible by over £500 million a year of UK support, with the costs spread amongst 26 million households across the UK, keeping average electricity bills in Scotland lower than they would be if funded by Scottish consumers alone.

How likely is it that this kind of subsidy would be provided to the energy market of a foreign country?

As I’ve said many times before, Scotland could go it alone.

But to suggest that spending can be increased; tax bills cut; an oil fund established; household energy bills kept down and investment in renewables increased simply doesn’t add up.

Texans played an important part in the early exploration of the North Sea.

So you’ll recognise the well-known Texan phrase – “all hat and no cattle”.

I hope those who advocate Scottish independence will offer a little less hat and a bit more cattle.

Let me end by saying this.

How we manage our country’s natural resources goes to the heart of the solidarity between the peoples and nations of these islands.

Whether we are realising the assets from the dark waters of the North Sea or West of Shetland, or shale gas reserves in Lancashire, or coal in Yorkshire or renewable energy in the Thames Estuary and the Firth of Forth.

You have my total commitment to your remarkable industry.

I will work with you to get the tax regime right, to support more investment, to create the climate for more production and more jobs.

My door is always open to hear what you have to say and to help you.

Volume and value.

Valuable and valued.

We know that when we:

– pool our resources

– share our advantages

– and join forces to tackle future challenges

– we achieve far more by working together

Industry and government.

Scotland and Britain.

The whole is so much greater than the sum of the parts.

Thank you.

George Osborne – 2013 Keynote Speech on the Economy


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, on 9 September 2013.

Good morning, ladies and gentlemen.

Today I want to talk to you about this government’s plan for economic recovery.

Now, you’re probably thinking that a construction site is a strange place to make a speech.

But I’ve invited you here for a reason.

This development – 1 Commercial Street – began in 2007.

The plan was to turn this building into 21 floors of office space, private apartments and affordable housing.

Construction began; and continued at a pace.

Until in 2008 the work simply stopped.

Investors pulled out.

Jobs were lost.

And the site lay silent for three years.

But last year, something exciting happened.

Construction began again.

Today, 230 people are working here at 1 Commercial Street to complete the development – and it will open its doors next year.

I’ve brought you here because this building is a physical reminder of what our economy has been through in the last six years.

The message from here to the British people is this.

The economic collapse was even worse than we thought.

Repairing it will take even longer than we hoped.

But we held our nerve when many told us to abandon our plan.

And as a result, thanks to the efforts and sacrifices of the British people, Britain is turning a corner.

Many risks remain. These are still the early stages of recovery.

But we mustn’t go back to square one.

We mustn’t lose what the British people have achieved.

This is a hard, difficult road we have been following.

But it is the only way to deliver a sustained, lasting improvement in the living standards of the families of this country.

For I’m going to make another argument today: you don’t solve the pressure on cost of living with simply a shopping list of interventions and government regulation.

Of course, there are important improvements we can make to the scale of energy and water bills, the cost of housing, the fees paid for everyday financial services, the expense of rail and road travel.

These are a burden on families – and we are doing everything we can do to reduce their cost – with more to come this autumn.

We know every penny counts for hardworking people.

But by themselves these changes don’t amount to an economic policy.

And to focus exclusively on these things alone, important as they are, is to miss the wood for the trees.

I know that times are tough and that family budgets are squeezed.

But fundamentally, Britain is poorer than it was not because government didn’t intervene enough, or rail regulation wasn’t tough enough, or rental policies weren’t fair enough.

Britain is poorer because of a massive failure of economic policy in the last decade.

Jobs were lost. Unaffordable public spending had to be reined back. A flawed model of growth had to be reformed. Unregulated banks had to be rescued. That is why living standards fell.

The best way to improve living standards is to tackle these deep economic problems head on and build an economy where those who aspire to work hard and do the right thing are rewarded.

More good jobs. Tax free childcare. Low mortgage rates. More of your income tax free.

Our plan for the economy is a plan for living standards.

The alternative plan still being presented is a return to higher borrowing, more debt, more instability, lost jobs, rising interest rates and higher taxes.

These will all add hugely to the cost of living.

And that we know from bitter experience will make our nation poorer not richer.

Today I want to look at the economic evidence behind all these arguments.

First, let’s look at what the latest data tells us about the scale of what happened to the British economy in 2008, and the macro-economic imbalances and underlying structural weaknesses that left Britain so vulnerable.

Second, the plan we have robustly pursued since 2010 is designed to address those imbalances and deeper problems in order to move from rescue to recovery. So let’s assess the growing body of evidence that shows it is working.

Third, I will show you how our economic plan will help avoid the mistakes of the past in this new recovery phase.

We must reject the old quick fixes that lie behind so many of our problems and hold to the course we have set.

That is the only sustainable path to prosperity, rising living standards and a recovery that works for all.

First, the past.

It is not for nothing that the new Governor of the Bank of England and many other economists now describe the period of economic contraction in 2008-9 as the Great Recession.

The same recent revisions to GDP data that showed there was in fact no ‘double dip’ also revealed that the impact of that Great Recession was greater even than we thought three years ago.

GDP fell by 7.2% from peak to trough.

That is almost twice as deep as the recession experienced by the United States; three times as deep as that experienced by Britain in the early 1990s.

The immediate impact of the crisis is now a familiar story: the banking system almost collapsed, unemployment rose; and the budget deficit soared.

The currency depreciated dramatically, leading to a sharp rise in the cost of imports and putting downwards pressure on household incomes that is still being felt today.

What happened in Britain was the product of a pattern of economic development that had been fundamentally unbalanced and unsustainable for many years.

The bailout of RBS was the biggest in the world because British banks had been allowed to become among the most leveraged and unstable in the world.

The banks reflected an economy that had become, on some estimates, the most indebted in the world – with total private sector debt reaching 470% of GDP by the beginning of 2010.

And the soaring budget deficit had its roots in an unsustainable increase in public spending in the eight years before the crisis – the second most rapid increase in spending as a share of GDP of all OECD countries.

As a result the government ran rising deficits even at the peak of the boom and entered the crisis with a structural deficit that the IMF estimates was more than 5% of GDP, the highest in the G7.

At the time most economists took a narrow view of sustainable growth: if inflation was low, and unemployment was close to its so-called ‘natural’ rate, then that was deemed to be enough.

Clearly that was a huge mistake.

We now know that truly sustainable growth also depends on sound public finances, well capitalized banks, healthy balance sheets, and a system of financial regulation that is alert to broader risks to the economy like asset bubbles and excessive debt.

The pre-crisis British economy was also unbalanced in other important ways.

Deep-rooted and long standing structural problems in our economy that had been masked by the great tide of debt were harshly exposed when the tide receded.

Growth had been too concentrated in one corner of the country while many other parts of Britain fell behind and became increasingly dependent on unsustainable levels of public spending.

Too many people remained trapped in dependency by an unreformed welfare and education system.

There is a focus today on the issue of household income growth.

What is less recognized is that household income growth had started to slow sharply from the early 2000s.

Annual growth in household disposable income more than halved from 3.6% on average over the five years before 2003, to an average of 1.7% in the five years after that.

The proceeds of unprecedented global prosperity and rising trade were not finding their ways into the pockets of British families.

Government borrowing to fund ever rising welfare transfers like tax credits – accompanied by the increase in household indebtedness – obscured this simple fact: Britain was not earning its way in the world.

As Raghuram Rajan – now the new Governor of the Reserve Bank of India – has compellingly written, stagnant incomes and declining productivity growth helped to fuel the bubble, as both households and the government used ever increasing levels of debt to maintain even more unsustainable levels of spending.

So these underlying structural weaknesses and our huge macroeconomic imbalances were intimately linked.

That is why the solution to the economic crisis the new British government faced in 2010 needed to confront both.

That brings me to my second argument: our economic plan is the right response to Britain’s macroeconomic imbalances and the evidence shows that it is working.

As I have argued for more than five years now, the correct macroeconomic response to the perilous economic situation in which the UK found itself in 2010 is a combination of fiscal responsibility and monetary activism.

Fiscal responsibility to deal with a record budget deficit over a period of several years; monetary activism to manage the process of deleveraging and support demand.

Some still question whether the government’s macroeconomic response was correct – whether we were right to hold to our economic plan.

The headline facts are not in dispute.

We know that recoveries after a financial crisis have historically been slower than other recoveries. But growth has been weaker than originally forecast.

Since the end of the recession the UK has grown by 4.3%, less than the US but more than the eurozone.

At the same time the labour market has performed much better than expected.

Employment has grown extremely strongly – more so than even the most optimistic forecasts, with over 1.3 million net new jobs created in the last three years.

Indeed, employment is now above its pre-recession peak in the UK.

That is not the case in the United States.

The difference is not simply down to growth in the labour force: our employment rate is above the US and has grown more quickly.

Particularly striking in comparing the UK and US experience is the different trends in working age inactivity – historically an Achilles Heel for the UK after previous recessions.

Since the crisis the working age inactivity rate in the UK has actually fallen by almost a percentage point to 23.5%, while in the US it has risen by over two percentage points to 27%.

Our unemployment rate would now be almost half what it is today if participation in the labour force had shrunk to the same degree as in America.

These are the facts.

The controversy has been why GDP growth has been weaker than originally forecast.

Broadly there have been two competing analyses.

The first is a simple – some would say simplistic – story that lays the blame mainly or sometimes entirely on fiscal consolidation.

Let’s call this the ‘fiscalist’ story of the last three years – and it was advanced by advocates of a so-called Plan B.

This argument claims that with interest rates at their lower bound, the fiscal multipliers – the impact of spending cuts and tax rises on output – have been much higher than anticipated, and the resulting impact of the consolidation on GDP growth far greater than forecast.

The second analysis is put forward by many independent economists, including those who support our economic plan, the so-called Plan A.

This analysis is that fiscal consolidation has not had any greater impact than originally allowed for in the Office for Budget Responsibility’s June 2010 forecasts.

Instead, the composition and timing of the slowdown in GDP growth relative to forecast is better explained by external inflation shocks, the eurozone crisis and the ongoing impact of the financial crisis on financial conditions.

This analysis – let’s call it the ‘financial conditions’ story of the last three years – has been set out in its most detailed form by the independent Office for Budget Responsibility in their Forecast Evaluation Reports.

As they put it, they are “still not persuaded” that the multipliers in the UK have been bigger than their original estimates.

In my view the last few months have decisively ended this controversy in favour of this ‘financial conditions/ story of the last three years.

Those in favour of a Plan B have lost the argument.

The reason is simple: proponents of the ‘fiscalist’ story cannot explain why the UK recovery has strengthened rapidly over the last six months.

The pace of fiscal consolidation has not changed, government spending cuts have continued as planned, and yet growth has accelerated and many of the leading economic indicators show activity rising faster than at any time since the 1990s.

If the fiscal multipliers were much higher than the OBR estimates, as the fiscalist story requires, this should not be possible.

Indeed, proponents of the fiscalist analysis predicted that stronger growth would only return if the government changed course and reduced the structural pace of consolidation.

In contrast, an analysis of the last three years that attributes weaker growth to the inflation shocks, the eurozone crisis and the resulting impact on financial conditions finds the latest better economic data straightforward to explain.

The initial impact of the commodity price shock at the end of 2010 has worked its way through the economy.

The eurozone crisis that began in 2010 and intensified in the summer of 2011 has finally abated following the ECB’s decisive intervention last summer.

That has removed the enormous tail risks that have been holding back investment and dampening consumption.

And the government’s continued fiscal credibility has allowed the UK authorities to pursue a strategy of monetary activism with schemes such as Funding for Lending that have supported a dramatic improvement in financial conditions.

Should we be surprised that the evidence does not support a story of the last few years based on higher fiscal multipliers in the UK?

No – economic theory and academic evidence both suggest that multipliers are likely to be relatively low in an open economy with a floating exchange rate and independent monetary policy like the UK.

Recent empirical studies – including several by IMF economists – that allow for multipliers to vary across countries have overwhelming found exactly this result.

The truth is that the UK’s pace of fiscal consolidation, at around 1% of GDP per annum, is line with the G7 and G20 average and the IMF’s guidance for developed economies.

What does set the UK apart from many countries is that we set out a clear plan early on.

It was a detailed, multi-year plan. We legislated for it and we’ve stuck to it.

The bulk of the consolidation has come from permanent reductions in spending on items like welfare entitlements.

