The comments made by John Redwood, the Conservative MP for Wokingham, on Twitter on 6 May 2022.
Why is the Chancellor making the U.K. the only advanced country respond to a global cost of living crisis by increasing taxes? Higher taxes make the squeeze worse. Higher taxes bring fewer jobs and less growth.
Will the Chancellor now cut taxes? Has he read the Bank of England forecasts of rising unemployment and no growth ahead? This time on his current policies they may be right for a change.
The speech made by Gordon Brown, the then Chancellor of the Exchequer, at Lancaster House in London on 26 January 2005.
Let me first of all thank you for giving me the chance to speak to this gathering of men and women concerned about international development in advance of the first G7 Finance Ministers meeting of 2005. And as we prepare at the same time for the report of the Commission for Africa which will inform our discussions at G7 and G8 let me also thank UNDP and Mark Malloch Brown in particular for their leadership on development – and I welcome the recent challenging Sachs Report setting out practical proposals to achieve the Millennium Development Goals.
Tomorrow we recall the sixtieth anniversary of the terrible events of the Holocaust.
Let us remember how out of the chaos and tragedies of the 1940s was born the United Nations to embody our aspirations and hopes for a better world.
And let me also thank all churches, faith groups, non-governmental organisations, all those concerned with development represented here, for your visionary, often pioneering, work. In his book ‘The Power of Myth’ Joseph Campbell described a hero as someone who have given their life to something bigger than themselves. So I want to honour you and members of your organisations as our modern heroes: fighting for great causes, standing for the highest ideals, often working in difficult conditions and bearing huge burdens and bringing the greatest of hope to those in the greatest of needs. And I congratulate you for coming together in the unique global coalition – Making Poverty History.
I believe that this year – already a testing time for the international community – is a year of great challenge but also a year of great opportunity and – potentially – a year of destiny: for I believe that in this year we, the international community, can agree a plan for a new deal between developed and developing countries as bold and as generous as the Marshall Plan of the 1940s.
And my purpose in speaking to you this morning is to set out detailed proposals in advance of the G7 Finance Ministers, the first of four G7 Finance Ministers meetings this year, the first to prepare for the G8 summit to be chaired by Tony Blair at Gleneagles this summer, the first when funding for work on HIV/AIDS, malaria and building trade capacity will join debt relief and funding for development on the agenda of a G7 Finance Ministers summit.
2005 is important not simply because British chairmanship of the G7 and G8 will lead us forward to the vitally important September UN Millennium Summit where we must discuss the progress, or lack of progress, in meeting the Millennium Development Goals.
2005 is also the twentieth anniversary of Live Aid, for millions of people the first time they were confronted by the reality of famine and death in Africa.
And I believe that already this year the response to the tsunami – the modern world’s greatest natural disaster – has demonstrated to us all the willingness of the British people and other peoples to come to the aid of fellow human beings who suffer.
Indeed, far from there being compassion fatigue, perhaps for the first time millions more people are understanding just how closely and irrevocably bound together are the fortunes of the richest persons in the richest country to the fate of the poorest persons in the poorest country of the world. Events which bind the world together are drawing them to the conclusion that even strangers who may never meet and may never know each other at first hand are neighbours brought together by shared needs, mutual interests, common purposes and our linked destinies, As Martin Luther King put it, increasingly we can see ourselves as each strands in an inescapable network of mutuality, together woven into a single garment of destiny.
But it is not just enlightened self interest that is encouraging people to be concerned about the needs of the needy and the suffering of the sick, but a moral sense that we all share that leads us to conclude that when some are poor all are impoverished, when some are deprived our whole society is diminished, when some are hurt the whole society shares that suffering. That we are part of one moral universe and wherever and whenever there is poverty, deprivation and need it is our duty to act.
And I am convinced that millions of people in Britain and in every continent who have given more generously than ever before in the aftermath of the tsunami now yearn for that unprecedented demonstration of generosity to be given enduring purpose – as Make Poverty History argues – with a new deal for all developing countries that will address the underlying causes of their poverty, their illiteracy and their disease.
