Philip Hammond – 2016 Speech at Lord Mayor’s Easter Banquet

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Below is the text of the speech made by Philip Hammond, the Foreign Secretary, at the Mansion House in London on 6 April 2016.

They say that a week is a long time in politics. And I have to tell you that the last year, frankly, seems like a lifetime. But when I stood here just before the General Election, I set out what we had achieved since 2010 to re-establish Britain’s place in the world.

Re-shaping with a new National Security Council and prosperity as a central aim of diplomacy. Addressing the new security challenges we faced and consolidating our position as a major defence power. And restating our commitment in the Foreign Office to excellence in diplomacy.

And since that election, as a single party Government (because I have to confide to you, when it comes to parties in Government less is definitely more) we’ve been able to go still further:

In the post-Election Budget, we committed to continue to spend 2% of GDP on Defence – demonstrating our determination to maintain world class Armed Forces with cutting edge capabilities.

And in the spending review we protected the Foreign and Commonwealth Office budget, confirming the value that we place on our worldwide network and our global influence.

We’ve boosted our unrivalled soft power, with new cash for the British Council and a strengthened BBC World Service.

And in the Commons, last December, the new Parliament, wiped clean the stain of the August 2013 Syria vote when, by a large majority, it voted to extend our military action against Daesh from Iraq into Syria – demonstrating that Britain does have the political will to act to safeguard our national security.

But these achievements have been made against a backdrop of some serious storm clouds gathering on the horizon.

Headwinds continue to buffet the global economy, forcing economic policymakers around the world to revise growth rates down.

In the first six weeks of the year, concerns about China’s economic slowdown wiped over eight trillion dollars off world markets.

And the collapse in oil markets – which welcome for consumers – is devastating those countries which rely on oil revenues for their public finances.

Persistently weak inflation, negative interest rates in some countries, stagnating global trade, and vanishing demand. All, I’m afraid, point to turbulent times ahead.

And as we seek to protect the British economy from these headwinds we have to recognise that we also face significant and growing threats to our national security.

Last year, I set out the principal challenges we faced: Islamist extremism; Russian aggression; and EU reform.

One year on and none of these challenges has gone away.

The Prime Minister’s prediction that tackling Islamist extremism would be a “generational struggle” is looking increasingly prescient. And the succession of terrorist atrocities around the world including Sousse; the Metrojet bombing; Paris; Brussels; as well as attacks in Turkey, Pakistan, Lebanon and Nigeria, confirm that the terrorists’ desire to attack our values, our democracy and our freedom remains undiminished.

But, in spite of these tragic incidents, we should not overlook the progress we have made in tackling Daesh in their heartlands of Syria and Iraq over the last year.

In Iraq, government forces have retaken the strategically significant cities of Tikrit, Baiji, Sinjar and Ramadi, recovering some 40% of the territory that Daesh in Iraq once held. And an increasingly self-confident Iraqi Security Force is now preparing the ground for the forthcoming battle to liberate Mosul.

In Syria, we and our coalition partners have been systematically targeting the Daesh senior leadership and the external attack planners who threaten us directly, as well as the oil infrastructure that has provided so much of their financing.

But we are also upping our preparedness for the broader counter-terrorism fight: doubling the number of counter-terrorism officers on the FCO overseas network, standing up the four regional Counter Terrorism hubs announced in the recent Strategic Defence and Security Review and, I can announce tonight, creating a fifth Counter Terrorism hub in Europe, in the wake of the Paris and Brussels attacks, and the ongoing Daesh violence in Turkey. And underpinning this growth, we’re boosting our counter-terrorism funding, with an extra £80 million committed to Foreign Office CT over this next spending review period.

But while we boost our fight against terrorism, the old challenge of state-based aggression in breach of the rules-based international order has not gone away.

Just three weeks on from the second anniversary of Russia’s illegal annexation of Crimea, fighting has flared up again in the last few days in eastern Ukraine.

In Syria, Russia’s unannounced intervention last September has strengthened Asad, who continues to wage war on his own people, driving some into the arms of the terrorists, and many more out of their homes, out of their country into the refugee camps in Jordan, Lebanon and Turkey – and onward to Europe.

Russia and Iran are the two countries which have real influence on the Syrian regime and as members of the International Syria Support Group they have responsibility for telling Asad that it is time to go.

For our part, we will continue to work with Russia where it is clearly in our national interest to do so – as it is in Syria. But all nations must know that if they violate the rules by which the international community lives, that community will hold them to account.

And it is through the EU – my third topic from last year’s speech – that we’ve applied the hard-hitting, co-ordinated sanctions in response to Russia’s intervention in Ukraine.

I said last year that we would fight for reform in the European Union, and the Prime Minister has delivered it: an historic deal which protects our special status outside the Euro and outside the Schengen area, exempts us from ‘ever closer Union’, creates a red card for national parliaments, and a new mechanism for repatriating powers, as well as a new regime to limit access to our benefit system for EU migrants.

I have historically been a sceptic on the EU, and if you’d asked me a decade ago whether I believed it would be possible to achieve the package which is now on offer to the UK, I would have said “no”.

Because at that time, many of our partners suffered from the belief that there could only be a one-size-fits-all model for the European Union.

But that has changed, and it’s changed, I believe, for three reasons:

First, the dawning realisation that the Eurozone countries will inevitably require further fiscal and political integration. The recent financial crisis has underscored that reality. With Euro-ins and Euro-outs, a multi-destination EU has become inevitable, destroying the federalists’ vision of a one-track Europe. So now, different views of the future can be accommodated: greater integration for those who want or need it; a looser model for those of us who do not.

Secondly, the impact of the global financial crisis on the Eurozone. In Britain, we were hit hard, but thanks to the measures we’ve taken since 2010, and thanks to the fact that we’ve kept the pound, we are back on the path of economic growth and rising employment. But in the Eurozone, without the safety valve of devaluation, the impact has been longer term. Many countries are still suffering from sclerotic growth and record unemployment. This bitter experience has been a wake-up call for those whose principal concern used to be protecting something called the “European social model” – an awakening to the fact that you can’t protect any kind of social model if you don’t have a competitive economy. Boosting competitiveness and a focus on job creation are the new policy drivers in Europe. The penny has finally dropped: without a strong and competitive economy, everything we value is built on sand.

And thirdly, political views across the EU have shifted decisively. Seven or eight years ago, the UK was a genuine outlier in terms of what we believed the EU should look like and what role it should play in people’s lives. But no longer. There is now a long list of countries who believe, to quote Italian Prime Minister Renzi, in “Better Europe, not more Europe”. What used to be regarded as eccentrically British views on the future on Europe are now firmly established in the mainstream of European political thought.

It’s probably fair to observe that we, in my party, may not always have been the greatest cheerleaders for Mr Juncker but he has certainly detected, and taken on board, this change of mood – and this Commission is now delivering on a reform agenda. Proposals for new legislation have been cut by 80%. And the Prime Minister’s deal commits the Commission to sectoral targets for burden reduction, with a special focus on SMEs.

That’s a good start, but our job is far from done. We now need to lock this change of mood into the DNA of the European Union, and turn the commitments made to the UK into a working reality, institutionalising our reform agenda. And if Britain votes, as I hope it will, to remain, taking active leadership of the reform agenda in the European Union. So despite my historic scepticism about the EU, it is my firm judgement that, on balance, the benefits of the single market with the unique terms of membership now offered to the UK, mean that we will be safer, stronger and better off in.

Increasing competitiveness through strengthening the single market and driving more EU trade deals… while maintaining Britain’s attractiveness as a destination for inward investment by staying in the 500 million-consumer Single Market, but keeping the Pound.

Britain is, and will remain, a world-class player. But our ability to project our influence around the world is enhanced by our EU membership. Acting as part of a European bloc to deliver stronger trade deals, to bolster the resilience of fragile partners around our periphery and to impose tough economic sanctions against those who threaten our security, gives us greater reach and greater influence.

So to those of my countrymen who care passionately about maintaining Britain’s influence in the world, I say this: our voice will be louder and more persuasive if the United Kingdom votes to “remain” on June 23rd.

There was of course, I have to admit, one big challenge I did not foresee in my speech last year, and that was the migration crisis in Europe.

The movement of hundreds of thousands, perhaps a million or more, of people across the Middle East into Europe is at a level not seen since the immediate aftermath of the Second World War.

Some of them are fleeing terror and conflict; others are simply pursuing a better life – enabled in their quest by the ubiquitous smart phone, delivering the instant access to information that has revolutionised all of our lives.

The fact is, the digital revolution means access to information is now ubiquitous, but economic opportunity is not.

And it’s clear to me that information-enabled economic migration will be a major challenge for all rich countries, long after the Syria crisis is resolved.

Working out how we discharge our moral and legal obligations to genuine refugees fleeing persecution and conflict while dealing robustly with the traffickers and those who are seeking to circumvent the rules to access a better standard of living, will be a major challenge for politicians across the developed world for many years to come.

My Lord Mayor, Excellencies, Ladies and Gentlemen, I’ve focused this year and last on we’ve acted to restore and enhance Britain’s role on the world stage.

We’re rebuilding our economy, the foundation of everything we do.

We’ve committed the funding to strengthen our defences and protect our diplomatic network.

And we’ve rediscovered the political will to act to protect our national security.

In the fight against Islamist extremism, we’re degrading Daesh and exposing the fallacy of the so-called “Caliphate”;

We’re keeping up the pressure on Russia over Ukraine and seeking a negotiated solution and an end to Asad’s rule in Syria;

We’ve secured a unique membership arrangement from the European Union and we’re giving the British people the final say on it at the ballot box;

And we’re working with the EU and with Turkey to crush the traffickers, stem the flow of economic migrants and protect genuine refugees.

Through the actions we’re taking, we’re ensuring that Britain is better prepared both to deal with the major threats today and for the unknown challenges yet to come.

Philip Hammond – 2016 Easter Message

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Below is the text of the statement made by Philip Hammond, the Foreign Secretary, on 25 March 2016.

“Easter is a season of hope for all Christians. At this time of celebration my thoughts are with all those facing persecution, discrimination and denied the right to worship freely, particularly Christians in the Middle East. This Government has pledged to stand up for the right to live and to worship free from discrimination, and we will continue to work actively to make this a reality”.

Philip Hammond – 2016 Comments at EU Foreign Affairs Council

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Below is the text of the comments made by Philip Hammond, the Foreign Secretary, to journalists when he arrived at the EU Foreign Affairs Council in Brussels on 14 March 2016.