And the whole credibility of the plan has been buttressed by the creation of an independent Office for Budget Responsibility.

The resolution of this debate is not simply an intellectual battle over recent history – it matters hugely for the future of the UK economy.

At times over the last three years the political pressure to change course has been intense – despite solid support from the business world and many in the economics profession.

Plan B would have risked higher interest rates as the UK became sucked into the eurozone sovereign debt crisis on our doorstep – and would have left us much more vulnerable had the euro crisis got even worse.

It would have undermined our ability to pursue an activist monetary policy.

Our recovery from the Great Recession would have been undermined, not strengthened.

The impact on living standards would have been much harsher.

So the evidence increasingly suggests that our macroeconomic plan was the right one and is working.

Amazingly, even with the evidence we now have, there are still those calling for the government to abandon its economic plan in order to spend and borrow more.

But to do so would be disastrous.

The risks from unsustainable debt in our world may have abated, but they have not disappeared.

For the UK now to set out to deliberately increase it’s budget deficit would be a signal to investors that we had abandoned discipline, at the very moment when we are turning a corner.

We would be back to square one.

I say this again because it is the biggest threat today to the British economy.

Those still calling for more borrowing and more debt in spite of all the evidence want to put low mortgage rates and jobs at risk.

The impact on living standards would be severe.

Just as our economy recovers and the British people’s efforts start to pay off – now is not the time to put all that at risk.

And I will not do that to this country.

This building illustrates the story of our economy.

The structure is built. The walls have gone up.

So too with our economic plan. We have laid the foundations. We have built on top of them. But we cannot stop now.

We have got to finish the job.

And we will.

For my third argument today is this: our economic plan will help avoid the mistakes of the past in this new recovery phase, and it will build a stronger economy for the future.

The only sustainable path to prosperity is to reject the old quick fixes and stick to the course we have set.

The main external risks we face today are these: the slowdown in emerging markets; the possibility of further turbulence in the Eurozone; and the risk that instability in the Middle East will push up oil prices.

We remain vigilant on all fronts, and our economic plan gives us the resilience and stability we would need if any of these risks were to materialise.

But we must be just as vigilant for any home-grown risks that could undermine a sustainable recovery.

For macroeconomic policy this means three things: avoiding an unintentional and premature tightening of financial conditions; using the Financial Policy Committee and our new system of financial regulation to avoid the mistakes of the past; and staying the course with our deficit reduction plan.

For microeconomic policy, not repeating the mistakes of the past means following through with our far-reaching economic reforms in order to raise living standards in a sustainable way.

Let me briefly cover each in turn.

I said at the Mansion House speech in June that “a steady rise in bond yields across the largest developed countries will be a sign of confidence returning” and so it has been.

But I also warned of the dangers of market instability and said that forward guidance under our new MPC remit could be a useful tool to manage expectations as the economy recovered.

Some have interpreted more recent increases in gilt yields as a sign that forward guidance has somehow failed, but that is, I believe, a misunderstanding.

I’d argue that market movements since the August Inflation Report vindicate the need for forward guidance: the counterfactual would have been even bigger increases in yields in response to positive economic data.

And the evidence suggests that forward guidance is succeeding in changing expectations in the real economy: the Bank of England’s Inflation Attitudes Survey shows a marked fall in the proportion of people expecting interest rates to rise over the next year.

Of course, just as an inadvertent and early tightening of monetary policy would be a mistake, so would leaving it too late to take away the punchbowl further down the track.

Our new regulatory system is designed to avoid precisely that age old error.

We’ve put the Bank of England back in charge of bank supervision, and created a new Financial Policy Committee to spot economy-wide risks to financial stability and act before they crystallise. Much current debate is focused on whether the UK is returning to the bad old ways of debt fuelled, consumption-led growth.

Many of those who previously claimed growth would not return have switched their argument in the face of the inconvenient economic data.

They now argue that we are seeing the “wrong sort of growth.”

But a close look at the data doesn’t support this argument.

Consider the facts.

Business surveys suggest growth is balanced across all sectors of the economy, including manufacturing as well as services and construction.

Consumer spending accounted for less than half the rise in GDP over the first half of this year.

Net exports contributed more than twice as much as that. And investment is picking up.

The government’s economic plan supports this through a combination of aggressive export promotion and a highly competitive business tax regime.

We will go on supporting both through this next phase.

Nor are we seeing a return to unsustainable levels of indebtedness and household borrowing, as some claim.

Total private sector debt has fallen by almost 40% of GDP since its peak in the first quarter of 2010.

The ratio of household debt to incomes has fallen too, unwinding all of the increase seen during the credit boom of 2004 to 2008.

And as Mark Carney said at the August Inflation Report, forecast consumption growth is “broadly in line with income growth”, not driven by rising debt.

Some have questioned whether new risks are emerging in the housing market.

This debate would benefit from a little less assertion and a little more examination of the evidence.

House prices are down a quarter from their peak in real terms, and relative to earnings they are back at 2003 levels.

Mortgage approvals are running at only a little more than half, and transactions a little more than two-thirds, of pre-crisis levels.

That is why the government’s Help to Buy scheme is a sensible, time-limited and necessary financial intervention to fix a specific financial problem: the dramatic reduction in the availability of high loan-to-value mortgages.

The median LTV for first time buyers has fallen from a long term average of 90% to just 80% now.

This change is not something we should welcome, it is both a market failure and a social problem – imagine if you’d had to find twice as big a deposit for your first home.

90% and 95% LTV mortgages are not exotic weapons of financial mass destruction – they are a regular part of a healthy mortgage market and an aspirational society.

And, importantly, Help to Buy mortgages will all be repayment mortgages, not interest only mortgages, so borrowers will rapidly build up a larger equity buffer within just a few years even in the absence of any house price growth.

Some claim that Help to Buy will boost demand but not supply, but again the evidence suggests otherwise.

Not only are the government’s planning reforms already increasing the flow of new planning permissions, but the lack of mortgage availability at higher loan to value ratios has itself been one of the biggest factors holding back the supply of new housing.

That’s why a report last week by former MPC member Charles Goodhart, now at Morgan Stanley, estimated that Help to Buy could increase housing starts by more than 30% between 2012 and 2015.

So the evidence suggests tentative signs of a balanced, broad based and sustainable recovery, but we cannot take this for granted.

The Financial Policy Committee and the Bank of England have made clear that they have the will and the means to act if necessary, with new macro-prudential tools that can target specific areas of the economy where imbalances are emerging.

If that happens they will need resolve and determination to take the right decisions, and it is only when those tools are required that will we see quite what an important innovation this new framework is.

For the government’s part, the same resolve and determination will apply to our deficit reduction plan.

With the successful conclusion of the Spending Round we have now set out detailed plans that started in 2010 and extend to April 2016.

Even if the improving economic news eventually leads to an improvement in the fiscal outlook, the job will not be done.

More tough choices will be required after the next election to find many billions of further savings and anyone who thinks those decisions can be ducked is not fit for government.

So whether it’s avoiding an inadvertent tightening of monetary policy, not repeating the debt-fuelled mistakes of the past, or sticking to the necessary fiscal consolidation, our macroeconomic plan will support the emerging recovery.

For microeconomic policy, the priority must be following through with our far-reaching economic reforms in order to raise living standards in a sustainable way.

As the evidence builds in favour of the government’s economic plan, many of our opponents are now shifting the focus of their criticism to the ongoing pressure on the cost of living.

Families have had a difficult time making ends meet thanks to what happened to our economy.

But this is not some separate issue – it is inextricably linked to the core arguments about the economy and the governments economic plan.

Our economic plan is the only sustainable way to raise living standards.

For a start, the most powerful tools that we have to protect living standards as our economy recovers are low mortgage rates and low taxes, and we’re delivering both.

The falls in mortgage rates that our plan has delivered are worth £2,000 a year to a family taking out a standard fixed-rate mortgage of £100,000.

Our record increases in the personal allowance have already saved a basic rate taxpayer £600 a year, rising to £700 a year by next year.

We’ve used billions of pounds to help with fuel costs by freezing fuel duty for over two years.

Low mortgage rates. A £10,000 Personal Allowance. Fuel duty frozen. And soon tax free childcare.

These make huge, positive impacts on the cost of living.

And none of this would be possible if we had abandoned our tough spending plans.

But as I said right at the start, in the long term, the only sustainable way to raise living standards is to raise productivity by tackling the underlying structural weaknesses in our economy that were exposed by the crisis.

Our economic plan constitutes the most ambitious programme of structural reform for a generation.

Our school reforms are raising standards and introducing more choice and diversity into our school system.

Our welfare reforms are helping more people into work, with the lowest number of workless households since 1996 and the lowest level of inequality since 1986.

Our universities are flourishing as their finances have been secured through tuition fees, while choice and flexibility drive up standards.

Our skills system is being transformed with a record number of apprenticeships, new University Technical Colleges and a greater role for employers.

The re-launch of TSB onto our high street today is another sign of progress in the biggest ever overhaul of our banking system.

We are delivering the biggest programme of investment in our railways since Victorian times, the biggest programme of road building since the 1970s, and -according to a recent global survey – our regulatory reforms have made the UK the best place in the world to invest in infrastructure.

And HS2 will transform the economic geography of our country and help spread rising prosperity to the Midlands and the North of England, which is why I am passionately in favour of it.

Our corporate tax system is now amongst the most competitive in the world, with companies that left the UK now bringing investment back home.

A new industrial strategy is finally providing the long term stability and leadership that is needed in so many sectors such as aerospace, automotive, agri-tech and bio-science.

And British science is scaling new heights with its budget protected for the future and rising capital investment in new facilities.

We have already achieved a lot, but there is still more than we can do in all these areas.

One thing is very clear.

Tinkering around the edges while ignoring the tough decisions required will not rise to the scale of the challenge.

We will not make that mistake.

We will learn the lessons of the last decade so that we are not tempted by the quick fixes that lie behind so many of our problems.

We will constantly examine what is happening in the present so that we can avoid repeating the mistakes of the past.

And we will keep our sights firmly fixed on the future so that we do not shrink from the changes required to build lasting prosperity.

Our economic plan does all these things.

Just like this building, with office space, private flats and affordable housing, the job is not finished, but everyone will benefit.

This is how we will build an economy that works for everyone.

George Osborne – 2012 Speech to Asia Financial Forum


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Hong Kong on 16 January 2012.

I am delighted to have the opportunity to address this Forum, to speak with such a distinguished audience and to do so here in Hong Kong.

I had a very useful discussion earlier today with Chief Executive Donald Tsang. He deserves our thanks for the excellent job he has done in his years as Chief Executive.

Later today I will fly to Beijing and then Tokyo.

It is no surprise or coincidence that my first trip abroad in 2012 should be to Asia.

It reflects instead the deliberate, conscious effort that the British Government places on deepening Britain’s partnership with Asia.

This Asian partnership is not a substitute for our close working relationship with our neighbours in the European Union, our strong links with North America. It is an essential complement to those friendships.

For Asia will be the engine of world growth in this year and the years ahead.

I have spent much of my time in Office in talks about the eurozone.

The eurozone has made progress in recent months, in particular the provision of liquidity to banks by the ECB.

But of course there remains more to do, as the euro area itself acknowledges.

No one likes to see credit ratings downgraded, but what matters much more are the actions western countries take to restore their own fiscal sustainability and take the structural reforms necessary to ensure productive, competitive economies.

All European economies need to tackle the structural obstacles to growth that we’ve simply not had the political will to address in recent years.

It is good news that these issues of growth and competitiveness will be the focus of European leaders’ discussions later this month.

Britain is taking all these problems head on.

Yes, we’re reducing our deficit with a strong, credible and comprehensive deficit-reduction plan.

But we’re also reforming welfare entitlements, removing regulation, making it easier to employ people and create businesses, overhauling education, reducing our corporate taxes to some of the lowest in the world, and championing within the EU a deepening of the single market and leading across the world the cause of greater free trade.

That’s why, as we look to this difficult year ahead, I want to focus today on three reasons to be optimistic for the future.

Three reasons for Britain to be bold.

The first reason is this:

A richer, stronger Asia is an opportunity for the world, not a threat – we should be bold enough to say it and to explain it to our own populations.

Second, we in Britain can build on our position as the home of Asian investment and Asian finance in Europe – provided we’re bold enough to do what it takes to make that happen, and we will.

And third, with a new alliance between Britain and our friends in Asia, we can be bold in defeating the forces of protectionism and make global finance a force for good, not instability.