So in pursuit of this Tony Blair who set up and chairs the Commission for Africa will give a major speech at Davos on these very issues and our International Development Secretary Hilary Benn – who has played such a big part working with NGOs, organising emergency aid and visiting South East Asia in the response to the tsunami – has this morning announced a major new initiative on education funding. Indeed because the first millennium development target – gender equality for boys and girls in education – due to be met in 2005 – is not likely to be met, the United Kingdom will provide by 2008 over £1.4 billion for education with a particular focus on the education of girls. And our aim is that the 105 million children, 60 million girls, who do not go to school today will be able to go to school.
No statistics however depressing can prepare you for the hopelessness and human loss that lies behind the numbers but I saw too amidst terrible suffering hope, optimism and a determination especially among mothers to see things change.
From the suffering in Africa I witnessed and the potential in Africa I could glimpse it is our duty to act and to act urgently.
In Tanzania I saw 8, 9, 10, 11 year old children begging to continue in school – but denied the chance because their parents could not pay the fees.
In Mozambique young mothers desperate for their children to go to school waving their pay cheques of £5 a week – and raising their hands as one to complain angrily that they cannot even begin to afford the fees.
In Kenya children chanting free education – but secondary education forever beyond their grasp.
Yet surely it is our belief that every child is precious
Every child is unique
Every child is very special
Every child deserves our support
No child should be left out
Every child matters
Every child counts
You cannot blame a child for her poverty
You cannot hold a child responsible for her deprivation.
You cannot condemn a child for no fault of her own.
You cannot consider a child, however sick, as of no consequence… and dismiss her as unproductive or uneconomic.
But that is what we allow to happen.
But our great obligation as adults is to the child, especially the most vulnerable.
And in turn children have a right to expect adults to take care of them.
It is because every child counts that the potential of every child should be the foundation of our policies internationally and nationally.
And just like the draft report of the Commission for Africa – and we look forward to the Commission’s final report – our agenda for the G7 is founded on the realisation that despite the promise of every world leader, every government, every international authority that by 2015 we would achieve primary education for all, a two thirds fall in infant mortality and a halving of global poverty, at best on present progress in sub Saharan Africa:
primary education for all will be delivered not as the Millennium Development Goals solemnly promised in 2015 but 2130 – that is 115 years late;
the halving of poverty not as the richest countries promised by 2-0-1-5 but by 2-1-5-0 – that is 135 years late;
and the elimination of avoidable infant deaths not as we the richest nations promised by 2015 but by 2165 – that is 150 years late.
Africans know that it is often necessary to be patient but the whole world should now know that 150 years is too long to ask peoples to wait for justice.
And I say to this audience: justice promised will forever be justice denied until we remove from this generation the burden of debts incurred by past generations.
Justice promised will forever be justice denied unless we remove trade barriers that undermined economic empowerment.
Justice promised will forever be justice denied unless there is a plan for Africa and all poorest countries as bold as the Marshall Plan of the 1940s, releasing the resources we need to match reform with finance to tackle illiteracy, disease and poverty.
So the first essential element of a 2005 development plan for a new deal is that we take the final historic step in delivering full debt relief for the debt burdened countries with a new agreement on multilateral debt relief that will enable billions to be reallocated to education and health in the poorest countries.
I have seen what has been achieved because of debt relief so far.
Because of debt relief in Tanzania 31,000 new classrooms have been built, 18,000 new teachers recruited and the goal of primary education for all will be achieved by the end of 2005.
Because of debt relief in Mozambique half a million children are now being vaccinated against tetanus, whooping cough and diphtheria.
But when many developing countries are still choosing between servicing their debts and making the investments in health, education and infrastructure that would allow them to achieve the Millennium Development Goals, we know we must do more.
Up to 80 per cent of the historic debt of some of the poorest countries is now owed to international institutions and I have set out detailed proposals to use IMF gold to write off debt owed to the IMF; to ask World Bank shareholders to take over the debts owed by up to 70 of the poorest countries to them; and having signed long term agreements already with Tanzania, Mozambique and then with other countries, we – Britain – have announced that from now until 2015 we will take responsibility for our share – 10 per cent – of the World Bank debts —- making this offer not just to the 37 heavily indebted poor countries but to all low income countries, as long as they can ensure debt relief is used for poverty reduction.
We make this offer unilaterally but we are now asking other countries to join us contributing in this way or to a World Bank trust fund.