I’d just like to start by offering my condolences to the people of Turkey and the people of Cote d’Ivoire for the terrible loss of life in the terrorist incidents there yesterday, and as you would expect, we stand firmly behind them, alongside the people of those countries and the people of all countries as they face and deal with the challenges of terrorism around the world.

We’re going to be focusing here today on Russia, on Libya, and on Iran.

On Russia, we need to be clear about how we manage the EU’s relations with Russia in the future. We have to have relationships with Russia but we can’t lose sight of the challenge that Russia represents to our values and to our security and we have to be robust in making our case and defending our principles, our values, and our borders in Europe.

We also need in Syria, the Russians to get a grip on their Syrian clients, and make sure that they are delivering the obligations that Russia has made on their behalf in the International Syria Support Group which lie behind the current cessation of hostilities. We expect President Putin, who has backed President Assad with huge amounts of military and political commitment, we expect him to be able to get control of Assad, and at the moment it doesn’t look like he is in control of Assad.

On Iran, we need to make sure that our approach is balanced so that while we exploit the opportunities that come from an opening of Iran and improved relationships between Iran and the West, we also have to be clear that Iran continues to carry out unacceptable behaviour, missile testings, aggressive behaviour in sponsorship of terrorism around the Gulf, and we shouldn’t in any way pull our punches about that kind of behaviour.

And finally we’ll be talking about Libya with Martin Kobler, the UN Special Representative. We are obviously all very keen to see the full endorsement of the government of national accord and its installation in Tripoli as the de facto effective government of Libya. The EU has plans for a big collaboration with the Libyan government once it is properly installed and in place, and we mustn’t lose sight of the fact either that Libya remains an important irregular migration route into the European Union and as well as worrying about the situation in Turkey, we need to think about potential for continued migration flows through Libya.

Philip Hammond – 2016 Speech on Alternatives to EU Membership

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Below is the text of the speech made by Philip Hammond, the Foreign Secretary, at Chatham House in London on 2 March 2016.

In just 16 weeks’ time, Britain will face a decision that will shape the course of our nation’s history for a generation or more: Should we remain within the European Union on the terms negotiated by David Cameron or should we withdraw from membership and go it alone?

The Government’s clear view is that we are stronger, safer and better off remaining within a reformed European Union; Stronger, because our global influence is enhanced by being a leading member of the world’s largest trading bloc, safer because of the work we do together with EU partners to strengthen our defences against organised crime and terrorism, and better off because of our access to a market of 500 million consumers. The deal that the Prime Minister won in Brussels twelve days ago ensures that the UK can remain in the EU with a special status: outside the Euro; outside Schengen; with an opt-in on Justice and Home Affairs matters, an exemption from ‘ever closer union’ and a new mechanism to limit access to our benefits system for EU migrants.

That deal protects British jobs by ensuring a level playing field in Europe for British business, safeguarding the pound and the Bank of England. It will boost EU competitiveness by completing the European Single Market, prioritising international trade agreements, and cutting the burden of EU regulation. And it provides an emergency brake to limit access to our benefits system for EU migrants and gives us new powers to exclude criminals and to stop exporting child benefits at UK rates.

I think that’s a good deal for Britain.

And as the British people decide whether to take it and remain in a reformed European Union, offering Britain the best of both worlds or to take a leap into the unknown, I want to shine some light on what a future outside the EU might look like for Britain. Because the Leave campaign have so far failed to do so.

On Monday we published a paper setting out the process by which we would exit the EU following a ‘leave’ vote. Today we are publishing a paper outlining the principal alternatives to membership. I am laying the paper in Parliament this morning and it will be available online. I now want to summarise our main findings.

But first, I want to be clear about the process of negotiating an exit, and our future relationship with the EU. Because it would become the defining national project for several years. A vote to leave on June 23rd would trigger a two year window, under the terms of the Treaties, for the UK to negotiate the terms of our exit from the EU. And in the meantime, we will be able to offer British businesses no assurance at all about their future access to EU, or for that matter, to other markets. We will have nothing to say to American, Japanese, Chinese companies looking for a base in which to invest to supply the EU market. Our economy would literally be on hold, whilst our competitors, including our European competitors, forge ahead.

And at the end of two years, there is no guarantee at all that we would have reached agreement, but our exit would be automatic unless every single member of the remaining EU agreed to an extension.

Our access to the Single Market would cease. Our trading agreements with more than 50 markets around the world would lapse, with an immediate and negative effect on confidence, on growth, on investments, and on jobs.

Years of uncertainty for Britain, just as we are getting back on our feet.

And, like any divorce, the negotiations with our former EU partners are likely to be difficult. The leaders of the remaining Member States would have their own pressing domestic political calculations to consider. In many cases people in their countries already think that they’ve gone the extra mile for Britain. They’d be frustrated that having done that, to offer Britain a special – and unique – status in the EU, their efforts had been in vain. And frankly they’d be apprehensive as well, apprehensive of the ‘contagion’ that a Brexit might bring to their own countries.

So let’s be clear, if we reject the special status the Prime Minister has painstakingly negotiated, then we can expect the goodwill that we have seen towards Britain during these negotiations to evaporate with them. The blunt fact is that our former partners in Britain will not feel that they owe us any favours; they will have no interest in helping us to thrive outside the EU.

And to those who argue, as some have done, that “they need us more than we need them”, I say “sadly not the case”. Even if the only factor was trade, and it certainly isn’t, the fact is that in 2014 half of the goods Britain exported went to the EU – just 7% of the goods the EU exported came to the UK.

Our exit negotiation and our attempts to forge some sort of new relationship are likely to involve some tough and protracted discussions.

So what, realistically, are the alternatives?

At different times, the various Leave campaigns have suggested over 20 different models to choose from including the current EU deals with Norway, Switzerland, Iceland, Lichtenstein, Canada, Turkey, Korea, Macedonia. Even Peru and Vanuatu!

But they have been unable to settle on one. In fact, they have deliberately avoided trying because they cannot point to an example which is better than the special status within the EU that we now have on offer. Every other option has significant drawbacks. And the simple truth is that we cannot know what deal a Britain outside the EU would end up with.

The evidence, however, and that is what this paper is about today, suggests that there are three basic models:

– The Norway model;

– The bilateral model. A negotiated bilateral agreement, such as the free trade deals used by Switzerland, Canada, Korea and Turkey;

– or as a default, the WTO (World Trade Organisation) model.

Let me take each in turn.

Norway

Norway, along with Iceland and Liechtenstein, is a member of the European Economic Area (EEA), but not the EU.

And Norway is the non-EU country with the greatest, although still not total, access to the Single Market. It does have the same access in services as the UK has now. But it is outside the Customs Union, meaning that all trade in goods between the EU and Norway is subject to customs checks and Rules of Origin. And it faces tariffs in agriculture and fish.

Norway does also take part in some areas of non-economic co-operation, like counter terrorism. But it pays a price for these privileges. It has to adopt most EU rules, without any say in making them. It pays roughly the same into the EU per person as the UK does.

And, crucially, it is obliged to accept the free movement of people from both EU and EEA countries: migrants in Norway have the same right to access benefits as Norwegians. Today, there is a higher proportion of EU nationals resident in Norway than there is in the UK.

The case of Norway neatly demonstrates the dilemma for Leave: the price of access to the single market is freedom of movement. And the more access to the market they promise, the more empty the boast that they would be able to unilaterally control migration from the EU.

And I say this: If we care about real sovereignty, about being able to shape the decisions which affect us, then the Norway model is definitely not for us.

Bilateral

What if we were to make a bilateral agreement? After all, the EU has a broad range of trade agreements with other countries, such as Switzerland, Turkey or Canada.

Some recommend the Swiss model. But it has taken Switzerland two decades to negotiate more than one hundred separate agreements that it currently has with the EU. Even then, they only have partial access to the Single Market. They face barriers for agriculture and, crucially from our point of view, for services. And once again, they are bound by the principle of free movement of people, with almost four times as many resident EU nationals per capita as in the UK.

Others point to Turkey as a model to follow. Now Turkey of course is a candidate country for membership and has been in a Customs Union with the EU since 1995. It has full access to the single market for industrial and processed agricultural goods, where it is subject to EU regulations, but no access for raw agricultural products nor again, crucially, services.

As part of the Customs Unions, Turkey must align its external tariffs with the EU. And when the EU signs a trade deal with a third country, Turkey must open its market on the same terms. But this is not reciprocal, and the third country is not obliged to open its market to Turkish exports.

Turkey does not take part in policing and criminal justice measures; has only limited co-operation on international security, and it has no say in EU decision-making.

And our conclusion is that the Turkish model would clearly not work for Britain.

What about Canada? The EU-Canada deal has taken seven years and counting to finalise and has still not been approved by the European Parliament! When it happens, and it will happen, it will be the most extensive bilateral agreement the EU has ever made. It gives market access without the free movement of people, and without paying into the EU budget. But Canada is not a European country. And let’s be clear: the Canadian trade deal does not even remotely replicate the access we have as an EU member.

Canadian manufacturers will only have tariff-free access if they meet EU ‘rules of origin’. So Canadian products, like cars, with complex international supply chains may still face tariffs. Canadian financial services providers can’t supply directly to the EU market. They have to set up subsidiaries inside EU member states operating under EU regulations; exporting Canadian jobs. This would really matter for Britain: our services sector is four-fifths (80%) of the UK economy. We are the second largest exporter of services in the world. And the EU is our largest market for those services.

The EU also sets regulatory standards on many products: cars, pharmaceuticals, toys, foodstuffs and Canada won’t have a say over any of them.

The fact is, none of the bilateral free trade models would offer anything like the access we have now to the Single Market and many of them would require adoption of EU regulations and freedom of movement rules. What about Britain’s trade with the rest of the world? We currently benefit from EU trade deals with over 50 different countries. And these deals have been based on the negotiating muscle of a bloc with 500m consumers and a quarter of the world’s GDP. Renegotiating them as a single country would take many, many years. Years in which British businesses would be squeezed out of traditional markets and with no guarantee at the end of the process we could get terms as good as we have now.

Some have said we should focus our attention on deals with the Anglosphere and the Commonwealth. But the EU already either has, or is negotiating, trade deals with all the biggest Commonwealth countries, and none of our allies wants us to leave the EU. Not Australia, not New Zealand, not Canada, not the US. In fact, the only country who would like us to leave the EU is Russia. That should tell us all we need to know.