First, a richer, stronger Asia.

There is no doubt that this is one of the most remarkable achievements in our modern history, and you’ll know the story far better than I do. The Chinese economy is 15 times larger than it was when I first visited China as a student two decades ago. In 1960, South Korea had the same income per head as those in Sub-Saharan Africa. Today, South Koreans enjoy an average income of $23,000.

What is the human story behind all these statistics? The desire of people to have a better life and to leave to their children more than they were born with.

It is the most powerful force for progress we have ever known – and here in Asia it has driven an economic transformation.

That hasn’t always been easy for those in the west.

I do not believe, as some argue, that the rise of the east is a threat to the west.

It is the strength of Asian economies which mean world growth in this decade and the next will be higher than the past 30 years.

Of course there are challenges as we adjust to sharp shifts in economic growth and power.

These adjustments can be painful when unemployment is a challenge in many countries across the world, and where competition for scarce resources affects the prices of key commodities.

In the past, when developed economies were weak, oil prices were self-correcting forces.

In the current crisis, demand from Emerging Economies has kept prices high.

But these problems are the problems of success – the problems of a stronger world economy.

Globalisation is a force for good.

Not only has it been a force for poverty reduction far greater than all the aid programmes across the world put together.

Not only has it allowed people here to have aspirations and ambitions beyond the dreams of their parents and grandparents.

But it also provides huge opportunities to trade and invest for countries who seize them, and I believe that we can make Britain the home of Asian investment and Asian finance in Europe.

This is my second reason for optimism.

If we take the right steps, if we’re bold, then growth in Asia means growth in Britain.

It is precisely as Asian economies become richer and become nations of consumers that hundreds of millions of people will want to buy the things that British companies can sell them.

They will want to buy modern medicines for the first time – and when they do so, I want to make sure it is from pharmaceutical firms like Glaxo SmithKline and Astra Zeneca, the largest employer in the constituency I represent.

They will need modern insurance, banking, and accountancy services, and when they seek those services I want them to do so from companies like HSBC, Prudential, Barclays and Standard Chartered.

The wealthiest will become consumers of Rolls-Royces made in Sussex, and Bentleys made in Crewe, dressed in Burberry clothes manufactured in Yorkshire.

And – like a generation of Japanese tourists before them – they will want to travel.

And when they do, I want them to go on holiday to Britain. I want them to go this year, the year of the spectacular London Olympics and the Queen’s Diamond Jubilee celebrations.

And when they go I want them to fly here on the wings of Airbus planes made in North Wales, powered by Rolls Royce engines assembled in Derby. For Britain is one of the top ten manufacturers in the world as well as a global financial centre.

If we are going to make the most of what the growing economies of Asia have to offer Britain, then we need make sure we have dealt with the problems in Britain’s economy.

And we are.

For one of the illusions of globalisation has been that the countries of the west could live indefinitely on the cheap credit and low inflation that the emerging economies of the East provided for us – that we could go on forever borrowing money from hard-working Chinese savers to buy the things those Chinese workers were making for us.

The financial crisis and the deep recessions has been the toughest of reminders of the simple truth that you have to earn your living in this world.

And the lesson of the past year has been that global confidence in a country depends on its determination to deal decisively with the challenges it faces – and by getting to grip with our debts, Britain has shown it is determined to do that.

As I’ve said, we are undertaking major reforms to increase Britain’s competitiveness.

Cutting business tax rates to among the lowest in the developed world, scrapping regulation on small firms, reforming welfare and education, and creating the most flexible workforce in Europe.

The UK is already one of the most open economies in the world – with a stable political system, a commitment to the rule of law and free trade.

Even more than it already is, we want Britain to become one of the easiest places to invest, to raise capital, to start a business, to expand and to export from.

And our links with Asia grow stronger and stronger.

The UK is now the largest source of foreign direct investment to China from within the whole EU and UK goods exports to China rose by 20% last year, and 40% the year before that.

UK goods exports to Hong Kong rose by 19%.

This is largely driven by the ingenuity and innovation of the Asian and British private sectors.

But we have got to do more if we are to be the home of Asian investment in Europe.

The British Government needs to roll up its sleeves and make it happen.

Let me tell you how.

Last year, my colleague William Hague, the British Foreign Secretary, spoke at this very Forum and said he wanted to refocus Britain’s diplomatic efforts on the East.

He has been good to his promises. Our embassy in China has expanded significantly and the work of our trade promotion agency, UKTI, has increased its presence across China.

As well promoting British investment in Asia, we are actively seeking Asian investment in Britain and its infrastructure.

We are investing in a new generation of transport, energy and communication networks for our country. Last week alone, we committed to a new high speed rail link to connect our largest cities. The Olympic Park is the largest urban regeneration scheme in Western Europe.

Here and in Beijing I will be promoting infrastructure as just one of the opportunities the UK brings for Chinese investors, following the lead taken by Hong Kong’s own Cheung Kong Group, the largest overseas owner of UK infrastructure.

And there is the potential for a new and fruitful partnership that would bring benefits to the people of China, Hong Kong and Britain.

Last September, at the UK-China Economic and Financial Dialogue, I agreed with Vice Premier Wang that “both sides welcomed the private sector interest in developing the offshore RMB market in London” and we agreed to “engaging in bilateral dialogue and dialogue with other authorities, as necessary, to support the market’s future development”.

My visit furthers that dialogue with the Chinese authorities, together with Chinese and British banks, on establishing London as a new hub for the RMB market, as a complement to Hong Kong and other financial centres.

The recent history of the growth of the RMB market is well known to all of you.

It is clear that there is scope for substantial expansion of the RMB market in the coming years.

In June last year, RMB had a world foreign exchange market share of 0.9 per cent.

This compares to China’s share in world trade in 2010 at 11 per cent.

London is perfectly placed to act as a gateway for Asian banking and investment in Europe, and a bridge to the US.

This is not just an accident of time-zone, or our language, although both are important.

It reflects London’s strength in product development, its regulatory structure and the depth, breadth and international reach of its financial markets. We are by some distance the world’s largest foreign exchange market; and the growing use of RMB in those global markets will bring substantial benefit to Chinese economic development and the wider world economy.

It is a reflection of China’s increase in influence and share of global GDP, and is a step towards greater capital convertibility.

I welcome the Donald Tsang’s comments on the importance of the joint private sector forum announced today, facilitated by the Treasury and the Hong Kong Monetary Authority, to promote closer cooperation between the London and Hong Kong on the development of global RMB business.

I also welcome Hong Kong’s decision to extend the operating hours of its RMB settlement system, which London is the key beneficiary of.

Our objective is simple: we want to expand the amount of business and trade we do with each other, so that the citizens of China, Hong Kong and Britain all benefit from the prosperity and jobs that will bring.

And it leads me to my third and final point today.

I believe we can be bold in forging a new alliance between Britain and our Asia partners to defeat the forces of protectionism and make global finance a force for good.

I have been doing this job for just short of two years now.

One of the things that have struck me in the thirteen IMF and G20 meetings I’ve attended is how often the British and Chinese agendas are very similar.

You might not expect it, given our different history, cultures and traditions.

But very often, around the table, China and the UK are some of the most forthright advocates of free global and open markets.

China is the world’s second largest manufacturing exporter in the world, while the UK is the world’s second largest services exporter.

I would like to set out what I think should be our shared agenda in 2012.

First, we need to resist a return to protectionism.

The December World Trade Organisation ministerial meeting highlighted that Doha is at a significant impasse.

We need to look at new and innovative alternative approaches to taking forward trade liberalisation, consistent with WTO rules.

That means continuing to push ahead with ambitious free trade agreements with key partners.

Britain is pushing hard to complete EU free trade deals with India and Singapore this year, as well as maintaining momentum towards an ambitious agreement with Japan.

Second, we need must ensure a reformed and more representative IMF has the tools and resources to do its job.

The reforms agreed at the Seoul G20 summit in 2010, which the UK was one of the first countries to ratify, will ensure the IMF is more representative of its whole membership.

The IMF does not belong to any one region of the world.

Its role is to support countries which get into difficulty, not currencies.

Its resources should be drawn from its members and available on an equal basis to all.

But its members also have a responsibility to ensure the IMF has the resources it needs to promote the global economic stability from which we all benefit.

The risks faced by the global economy have increased significantly over the past year.

The capacity of the IMF may also need to rise to ensure those risks can be addressed, but this cannot be a substitute for action by the eurozone.

Britain stands ready to play its part.

Third, we must also ensure global capital markets are underpinned by global rules for financial regulation enforced by strong global institutions.

As home to two of the world’s major financial centres, Hong Kong and Britain share an interest in a truly global approach to financial regulation that maximises the benefits, while reducing the risks, of open financial markets.

It is because we favour a global approach that we oppose an EU-only FTT.

At the heart of these new global rules are the Basel III prudential requirements for banks, which must now be rigorously implemented around the globe.

We must also push ahead with the agreed G20 reforms of derivatives, remuneration and systemic financial institutions and I would like to take this opportunity to acknowledge what Michel Barnier – who will speak at this Forum after me – is doing to help advance issues in Europe.

These new global rules – high standards, globally applied – must be overseen and enforced by a stronger Financial Stability Board as the global financial watchdog, building on the reforms made at the Cannes G20 summit.

These are all long-lasting reforms that will make global finance a force for good rather than a source of instability, intermediating to put to work the savings of millions to create new jobs and new investments for millions more.

And working with partners in Asia we can do just that.

Ladies and Gentlemen, these are challenging times for the world.

But there are also opportunities to build a more balanced, sustainable global economy if we take them.

A strong Asia.

A strong British-Asian relationship.

And strong multi-lateral organizations that support open markets and global stability.

In a challenging and difficult year, these are three reasons to be positive about our future.

Together, let’s build a more prosperous economy for everyone.

Thank you.

George Osborne – 2012 Speech to CBI Leaders at Davos


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at the CBI Leaders Meeting at Davos on 27 January 2012.

It’s good to see such a strong British presence in Davos.

Someone said to me yesterday that they’d never seen such a sombre mood here.

That reflects the very difficult economic outlook, as shown in the UK by the negative fourth quarter GDP data earlier this week.

But my argument today is that policy makers are not powerless in the face of these economic forces.

Let me explain that with three propositions.

First, it is possible to resolve the eurozone crisis, and that would provide the biggest possible boost to the British economy.

Second, we in Britain can deal with our own problems – including the colossal debts and imbalances that built up during the long boom.

And third, we can win the argument for open markets and free enterprise as not the source of the problem but the solution.

Let me begin with the eurozone, the main topic of debate here in Davos.

And let me start by saying something that is not acknowledged enough in our national debate.

Eurozone countries have achieved a lot over the last eighteen months.

Pooling their resources into a central fund, giving up sovereignty in a fiscal compact, fiscal consolidation and structural reforms in many countries.

These are all difficult and courageous decisions, and they are having an impact.

But while we should acknowledge these achievements, it would be a disservice to our own citizens to pretend that they are enough.

As David Cameron argued yesterday, more still needs to be done to reach a convincing and lasting solution.

The evidence for this can be seen in the continuing scepticism of investors around the world, in volatile financial flows, in continued stress in bank funding markets and in the still elevated interest rates on periphery sovereign debt.

The problem is simple: how will some countries in Southern Europe be able to make the adjustments required of them and retain the competitiveness they have lost in a way that is politically sustainable in a democracy?

The argument is not that fiscal consolidation and structural reform are the wrong prescription when budget deficits are unsustainable and economies are uncompetitive – they are absolutely crucial.

But in the absence of the flexible exchange rate and independent monetary policy that are helping to smooth the process of adjustment and rebalancing in the UK, the resulting cost may be simply too high to be credible.

That’s why I agree with Christine Lagarde, the Managing Director of the IMF, when she said earlier this week that the eurozone “needs some form of fiscal risk-sharing” to complement the fiscal compact and provide more support for countries making painful adjustments.

That risk sharing could take many forms.

One solution suggested by the IMF is the creation of Eurobonds to finance at least some proportion of national budgets – something that I first argued last summer was part of the inexorable logic of monetary union.

Political agreement to the principle of Eurobonds would go a long way to convince financial markets of the euro’s long term future.

We in the UK should not be anxious about eurozone countries embarking upon deeper fiscal integration without us – we should welcome it as a way of resolving the current crisis on our doorstep.

Nor should we be paranoid about our influence as a member of the EU.