And I also ask the European Union which deserves credit for more than 1.5 billion euros of debt relief so far to match that generosity with deeper multilateral debt relief.
Alongside more debt relief, 2005 is the opportunity that may not easily return if missed to agree a progressive approach to trade.
We all know the damage that rich countries protectionism has done to the poorest and our proposals mean Europe and the richest countries must agree to open our markets, remove trade-distorting subsidies and in particular, do more to urgently tackle the scandal and waste of the Common Agricultural Policy. We must also amend the Rules of Origin requirements – requirements which instead of promoting fair trade have become a barrier to fair trade – and agree new simple Rules of Origin coordinated across continents. And I call on the EU in its work on Economic Partnership Agreements to take a non-mercantilist approach and put development first so that poor countries are able to sequence their trade reform within their poverty reduction strategies and participate on equal terms in the international economy.
But – as I have heard from every African President, Prime Minister, Finance Minister and Trade Minister I have met – although trade justice matters so too does making sure developing countries have the additional resources they need to take advantage of trading and investment opportunities – and to prevent their most vulnerable people from falling further into poverty as they become integrated into the global economy.
It is not enough to say ‘you’re on your own, simply compete’.
We have to say ‘we will help you build the capacity you need to trade’.
Not just opening the door but helping you gain the strength to cross the threshold.
Infrastructure is key.
Even today for 12 African countries less than 10 per cent of their roads are paved.
Telecommunication costs are such that calls from the poorest countries to the USA are five times the costs of calls from a developed country.
While water and sanitation underpin health and development, even today 40 billion working hours in Africa each year are used up to collect water.
And while tariff costs are often highlighted, it is actually transport costs that often constitute a bigger burden of the cost of exporting. With freight and insurance costs representing 15 per cent of the total value of African exports it is difficult for them to be competitive.
So we must also provide developing countries with the additional resources they need to build physical infrastructure – road, rail, electricity, telecommunications – institutional capacity – from legal and financial systems to basic property rights – and, of course, investment in human capital to enable growth, investment, trade and therefore poverty reduction.
We support the proposals put forward by the Africa Commission on infrastructure:
a fund to support infrastructure priorities;
loan finance for small and medium sized businesses and for micro-credit;
a science and technology and tertiary education plan;
and a plan for rural development, irrigation, research, encouragement of local markets, land reform and environmental improvement.
And at its very core this economic development plan demands that all of us, rich and poor countries alike, be fully transparent in our dealings, unapologetically address corruption, be truly accountable, show where the money goes. And the way to achieve this is for all of us to put transparency and the best governance into practice by all of us, rich countries and poor together, opening our books – with, in particular, a new honesty amongst the richest countries about the levels of developed country protectionism and of tied aid. So I repeat: we will open our books, all countries must also open their books.
But to progress what voices all over Africa demand on debt and trade cannot happen unless there we take a third step — a substantial increase in resources for development, to tackle illiteracy, disease and deprivation.
Making better use of existing aid – reordering priorities, untying aid and pooling funds internationally to release additional funds for the poorest countries – is essential to achieve both value for money and the improved outcomes we seek. But we must recognise that while ten years ago aid to Africa was $33 per person, today it has not risen but fallen to just $27 so we are a long way short of the predictable, regular financing necessary to make the difference that is needed.
While the Marshall Plan transferred 1 per cent of richest country’s national income to the poorest, our proposal is for each of the richest countries to reach 0.7 per cent of national income in long-term and predictable aid for investment. I congratulate Par Nuder and the Swedish Government for their leadership – having already reached 0.7 – and I urge all countries to join us in becoming countries which have either already reached 0.7 or have set a timetable towards it.
We are of course prepared to consider all proposals for raising international finance including international taxes and are happy to do so in detail. But I believe that even as we do so we should also agree to create now, this year, on the road to 0.7 per cent, an International Finance Facility (IFF) that each year from 2005 to 2015 generates $50 billion a year more of resources — the quickest, most effective way of guaranteeing long-term, stable, predictable funding.
The IFF is founded upon long-term, binding donor commitments from the richest countries like ourselves.
It builds upon the additional $16 billion already pledged at Monterrey.
And on the basis of these commitments and more it leverages in additional money from the international capital markets to raise the amount of development aid for the years to 2015.