WTO

Let’s look for a moment now at the default option – the World Trade Organisation rules, which is where we will end up if we leave without a deal agreed. For anyone who wants to ensure a clean break with the EU, the WTO model is the only honest model. WTO rules mean we could sell into the Single Market, but at a price: The EU imposes a ‘common external tariff’ on goods and services from countries outside the EU who don’t have free trade deals agreed.

10% on cars. 30% on confectionary. 36% on dairy produce.

Our exports would cost more and so be less competitive. That will cost British jobs. And if we reciprocated, our imports would cost more too meaning higher prices in our shops.

And that would not be all. Under WTO rules, we couldn’t differentiate between countries. So, for example, if we decided to allow Irish goods to enter the UK tariff-free, we would have to do the same for all 160 countries in the WTO – putting British jobs at risk from foreign competition.

Because, as EU members, the common external tariffs protect our industries from undercutting from outside the EU, while allowing us to import from Europe without tariffs pushing up costs. Outside the EU, it would be all or nothing under WTO rules.

And for our crucial services sector, without a preferential trade agreement, UK businesses would only be guaranteed access under the General Agreement on Trade in Services. This is a much more basic framework, providing much less access to markets.

So on even a cursory inspection, the WTO model does not deliver for Britain. It would be bad for business; bad for jobs; bad for growth. Bad for Britain.

Our choice: leadership of a reformed EU or a leap into the dark
The truth is, the Leave campaigns cannot point to a credible alternative. They are unable or unwilling to address their core dilemma: the price for any significant level of access to the single market for goods, let alone services, is acceptance of free movement of people. The EU has been remarkably consistent in its dealings with other European countries. And the more access to the single market the Leave campaign promises, the more hollow their pledge to limit EU migration.

So what should we conclude from this analysis? That none of the ‘post-exit’ options offer anything close to the best-of-both-worlds, special-status, deal that the Prime Minister has negotiated in the European Union. And the most often cited model, Norway, would offer us, quite literally, the worst of both worlds. Paying as if we remained a member of the European Union, subject to the European Union and obliged to observe the principle of free movement to gain access to the single market that we have now, without any say in how those rules are made and without any say over how the European Union is run.

Negotiating any kind of arrangement with 27 countries we that have just rejected will almost certainly take years, will not give full access to the Single Market without contributing to the budget, accepting all the rules, allowing free movement, and will leave us with no seat at the table. To me, that’s less sovereignty, not more sovereignty.

Balancing the burdens and the benefits, none of the options that are remotely likely to be deliverable comes close to matching the deal that we already have on the table.

So why would we take a leap in the dark?

Why would we risk the effect of years of uncertainty on the British economy?

Why would we take that chance with our children’s future – risking our influence, our prosperity and our security?

When by voting to remain, we can have the best of both worlds in a reformed EU; rather than the worst of both outside. A powerful voice inside Europe; instead of a lonely voice outside. A Great Britain, stronger, safer and better off within the EU.

Thank you.

Philip Hammond – 2016 Speech on Global Uncertainty

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Below is the text of the speech made by Philip Hammond, the Foreign Secretary, at the Savoy Hotel in London on 4 February 2016.

It’s a great pleasure to address such a senior business audience.

Lloyds Business Leaders Meeting
I think it’s true to say that the business and political cycles don’t always coincide.

But I suspect right now is the exception that proves the rule: most of you will be watching developments as we enter the final stages of our EU renegotiation process just as keenly as most politicians.

And I will, of course, talk about those EU reforms later in my remarks: why they’re necessary for the future health of both the British and the wider European economy.

But our EU reform agenda is just one part of a much wider, more ambitious package of reforms, aimed at equipping Britain to compete and win in this 21st Century globalised economy.

As we enter 2016, the world is once again facing economic uncertainty; but this time, unlike 2008-2010, we are simultaneously dealing with a level of global strategic insecurity and instability that we have not seen since the end of the Cold War.

The start of this year of course has underlined just how uncertain the global economic outlook is.

You all know the key statistics.

The IMF estimates that the global economic growth rate in 2015 will be just 3.1% – the lowest for 7 years.

Oil prices dipping below $30 a barrel.

Stock markets around the world volatile, to say the least.

And there’s been significant speculation about the nature of the slowdown in the Chinese economy and the Chinese authorities’ ability to manage it, and what all that means for global growth prospects.

Combined with this economic instability, the global security environment remains extremely volatile.

Just four weeks ago, the DPRK announced the test explosion of what it claimed was a thermonuclear, or hydrogen, bomb, reminding us all of the ambitions of North Korea’s illegal nuclear programme.

And despite the cooperation with the international community that led to the nuclear deal, Iran has continued to test fire ballistic missiles, in violation of UN Security Council resolutions.

Meanwhile the old adversary, Russia, is rearming at an alarming pace, despite its economic difficulties, and challenging the international community with aggressive behaviour in Syria, Ukraine and indeed closer to home as Cold War-style probing flights test our defences on a regular basis.

The migration crisis in Europe, driven by the civil war in Syria and the rise of Daesh in Iraq and Syria, continues, and represents a real political threat to some of Europe’s Governments.

If we add to these challenges the spread of Daesh and its affiliates to North Africa and parts of Asia; the civil war in Yemen; continued tension across the Middle East; and recent terrorist outrages in Europe and elsewhere in world; and the strategic impact of oil prices on critical and / or fragile countries across the Middle East, it all adds up to a picture of serious instability across the world.

A potentially toxic mix of threats that represents a grave challenge to UK and to global security.

So what is the Government’s response to this broad ranging set of challenges?

You all know just as well as we know, that businesses, and thus, economies prosper when uncertainty about the long term business environment is minimised and confidence is maximised.

We, of course, cannot be immune from the international climate, but domestically we can and we will seek to insulate the UK economy as much as we can through our long-term economic plan. We are continuing the transition from a low skills, low wage, high tax, high welfare economy; to the higher skills, higher wage, lower tax, lower welfare country that we want to see.

In 2014, we were the fastest growing economy in the G7; and in ‎2015 we were up there again, as one of the two fastest-growing major advanced economies alongside the United States.

We’ve grown almost three times faster than Japan, twice as fast as France and faster than Germany.

We’ve backed business, cutting Corporation Tax from 28% to 20% over the last Parliament, one of the biggest boosts British business has ever seen – with further phased cuts to 18% by 2020 still to come.

And, despite the dire warnings about our austerity programme from the doom-mongers and those who wanted to spend and borrow more, there are now 2.7 million more private sector jobs than there were in 2010; and over 900,000 more British businesses.

Living standards are rising.

But as we’ve recovered from the recession, the old structural weaknesses that have plagued the British economy for decades have re-emerged into the limelight:

Failings in our education and training system;

A welfare system that has too often acted as a disincentive to work;

And an infrastructure deficit that will take decades to correct.

And I am proud to say that we are tackling these familiar challenges – starting during the Coalition, despite the economic and fiscal difficulties that we faced, and continuing under this Government.

And all the while reducing the public sector deficit steadily to our target of delivering a surplus in 2019-20.

Reforming our schools and our vocational training; transforming student finance to ensure our universities have the funding they need to compete in the global marketplace for talent.

Fixing a welfare system that politicians – of all parties – have talked about for years, but always shied away from reforming. We’re fixing that welfare system so that work really will pay, all the time, for everyone.

And investing in infrastructure, right through the difficult years of fiscal austerity, and now increasing by 50% our investment in roads and rail to give Britain the networks it needs – as well as facilitating massive private investment in Britain’s creaking power generation sector.

In short, and if I may coin a phrase, we are fixing the roof.

And when it comes to the global economy, we reject the advice from those who say we should cut ourselves off from the rest of the world – somehow isolate ourselves from the world’s problems whether they are economic or political.

In a globalised, interconnected economy, sustainable economic growth will not come from isolation.

We have to engage with the fastest-growing economies of the world, and the economies with the greatest potential, like never before.

And we are.

Through the Spending Review, we have protected the crown jewel of the Foreign Office – our global diplomatic network – and given it a mandate to lead the charge for British businesses across the globe.

Now I know that Diplomats can’t do your overseas business for you. And we won’t try to.

But what we can do is coordinate British business approaches to key opportunity sectors; lobby foreign governments for access and for fair treatment; and help to create the most benign environment possible for British business through advocating and supporting liberalisation and reform in the fastest-growing economies.

We’re reforming UKTI, as Francis Maude I suspect has already explained to you this morning, making it leaner and more focused on the markets where we, Government, can make the biggest difference to what you, business, are doing.

And I can’t mention UKTI without thanking Lloyds for your support for the GREAT campaign, which is has done huge amounts to boost Britain as a brand around the world.

With China, we’re forging a new, 21st Century partnership – demonstrating in deeds our stated intention to be China’s partner of choice in the West; and to do that by being the Western market most open to Chinese investment.

And we are also opening up new markets for British businesses back in China, creating greater access to the world’s fastest-growing consumer market.

And it’s not just China.

We’re building a closer relationship with India, building on Prime Minister Modi’s visit at the end of last year and the agreements reached by the Chancellor and Finance Minister Jaitley on financial services, infrastructure and technology.

We’ve seen exports to South Korea more than double since 2010.

We’re the driving force behind efforts to deliver an EU-Japan Economic Partnership Agreement that could deliver an extra £6 billion in UK exports.

And now, Britain is the leading advocate, working with the US and other like-minded EU partners, for a new Transatlantic Trade Deal – TTIP – that has the potential to add almost £100bn annually to Europe’s GDP, and £10bn to Britain’s, bringing huge benefits for particularly the City, but for British businesses in general and for the British people.

Reforming the EU to make it more competitive

And a core part of our plans to boost the international competitiveness of the UK economy is the package of EU reforms that were outlined in documents published by Donald Tusk on Tuesday.

The Prime Minister has said this is a deal that is far from done.

And some of the most important details are still up for negotiation in the run up to the February European Council.

But I believe that the framework represented in that package, if – and only if – we can get agreement on the details, has the potential to address the four most important areas of concern about our EU membership for the British people.

The text draft delivers substantial progress in each of those areas – welfare, sovereignty, competitiveness and governance of the Eurozone.

Now I know that not all of these baskets of issues are as important to business as they are to the British electorate and I won’t go through the detail of all of them.

But I do want to address the two baskets that business leaders tell me are of greatest concern to them: the arrangements for a fair settlement between the Eurozone and the non-Eurozone countries in the EU; and the competitiveness agenda.

First, competitiveness.

We all know the problems created by the over-regulation and bureaucracy emanating from the Commission in Brussels that imposes burdens on business, limiting growth and costing jobs.

Making the EU more competitive in the global economy is crucial to Britain’s continued membership.