In the last week Britain has supported EU action to take sanctions against Iran, and we are very close to agreeing a complex directive on the regulation of derivatives.

We will remain active members of the EU, pushing for an expansion and deepening of the single market on which so many British jobs depend.

A large number of EU countries see us as vital allies in than task, which should be the main focus of the EU Council meeting on Monday.

If fiscal risk sharing is the way to make the euro work in the future, the most urgent requirement to address the current crisis is an increase in the resources of the eurozone’s financial firewall.

Eurozone countries need to convince financial markets that they can respond to any eventuality.

The eurozone economy as a whole has sufficient resources to put the credibility of the firewall beyond doubt.

All that is required is the political agreement to make those resources available on a credible timescale.

At the same time the global community – through the IMF – should always be ready to support individual countries that get into trouble and need temporary financing while they adjust.

As I have said many times, the UK is a longstanding supporter of the IMF – indeed we were instrumental in its creation – and we stand ready to play our part in that global effort if certain conditions are met.

No new vehicles or funds specific to the eurozone.

Full IMF conditionality.

The participation of other G20 countries.

And crucially, IMF resources to support individual countries cannot be a substitute for further credible steps by the eurozone to support their currency.

In other words, the world needs to see the colour of their money before it contributes any more.

A resolution of the eurozone crisis would provide the biggest single boost to the British economy in the short term.

But we will not put our economy back on the path to prosperity unless we confront our domestic problems.

And the biggest of those is captured by a single word: debt.

Over the last decade Britain experienced the biggest increase in debt of any major economy.

The total of household, corporate, financial and public sector debt in the UK reached 500% of GDP.

As a country we went on a debt-fuelled binge.

We are now experiencing the reality of deleveraging.

History tells us that this process is painful, and as Carmen Reinhart and Ken Rogoff have shown recoveries after debt-fuelled financial crises tend to be slower than other recoveries.

We cannot change what happened in the past, but we can ensure that we manage the process of deleveraging as best we can.

And that means that we must never lose sight of this crucial point – when the underlying problem is debt, deliberately adding to the stock of debt is exactly the wrong thing to do.

The initial crisis of banking and private sector debt has now evolved into a sovereign debt crisis.

When this Coalition Government came to power, the UK was forecast to have the largest budget deficit in the G20.

Since then, the argument we have made, supported by the CBI, about the absolute necessity of a credible deficit reduction plan has been vindicated by events.

Growth has been weaker than originally expected due largely to a commodity price shock and the eurozone crisis.

But the arguments for deficit reduction have become stronger, not weaker, over the last year.

You only have to look around us to see how a loss of fiscal credibility can lead to higher interest rates.

In an economy as indebted as the UK, that would make recovery all but impossible.

And once credibility has been lost, it is a long, hard road to get it back.

We have taken difficult decisions that others have ducked.

By confronting our country’s problems we have secured the same low interest rates as Germany and the US, and we have won credibility where once it was being lost.

None of this is easy for elected politicians to achieve.

So I welcome the continuing support of British business in making this argument.

We are winning it for now, but we can never afford to let our guard down against the vested interests that will defend every line item of government spending.

The other aspect of deleveraging that must be carefully managed is the deleveraging of the financial sector.

More capital and lower leverage is a crucial part of making our financial system safe for the future.

Again the process can be painful, and pace of change must not be excessive, but the destination cannot be in doubt.

The Basel III agreement and the Vickers reforms in the UK provide the right framework, and the transition timetable will give banks enough time to make the necessary changes.

In the meantime, the Government is doing what it can to ensure small businesses aren’t the innocent victims of a squeeze on credit – so we will be passing on the hard-won low interest rates that the Government can borrow at through our £20bn National Loan Guarantee Scheme.

I am today publishing the Financial Services Bill that will overhaul the failed system of financial regulation which allowed such dangerous levels of leverage to emerge.

The failings of that system are now well understood.

The tripartite structure was incoherent, without clear lines of accountability.

The tripartite committee didn’t meet for almost a decade.

Everyone was so focused on ticking off a regulatory check-list that nobody felt it was their responsibility to use their judgement.

The astonishing result was that RBS was allowed to take over ABN Amro when the credit markets had already frozen up.

And crucially it was unclear who was in charge in a crisis when taxpayers’ money was at stake.

We are putting in place clear lines of accountability, and restoring that crucial element of judgment.

One body will be put back in charge of prudential regulation and systemic stability – the Bank of England.

A new Financial Policy Committee with independent external members will monitor the evolution of leverage and risk in the economy as a whole.

And when taxpayers’ money is at risk in a crisis this legislation gives the Chancellor the power to direct the Bank of England to act.

This power will be a more credible tool than the 1946 power of direction, which has always been regarded as a nuclear option and therefore never used.

For the first time it will allow the Chancellor to direct specific liquidity interventions to assist individual entities, the Special Resolution Regime for banks, and general interventions to preserve stability as long as the Government is willing to take responsibility for the action and take the resulting risk on its balance sheet.

Independent central banks should not be put under pressure to do what governments do not have the courage to do on their own account.

There will be no ambiguity about who is in charge.

During normal times the independent Bank of England will be responsible for prudential regulation and systemic stability, accountable to Parliament.

But in a crisis, when taxpayers’ money is at risk, both the responsibility and crucially the power to act will rest with the Chancellor of the day.

I hope that we will never again see the paralysis and confusion that did so much damage when the latest crisis hit.

Resolving the eurozone crisis.

Tackling our problems at home.

These are necessary requirements to get our economy back on its feet.

But I believe that we need to do much more if the British economy is to fulfill its potential.

We need to redouble our commitment to open markets and free enterprise.

Last year at this lunch I said I needed the support of British business against the forces of stagnation.

I would argue that we are an unabashedly pro-enterprise Government that is doing almost all of what you have asked of us.

We are reforming employment law, doubling the period before employees can claim unfair dismissal and introducing fees to deter vexatious tribunal claims.

We are changing the planning system to include a presumption in favour of sustainable development.

We are cutting corporation tax from 28% to 23% and reforming the controlled foreign companies rules so that multinationals are coming back to Britain instead of leaving it.

We have introduced one of the most generous tax regimes for investors in new businesses with improvements to the Enterprise Investment Scheme.

We are unblocking the barriers to infrastructure investment and taking a more activist approach to coordinating the necessary finance.

We will continue to push forward on all these fronts and many more.

In each case we will continue to need your support to confront the vested interests that oppose reform.

But there is one more thing that we need to fight for.

The unique British advantage – more I would argue than any country in the world – of open markets and free enterprise.

We still understand the British insight of 150 years ago that when you open your markets you benefit even if others don’t do the same.

We welcome foreign investment for the jobs and prosperity it brings.

This is a source of huge strength for the British economy.

When I was in Asia earlier this month I was hugely encouraged by the enthusiasm I found for Britain.

We are in the EU single market without being in the euro.

We are a liberal Anglo-Saxon economy and even more open to trade and investment than the US.

The recent investment by the China Investment Corporation in Thames Water and the progress we are making in establishing London as an offshore RMB centre are hugely positive signals.

With your help we must continue to preserve this openness against those who seek to undermine open markets and free enterprise.

We must ensure that Britain remains connected to future source of growth.

And continue to send the signal around the world that Britain is open for business.

George Osborne – 2012 Speech at Global Investment Conference


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at the Global Investment Conference on 26 July 2012.

Welcome to this session – and a particularly warm welcome to my distinguished colleagues, Christine Lagarde, Managing Director of the IMF, and Angel Gurria, Secretary General of the OCED.

I thank you both for taking the time to join us on the eve of the London Olympic Games.

The Olympic Games celebrate human endeavour and peaceful competition between the nations of the earth.

This Global Investment Conference celebrates human innovation and industry, and show-cases Britain as a home for investment in a fiercely competitive world economy.

You’ve heard from the Prime Minister and many colleagues of mine in Government already.

I hope the message you are receiving is loud and clear:

Britain is open for business.

Indeed, we assert that there is no major western economy that is more open, more welcoming of foreign investment, less protectionist and more pro-free trade than the United Kingdom.

Across all political parties, in all parts of the country, we welcome overseas companies with open arms.

In the last few months, we’ve encouraged Chinese investment in our capital’s water system, Hong Kong investment in our telecoms and gas network, Indian investment in our car-making and steel, and today, Malaysian investment in a prime property site here in London.

In the very difficult global economic environment – and with our own disappointing GDP numbers – we as a Government have to work even harder to attract more of this investment.

We have a relentless focus on the economy.

And our message, our sales pitch, if you like, to investors has three components:

– We’re dealing with our debts

– We’re creating the most pro-business tax regime in the developed world

– And we’re making the long-term structural reforms to secure a more productive future.

Let me take each briefly in turn.

First, in our continent reeling from a sovereign debt crisis, the UK is a country which demonstrated to the world that is has a credible plan to deal with its debts.

In the last 2 years, we have cut our deficit by 25 per cent.

When this Government entered office, the UK’s cost of borrowing was the same as Spain’s and Italy’s.

Today, their cost of borrowing is more than six per cent and ours is one and a half per cent.

That market confidence and those ultra-low interest rates are precious assets – hard won and easily squandered.

And it is precisely that market confidence and fiscal credibility that allows our independent monetary authority, the Bank of England, to operate a more active monetary policy.

– Expanding the Quantitative Easing programme.

– Launching with the Treasury the new Funding for Lending Scheme operational next week that will reduce bank funding costs to reduce loan rates and mortgage costs.

– And it is the same fiscal credibility that means we can use our balance sheet to offer billions of pounds worth of guarantees to new infrastructure projects and export opportunities.

You will hear those arguing that we should abandon our plan and spend and borrow our way out of debt.

You hear that argument again today.

These are the siren voices luring Britain onto the rock.

We won’t go there.

A credible plan to deal with our debts is an anchor of stability and a prerequisite of recovery.

We have that credible plan – and we’re sticking to it.

That gives confidence to investors looking at the UK.

So too should our pro-business reforms to the tax system.

I challenge anyone in the audience to name another major western economy that is:

– Reducing its corporation tax as aggressively as we are: from 28% to 22%.

– Or cutting its top rate of income tax to attract wealth creators.

– Or introducing new generous tax regimes for patents, and research, and creative industry.

– Or creating a new regime for the headquarters of global firms, so that companies are now moving to Britain instead of moving away.

– This is the most pro-business tax reform in any developed economy today.

And the final sales pitch is this.

We are also tackling the deep-rooted problems that undermine the competitiveness of many western economies, including ours.

In the last 2 years, we’ve undertaken major reforms of planning, higher education, schools and welfare that will equip Britain for the future.

It’s involved tough decisions, raising pension ages, reducing public sector costs, taking on vested groups.

But we’ve done it.

And despite disappointing GDP numbers, we are determined to continue to tackle the deep rooted problems our economy faces.

The deficit is down by a quarter.

Inflation has halved.

Employment is up.

Exports are rising – and Britain’s businesses are now exporting more to the rest of the world than to Europe.

A sign of openness to the opportunities from emerging as well as established economies across the world.

And we know we have more to do.

Our motivation is simple.

It was spelt out by the Prime Minister this morning.

We’re in Government at a time of great change in the world economy.

Great change, and of course, great uncertainty.

And we think that some western countries will adapt well to that change, cope with that uncertainty well.

And others not adapt so well.

We have a relentless focus to ensure that Britain adapts to the changing world and thrives in it.

These Olympic Games are a showcase of Britain at its best.

This Conference is a sign of our nation’s commitment to welcome the world’s investors.

Britain is open for business.

George Osborne – 2016 Speech at Davos


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at Davos on 22 January 2016.

It’s great to be here again speaking to British business leaders.

I’m glad to see so many familiar faces.

It takes me back to the last time I spoke at this lunch, four years ago.

I spoke then of the sombre mood at Davos, and of the great challenges facing both the British and European economy.

Back then we were still struggling to recover from the financial crash that brought us to the brink, and the great recession that did so much damage.

As a new Chancellor, I had set out a clear economic plan for us to follow. We would tackle the crisis in our public finances.

We would cut business taxes and boost enterprise.

We would take the difficult long term steps to ensure a lasting private sector recovery rather than pump up the public sector balance sheet still further and risk catastrophe.

I described it as “a hard road to a better future.”

But by the time I spoke here to you, the enemies of that plan and our long term solution were circling.

There was talk of a double dip recession.