I welcome President Chirac’s proposals today to raise additional international finance and his initiative on international taxation to back and complement the IFF. And I thank him for his support for immediate implementation of the IFF.
With one bold stroke: doubling development aid to halve poverty.
$50 billion more in aid a year each year for the poorest countries.
Our fourth objective made possible by the International Finance Facility is to provide the $6 billion more a year needed to fund primary education free of charge – ensuring the 105 million children today and every day denied schooling can learn with classrooms, teachers and books. And with the IFF we can ensure all developing countries have the increased, predictable, up front funding they need to abolish user fees and enable more effective teacher recruitment and training, greater provision of teaching and learning materials, improvements to school buildings and sanitation facilities, and special help to get girls into education.
Our fifth objective for which there is a detailed implementation plan drawn up by and coordinated by the Department of International Development is that the IFF provide the proper funds that would allow us to build health care systems, match the medical breakthroughs now being achieved in developing a preventive vaccine for malaria by the farsightedness of an advance purchase scheme that could prevent the loss of more than 1 million lives a year because of this dread disease, and tackle HIV/AIDS with the first comprehensive plan from prevention to cure and care.
AIDS is not a curse that we must deny said Nelson Mandela, it is a disease that can be defeated and the way forward on HIV/AIDS cannot involve one initiative in isolation but requires a comprehensive strategy:
a global advance purchasing scheme to ensure that vaccines go into commercial production and are available at affordable prices;
prevention, treatment, and care for all those who need it including increased and more predictable funding for the Global Fund to Fight AIDS, TB and Malaria;
the development of essential healthcare systems with well-trained staff and equipment, and the abolition of health user fees for basic health services;
a global anti-poverty strategy – in particular funding the development of education and sanitation systems which can reduce the chance of infection and help sick people stay healthy longer.
And because only £400 million a year is spent on research for a preventive HIV/AIDS vaccine and because the challenge is to internationalise HIV/AIDS research, coordinating it worldwide, sharing information globally, more widely and more rapidly, with resources directed to the top scientific priorities, the G7 will – for the first time – discuss a joint UK-Italian paper on financing a worldwide infrastructure for sharing and coordinating research in AIDS and then for encouraging the development of viable drugs, vaccines and other technologies such as microbiocides.
And let me give you a glimpse into what is possible by applying the principles of the International Finance Facility to the work of the Global Alliance for Vaccines and Immunisation (GAVI).
Over the last five years GAVI have immunised 50 million children round the world – the most successful global immunisation programme in history.
So Hilary Benn and I welcome the announcement made yesterday by both the Gates Foundation and the Norwegian Government for an additional $1 billion for GAVI to spend on immunisation over the next 10 years.
GAVI have, together with the UK, France and the Gates Foundation, developed a proposal to apply the principles of the IFF to the immunisation sector — with donors making long term commitments that can be leveraged up via the international capital markets in order to frontload the funding available to tackle disease.
On behalf of the United Kingdom the International Development Minister Hilary Benn will announce today that we propose to make a substantial contribution for 15 years to this new financing facility for immunisation of $1.8 billion.
We are urging other donors to also contribute. And if, by these means, GAVI could increase the funding for its immunisation programme by an additional $4 billion over the next ten years, it would be possible to save the lives of an additional 5 million people between now and 2015 and a further 5 million lives after 2015.
If this is what we can achieve by applying the principles of the IFF with one fund and one initiative think what we can achieve not just in health but in education and economic development.
So the aim of the International Finance Facility is to bridge the gap between promises and reality.
Between hopes raised and hopes dashed.
Between an opportunity seized and an opportunity squandered.
It is about action to right wrongs this year, now, urgently. No longer evading, no longer procrastinating, no more excuses, not an idea that will take years to implement but one which can move forward immediately.
I welcome the support given to the IFF by almost fifty countries. And in the forthcoming G7/8 discussions we will ask all countries to join those who have already given their backing to support and sign up to the IFF — and we will be setting out a framework within which we can implement it.
It is because I believe the need for action is urgent that we must act now.
I saw in Africa – more clearly than anything else:
a healthcare system in crisis;
and education in crisis too;
and the terrible human cost of these failures.