And the good news is that, after many years of a, frankly, cavalier attitude to Europe’s declining competitiveness, most of our EU partners, and certainly the Juncker Commission – one very nasty recession and 7 years of persistent high unemployment later – do now get it. That we do need to be competitive if we are going to maintain our current position.

The separate draft Council Declaration on competitiveness that was published on Tuesday sets out the significant steps the EU will take to deliver progress in all the areas that we’ve been pushing:

– progress towards completion of the single market, including in energy, digital and services;

– on completing international trade deals, including TTIP;
and, for the first time, introducing sector-specific regulatory burden-reduction targets, with an accountability mechanism, which will be particularly important to small and medium-sized businesses.

Secondly, in the equally crucial area of ensuring that Britain – and in particular, our hugely important financial services industry – will not lose out as a result of our decision not to join the Euro, we have secured the protections that we need.

We want the Eurozone to succeed. The Eurozone countries are our biggest market, and we want to be able to continue to grow our trade with them.

But we cannot allow Britain to be bullied into changes to facilitate Eurozone integration that would be bad for Britain.

We cannot accept the British economy, British businesses and British workers losing out as a result of changes imposed on the EU by the Eurozone countries who now form a Qualified Majority in the EU.

Now, for the first time, in these texts we have proper recognition that the EU has more than one currency, with explicit recognition that further Eurozone integration must not discriminate against non-Eurozone members, like the UK; that any discrimination based on the currency of a member state is unlawful.

If we can deliver this deal as drafted, never again will Britain be forced to bail out Eurozone countries; and never again could the EU attempt anything as clumsy as its “location policy” seeking to limit the clearance of Euro-denominated financial instruments to institutions located in Eurozone countries.

And underpinning these measures is a new mechanism – a brake that we can pull – to ensure that if these safeguards are not being properly applied in accordance with this agreement, the issue in dispute will be addressed at the European Council.

Now as I said earlier, this is far from being a done deal.

And there will be some robust discussions with the EU institutions and with our EU partners on these two baskets – and on the sovereignty and migration issues that are of even greater salience with the British people – in the run-up to the February Council in two weeks time.

But we are confident that we can reach an agreement that delivers what we need. But we are clear that we’re in no rush to do this.

Getting the right deal is more important than getting a quick deal; if it can be done at the February Council, good. If it can’t be done at the February council we’ll continue working on it. And only when the deal is done will we decide the timing of the referendum that will put it to the British people. But whether it’s sooner or later, that referendum is a commitment we have made and a commitment that will be delivered.

And as the public debate on our EU membership reaches its crescendo, I would urge all of you as business leaders, on whatever side of the argument you come down, to please get involved in that debate.

And I know, from my many discussions with business leaders, the frustrations that many of you have with the EU and actions that have, in the past, seemed like an attack directed at the success particularly of the financial services sector in this city.

But I also know that most of you will regard access to the single market, and Britain’s unique position as the first point of investment for many foreign companies into the EU, as of paramount importance to your future success.

And I say this to you: Business has a crucial role to play in this debate. These are complex economic issues and people who work for you will expect that you understand these issues better than they do, that business is in a position to make an objective, dispassionate judgement about the balance of advantage for Britain staying in the EU versus leaving it. And they deserve to hear it from those who are qualified to opine on all sides of this debate before they make up their minds, so that when they come to cast their votes, however they choose to vote, they have done so in full possession of the facts.

Delivering reform in the future

For my part, the most significant part of this deal is not the detail.

It’s something more fundamental.

It’s the fact that this negotiation has happened at all and that, if we get agreement at the Council meeting later this month, we will have delivered significant and enduring change to the way in which the European Union operates.

Because for the last forty years the European Community, now the European Union, has operated on a one-way ratchet.

It has accrued more and more powers from the Member States’ Governments, extending its areas of competence far beyond our membership of the single market that was the basis of the last European referendum in this country in 1975.

But if this deal is agreed and implemented we will have passed the peak of European Union interference in the UK.

The tide will be running in the right direction – and we see more and more people across Europe aligning themselves with our views on competitiveness, burden reduction and subsidiarity.

More and more governments being elected in the European Union countries that agree with our vision of the future of Europe.

The ratchet will have been broken – in favour of a more balanced, less ideological, more pragmatic, two-way mechanism.

Other countries, particularly those in the Eurozone, will wish – and will need – to integrate further in the future.

But Britain and the British people have never been signed up to ever closer union.

We have never believed in the one-way ticket to economic, social, fiscal and political union – the inevitable destination of the Eurozone, if it is to succeed.

And we have never believed that the key decisions affecting how this country is governed should be made in Brussels rather than just up the river, in Westminster.

The draft text presented this week demonstrates that powers can flow back from Brussels to the Member States; that restrictions can be applied to new migrants; and that the powers of Eurozone Member States can be fettered to protect the interests of the non-Eurozone Member States.

But let us be clear: whatever agreement is reached will not be the end of the process.

No-one is asking, no-one is suggesting, that Britain should stop fighting for open markets and free trade if we stay inside the European Union.

No-one is asking us to endorse as “final” or “perfect” any part of the EU arrangements.

Britain can, and will, continue to fight for an outward-facing, open-market, non-interventionist EU from the inside as we have done for years and, if I let you into a secret, as many of our fellow Member States would want us to carry on doing in the years ahead.

Britain is the second largest economy in the EU; and may well become the largest in the next 20 or so years.

And if the British people decide that our future is in the EU, that should be a future of leadership, a future in which Britain shapes the European Union for the future not grumbles from the sidelines about the direction of travel.

So Ladies and Gentlemen, I return to the theme I set out at the start

With a potentially toxic mix of instability in the international markets and a particularly volatile global security environment, charting a clear and certain course is vital to maintaining our economic security, the foundation upon which our national security is built.

Whether it’s the reforms to our tax system, to our welfare system or to the business environment here at home, the crucial international trading relationships we’re strengthening abroad, our commitments on Defence spending and the overseas aid budget or the renegotiation of the terms of our membership of the EU, we are taking the actions needed to ensure Britain’s prosperity.

And to ensure Britain’s national security.

We can’t be immune from external shocks.

And we cannot isolate ourselves from global threats.

But by enacting our bold reforms, backing business, backing job creation, strengthening our Armed Forces, boosting our competitiveness and building up global trade we will maintain and grow Britain’s position as one of the most competitive and dynamic developed economies in the world, and one of the most capable partners in defending the Rules-Based International System.

Business, and business leaders, are and will be a vital part of that success.

And I and all of my colleagues in Government look forward to continuing working with business to deliver it.

Thank you.

Philip Hammond – 2012 Speech to the Royal College of Defence Studies

philiphammond

Below is the text of the speech made by Philip Hammond, the then Secretary of State for Defence, to the Royal College of Defence Studies on 23 July 2012.

Introduction

Thank you for inviting me here to speak to you.

And as you approach the end of your course I know you will have made the most of the opportunity presented here at the Royal College of Defence Studies to get to grips with some of the very complex issues facing defence and defence diplomacy.

Many of which are common to the United Kingdom and its allies and partners.

The international nature of this course is one of its strengths.

And your generation of leaders will have a key role in addressing these challenges; and in forging the bilateral and multilateral defence relationships that the defence and security arrangements of every country, even the United States, is likely to rely on in the future to protect its national security.

So I want to talk this morning about some of the strategic challenges we’re facing in UK defence and more widely.

And pose you some of the questions that will have to be answered during your generation’s tenure in the top jobs.

Strategic picture

Strategically, the world is a far less certain and, in some ways, a less threatening place than it was 25 years ago.

Then we faced an adversary with the means and the intent, if an unpredictable and paranoid leadership.

Nowadays at least the paranoid leaderships are still struggling to obtain the means!

More broadly technology is racing ahead; changing the way we protect critical infrastructure more likely to be rendered inoperable through a computer virus than a bombing raid, requiring multi-level C4ISTAR; capabilities which are not as obvious to the public as an aircraft carrier, a tank or a jet.

The rise of ‘invisible’ capabilities like this presents a challenge to politicians who need to demonstrate to the public who are paying for them, how we are spending their money and how we are keeping them safe.

At a geo-political level, the dispersion of power that began as the Berlin Wall crumbled has gathered pace with the emergence of new potential military powers and greater strategic competition between growing economies, both regionally and globally.

Alongside this, the impact of globalisation means there are diminishing levers available to individual national governments to effect change, manage their economies, and protect their national security.

The economic realities facing the mature economies show how linked we are; how easily contagion can spread.

In the medium term, those charged with the task of protecting national security, in economies set for relative decline as the pattern of wealth adjusts, will have to do so in an environment of constrained resources

This is the future in which you will lead in your respective services and in your respective countries.

And although this future will be unpredictable and volatile, we can clearly see some of the issues that will dominate.

Economic means

First, the economic backdrop.

Economic strength underpins national security.

It is a requirement for generating military capability.

Look at what is driving the changed pattern of military power today.

Look at what settled the Cold War.

Without strong economies and public finances it is impossible to build and sustain, in the long-term, the military capability required to project power and maintain strong defence.

That is why, today, the debt crisis should be considered the greatest strategic threat to the future security of western nations.

And it is also why, although NATO has often talked of distributing the burden of collective defence more equitably, in the current fiscal climate, it is essential that we no longer talk, but begin to act.

The reality is that too many member states are failing to meet their financial responsibilities to NATO, and so failing to maintain appropriate and proportionate capabilities.

Too many are opting out of operations or contributing but a fraction of what they should be capable of.

But we have to be realistic.

The economic and fiscal circumstances in which most developed countries find themselves makes this problem difficult to fix in the short term.

Across the alliance, aggregate defence expenditure is certain to fall in the short term and, at best, recover slowly in the medium term.

So more money is not going to be the answer.

So, the challenge is to maximise the capability we can squeeze out of the resources we have available.

Political will

Which brings me to my second point: alliance structures are only as strong as the political will of individual nations to meet their responsibilities.

It matters that NATO countries meet their commitments on funding defence, to ensure the means to protect our collective security.

But it is no good having the means if you lack the will to use them.

Libya showed what can be achieved when many of the stars are in alignment:

The UN Security Council, NATO, regional powers, the political will of those with the capabilities to act, and of course the will of the majority of the Libyan people.

But it also showed quite starkly the imbalances in NATO.

Imbalances in the hardware (and increasingly software) available to the alliance from national contributions.

But also imbalances in the will to act, the will to deploy, the determination to take part and commit nationally owned capabilities that have absorbed many billions of taxpayers’ cash in order to make us all collectively safer.