Our unemployment rate had just hit its peak of 8.5%. Real wages were falling.

The clamour for plan B – and a return to spending and borrowing – was growing.

But you – the British business community – never wavered. You kept faith with our plan – plan A.

You understood there was no easy shortcut to the work Britain had to do. You kept your nerve and so did we.

And I want to thank you all for the role you have played over these years – for your support and commitment to the difficult choices we’ve taken to turn Britain around.

And the results have been there for all to see.

Britain has been one of the fastest growing advanced economies in the world these past few years.

This week we saw our unemployment fall again to almost 5%.

And now we’ve got the highest employment rate in our history.

Real wages are growing.

The deficit as a share of GDP is down to nearly a third of what it was with solid public finance data this morning.

On the back of this, business investment is forecast to grow at 7.4% this year – the fastest growth since before the crisis.

That shows your confidence in the UK economy.

I’m proud of these economic achievements.

And I think you should all be proud too.

Because much of the success of our economy is down to you – you’re the job creators, the innovators, the providers of opportunity.

And thanks to you, the UK has been a bright spot in the world economy.

We have been a chink of light cutting through the global gloom.

But that gloomy backdrop means we cannot rest or become complacent.

Some seem to think the job is done and we can afford to let up.

The new year is only three weeks old, and already I’m facing calls to abandon our public spending controls and borrow freely.

That would be precisely the wrong response.

We need to continue to implement our long term economic plan. We need to keep cool heads as the market heats up.

Now, as much as ever, we need to go on putting our own house in order.

For as I’ve said, we face a dangerous cocktail of risks from the global economy. Everyone here in Davos is discussing China’s slowdown, and plunging oil prices.

And here’s a sobering fact:

2016 has been the worst start to a year for the financial markets in my lifetime.

And I’m not so young anymore.

Oil is now around $30 a barrel.

Let’s be clear: cheaper energy is helpful to many of you here – and to British families.

But the speed of the drop has hit oil-producing emerging economies hard.

And Iran – OPEC’s second biggest member – is now bringing on more supply.

Long term that is good news, but we could all do with a little less of this volatility in our lives.

Meanwhile, as corporate earnings seasons kicks off in the US, there are reports it could be a weak one.

With some people already querying the US rate rise.

It adds up to a hazardous mix.

But my message today is one of confidence: we can meet these risks and overcome them, if we stick to our plan.

We are all here to talk about the future – for your businesses, for our countries. So I wanted explain what the best antidote for the dangerous cocktail is.

To offer concrete proposals on how the global economy needs to change.

And explain how we plan to reform Britain’s economy too.

The Chinese are fond of their proverbs and they have a good saying.

They say that “talk does not cook rice.”

It is simple, it is true, and it is particularly relevant now.

There’s a lot of transition taking place – transition that is difficult and turbulent, yes; but transition that is fundamentally positive too.

We know that China is transitioning from investment to consumption.

We know that global oil markets are in transition, with new suppliers like Iran and new technologies like shale.

We know that interest rates in the US are in transition.

And we know there are big forces at work as the demographics of many Western nations change, altering the balance between investment and savings.

These are the shifting tectonic plates of the global economy.

So since we all know they are shifting, we should also know that those shifts create tremors.

The question is: how large will those tremors be?

And the question for all of us here is: do we just talk about this transition – or do we take the action, and show the political will, to adjust to this transition and make it as smooth as possible?

You will hear, here at Davos, any number of political leaders promise reform.

What we need to see are the results.

We need to see every shoulder at the wheel.

Every country acting as one in search of growth.

We need China to keep reforming. To deliver on the commitments in the Fifth Plenum to allow markets to play a greater role as it consistently says it wants.

We need Japan to stick to all three arrows of its bold plan. To deliver not just stimulus but the structural change to deliver the sustainably higher growth rates it so badly needs.

In countries like Russia and Brazil we need greater efforts to diversify, away from state owned companies and to increase investment, particularly in infrastructure.

And in our continent of Europe I’m tired of seeing yet more action plans for completing the single market and yet more calls for free trade deals. I want to see those plans put into effect.

That is part of the reform we are now seeking in the EU.

Our global institutions can play their part too – and up their ambition.

The theme of Davos this year is the digital economy.

And we should give our global institutions a reboot.

Take trade.

Opening up markets with trade deals can help all your businesses grow, helping every economy you operate in.

I welcome the recent trade agreements in Nairobi, but it is simply unacceptable that the Doha Round of trade talks that were kicked off in 2001 have still not been concluded.

It is no easy task but the World Trade Organisation has a strong leader. Let’s get behind him.

Or take the IMF.

The IMF tells us reforming the supply side of economies by backing competition can boost growth.

So I want the Fund to hold countries feet to the fire – tell us when we are not doing enough to reform.

Christine Lagarde has shown real leadership and guided the IMF through a very difficult period with integrity and intelligence.

I was the Finance Minister who proposed her for the job 5 years ago.

Yesterday I nominated her again, for a second term, so she can complete the job.

And we will need more from the G20 too.

China will lead this year and the focus – on trade, and on competitive reforms – dovetail with what we need from the WTO and the IMF.

Working together across these institutions we should make it a year of action.

For as that Chinese saying goes, talk does not cook rice.

And in turbulent times we need action to deliver economic security at home. At its heart are sound public finances.

When we came to office in 2010 the deficit was over 10% of GDP. £1 in every £4 the country spent had to be borrowed.

We’ve dramatically reduced that deficit – but it remains too high. So does our debt.

The Budget last summer and the Spending Review that followed took further difficult decisions so that we turn that deficit into a surplus.

I said at the time that we needed that surplus as the precaution against tough times ahead. People said it wasn’t necessary, we should run a deficit forever.

I think events at the start of this new year have borne out our judgement. They serve as a salutary reminder that we need to do everything we can to fix our public finances and build our resistance for whatever lies ahead.

Reducing government spending is easy to talk about; but hard to deliver.

Every government budget has its pressure groups who will go on our TV and radio to defend every pound we spend. But we have persevered in the patient work of saving money and reducing borrowing.

In the UK we are seeing what independent observers like the OBR describe as the most sustained reduction in government consumption in over 100 years.

Indeed, it’s the biggest fiscal consolidation any G7 economy has achieved in modern history.

You, the business community, have consistently backed us as we’ve taken these difficult decisions – because you know that there`s no security unless a country lives within its means.

Just as we’ve put the public purse on a stable footing we’ve radically reformed financial stability too.

People ask me about whether we’re keeping an eye on levels of private debt. Yes we are.

Indeed, I created the new Financial Policy Committee in the Bank of England precisely to spot those kind of risks.

The Committee has already taken action to limit bubbles in the housing market, and require our banks to hold more capital.

It’s looking at Buy-to-Let mortgages and it’s made it very clear it will take further action if needed.

For economic security is a foundation that every working person and every company operating in our country gains from.

Sound public finances, a sound financial system.

These don’t happen by accident.

They’re not a consequence of speeches… They require hard decisions, persistence and action. And we are delivering it.

Of course, stability is essential, but it is not by itself enough.

After all, graveyards are pretty stable places.

We need a dynamic economy.

We need major reforms to improve our productivity, which is the key to sustained rises in living standards.

We start with education and skills.

It’s been a perennial British weakness. Lots of governments have talked about it as a priority.

But changing schools, demanding excellence and driving up standards is easier said than done.

The vested interests gather. The unions circle the wagon around the status quo.

But we’ve challenged that status quo – and I think people will look back on the far-reaching reforms we’ve made to schools under Michael Gove and Nicky Morgan as one of the most important economic and social reforms any post-war government has undertaken.

Five years ago 200 schools were academies; today over 5000 are.

Our reforms mean 1.4 million more pupils are being taught in good or outstanding schools.

Our reforms mean millions of new apprenticeships, giving young people the chance to learn a trade.

And despite all the protests, we raised student loans and now our universities are flourishing, many rank among the best in the world, and more kids from low income backgrounds are going to college than ever before.

Now under the leadership of my friend and colleague Sajid Javid we’re pushing forward with more apprenticeships funded by a levy, more improvements in schools and university reforms – again bitterly opposed – but absolutely right.

Not just talking about excellence, but delivering it.

As well as investing in people we must invest in hard infrastructure

In Victorian times we led the world in rail.

The first inter-city railway in the world was British, the fastest steam locomotive in history was British.

But then we fell back.

Now I want us to get back the cutting edge, building new high speed lines.

Again, we faced opposition. Everyone is in favour of infrastructure in general until you propose something specific. But now the budgets for HS2 are set, the legislation is going through Parliament and construction will soon begin.

We’re also backing the largest road investment programme since the 1970s, building new nuclear power and investing in renewable energy too.

And we’re now trying to instil long term thinking in all our infrastructure planning – taking it out of the day-to-day political fight.

Crossrail took 20 years to get off the ground because a political consensus couldn’t be found.

It was the first project I was asked to cancel, and the first project I gave the green light to – and now this awe-inspiring underground railway is taking shape.

I’m not going to stand by and let British people travel for longer to work, or pay more for their utilities just because we struggle to get political consensus for the big decisions.

That’s precisely why I wanted to set up the National Infrastructure Commission – it’s why I reached out for the very best person to help me set it up in Andrew Adonis.

And now I’m looking forward to reading their first report before the Budget on how we can improve transport in the north and in London and every region across the country.

We are also committed to creating a competitive economy. Now again, we know, competition doesn’t always happen if you leave it to the market alone.

That’s why in November we published a new plan to break up monopolies and back new entrants.

Why shouldn’t customers choose their water provider? Why can’t more pharmacies deliver drugs online? Why can’t supermarkets offer legal services? Of course, there will be protests from those whose businesses are shielded by existing regulation.

We need action to let competition flourish, back the new company that doesn’t always have a seat at events like this, and put the customers first.

And we need to improve connectivity.

We start from a decent base: British households are pretty savvy when it comes to the internet.

The average Briton spends £1500 online each year with the internet contributing more than 10% of our GDP – higher than anywhere else in the G20.

We are the top destination in Europe for Foreign Direct Investment and the leading FinTech hub in Europe.

These are encouraging signs. Because a digital economy is a productive one

But here’s another statistic for you: just a 10% increase in the UK’s digital density could add £40 billion to GDP by 2020.

Those are the sort of gains we must grab

That’s why we will be publishing our far-reaching Digital Strategy this year, setting out what we will do to ensure that the benefits of digital are felt throughout the economy.

And we must go on building stronger and deeper links with the rest of the world.

That’s why events like this are important Because yes, it is true that growth in emerging markets has slowed recently, down from 7.5% a year in 2010 to 4% a year in 2015.

But even with this slower pace of growth, the emerging economies are still expected to have accounted for 70% of all the growth in the world in 2015.

We don’t deliver sustained growth by becoming insular and isolated.

We’ll protect ourselves by reaching out to the world and broadening our links.

By looking to each and every trading opportunity.

So that we are doing business with many countries, and many sectors. That`s why we are determined to pursue reform of the EU and achieve a better relationship for Britain with our European partners, as David Cameron explained yesterday.

That’s why, earlier this week I welcomed Indian Finance Minister Arun Jaitley in Downing Street and we reaffirmed the strength of our economic relationship, jointly announcing the upcoming issuance of the first-ever Indian offshore Rupee bond in London – cementing our future as the world’s centre of finance.

And it’s why I hosted the first ever UK – Brazil Economic and Financial Dialogue in London at the end of last year.

These relationships help to boost trade for British businesses – exports from the UK to the emerging economies have increased by 16.5% since 2010. And let me just say a few more words about China.

We want China to rebalance.

All of the troubling statistics – slowing energy use, low metals demand—are signs of the same thing, a shift to a consumption based economy.

So my main message on China is that we won’t rubberneck and fret about each new bump on the road.

We’re in it for the long haul.

We are going to support China on the difficult route of economic reform that it is following.

We want to be China’s best partner in the West.

Some say the stock market volatility in China means we’re wrong to strengthen our economic ties.

But those critics can’t look beyond the next days’ headlines.

China is an economic colossus, it is the second biggest economy on the planet. It’s a huge part of our world’s future.

Any economy that size you want to trade with, whether it is growing at 7%, 6% or 5%.

Even at this growth rate, China will add an economy equivalent to the size of Germany’s to world output by the end of this decade. So we strengthen our links across the world.

But we will only thrive as an outward looking nation that wants to trade with the world if we have a pro-business government.