We take it for granted that education and health are universal and free. But the people of Africa are doubly disadvantaged for instead of a free education and free health service African countries increasingly charge for secondary schooling and charge even for the most basic of medical drugs and fees for visits to doctors.
And just as I have seen in the countries I visited displays of real anger at charges in education so too I have seen real anger at charges for health care.
Just as millions of school age children who have hopes and aspirations for themselves and their country are deprived of their potential, so too millions of people who are sick or injured or simply frail are deprived of the life saving health care they urgently need.
Yet when Kenya made education free over 1 million more children turned up for school. When Uganda made education free numbers in school rose from 2.6 million to 6.5 million in three years. When Malawi introduced free primary education there was an immediate jump in enrolments of 50 per cent – an increase of more than 1 million children going to school. And when South Africa and Uganda abolished health users fees the poor started to appear in our hospitals and surgeries for treatment.
What I want for my child, I want for all children and there is a strong case for children and families not just in some developing countries but in all developing countries enjoying basic health care services free at the point of need based on need not ability to pay. And there is a strong case for recognising that to develop the potential of not just some of our children but all our children, education should be universal and free and so send a message that the best way you can defeat poverty is through free education and free health care available to all.
Indeed I believe that the response to the tsunami showed what the debate this year on a new deal for developing countries will show: that, as Rabbi Jonathan Sacks has written, we cannot feast while other starve, we cannot be well while other languish in sickness or disease, we are not truly free when others are in servitude. More than that, as he writes, societies achieve true and enduring greatness not because of the way they help the strong but because of the way they come to the aid of the weak, not by how they acclaim those who have power but by their concern for the powerless – and not by how they reward the wealthy but by the care they show for the poor, and the compassion they show to the vulnerable.
And this is what happened in 2000 when first hundreds, then thousands, then millions of people first in one country then in one continent, then in all countries, and in all continents came together to demand an end to the injustice of unpayable debt and in doing so changed the world. And we can do this again. For I believe support for a year of change is growing wider and deeper with already in ‘Making Poverty History’ more than a hundred aid, development, and trade organisations and anti poverty organisations coming together in demonstrations, campaigns, petitions – in challenging Government to make poverty the issue of the year.
And so when people ask whether we can make a difference this year, when they say that our proposals are too difficult, we should reply:
doubters thought the original plans for the World Bank were the work of dreamers;
doubters thought that the Marshall Plan unattainable;
doubters thought apartheid would last for ever and Nelson Mandela would never be released;
and just as in 1997 doubters thought debt relief an impossible hope, doubters even in the last year thought no more countries would sign up
to a timetable for 0.7 per cent in overseas development aid and yet in that year alone five countries have done so.
And so next week in this very building I will start my discussions with my G7 colleagues about debt relief, 0.7, the International Finance Facility and funding for trade capacity, education and health.
A few months ago I quoted a century old phrase saying ‘the arc of the moral universe is long but it does bend towards justice’.
This was not an appeal to some iron law of history but to remind people in the words of a US President that ‘the history of free peoples is never written by chance but by choice’ – ‘that it is by our own actions that people of compassion and goodwill can and do change the world for good’.
And I believe that:
with our determination not diminished but intensified;
with the scale of the challenge revealed;
with the clamour of public opinion calling for action now – resonating here in Britain and reverberating across all countries; and
with a determination among world leaders to be bold;
the arc of the moral universe while indeed long will bend towards justice in the months and years to come.
To remind you of Seamus Heaney’s poetry about Nelson Mandela’s release:
‘A further shore is reachable from here…
Once in a lifetime justice can rise up
And hope and history rhyme’
That is our task, our challenge, our opportunity.
The speech made by Gordon Brown, the then Chancellor of the Exchequer, in Manchester on 2 February 2005.
It is a pleasure to be here in Manchester today.
The economic heartland of our country. Once remembered most for its role in the industrial revolution, now the largest and fastest growing city outside London. Home to six higher education institutions and 90,000 students. Leading in high-quality research with specialist facilities like the Daresbury laboratory.
And I want to congratulate Manchester on becoming one of our first science cities nurturing world-beating businesses in hi-tech sectors from biotechnology and pharmaceuticals to digital electronics.