There are untapped reserves of resource in European NATO which need to be tapped to support our collective security.

Over the next few years, the United States will put into practice its ‘tilt’ to the Asia-Pacific theatre, a focus that is very much in our interests as the US rise to meet the strategic challenge set by the emergence of China.

The US will expect Europe to do more to of the heavy lifting to ensure security in our own region, and our near abroad: the Middle East, North Africa, and the Horn of Africa.

How European nations respond to this pivot will set the context for the multilateral environment British armed forces and others will operate in.

This brings me to my third point: cohesion of purpose.

Meeting threats

We need to confront, head on, a real tension within the NATO alliance: basically to answer the question, what is NATO for in the 21st century?

The threat from a monolithic Soviet Union no longer exists.

And the approach to Russia differs across the alliance.

For those of us further back, west of the old iron curtain, the threat is no longer territorial, but global terror and rogue states.

So a passive defence of national territory is no longer adequate protection for our citizens.

We are starting from a reality that it is much better to fight in the space of our adversaries rather than at home.

Of course this is relatively easier to do if your adversary is a terrorist, rather than a state.

And this requires rapidly deployable, adaptable, agile, flexible, expeditionary forces.

So this is what the UK’s strategic defence and security review was all about; responding to these 3 drivers: the economics, the evolving alliance pattern, and the evolving threat pattern.

Shaping the spread of capabilities we will maintain, in the face of fiscal restraint, to the future character of warfare, and to maintain national security by acting at distance.

But.

The future posture of Russia is by no means certain.

And with political change sweeping across North Africa and the Arab world, change that is far from at an end, far from predictable, and has the potential to leave a less secure and less safe neighbourhood, we cannot rule out the return of a strategic threat to territorial Europe.

So this has been about striking the right balance between our own direct national needs and those of the NATO alliance upon which we continue to rely for collective security.

And recognising the likely future shape of operations in that context.

The future shape of operations

You will have had the opportunity during your course to look at current operations and to draw lessons from them for the future character of warfare.

Libya showed the utility of precision weapons in an era where minimising collateral damage and civilian deaths will be part of the strategic objective.

And it also exposed shortfalls in the European contribution to NATO.

But Libya has tested another concept.

The utility of air power as an alternative to ‘boots on the ground’.

Libya has shown how air power can provide politicians like me with political choices short of intervention on the ground.

But I have not drawn the conclusion that ground intervention will be unnecessary in the future.

There was a ground campaign in Libya;

It could not have proceeded without NATO airpower support.

But it was decisive.

And it was undertaken by Libyans, not NATO troops.

After 10 years of enduring campaigns, you do not have to be a political sage to recognise that the public’s future appetite for open ended interventions is limited.

Of course, we do not yet know the end outcome of the Libya intervention.

Displacing the old regime was, relatively, the easy bit.

And what comes after is not yet completely clear.

So modern warfare requires firepower and political sensitivity;

And that requires a deep understanding of the situation on the ground.

In Afghanistan, our troops have had to wear the face of both the warrior and the diplomat, fighting one moment, and taking tea with the elders the next.

The political dimension of warfare is crucial to success.

You can win the battle but lose the war unless you are focussed on what you really want to achieve.

And it will usually be the case that force of arms alone cannot deliver victory.

That is certainly the case in Afghanistan.

That is why the comprehensive approach, marrying politics, finance, military capability, diplomacy, development, not just across national government, but internationally too, will be so important in the future.

So, against that backdrop, let me bring this discussion closer to home and say something about the future shape of the UK’s armed forces.

The future shape of UK armed forces

Afghanistan is still very much the priority in terms of operations.

But the end of the combat mission is now in view.

And, intellectually, we have moved on to look beyond 2014 at the shape of the forces we will need for the future.

The needs of the mission in Afghanistan, and before it Iraq, have dominated for a decade.

For all the dangers and complexities of those missions they have provided some predictability.

People have known, often 2 years in advance, when they are going to be deployed; they know how long they are going to be deployed for; often they have known exactly where they are going to be deployed to before they go.

We have bent our military, our army in particular into the shape required for this 6 month rotational enduring conflict in Afghanistan.

But, in the process, we have lost some contingent capability.

Post 2014, the move from enduring campaign to contingency signals an end to the predictability of the roulement cycle;

It heralds a future force geared toward being ready to deal with the unexpected and unplanned.

And we make this change against a background of fiscal constraint driven by the economic health of the country as a whole, and the legacy of mismanagement in the defence budget in particular.

The transformation we are undertaking is challenging, probably the most complex change programme being undertaken anywhere in the western world at the current time.

The black hole that existed in the defence budget, the weakness of the equipment programme, and the shape of the country’s finances, have militated against simply bailing the budget out.

It would be hard to justify excluding the defence budget, the fifth largest call on the public purse, from the programme to exert fiscal control.

Balancing the books and creating a sustainable forward defence programme has meant reducing personnel numbers, retiring some capabilities, and taking some calculated and managed risks.

But as I told an audience in Washington last week, it is far better to have a smaller but well-equipped and well-trained force; with an equipment programme that offers a high level of confidence that we will deliver it; giving our armed forces the ability to plan for the future.

With the announcements I have made over the last couple of months on the defence budget, the equipment programme, army 2020 and the reserves we have put in place the vision set out in the SDSR of sustainable armed forces, equipped with some of the most capable and most technically advanced platforms in the world, configured to respond to the unexpected and to go anywhere to do it.

And we have also set out a blueprint for the reform of the management of defence:

Renewing the way strategic direction is provided;

Pushing authority and accountability down the chain of command;

Encouraging innovation and budgetary responsibility;

And developing a new strategy for the procurement of defence equipment.

Seeking to instil private sector skills and disciplines to our acquisition process, driving up productivity, by bringing a private sector partner into the process.

And creating clearer and harder relationships between the different functions in the defence procurement chain.

To read some of the comment in the media, often fuelled by retired officers whose view of the world was shaped in the Cold War era, you would think that Britain was getting out of the force projection business altogether.

Nothing could be further from the truth.

Even when this programme is complete, we will still expect to have the fourth largest defence budget in the world;

Exceeding the NATO standard of 2% of GDP;

Spending £160 billion on our equipment programme over the next 10 years;

Delivering the next generation of military technology and platforms that will help provide a battle-winning edge;

So this is the picture:

Smaller armed forces, but better equipped and confident that they will receive the equipment that has been promised;

Agile, high-tech, capable of conducting the full spectrum of operations;

Structured to allow rapid reaction and expeditionary warfare;

Able to deploy overseas and sustain a brigade-sized force indefinitely, or a division-sized force in time of need.

Able to command in the coalition context and more interoperable with our main allies;

Fully integrated between regular and reserves, with predictable obligations for the reservists that will require a real commitment to service;

And a more systematic use of contractors for support and logistics; allowing greater focus of military manpower on fighting tasks;

And, crucially, structured to be able to generate mass and capabilities if the threat picture changes or the fiscal position eases.

Conclusion

These are the British armed forces that some of you will be leading in, or for our partners overseas, the British armed forces you will be operating with.

And many of you who are from overseas will be seeing similar transformations in your own militaries over the next few years.

All of you are here because you have been identified as having the qualities needed for top level responsibilities.

You know that the moral component of leadership is one of the most important.

If this transformation is to be realised, and national and collective security to be guaranteed, you will need to be focussed, positive, full of ideas, prepared to change, to challenge convention, and willing to drive change in others, inspiring those around you.

And there is a challenge at a political level too, for people like me.

As Secretary of State, I have responsibility for defence but as a cabinet member, I have responsibility to look wider and help to balance national priorities.

When an immediate or existential threat shrinks, the public appetite to fund defence shrinks with it.

We are lucky in the UK, particularly compared to other European nations, that the public feels a strong affinity with our armed forces and has a greater inclination to give defence a higher priority than many of our neighbours.

But the legacy of Iraq and Afghanistan has undoubtedly left us a public which is without appetite for enduring campaigns.

And politicians need to think carefully about how we are going to maintain public support for defence spending in the years ahead;

Especially when more and more of the capabilities we are investing in will not be traditional military assets, and indeed will often be invisible to taxpayers.

There are many actions in hand to manage the transition from a period of enduring campaigns to one of contingent readiness; and I have described a few today.

But we have answered by no means all the questions:

Questions about the future focus of NATO;

About how we maximise the military effect that we get from limited budgets across the alliance;

About the balance of capabilities between traditional kinetic effect and investment in C4ISTAR, cyber and space;

About the type of warfare we need to prepare to fight;

And about the future of European defence industries in the face of rapidly changing export markets and shrinking domestic purchasing power.

These, and many other questions, will form the challenges that the next generation of military and political leaders will face over the coming years.

And I look forward to hearing your thoughts on them!

Philip Hammond – 2015 Speech on Somali

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Below is the text of the speech made by Philip Hammond, the Foreign Secretary, in New York, United States on 9 November 2015.

It is an honour to follow the Prime Minister of Somalia who is working so hard to rebuild his country. Let me also thank the Secretary-General, and you Ambassador Antonio for all the African Union has done to ensure that the United Nations and African Union are working together to bring peace and prosperity to the people of Somalia.

Our purpose today is to discuss what more we can do to defeat Al Shabaab and deliver a better future for Somalia. But before we do, I think it is helpful to remind ourselves of the past.

Just four short years ago, inside Somalia, Al Shabaab controlled major cities, including Kismayo and the capital, Mogadishu. The security environment made trying to run a business a high risk venture, where owners risked their goods, their property and, sometimes, their lives.

And this affected all of us directly too. In 2010 alone, there were 174 pirate attacks and Somali pirates held 404 hostages.

Fortunately, there has been much progress.

Al Shabaab is on the back foot, with AMISOM and the Somali National Army now controlling 80% of Somali territory. And Somalia’s economy is reviving, with GDP growth on the increase and shops and businesses opening at ever increasing rates.

And off the of shores Somalia, there have been no successful pirate attacks for over 2 years, as the Prime Minister said.

I am pleased to be able to describe this progress, as the UK has long recognised the need to build enduring peace and security in Somalia.

Our commitment is clear and we have invested heavily. We are Somalia’s second biggest bilateral donor. We have opened an Embassy in Mogadishu: the only EU member state to do so. And we have strong personal links, with a thriving Somali diaspora in the UK.

But we must today take time to recognise and pay tribute to the bravery and sacrifices made by the AMISOM and Somali National Army troops on the frontline of this fight.