So my aim, and what I’m working to achieve, is making Britain the best place to be a global firm.

For five years we’ve unashamedly backed business, large and small.

You asked us to set a permanent level for the Annual Investment Allowance; we did that and made it bigger too. At £200,000: it’s at its highest ever permanent level.

You asked us to reform R&D tax relief, so we made it more generous.

You asked us to deal with the punitive 50% income tax rate because it was destroying enterprise – and though it was not popular, I cut it.

But the business tax reform I am most proud of is the reform we’ve made to corporation tax.

When I became Chancellor it stood at 28% – and as a result, Britain did not stand out as a low tax destination for business. Today it does.

In Budget after Budget I’ve cut the rate – from 28% to 20%. The lowest in the G20.

I could stop there. Let other countries catch up. Or we could press on and press home our advantage.

The future favours the bold. So I’m cutting corporation tax again, to 19% and then to 18% by the end of the decade.

Let us forge ahead and let others follow our dust tracks.

Overall the business tax cuts we’ve announced since 2010 will be worth nearly £100 billion to business this decade.

To repeat, that is £100 billion of support.

At times when we’ve had to make many other difficult decisions on the public finances I hope those facts make my priorities clear.

And I want to assure you of another thing.

That these choices are born from deeply held views I hold about enterprise and free markets.

I`ll be frank with you: There aren’t many votes in cutting taxes for business.

And so we don’t pander to business to win your votes.

We support firms like yours because we honestly believe that the business community shows some of the best British values.

Of self-reliance, of building for the future.

Of innovating to solve problems, and of open and fair competition.

That is what the UK is about.

That`s what this government is about.

That is what your businesses do. And without your success there are no jobs, no resources for public services, no future.

We’ve all come a long way together since I spoke to you at this lunch four years ago.

There were bumps on the way, but we stuck to the course. Now, as markets around the world heat up, we in Britain will keep a cool head.

Because we have further to go to achieve our aim – and become the most prosperous major economy in the world by 2030s.

My door is always open to you.

I will need your ideas to achieve that goal.

And I’m looking forward to working with you all in the years to come to make it happen.

For, as the team who’ve provided this meal today know: talk, my friends, does not cook rice.

George Osborne – 2012 Speech at ICT Olympics Event


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at the ICT Olympics Event held on 3 August 2012.

It’s a great pleasure to be here today.

Thank you all for joining us at Lancaster House for this Olympic trade event.

We’re here to celebrate the best of British technology and innovation, and to help forge new business partnerships with companies and countries from across the world.

It was a week ago today that millions of people tuned into the Olympic opening ceremony, and witnessed the wonderful tribute to the British inventor of the World Wide Web, Sir Tim Berners-Lee.

What a special moment that was.

Not just because it was great to see Tim’s achievement honoured in such a generous way, though that was certainly the case.

To me it was so special because of what it said about Britain in 2012.

It showed that Britain is a country that’s so passionate about technology that an entire section of our opening ceremony was dedicated to the man who created the Web.

I’m proud that this message was heard around the world last week.

And it’s a message that I want all of you to leave this event with today.

Because our passion for technology is not only reflected in our brilliant opening ceremony – it’s reflected in our economy as a whole.

The statistics speak for themselves.

Earlier this year, a report by Boston Consulting Group showed that the internet economy was responsible for 8.3% of UK GDP in 2010.

This is a far bigger share than any other G20 economy.

The report found that the same is true when it comes to e-commerce.

13.5% of UK purchases were made online in 2010 and this is projected to rise to 23% in 2016.

In fact, British shoppers make more purchases online than any consumers in any other country in the world.

This isn’t just great for retailers, but it also means that a bigger proportion of advertising budgets are spent online in the UK than anywhere else.

No wonder that the UK web economy is projected to grow at a rate of 11% a year between now and 2016 – a growth rate better than the US or China.

So it really is no exaggeration to say that the UK is the most “wired” economy on the planet.

And I’m here to tell you that the British Government is every bit as pro-technology as our economy.

You really will not find a government anywhere that is more supportive of new technologies, or doing more to back technology entrepreneurs and investors.

We are pulling out all the stops to ensure that you – the world’s leading investors and technology companies – have everything you need to innovate and succeed right here in the UK.

Let me explain how.

First, tax.

We are making the bold changes to the tax system that businesses and investors need.

We are cutting the top rate of income tax…

…Cut our corporation tax to the lowest level in the G20.

And introduced the most generous early stage investment tax breaks of any country in the world, along with new tax reliefs for animation video games production.

In my view, this video game tax break is a fantastic complement to our long-term incentives for film production.

These film tax breaks have brought billions of pounds of investments and thousands of new jobs to the UK, and they are very much here to stay.

A great example of this investment is the £100m that Warner Brothers has invested to create a world class studio at Leavesden.

And I’m pleased to be able to reveal today that the first film shot at Leavesden Studio will be a major production starring Tom Cruise and our own London-born Emily Blunt.

This will create over 500 jobs – many of which will be in digital and special effects.

This is a great example of how our tax policies are creating the right environment for investment and innovation.

But we recognise that technology investors in particular have specific challenges and needs, so we have put in place special policies to help.

Take our Research and Development tax credits, for example, which offer a tax relief of up to 225%.

In case you didn’t catch that, let me say that again.

A tax relief of up to 225%.

So investing £1 million in R&D could mean getting up to £2.25 million back in tax relief.

No country in the world can match that.

And we have also introduced a tax incentive we call the Patent Box, which offers a corporation tax rate of just 10% on profits generated from patents created in the UK.

So if your company is doing R&D and creating intellectual property, there really is no better place in the world to do it than the UK, and no better time to do it than right now.

These, then, are the tax policies we’ve put in place to support technology entrepreneurs and investors.

But, even for a Chancellor, tax isn’t everything.

So let me tell you about some of the other ways that we’re making the UK the best place in the world for technology and innovation.

We know that top business talent is truly global.

So we’re rolling out the red carpet for the next generation of technology entrepreneurs by introducing a brand new Entrepreneur Visa.

This Entrepreneur Visa enables venture capital backed start-ups to move to the UK quickly and easily.

So if you’re investing in early stage companies outside the EU, you can bring them to London using this targeted Visa.

We’re not only changing our immigration system, we’re also overhauling the way that ICT is taught in schools.

For too long, our young people have been taught how to use computer programmes, not how to write code.

We are putting an end to this, and making sure that our school system is producing the next generation of coders that technology companies need.

We’re being just as ambitious when it comes to investing in fibre broadband – the fundamental infrastructure of the internet economy.

Earlier this year, I announced a further £50 million – bringing Govt investment up to £150 million – for ultra fast (80 megabit+) broadband rollout in Britain’s major cities. This is in addition to £530million already committed for superfast broadband in local areas across the UK.

This investment in super-connected cities will mean that the UK has the fastest internet speeds in Europe by 2018, providing the bandwidth that technology companies need to expand and flourish.

So right across the board, the British Government is leading the world when it comes to ensuring that our policies are supporting technology and innovation, not holding it back.

Nowhere is this more true than when it comes to Tech City, the technology cluster in East London, which is home to some of the UK’s most innovative companies, such as Mindcandy, Songkick and Mendeley.

In November 2010, the Prime Minister launched the Government’s major initiative to support the growth of this exciting cluster.

Ever since then, we have been pulling out all the stops to help this cluster go from strength to strength.

We have created a dedicated unit, the Tech City Investment Organisation, which can help global investors and companies come to East London.

And we are bringing cutting edge research facilities to Tech City to ensure that the cluster isn’t just at the forefront of today’s innovation, but tomorrow’s too.

Take the Open Data Institute, for example, which is being built in Shoreditch with public and private funding.

This “ODI” will be an incubator where businesses and researchers can come together to work on innovative new products that take advantage of the incredible power of big data.

We’re also bringing together two of London’s leading universities, University College London and Imperial College London, to create a Smart Cities research centre in Tech City.

No wonder that the world’s leading technology companies are beating a path to London.

Google has opened a seven storey “Campus” in the heart of Shoreditch, housing literally hundreds of start-up entrepreneurs.

Intel is establishing a cutting edge research facility in East London that will develop new technologies to make 21st Century cities more connected and efficient.

And the likes of AirBnB, Yammer and General Assembly have made Tech City their European home.

In the last week alone, we have seen two of the world’s technology giants unveil major new investments in London.

Facebook has committed to open its first non-US engineering base, right here in London.

As Facebook software engineer Philip Su put it, “London is a perfect fit for Facebook engineering.”

And just a few days later, Amazon announced that it is establishing an eight-floor, 47,000 square foot research and development facility in Tech City.

Why did Amazon choose Tech City?

In their words, it was because “London is a hotbed of tech talent”.

I couldn’t agree more.

And I am pleased today to be able to reveal three major new investments in Tech City.

First, Vodafone.

Vodafone is today announcing the creation of a new technology lab and incubation centre in East London.

Vodafone xone [pronounced Zone] will help bring together Vodafone’s technology experts and VC investors with start-up companies in East London.

It’s a brilliant example of how large companies can support the growth of the Tech City ecosystem, and we applaud Vodafone for making this far-sighted investment.

The second new investment in Tech City I can reveal is by Barclays, who are opening a 4,000 square foot space in Shoreditch right next to the Google Campus.

This “Central Working” hub will be a collaborative space for local entrepreneurs to come together, share ideas and find the support they need to take their company to the next level.

Barclays estimate that this space will help over 10,000 businesses over the next decade, which will be a huge boost for entrepreneurs in East London and beyond.

The third and final new investment that I’m pleased to be able to announce is from GREE, one of the world’s largest social gaming companies.

GREE is today announcing that it will establish a new game development studio in Tech City, making the most of East London’s talent base to create the next generation of video games.

Taken together, these major investments by Vodafone, Barclays and GREE represent a triple whammy for Tech City.

Coming so quickly after the announcements from Facebook and Amazon, British technology has hit a purple patch.

You will not find a country anywhere in the world that is more open to technology more open to investment and more open for business.

We’re putting in place the right vision and the right policies to help your company succeed right here in the UK.

That’s why the world’s leading technology companies are beating a path to our shores.

And that’s why we will continue to do everything we can to help technology investors and entrepreneurs invest, innovate and succeed in the UK.

Thank you.

George Osborne – 2012 Speech on Energy Sector Day


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at Lancaster House in London on 7 August 2012.

I am delighted to be here at the Energy Sector Day at Lancaster House when the world is here in London for the Olympics.

The Global Business Summit is a demonstration of how the UK can lead the world in the energy sector: securing investment, creating jobs and building a more prosperous future.

And there is no better example of the significant contribution that this sector makes to our economy than the UK oil and gas industry.

This has long been one of our great industrial success stories, supporting a third of a million jobs, and extracting the equivalent of over 40 billion barrels of oil to date.

We recognise that companies operating in the North Sea work in a truly global market – and that we have to work hard to attract their capital and their jobs.

We are committed to ensuring that these businesses continue to see the UK and the UK Continental Shelf as an attractive location for that investment.

To making the most of our remaining oil and gas reserves.

And to ensuring that the UK economy continues to benefit from the fruits of this remarkable industry.

That is why, at this year’s Budget, I introduced an ambitious package of tax measures to encourage investment and innovation in the North Sea.

I announced that we would end the uncertainty that has hung over the industry for years by introducing a contractual approach to oil and gas decommissioning.

This will stimulate the market in North Sea assets, release billions of pounds of capital for further investment, and give companies the assurance they need to continue investing in mature fields.

I also announced changes to the field allowance regime to encourage investment in commercially marginal fields.

Including a £3 billion allowance for large and deep fields, to open up the West of Shetland, the last area of the basin left to be developed.

And it is great to see the very important Rosebank project pressing ahead as a result.

Building on this success, last month we introduced a further allowance for large shallow-water gas fields. Following this announcement, we have seen confirmation of the £1.4 billion investment in the Cygnus gas field.

This will be the largest gas development in the Southern North Sea in the past 25 years. Once in production, it is estimated that the field will deliver 5% of the UK gas demand and contribute significantly to UK security of supply.

This reinforces our commitment to gas as the biggest source of energy in the UK.

With 80% of the project’s expenditure destined for UK companies, Cygnus is expected to create around 4,000 jobs across the UK.

Just today, the companies involved have awarded contracts to a number of UK suppliers, including yards in Hartlepool and Fife.

These contracts alone will support 1,235 jobs.

I am proud that highly skilled supply companies such as these have developed a global reputation of excellence and expertise.

Proud that the UK is home to businesses that lead the world in cutting edge research and technology.

As we are committed to providing the best possible environment for investment in oil & gas, so we want to the UK continue as an open, competitive location for investment in electricity generation.

We have an independently regulated market that welcomes investment from all over the world.

This helps provide the UK with the expertise and resources available around the world and with a diverse and secure supply of power.

We have a clear and stable investment regime which allows investors to commit funds with confidence.

The carbon price floor provides a clear cost trajectory for gas and coal generators.

The new support rates announced for renewable technologies will ensure that low carbon generation remains affordable for consumers whilst providing certainty for investors.

Last month we made clear that we expect gas to play a key role in meeting electricity demand for the UK throughout the 2020s and beyond.

We will provide more detail in the autumn on steps we will take to make the UK an even more attractive place for gas investors.

Together these polices will enable billions of pounds of investment in the UK economy; creating jobs, and securing the UK’s position as a world leader in energy technology development.

And this Government is committed to ensuring the UK maintains its competitive edge in science, and to putting innovation and research at the very heart of its growth agenda.

That’s why top businesses such as BP are investing in the UK and supporting our world-leading universities in delivering cutting edge research.

It gives me great pleasure today to welcome BP’s announcement to create an International Centre for Advanced Materials.

The fact that Manchester University is the hub for this great project and that two of the three spokes are at Cambridge University and Imperial College clearly demonstrates the UK’s strength in science and innovation.

The centre will play a key role in helping to maintain the world-leading status of the UK in the research of advanced materials and I want to acknowledge the substantial investment by BP in creating 25 new academic posts, 70 post-grad researchers and 50 postdoctoral fellows.

In my capacity as a local MP as well as the Chancellor of the Exchequer, I am delighted that this investment will further strengthen Manchester and the North West of England as a world-leading centre of expertise in materials technologies.

It complements the £50m investment to create a Graphene Global Research and Technology Hub based in Manchester that the Government announced last year.

It will also strengthen other centres of materials expertise such as the National Composites Centre in the South West, and the Advanced Manufacturing Research Centre in Sheffield, which are working in partnership with global businesses such as Airbus, GKN and Rolls Royce, and Boeing.

The UK’s research base is second only to the USA for number of citations, and it is the most productive country for research in the G8 in citations and publications per pound.

Our research institutes include world-leading facilities that combine flexibility to pursue innovative research with a unique environment for developing outstanding students and early career researchers.

Throughout the energy sector and beyond, we are committed to creating an environment that allows research and innovation to flourish, ensuring that world-leading businesses, including energy businesses, continue to see the UK as an attractive location for investment.

And we are committed to harnessing their success to drive our economy forward.

Thank you.

George Osborne – 2016 Speech on the Economy


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Cardiff, Wales on 7 January 2016.

Scott, thank you and thank you for such a warm Cardiff welcome.

It’s good to see so many business leaders here today.

It’s fantastic to be back here again to see the Cardiff Business Club and talk to the people who are helping to drive forward the Welsh economy.

And it is fitting that we have Cardiff Bay as our beautiful backdrop, in typical sunshine.

From this Bay, the people of South Wales set off to lead the industrial revolution around the world.

But by the 1970s, after decades of decline, it was left derelict.

Today it is thriving again. Audiences flock to the Millennium Centre from all over the world – and get to experience that famous Welsh hospitality when they do.

Much of the development that underpinned this happened during the 1980s, spearheaded by local people working in partnership with my colleagues Nick Edwards and Michael Heseltine.

And we owe a particular debt to the late Sir Geoffrey Inkin for driving the redevelopment forward.

It is an example of the government working with you – the job creators – to deliver for Wales.

As we look across the Bay, we can all see the Welsh Assembly building on the other side.

Today I make this offer to the next Welsh government: work with us to make Wales stronger still.

We have our plan for Wales, one that support jobs, pay and rising living standards.

And the question for the whole United Kingdom is this: are we going to see through the economic plan that is delivering growth at home and security from risks abroad?

For I worry about a creeping complacency in the national debate about our economy.

A sense that the hard work at home is complete and that we’re immune from the risks abroad.

A sense we can let up, and the good economic news will just keep rolling in.

To the people peddling those views, I have a very clear warning.

Last year was the worst for global growth since the crash and this year opens with a dangerous cocktail of new threats from around the world.

For Britain, the only antidote to that is confronting complacency and delivering the plan we’ve set out.

Anyone who thinks it’s mission accomplished with the British economy is making a grave mistake.

2016 is the year we can get down to work and make the lasting changes Britain so badly needs.

Or it’ll be the year we look back at as the beginning of the decline.

This year, quite simply, the economy is mission critical.

We have to finish the job.

So let me explain, first, how the economy is mission critical here in Wales.

A lot has been done since 2010.

70,000 thousand jobs have been created.

Unemployment has fallen by 30%.

Superfast broadband has been rolled out to over half a million homes and businesses.

We pulled the eyes of the world to Newport when we chose to bring the huge NATO Summit here.

The UK Investment Summit with over 150 global investors that followed soon after saw £240 million of new investment across the UK.

And we’re seeing results: since 2010 Wales has grown faster than any part of the UK outside of London, and in the latest data employment is rising almost twice as fast as in the capital.

But ambition for Wales should not end there. I know yours doesn’t; well mine doesn’t either.

For while we’ve come a long way, we cannot be complacent.

Wales still faces the decades-old challenge that it lags behind much of the rest of the UK.

Unemployment is higher, pay is lower, and output is lower. Wales could be doing so much better.

The government recognises that Wales needs more investment.

That is why, working with Stephen Crabb, our strong and effective Welsh Secretary, we’ve just announced we’ll boost capital investment by £900 million over the next five years.

We recognise that Wales needs to be better connected to the rest of the UK.

So we are electrifying the Great Western Mainline to Swansea and giving the Welsh government early access to the capital borrowing powers to help fund the M4 relief road.

And by bringing the massive investment in HS2 to Crewe six years early, we will bind North Wales ever more closely into the Northern Powerhouse and the rest of the UK too.

We also recognise that more decisions affecting Wales should be taken here in Wales.

The Welsh Assembly already has the power to legislate on health and education; we’ve given them power to set business rates, and, from 2018, the power to set Stamp Duty and Landfill taxes too.

And soon the Assembly will have unprecedented power to set income tax as well.

Crucially, this means that the Welsh government is now going to be responsible for how they raise money, as well as how they spend it.

That will focus attention on who can deliver low taxes for the people of Wales and Welsh businesses, and who can deliver value for money. That is attention I want to see.

As a UK government we’ve committed to a City Deal for Cardiff.

This City Deal can transform this city as much as the development around the bay did a generation ago. It’s a deal that will secure Cardiff’s bright future.

We will support a new infrastructure fund for the Cardiff Capital Region as part of this.

It demonstrates our ambition for the Cardiff region and I want to see the deal signed by the time of the Budget in March. So let’s get on with it.

Wales is an incredibly exciting, innovative nation, home to world class research and pioneers of technology. I want Wales to be at the centre of the high tech economy of the future.

Steven and I have been to Cardiff Uni to see brilliant work on semiconductors with companies such as IQE.

So today I can tell you that we will establish a new UK national centre – based here in Wales – that will develop the semiconductors that are at the heart of modern technology. It will be part of our network of R&D catapults.

It will bring together scientists and businesses with expertise in this cutting edge technology. It will create jobs, here. Bring investment here.

And I’m committing £10 million this year and every year for the rest of the decade, £50 million in total, so that we build the future here in Wales.

I see it as a down-payment on our side of the deal.

Here’s a striking fact and a challenge for us all.

If the growth rate in Wales matched that of the UK average, the economy would be around £6 billion bigger by 2030.

That is almost £1,900 more per person here than if Wales continues at its current pace.

And if employment increased by as much in this Parliament as in the last, there would be over 60,000 more people in work in Wales by 2020.

There can be no room for complacency about Wales’ future.

And there can be no room for complacency when it comes to Britain’s economic future too.

We are only seven days into the New Year, and already we’ve had worrying news about stock market falls around the world, the slowdown in China, deep problems in Brazil and in Russia.

In just one week in December South Africa had three separate finance ministers…a stat no Chancellor likes to read about.

Commodity prices have fallen very significantly.

Oil, which was over $120 a barrel in 2012, dipped below $35 earlier this week.

That is good for consumers and business customers here in Britain, bad news for the oil and gas industry, worrying for the creditors who have lent to it, and a massive problem for the countries that depend on it.

And all of it adds to the volatility and sense of uncertainty in the world.

Meanwhile, the political developments in the Middle East, with Saudi Arabia and Iran, concern us all.

Alongside this short-term turbulence there is a long-term trend economists worry about.

It is an idea that date back to the depression-era 1930s dubbed ‘secular stagnation’

And it results in predictions that Western economies might not grow at all.

The concern is that demographic changes – an aging population – means a rise in global savings.

At the same time entrepreneurs stop innovating.

They don’t want to set up companies or expand and so don’t want to borrow those savings to invest.

But when the demand for borrowing is so weak firms will only take a loan when interest rates are ultra-low.

And the so called ‘natural’ rate of interest – this is the rate needed to keep the economy growing at a healthy pace – falls permanently.

Some of the predictions from the 1930s were stark.

They spoke of “sick recoveries which die in their infancy.”

Slumps with an “immovable core of unemployment.”

That’s not been Britain’s story these last few years.

But think of much of the rest of the western world since the crash.

Many places have seen stop-start recoveries; others persistent high unemployment.

Some economists have revived the idea of secular stagnation for the modern age – warning that we will either get stagnation and unemployment, or, where there is growth it will be pinned on asset price bubbles.

They pose these economics for us what seems like an impossible choice:

Do you keep rates ultra-low to boost your economy, but accept the risk of bubbles?

Or do you hike rates to avoid bubbles, and accept an economic slowdown?

I’m determined to show that this choice is a false one.

That you can have sustained growth and new innovation and a strong savings culture, and by doing these things lay the foundations for higher living standards for decades to come.

And our economic plan – which backs investment and the generation of new ideas like the catapult here for compound semiconductors, and puts in place checks on debt and bubbles – is the way to achieve that.

Economies grow and prosper when there is a security and confidence about the long term. We’re providing that here in Britain with our economic plan.

So what is our response to the current risks in the global economy?

It’s not to cut ourselves off, and isolate Britain.

You don’t avoid the world’s problems by trying to pretend, in the modern age, that we can be completely self-contained.

No, our problem is that we haven’t had strong enough links with many of the fastest growing parts of the world.

That is because we were complacent in the run up to the crash. We didn’t go out there and build those links with the rest of the world.

Well now we are.

Our determination to be China’s strongest partner in the West is opening up new markets for our businesses and bringing new investment and jobs to our shores.

We have an excellent relationship with India but we can do more. So we will, and the Indian Finance Minister Arun Jaitley is coming to Britain later this month to make that happen.

We’re working with the US and the EU to agree a new Transatlantic Trade and Investment Partnership, a big trade deal that could increase the size of our economy by £10 billion per year.

And with our partners in Europe, we’re seeking ambitious reforms that will make a real difference to the British people.

What could be more complacent than acknowledging Europe needs to change and can work better for Britain; but then to say: that’s just the way it is in Europe – there’s nothing we can do about it?

Under the strong leadership of David Cameron, we’re working flat out to get a better deal and then we’ll put it to a vote and the British people will decide.

There’s also much more we can do at home to strengthen our economy and build for the future.

Productivity lies at the heart of a healthy, growing economy. Because when output per hour is higher firms can pay their workers more, and return larger dividends to their investors.

What does that mean? It means more money and higher living standards for families.

Delivering that requires action to address historic weaknesses in the British economy.

We have suffered a chronic shortage when it comes to skills for decades – so next year we’re introducing our important new apprenticeship levy on all large firms.

The levy will fund three million apprenticeships in England – with firms offering apprenticeship able to get out more than they put in. And Wales will get its fair share of the support too.

It’s a major reform to raise the skills of the nation.

Another weakness is that Britain has always been too slow to build.

Late last year I set up the National Infrastructure Commission.

Its independent group of world-class experts; it’s already hard at work, led by Andrew Adonis.

Today we are publishing a consultation which set outs the structure and operation of the commission.

It represents a huge shift.

The old way – short termism and a failure to think ahead – is out.