And we should pay tribute to the Federal Government of Somalia for the commitment they have demonstrated in helping to steer Somalia towards completion of the federal map and a permanent, sustainable, political settlement.

I also commend the vital role of the UN. Nick Kay has worked tirelessly since July 2013 as the SRSG to ensure the UN has been at the centre of international coordination and support for Somalia under difficult conditions including the tragic loss of seven UN civilians. We are very grateful to him and his team for everything they have done.

I am also grateful to UNSOA, the UN’s most direct and tangible contribution to countering terrorism and extremism in the Horn of Africa. The successes of AMISOM and the Somali National Army in combating Al Shabaab would have been impossible without the essential logistical support the Mission provides.

It is clear that UNSOA has been under-resourced; that it has been operating at the very edge of its capabilities. And so I’m pleased that today, we have all agreed on the importance of putting that right: and I thank you for supporting the Resolution that was put before us today.

But the challenge for all of us, Somali and non-Somali alike, is to sustain effort and momentum. And to be fully coordinated as we do so.

On security, that work has started. The President has committed to significant security sector reform and I urge him and his Government to press forward with the implementation of those reforms. The UK will continue to play its part. As our Prime Minister announced here in September, we will deploy UK military logistical, engineering and training expertise to reinforce UNSOS in support of the African Union peacekeeping mission in Somalia.

Building security and stability are key, but the foundation on which they rest is political progress. And in 2016 the eyes of the world will be on Somalia. Conducting a credible electoral process in 2016 is critical. Failure to do so would risk undermining the collective effort to defeat Al Shabaab and all that has been achieved so far. It would risk undermining the international community’s support for Somalia. But most importantly, it would undermine the right of the Somali people to hold their leaders to account.

Ensuring a credible electoral process will allow Somalia to show the world just how much progress has been made since 2012. It will quieten the remaining sceptical voices who say political renewal can’t be achieved. And it will help in ensuring the international community remains committed to supporting Somalia on the right path: a path towards a more secure, peaceful future.

The UK remains committed to supporting progress in Somalia. I urge the Council, and other international allies to continue their commitment to Somalia. Unity of purpose and effort will ensure success.

Over the coming year, our commitment must be shared by all across the political spectrum in Somalia. Personal differences and vested interests must be set aside, for the good of the whole nation. As this Council has set out in Resolution 2232, all key actors and institutions in Somalia, including Parliament, should engage constructively to ensure progress. Only then can we truly say Somalia has turned a corner.

Thank you.

Philip Hammond – 2015 Speech on Syria

philiphammond

Below is the text of the speech made by Philip Hammond, the Foreign Secretary, at the United Nations Security Council in New York, United States, on 18 December 2015.

Thank you Mr. President.

Let me begin by thanking the Secretary-General, and his Special Envoy Staffan de Mistura for all that they are doing to bring the Syrian parties together.

And let me also thank you Secretary Kerry for the characteristic drive and energy that you have brought over recent months to this process in establishing the International Syria Support Group. This has given new international momentum towards the resumption of Syrian-led talks and has brought us to this important occasion today.

The resolution we have adopted today is a further step in this work. Sadly, it is far too soon for any of us to predict an end to the Syria conflict, but I hope that we will look back on today as a significant step in that direction. Frankly, on Syria this Council has too seldom found the unity it needed to live up to its responsibility for delivering peace and security, despite some useful but only partially implemented Resolutions. This has to change.

No country, no person who has been involved in Syria’s destruction in the last four years can take any satisfaction from what has happened. On the Syria dossier we have to concede we have all failed; we have all been losers; but by far the greatest losers are the people of Syria themselves. We have to do better and we have to do better fast if there is not be still more suffering.

The participants in the ISSG came together behind a single aim: to support the Syrian parties to find an end to the conflict and tackle the terrorists currently operating in their country. We all share the sense of urgency which comes from witnessing the continuing deterioration of the humanitarian and security situation in Syria. The Syrian population, over 250,000 of whom have been killed and millions more forced from their homes, have borne the brunt of this conflict. This is not a humanitarian disaster; it is a humanitarian catastrophe.

The ongoing indiscriminate use of weapons on civilians, especially artillery and aerial bombardments, including barrel bombs, continues to cause terror, destruction and civilian deaths. And while Daesh poses a real threat to Syrians as well as to the wider region, it is Asad who bears the responsibility for the majority of the deaths in Syria.

Mr President,

I commend Saudi Arabia for convening a broad cross-section of representatives of the Syrian opposition in Riyadh earlier this month. The agreement reached at that meeting in Riyadh and the formation of a high negotiating committee showed the determination of the Syrian Opposition groups to come together, whatever their differences, to play a crucial, constructive role in talks. They reaffirmed their commitment to implementation of the Geneva Communique, working towards a managed transition away from Asad and a pluralistic future for Syria.

I welcome too Jordan’s efforts to build consensus on identifying terrorist groups operating in Syria. Whilst it is for this Council ultimately to decide to designate any such groups, the ISSG is in a privileged position to provide information, analysis and advice to the Council to assist it. We believe that it will take time to mature that view and we are able to test which groups are willing to commit to a political process and a ceasefire.

Mr President,

I would like to turn to the content of the Resolution and highlight the areas that will be critical to the progress of talks.

First, all of us – both in this Council and in the broader international community – want to see a national ceasefire established. To have a realistic chance of success, a ceasefire must be closely aligned to progress on political transition and talks between the Syrian parties and under UN auspices. We’ve seen previous attempts to end the conflict in Syria undermined by a lack of determination by the parties to contribute productively to talks.

It is critical that the voices of all Syrians are heard in this process, including Syrian women and members of Syrian minorities.

Second, there needs to be confidence amongst the parties that the political process will deliver real results, without which neither the talks nor the ceasefire will be successful. This will not be easy: 5 years of conflict has eroded confidence.

Therefore all parties must undertake Confidence Building Measures, some of which are identified in the resolution we’ve passed today. We welcome the work being undertaken by the UN to this end, and towards modalities for a ceasefire as mandated by this Resolution.

All parties have a duty to take care in their military actions not to cause the death of civilians whether by deliberate or by reckless targeting. The indiscriminate use of weapons, especially the use of artillery and aerial bombardments including barrel bombs, must stop. Medical facilities and schools have increasingly become a target for aerial bombardment, something that is abhorrent to all of us and must stop.

All parties must adhere to their duties under International Human Rights and International Humanitarian Law. They must allow humanitarian agencies rapid, safe and unhindered access throughout Syria by most direct routes. There are 13.5 million Syrians in need of humanitarian assistance. These people need to see a change to their lives if they are to have confidence in this political process and to feel its benefits. The UK is the second largest bilateral donor to the humanitarian effort in response to the Syrian conflict after the United States. But let us all do more on this front.

This resolution also repeats a commitment to political transition in Syria, following the principles of the Geneva Communiqué in full, and leading to free and fair elections under a new Syrian constitution within 18 months. This will involve the establishment of a Transitional Governing Body with full executive powers and representative of all Syrians, which provides the framework for talks and an end to the conflict.

This process necessarily involves the departure of Bashar al-Asad. Not only for moral reasons, because of the destruction he has unleashed upon his own people, but also for practical reasons, because it will never be possible to bring peace and unity to Syria as long as he remains in office. But we must and will protect the institutions that are necessary for the future governance, and that will be possible with a representative Transitional Governing Body and with the support of the ISSG.

Mr President,

Whilst we must seek to end the conflict in Syria, especially the violence that is directed against civilians, we must also join in confronting the threat posed by Daesh and other extremist groups in the country. An end to the civil war in Syria is critical to tackling Daesh in the long term. We are all clear that terrorist groups must not and will not benefit from ceasefire we are promoting.

A key consideration for the Syrians in the establishment of the Transitional Governing Body will be the fight against terrorism. In this fight they will have the full support of the ISSG and of the Global Coalition. Following the appalling attacks in Sinai, Beirut, Ankara and Paris, this Council unanimously decided to adopt resolution 2249 which calls on countries to use all necessary means to combat Daesh. The UK responded to this resolution by extending the airstrikes we were already carrying out in Iraq against Daesh into Syria.

In this regard it is vital that those countries that claim to be fighting Daesh do what they say, rather than directing the bulk of their attacks against non-extremist opposition groups. There is clear evidence over the last weeks that the weakening such groups has created opportunities for the expansion of Daesh in some areas, the very opposite of the stated objective.

Mr President,

As well as focusing on the immediate threats, we must also prepare for the future in Syria. We must affirm our commitment to assist in the post-conflict reconstruction of the country. Next February, in close partnership with Germany, Norway, Kuwait and the UN, the UK will co-host a conference in London on humanitarian support for Syria including a focus on civilian protection as well as planning for stabilisation. Of course Mr President, that conference will seek to raise the funding that is necessary to meet the United Nations appeal to support those displaced by the humanitarian crisis. But the UK is also committed to support post-conflict reconstruction efforts in Syria and has already committed to provide at least 1.5 billion dollars to this work in the long term in addition to the over 1.64 billion dollars we have so far given in humanitarian aid and I hope in February we will see others committing to both the immediate challenge and to the long term challenge of reconstruction.

In conclusion Mr President,

The conflict in Syria is now almost 5 years old. In that time more than 250,000 Syrians have been killed. We all have a duty to prevent further slaughter.

Despite the important step we have taken with today’s Resolution, despite the progress we made in Vienna, despite the important steps forward made at the meeting in Riyadh the week before last, there is still a very long way to go.

And to have a chance of success, the United Nations will need the clear and continued support of the International Syria Support Group and I know that I can say that it will have the support of that group.

But above all, we need Syrian leaders of all persuasions to take responsibility for the future of their country and to take the tough decisions needed to bring about a lasting political settlement and an end to the conflict.

Because we can help, but only Syrians can bring an end to Syrian suffering.

Thank you.

Philip Hammond – 1997 Maiden Speech in the House of Commons

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Below is the text of the maiden speech made by Philip Hammond in the House of Commons on 17 June 1997.

I am delighted to make my maiden speech in the debate on this short but important Bill, which will have a significant effect on many of my constituents.

A number of my hon. Friends who are new Members have already made their maiden speeches. My tardiness owes something to Disraeli’s advice to a new Member: “It is better they wonder why you do not speak than that they wonder why you do.” It must be said that if I were looking for support from my colleagues, my timing has not been perfect; but Conservative Members are not so numerous that we can afford to carry passengers indefinitely and, for better or worse, the time has now come.