Long term thinking is in.

And I’m looking forward to receiving the first ideas from the new Commission by the time of the Budget.

Getting infrastructure decisions right in 2016 is mission critical.

So too is our plan to boost the wages of Britain’s low paid.

If we’re complacent, Britain could find itself going the way of some other Western nations and become a society of higher welfare bills, higher taxes to pay them and lower wages as a result.

We need to do the opposite. That doesn’t happen by itself. It needs a plan and decisive action.

So we’re reducing welfare costs and ensuring it always pays to work, with major reforms to our benefit system.

We’re cutting taxes on income – in April the tax-free personal allowance will reach £11,000.

We’re making further major cuts to corporation tax to give us the lowest rate of any major economy in the world.

And we’re bringing in the new National Living Wage in April. The new rate of £7.20 will mean a £900 increase in the annual earnings of a full-time worker.

This is how we build the higher wage, lower welfare, lower tax society Britain needs.

And we’re going to make sure those wages go further too.

So we have committed to a big push on competition. Again, competition doesn’t just happen.

If you’re not active in promoting it, monopolies creep in, vested interests take control.

Last autumn I asked Treasury economists to look at 10 core markets – things like banking, telecoms, the utilities and insurance – to make sure customers are getting good deals.

They found a typical household spent close to 40% of their disposable income in these markets.

But they also found inefficiencies: a lack of competition in some markets, opaque pricing and people paying too much in others.

The steps we are taking to cut out those distortions mean households could save close to £500 a year.

And over the course of this Parliament we will go further, removing the obstacles to allow new competitors to enter protected markets.

I’ll give you some examples. It means online pharmacies that deliver prescriptions to the door; it means giving people choice over their water supplier; and making it easier for places like supermarkets to provide legal services.

One of the biggest monthly bills many people pay is their mortgage – and an important source of income for people is their savings.

So it’s no wonder that people are starting to talk about what a rise in interest rates might mean for us all.

Of course, interest rates are not something for me to set. That’s for the independent Monetary Policy Committee at the Bank of England.

But inevitably, with the US Federal Reserve having made their decision to raise rates last month, there is a discussion about how and when we begin to move out of a world of ultra-low rates.

Let’s be clear, higher interest rates are a sign of a stronger economy.

The job of government is to make sure we’ve got in place the policies to monitor overall levels of indebtedness across families and the wider economy, while backing savings too.

That doesn’t just happen by itself.

It requires positive action and a plan, and that’s what we’ve put in place.

So I’ve created a powerful new Financial Policy Committee in the Bank of England that can check overall levels of debt in the economy, and deal with specific risks such as the buy-to-let mortgage market.

These steps are not always popular, but they do make our economy more resilient.

British families have also worked hard these past few years to reduce their debts – and so debt as a proportion of income has fallen.

But there is more to do to make sure British household finances are sound.

40% of British adults don’t have a week’s wages put aside to cover an unexpected expense, and almost half don’t have any pension savings.

Of course, putting money aside is often difficult, every family is different – and it’s up to each one to make their own decisions about when it’s right to borrow and when it’s right to save.

But that is not an excuse for government inaction and complacency.

Overall we must make it easier and more attractive for people to save.

For while there may be a global glut of savings, here in Britain not enough people on lower and middle incomes are saving for their retirement.

That’s why we’ve got a plan to change that: auto-enrolment – the scheme where employers enrol all employees into a pension – is having a huge impact: there are three million more people are saving into a pension compared to just two years ago.

We’ve made pension saving more attractive – by removing the restrictions on how people can spend their savings when they reach retirement.

We’ve massively increased ISA limits – the most popular way for people to save tax-free.

Last month we launched our Help to Buy ISA – already over 140,000 people have opened an account and are starting to save for their first home.

And in April we’re introducing our new state pension. It will be far simpler than the current system, more progressive and much fairer to women.

It’s all part of supporting saving for everyone. And there’s more critical work to do in 2016.

There’s also work to do to shake the national debate out of that sense of complacency about our economic prospects that I talked about earlier.

Yes, the British economy has performed better than almost anyone dared to hope. And as an issue, the economy has slipped down the list of everyday concerns.

But the biggest risk is that we all think that it’s “job done”. Many encourage this, irresponsibly suggesting that we can just go back to the bad old ways and spend beyond our means for evermore.

Though the year is only seven days old, already we’d had their predictable calls for billions of pounds, literally billions more debt-fuelled public spending.

They reject all the reforms we propose to deliver better-quality public services for less taxpayers’ money.

Today I want to issue this warning: unless we finish the job of fixing the public finances, to get Britain back into the black by finally spending less than we borrow, all of the progress we have made together could still easily be reversed.

That’s why we’ve got to go on fixing the roof while sun is shining.

The prize for us all if we do is that Britain could become the most prosperous of all the major nations in the world in the coming generation.

In 2015 we won the support of the British people for our economic plan – and we set out in the Budget and Autumn Statement the means to achieve that.

We established new fiscal rules to reduce debt and get that surplus.

We set out department spending plans that mean we live within our means.

Taken together, it is part of a huge national effort to get our house in order – what the Office for Budget Responsibility describes as the biggest reduction in government consumption outside of demobilisation in over 100 years.

If 2015 was the year for setting out that plan – 2016 is the year for the delivery of it.

That is why it is so critical.

Economic security and sound public finances don’t just happen – they require hard effort and continued application.

And this year we will require that. You know – as do I – that none of us can see the future.

We don’t know what exactly will happen to the global economy.

We don’t know when the next turn of the cycle will come.

But we do know that we haven’t abolished boom and bust.

So there is no excuse for inaction. We are in charge of our own destiny.

We can back infrastructure investment and innovation.

We can be an outward facing nation – forging new and stronger links with the rest of the world.

We can continue to support higher pay, lower tax and consumer markets that foster choice and competition.

We can do more to support savers.

This plan is what Wales, and the UK, needs.

And it is why the economy remains centre stage to everything we want to achieve in this country.

So 2016 is not mission accomplished. But our future is very much in our hands.

This year is mission critical year.

Now is the time to make the long term decisions to secure our country’s future.

And in the forthcoming Budget and beyond, that’s precisely what I’ll do, for Wales and for the whole of the UK.

George Osborne – 2015 Speech on Daesh


Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at the United Nations Security Council in New York, United States, on 18 December 2015.

Thank you very much, and let me begin as others have done by congratulating you, Jack, for suggesting this meeting, where the finance ministers of the Security Council came together for the first time in the history of the United Nations. And let me congratulate the Secretary-General and the head of the Financial Action Taskforce for the leadership they have shown on this issue.

Let me start by offering my condolences and the condolences of the British people for those who lost their lives in Paris as a result of those dreadful attacks, but also of course those who lost their lives in Ankara, in Beirut, in California, and indeed the Russian holidaymakers travelling home from Sharm el Sheikh who lost their lives.

Of course, these acts of violence were designed to intimidate and divide us but they have failed and I think it’s very striking, if you look at this table, this Security Council room, this is often where divisions of the world have been most evident, yet today the unity of the world is on display and far from dividing us, actually the terrorists in Daesh and ISIL are actually uniting us and we are determined to take the fight to them, to deprive them of their financing and to defeat them.

Now, of course, all of us around this table have been grappling with threat that terrorism poses. In the last year alone, in the United Kingdom, our security forces have prevented 7 different plots to attack citizens in the United Kingdom. But I would say this, at a time when people question whether we can defeat these terrorists, we are defeating these terrorists and we are making progress. In the last year, the coalition against Daesh/ISIL has liberated over 40 percent of the territory under their control in Iraq. We are stemming the flow of foreign fighters to their ranks, we are exploiting the vulnerabilities in their financial network and we’re successfully targeting their oil supply. And as British Prime Minister David Cameron said here at the United Nations in September, we are leading the efforts to tackle their propaganda so that fewer people around the world are influenced by their message of hate.

Now we know that those who seek to commit acts of terror will not stop, and so neither should our resolve to defeat them. And when our values, democracy and freedom are threatened, when efforts are made to undermine the international peace and security that this Council protects, we must all unite to condemn those actions and prevent further tragedy.

Since the council first adopted resolution 1267 back in 1999, the threat from terrorism has evolved. In Daesh we face a new type of threat, oppressing those in the territory that they physically control, inspiring foreign terrorist fighters to join their cause in places like Syria and Iraq and now of course potentially in Libya too, and radicalizing individuals to inspire them to commit atrocities at home. It’s a new breed of terrorism and a challenge for us as governments and the international community and it calls for a new response and today I think we’re making significant further steps to strengthen that response. I very much welcome the adoption of the very comprehensive resolution today, and thank the Secretary-General and his team at the UN for their work on this agenda.

I just wanted to briefly set out the areas that the UK judges to be key to strengthening the global efforts to combat terrorist financing, combat the financing of Daesh and make full use of this resolution.

First, I want us to ensure that we’re using the existing tools we have to combat the threat of terrorist financing to their full effect. In September this year the United Kingdom put forward a list of names of British nationals who have travelled to Syria and recommended them for listing them under UN sanctions. Today, I would urge other Member States to do the same. To propose the designation of individuals who pose a real threat, so their assets can be frozen around the world and we can cut off the resources they need before they can commit their planned acts of terror. Domestically too we must ensure we are using our counter terrorist financing regimes to full effect. I agree with what Secretary-General was saying earlier, we need to make sure that all members ensure they have a regime in place that criminalizes the financing of terrorists for any purpose, and that they implement the UN sanctions regime to fully and promptly and I thought this was a point that the President of FATF raised and was an extremely important one, this gap between the sanctions being announced and the sanctions being implemented is crucial in a world where you can move money in matter of seconds.

In the United Kingdom, we’ve taken a long look at our regime and I can confirm today that we will legislate domestically to make sure we can implement UN sanctions without any delay. We are currently like other members of the European Union, reliant on an EU process that takes too long, and we want to work with our partners in the European Union to streamline that process and to make it more rapid, and to make sure we at European level are able to implement UN designations immediately.

Second, I want to make sure that we are responding to the evolving nature of the terrorist threats with new measures too. We’ve already heard today about the value of the Syrian oil fields to Daesh, that this alone is providing them with millions of dollars a day, estimated $1.5 million each day. We know that military action which the United Kingdom through our air forces, proud to be taking with our allies is having success in limiting this resource, this oil money. But let us as finance ministers also take action too, we should make clear as we do with this resolution today that the UN sanctions regime can and will be used to target not just the terrorists but the traders, the middlemen, the people who facilitate the illegal trade in oil which provides Daesh with one of its principal sources of revenue and we should apply the same focus on the illegal trade in cultural artefacts, which I thought the finance minister of Jordan spoke very powerfully about. We are seeing literally the history of some of these countries being stolen from them, and there is much more we can do, frankly, to shine a light on this opaque trade in cultural artefacts.

But of course, as we limit one arm of Daesh’s financial network, we know they’ll attempt to strengthen another, so we must be ready to respond to their evolving financial needs, such as financing through kidnap for ransom or organized crime. And I’m delighted that the resolution makes that clear as well. And I also want to look at new ways of gathering and sharing information internationally between our law enforcement agencies and indeed, domestically between law enforcement agencies and the private sector including our banking systems. This was a point that was raised by a number of speakers and I think it’s a very important one. And we are taking steps in UK as the home of one of world’s largest, indeed the world’s largest financial centre, we’re taking steps to make sure we have that partnership with the financial sector, working together to tackle illicit financial flows.

The third and final point I want to make is this. I want to make sure that this group continues to work together to consider how we implement the recommendations, on how we do more to tackle terrorist financing, because as the threat is constantly evolving, so must our response to match it. I welcome the special meeting of Financial Action Taskforce last weekend, specifically focused on our collective response to terrorist financing. In particular, I was pleased to see a commitment from the group to update their report on Daesh financing, working with the counter-ISIL finance group and others. And I think it would be sensible for finance ministers to perhaps meet again in the Security Council in the months ahead at some point to review the evolving situation and to consider proposals for further measure. Let’s be clear, passing a resolution is one thing, implementing the resolution is of course another, and we’ve all committed to report to United Nations on the progress we make on that and I think that’s something that we should therefore put into action.

So that’s where I see the priorities for action, ensuring we’re making the most of existing tools we’ve got, implementing new measures to respond to the particular threat that Daesh poses to us, and continuing to work together to develop our response further and reporting back here at the United Nations until we fully destroy this evil.

Thank you.