I have the privilege to represent the new constituency of Runnymede and Weybridge, which was formed largely from the former Chertsey and Walton constituency, with a piece of North-West Surrey attached to it. The boundary commission seldom wins friends when naming new constituencies, but that much-maligned body has surely got it right this time in including the historic name of Runnymede in the title of a constituency for the first time.

I am sure that many hon. Members envy me a constituency which stretches from the Wentworth golf course in the west to the St. George’s hill course in the east, by way of another five first-class courses. It is, perhaps, in the interest of diligent pursuit of parliamentary duties that such a constituency should return a non-golfing Member.

I follow in the footsteps of a number of eminent Members who have represented areas that are now part of my constituency, but it is my immediate predecessors in Chertsey and Walton and North-West Surrey to whom I now pay tribute. Both Sir Geoffrey Pattie and Sir Michael Grylls did excellent work on behalf of their constituents over the years, in their different ways. My special thanks are due to Sir Geoffrey Pattie for the superb apprenticeship that he bestowed on me during the 18 months before my election. He served Chertsey and Walton for 23 years, becoming a Minister and a vice-chairman of the Conservative party. I can honestly say that, if at the end of my parliamentary career I have made half as many friends and admirers in my constituency as Sir Geoffrey has, I shall regard that career as having been a great success.

Runnymede and Weybridge comprises two local authority areas, the borough of Runnymede itself and part of the borough of Elmbridge. The constituency straddles the M25 and the M3; indeed, in those road atlases that tend to exaggerate the width of roads my constituency appears to contain little other than the intersection of those two motorways. It also comprises the ancient town of Chertsey, where the Romans first crossed the River Thames, Egham, Addlestone and Weybridge, as well as the historic site of Runnymede and that of the Tudor royal palace of Oatlands. Those historic locations, together with a selection of smaller towns and villages and the garden estates of Wentworth and St. George’s Hill, are set in the beautiful Surrey countryside, which many people are surprised to find so close to London.

Most, if not all, hon. Members will recognise the name of my constituency and may even be able to locate it geographically through their knowledge of the events in 1215. The basis of constitutional government in England began to emerge when Magna Carta was signed in the meadows by the Thames, between Staines and Windsor, near the town of Egham. We can trace the origins of our modern freedoms to that event which took place in my constituency. It was on 15 June that year when the King and the barons first met at Runnymede. During the next few days, they negotiated the charter. I am delighted to be able to commemorate this week, the 782nd anniversary of the signing of Magna Carta, by making my maiden contribution in the House in the name of Runnymede and Weybridge.

Rather more recently, Brooklands, in Weybridge, has been renowned as the home of British motor sport and the birthplace of the British aviation industry. It spawned an engineering industry in the area, which provided an important part of the country’s aviation resource during the second world war. It has also created a surprisingly diverse economy in our constituency.

The Brooklands museum is an extraordinary tribute to the men of vision and spirit who built those twin industries on Hugh Locke-King’s race-track during the 1920s and 1930s. I strongly recommend hon. Members to take the time to visit that museum when passing through my constituency.

Like people in many similar areas of the home counties, my constituents enjoy the benefits of material prosperity, which are due primarily to our proximity to London and the excellent communications that we enjoy because of the motorway network and Heathrow airport. We also suffer because of that proximity from traffic, noise, pollution and the inexorable pressure for further development. The challenge for my constituency as we move into the new millennium will be to get the balance right. We must achieve the correct balance between continuing prosperity and maintaining the quality of life in the area. That will not be an easy task, but I look forward to playing my part, together with the elected local authorities in the constituency, in achieving it over the years to come.

It will be a pleasure to work with those local authorities, especially Surrey county council, now returned to Conservative control by a substantial majority, and Runnymede borough council, which is also Conservative controlled. Whatever other messages the electors of Surrey may have sent out on 1 May, they clearly voted yes to sound Conservative principles and good management in local government.

Runnymede has the lowest council tax in Surrey while, by general consensus, delivering a high standard of services. It has no statutory obligation to do so, but it is the highest spending authority on services for the elderly in Surrey. Its programme of upgrading and improving council-owned housing stock has the widespread support of tenants. Its private sector partnerships have attracted interest across the country. A key factor in achieving that enviable combination of low council tax and high service provision has been the careful management of its capital receipts. Runnymede is debt-free and it has chosen to invest its capital receipts to produce a substantial income to supplement the council tax for the benefit of all the people of Runnymede.

When the Labour party first promoted the idea of the release of capital receipts, it was presented as some kind of cost-free option. The idea was to take out from under the bed the pot of gold that the wicked Tories had squirrelled away and to spend it to good effect. It is now generally understood that there is no pot of gold. To the extent that set-aside capital receipts are cash-backed, the cash is largely in the wrong places. In public sector borrowing terms, the receipts have already been taken into account. Any increase in the aggregate supplementary credit approvals issued will result in an increase in the public sector borrowing requirement. There is no offsetting effect on the PSBR from any notional release of set-aside capital receipts. There was no mention earlier of the Revenue effects of the increased housing provision that the Government are seeking. If the Government achieve anything by the Bill it will be only by robbing Peter to pay Paul.

The reference in the Bill to capital receipts is a smoke-screen. It does not detail the methodology that will apply in determining the supplementary credit applications. If it is to increase the amount of investment in social housing, it must envisage an increase in the aggregate amount of borrowing by local authorities for that purpose.

The Bill provides a thin cover, through the mechanism of taking total capital receipts into account when determining the supplementary credit approvals, for a transfer of borrowing power from authorities with capital receipts to those without. In many cases, that will mean a transfer of borrowing power from authorities that have managed their housing stock well; taken a forward-looking, innovative approach to housing; and undertaken large-scale voluntary transfers to those that have succeeded in frustrating their tenants’ right to buy and which have eschewed the opportunities of the large-scale voluntary transfers that have brought such a welcome diversity to the social housing sector. Incidentally, such transfers have also attracted £4 billion of private sector money, which otherwise would not have been available. The Bill represents the worst kind of subsidy—a subsidy from the efficient to the inefficient.

The implementation of the Bill represents an unjustifiable penalisation of thrifty, well-managed councils such as Runnymede and an erosion of the principle of local autonomy and accountability, which the Government purport to favour. It will also lead directly to the imposition of higher council taxes and higher rents as receipt-rich authorities are forced to run down their balances and forgo the considerable income that those balances currently generate. No less an organisation than Shelter, hardly a well-known supporter of the Conservative view of the world, has calculated that council house rents will rise by £6 a week if all the receipts are released. It is clear that council taxes will rise or services will be cut as prudent councils find that the dice are loaded against them and are forced to liquidate investments.

The Bill is an attack on thrift and good management. It represents a thinly veiled transfer of borrowing power to Labour’s friends in local government. I fear that my constituents may expect more of the same when the local government settlement is announced.

The Bill attacks the capital balances of prudent authorities and an attack on their revenue support will not be far behind. It is the new Government’s double whammy for the council tax payers of Surrey.

When the Bill is stripped of the smokescreen of capital receipts, it is clear that it paves the way for either an increase in the PSBR or for the reallocation of borrowing power away from receipt-rich authorities. It would be better if it said so plainly without hiding behind the fig leaf of capital receipts. It represents an inefficient way of achieving the Government’s legitimate manifesto commitment to higher investment in social housing.

The Bill is unfair in its effect on prudent local authorities. It is lacking in detail. It confers excessive discretion on Ministers. In short, it is an ill-conceived piece of legislation and I urge the House to vote against it on Second Reading.

Philip Hammond – 2015 Speech on Climate Change

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Below is the text of the speech made by Philip Hammond, the Foreign Secretary, on 10 November 2015 at the American Enterprise Institute in Washington DC, USA.

Thank you very much Dr Brooks for your kind introduction. I’m delighted to be here at the American Enterprise Institute.

You are rightly regarded as one of the most influential think tanks. The work that you do here has a real-world impact. Papers become policy. In Republican and Democrat administrations.

I also welcome the AEI board members who are here today. The fact that so many influential and busy individuals regularly take the time to hear not only from external speakers, but also from AEI scholars, is testament to your reputation for high quality and relevant work.

I haven’t come here by chance. I have come here by choice – because I want to make an argument to a conservative audience: first, that it is wholly consistent with conservative values to tackle the challenge of climate change; and second, that those conservative values can show us how best to deal with that challenge.

As I said in my speech in Boston last year, for too long, we’ve allowed the debate about climate change to be dominated by purists and idealists – many of whom operate on the left of the political spectrum – who actively promote the notion that they and only they, have the answers to the climate challenge; and that we have to sacrifice economic growth and prosperity in order to meet it.

I reject those arguments. I reject them first of all because wanting to protect the world we inherit, to pass it on intact to the next generation is a fundamentally conservative instinct. As long ago as 1988 former Conservative Prime Minister, Margaret Thatcher said, “the last thing we want is to leave environmental debts for our children to clear up… No generation has a freehold on this earth. All we have is a life tenancy – with a full repairing lease.”

And I reject those arguments secondly because I do not accept that we have to choose between our future prosperity and safeguarding the future of our planet. This is not a zero sum game. As conservatives, we choose both.

The starting point for any discussion on climate change must be the threat it poses. Now of course, no-one is 100% certain of every aspect of the science. And no-one is 100% certain of the precise effects of man’s activity on our climate. But the evidence in favour of taking action to curb carbon emissions has been steadily mounting for decades. Uncertainty about the exact effects of climate change, or the role of man’s activity in delivering it, is not an excuse for inaction. In every other facet of life, we assess the risks and where the risk of occurrence is high and the impacts are potentially catastrophic, we act to mitigate and to prevent. Our approach to climate change should be no different.

That is exactly the precautionary approach that President Reagan took decades ago when the world faced a similar challenge.

In the 1980s, the majority of the world’s scientists were deeply concerned about the environment: in that case, about the depletion of the Ozone layer.

There were some doubters, but President Reagan concluded that the risks of doing nothing were too great. It was a core part of his conservative principles to take bold action when necessary. He displayed leadership, galvanising business and the international community to agree what became the Montreal Protocol, to phase out the use of damaging CFCs.

President Reagan described it as a “magnificent achievement”. And he was right to do so: we now know the worried scientists were right; and as a result of the Protocol, the ozone layer is now recovering.

I recognise the concerns of those who worry that the costs of tackling climate change will prove too great; that the attempts to do so might ruin our economy.

This is a reasonable concern.

And if it really was a choice between economic growth on the one hand, or lower greenhouse gas emissions on the other, then I too would be cautious.

But I shall argue that it is not.

And in doing so, the first thing I need to stress is that the cost of doing nothing is not … nothing.

Nearly a decade ago, the then UK government commissioned a review by one of our leading economists, Nicholas Stern, to ask what the cost of doing nothing might be. That Review estimated it could be equivalent to losing 20% of global consumption.

Since then, as our knowledge has developed, we have come to see this as not only an underestimate, but also a narrow way of looking at the problem. Many of the losses caused by climate change could be irreversible, regardless of our resources.

Unchecked climate change, even under the most likely scenario, could have catastrophic consequences – a rise in global temperatures similar to the difference between the last ice-age and today, leading in turn, to rising sea levels, huge movements of people fuelling conflict and instability, pressure on resources, and a multitude of new risks to global public health.

The worst case is even more severe: a drastic change in our environment that could see heat stress in some areas surpass the limits of human tolerance, leaving as the legacy of our generation an unimaginably different and more dangerous world for our children and grandchildren.

So the costs of doing nothing are, potentially, catastrophic – beyond anything that can easily be quantified in economic terms.

But even that argument would be vulnerable if the immediate cost of taking the necessary actions was economically ruinous. So the second thing we need to consider is what really are the costs of the necessary action?

And we should be honest. We should not pretend that acting on climate change does not involve hard choices. Even as the economy as a whole has more to gain than to lose from embracing the low-carbon agenda, there will be losers. Some sectors – particularly coal – are in for a difficult time, and we will need to think carefully about how we manage the impact on communities that have depended on these industries for generations. Their contribution to our economies has been a great one, and we should not abandon them now.

However, the more we learn, the more the evidence is shifting in favour of action. Because that evidence is showing that many of the measures to reduce climate risk will, in fact, stimulate economic growth.

Our experience in the UK bears this out. We have already reduced our emissions by more than a quarter since 1990. And over the same period of time, our economy has grown by more than 60%. Just last year, we registered a reduction in the carbon intensity of our economy of more than 10% – the steepest drop achieved by any country in the last six years. At the same time we had the fastest economic growth rate in the G7.

Not only that, but the growth in the low carbon sector of the UK economy is now outpacing the growth rate of the economy as a whole. In the UK, firms engaged in low carbon goods and services employed over 460,000 people and contributed 45 billion pounds to the UK economy in 2013. This is an increase of almost 30% in just 3 years.

And the global trends are in the same direction. The global low carbon economy is already worth 6 trillion US dollars, and is growing at between 4 and 5% a year. In 2013, additions to the world’s renewable energy generating capacity exceeded those to the fossil-fuelled capacity for the first time ever.

And the price of renewable generation is falling fast: the price of solar panels has fallen by 80% since 2008, and the price of wind turbines has fallen by more than a quarter since 2009. This is increasingly allowing these energy sources to compete on cost with fossil fuelled power generation, without the need for subsidy.

Our businesses in the UK are looking at these trends, and telling us that we should be a leader, not a back-marker; that we should be at the forefront of these developments, taking advantage of the opportunities.

The final argument against tackling climate change that I want to address today is the argument that if we take action, it will put us at a disadvantage to competitors who don’t.

Again, this is a perfectly reasonable concern. But, with countries representing 85% of the world’s emissions signed up to national contribution targets ahead of COP 21 in Paris, the reality is, all significant potential competitors are now headed in the same direction. And in any case, the UK’s experience so far is that a robust climate policy, even during a period when others have been uncommitted, has had no noticeable impact on our overall competitiveness. Businesses remain attracted to the UK’s openness to investment, flexible labour market, and highly skilled workforce.

In fact, it is increasingly clear that the economy of the future will be a low carbon economy. Studies suggest that by stimulating greater innovation and efficiency, climate policies will increase our economic competitiveness.

Two weeks ago, I was in the United Arab Emirates giving a speech on climate change as it happens. They have the world’s seventh largest reserves of gas and oil. Despite this, they are already planning for a future without hydrocarbons. They are investing in some of the world’s largest solar power plants, and are at the forefront of innovation in technologies such as high-efficiency solar-powered desalination.

And that is not only happening in the Middle East. China is now the world’s leading investor in renewable energy. In the next five years alone, it will add more wind power than the entire generating capacity, from all sources, of the UK. China has efficiency standards for its vehicles similar to those of Europe and America, and woe betide the Chinese official who rigs the test, and is increasingly planning its cities to be low carbon and resource efficient. Seven regions of China are already putting a price on carbon and in another two years, this will spread to cover the whole of the country.

So in summary, the world is moving towards a low carbon economy; I would suggest that there may now be more risk in being left behind than there is in taking the lead.

The threat is great, and the costs of dealing with it are now manageable. But the question remains: how best to respond to the challenge?

What are the appropriate mechanisms?

What are the conservative solutions?

How best can we tackle the principal cause of climate change: carbon emissions?

Of course there are those on the left who have seen the need for action on climate change as a justification for large scale “mobilisation”; for a regulatory bonanza and a bigger state. And, if a purely regulatory approach was the answer, I have no doubt that economic growth would suffer.

But it isn’t. The answer, as even the Chinese have realised, is to harness the power of the marketplace. To let the “hidden hand” of market forces loose on the challenge we are facing. And watch it deliver solutions – as it has delivered solutions to every other problem we have faced and resolved in our history.

We should be well placed in this regard. Free markets have shaped both our countries. New York and London host the world’s two most important stock exchanges; London, New York and Chicago the world’s most important commodity exchanges.

And it’s my confidence in markets that drives my approach to the economics of climate change.

In the UK we placed a price on carbon. This is completely in line with conservative economic values: a carbon price corrects a market failure: that we have allowed CO2 emissions to be a “free good” to the polluter even though they impose costs on society. With any other waste, we pay for it to be taken away. We don’t let people just dump it in the street.

Moreover, a market solution is simple and gives business the certainty that they’re asking for. Alongside 70 governments, over 1,000 businesses signed a declaration calling for carbon pricing last year. And rather than waiting for government, many businesses are taking matters in to their own hands by bringing in an internal carbon price to guide their investment decisions. The number of multinational businesses taking this approach has tripled over the past 12 months, tripled. Even oil companies, including BP, Shell, Statoil and Total, have come out in favour of carbon pricing. Major US companies that either already use internal carbon pricing, or intend to introduce it within the next two years, include Google, Microsoft, American Express, Coca-Cola, Monsanto, Wal-Mart, and Yahoo.

And fundamental to a market-based approach is letting our entrepreneurs and our innovators show the way.

Your organisation is dedicated to preserving and strengthening the foundations of a free society, including “competitive private enterprise”.

I agree wholeheartedly with that aim. Far too often, business is cast in the role of villain when it comes to climate change. But as Margaret Thatcher said in her speech to the UN General Assembly back in 1989:

“We must resist the simplistic tendency to blame modern multinational industry for the damage which is being done to the environment. Far from being the villains, it is them on whom we rely to do the research and find the solutions.” And she could have added: “make the investments”.

And again, the UK and US are well-placed to lead. We have some of the most innovative businesses, and our entrepreneurs are already leading the way. For example, UK firms build more Formula 1 racing cars than any other country, and they are pushing the boundaries of technology to harness the energy from braking, and release it back into acceleration through electric motors. The US firm Tesla is leading the world in developing battery technology for road cars, and increasingly for homes too – giving them independence from the grid, and moving us closer to the time when renewable generation is matched by effective storage to give round-the-clock access to renewable power.

We have the best research institutes in the world. If you look at a list of the top universities in the world, you will find that last year all of the top 10 were either British or American. (And, by the way, we think the 4/6 split UK/US is pretty reasonable, given your population is five times ours!).

The UK leads the world in offshore wind energy: we have installed more capacity than any other country in the world, and this is increasingly creating jobs as firms export their products and services. Meanwhile, companies such as Google are leading in developing the big data capabilities which will allow the supply and demand for energy to be matched more intelligently, reducing waste and cost.

I believe that our countries need to accelerate the pace of innovation in all of these technologies. In particular, we should focus on crossing the critical frontier of large-scale, high efficiency energy storage – giving the prospect of cost-effective renewable storage, not just round-the-clock, but through the seasons. If our innovators and entrepreneurs can solve this challenge, and bring the cost of clean energy with storage below the cost of fossil fuelled power generation, then the need for intervention will have passed and we can step back and leave the market to do the rest. Renewables will become the energy of choice – clean, competitive and secure.

If we take all of this action, we will reduce the cost of energy and the risks of climate change. We will create jobs, and enhance our energy security.

So if Britain and the US move ahead, we can reap the rewards. But of course, we cannot solve climate change alone. Only effective global action will achieve that.

That’s why the international community is negotiating right now what I hope will be a strong, effective and binding deal at the Paris meeting next month.

The Paris deal is important because it will give all countries confidence in the direction of travel. It will level the playing field, confirm once and for all that climate action does not create competitive disadvantage, catalyse investment, and spur innovation.

Over 150 countries have already made commitments to reduce their emissions over time ahead of the Paris meeting. It is likely that every significant country in the world will have done so, by the end of this year. These are not just rhetorical commitments. Many include strong substantive elements, such as China’s commitment for clean energy sources to make up a fifth of its energy consumption by 2030. Independent analysis estimates that this commitment could give China a renewable energy capacity of a thousand gigawatts by 2030 – roughly equivalent to the United States’ total electricity generating capacity today. This huge increase will fundamentally change world energy markets by expanding economies of scale, and accelerating technological innovation.

Our history shows us that when the US and the UK take a lead, we can persuade the world to follow. And we must take that lead.

Through our world-beating innovation, our trust in markets and our leadership on the world stage, we can show the world how to counter the threat of climate change at the same time as growing our economies.

As conservatives, we know the responsible thing to do is tackle threats when we see them, and to do so in ways which preserve our future security and prosperity.

And we know the smart thing to do is harness the power of the market to tackle the challenges of climate change.

Because if we do not lead, others will decide the way forward. And their solutions may not be conservative ones.

But if we do take the lead, we can ensure the global response is founded on the force of markets, the power of technology, and the institutions of capitalism.

To get there, leadership is required and not just that of Government. Think tanks, academia, businesses – all have a crucial role to play. The papers you write here at AEI; the policies you promote; the investments business make: all of these things together will determine whether and how we choose to address the challenge of climate change.

Taking action to combat climate change is the right thing to do;

The conservative thing to do.

And we have the power to ensure that as the world embraces the challenge it does so by harnessing the power of markets and the institutions of capitalism – the very things that have delivered for us time and time again throughout history.

I look forward to working with you to seize this opportunity.

Thank you.