Now I can genuinely say that the Treasury and I are privileged to be associated with the challenge, led by the Deputy Prime Minister John Prescott, of creating sustainable communities in our towns, cities and rural areas.
And I want to start this morning by welcoming our distinguished international visitors to Britain and by congratulating all the participants here:
councillors
local authorities
regional development agencies
town planners
academics
community groups
companies
specialists in every field and from every continent
on the huge advances that have been made in our understanding of, and action on, what makes for quality of life in our communities: advances in the study and practice of geography, planning, the built environment, the role of cities in regions and – my theme today – understanding of the economic and social forces at work in poorer communities.
And I want to thank you for the work you do, the service you give and contribution you make.
The fact that you have all come together today; that you are focusing on the role of regional development agencies, local government, local communities; that you are discussing how working together we can transform communities into sustainable communities; is a reflection of how both economic policy and how regional and urban policy are being transformed – and you might say humanised – and it is this I want to talk about today.
I think most of you would agree that 50, 20 or even 10 years ago the idea that the Treasury would be interested in issues like public space, the design quality of public procurement, environmental standards, devolution, regionalism and social exclusion would be almost unthinkable.
But we know that not only are these questions vital to successful, economically vibrant communities but they are at the heart of the agenda for social and economic progress.
The goals we seek should be high and stable levels of growth employment and sustainable development.
So I now believe that Finance Ministers faced with the challenge of environmental degradation and the need for sustainable communities have to ensure that economic, social and environmental policies are better in balance than ever before.
But there has been a second major change that Finance Ministers have had to recognise – and it goes to the heart of what you have been discussing in each of your sessions yesterday.
The old idea in regional economic policy was of help directed from the centre.
Think of Britain’s first generation of regional policy, before the war: essentially ambulance work getting help to high unemployment areas – central government providing first aid.
And then the second generation in the 1960s and 1970s was based on large capital and tax incentives delivered by the then Department of Industry and then overseen by Brussels.
When you think back the policies of the 1930s were just about first aid – to paper over the cracks of mass unemployment – and there was little that was comprehensive or organised about the planning behind them.
When a Labour Prime Minister stood up in the House of Commons to explain why four areas of the country had received first aid when faced with unemployment and this region – the north-west – with similar levels of unemployment had been refused he replied: ‘there is no logic in the conduct of human affairs’. At best it was rescue not regeneration.
And so we moved to that second era of regional and industrial policy – all advanced industrial economies trying to attract as much major company mobile investment as possible.
But as with first aid and ambulance help for the depressed areas in the 1930s, so too reliance of incoming multinational investment later did not do enough to close the gap between the areas of high unemployment and areas of low unemployment, and ensure both social and economic regeneration.
That is why just as we have moved macroeconomic policy from simply a concern about high and stable levels of employment to a concern also about sustainable communities, even Finance Ministers are now recognising that supply side or microeconomic policy must be about more than first aid, more than reliance on external investment to solve the problem, more about what I call the third stage of British regional and urban policy where the new emphasis is about local action and using all levers for regeneration.
An emphasis not just on encouraging inward investment – important as it is – but on encouraging investment generally —- building local indigenous strength through encouraging local innovation, local skills and local investment, and doing so at a local level in an integrated way. And that is why both our regional development agencies and local authorities have new freedoms and flexibilities for local people to make decisions based on local needs.
So from the top down centralised systems of regional and urban policy – the dirigiste systems of the mid twentieth century – the focus is on local indigenous creativity.
It is based on the recognition that production need no longer be based where the raw materials or ports are but where there are skilled, adaptable, flexible labour markets. And that it is local attention to skills, enterprise, business creation, innovation and investment that will bring the most jobs, wealth and prosperity.
And so in this third stage of regional policy our emphasis is firmly on people – their skills, their flexibility, their willingness to change, their dynamism.
And so to reduce the persistent regional disparities – to help those on the margins, those whom prosperity has passed by:
we must continue to make the right long term choices about stability and growth and in the next Parliament intensify the economic reform agenda. And when the G7 Finance Ministers meet this weekend we will look at how each continent can contribute to that – Europe by economic reform, the United States by tackling its deficits and Japan by financial sector change;
we must ensure the finance necessary to back reform and modernisation in local public services – the task of last July’s spending review;
and we must also, more fundamentally, tackle not just the consequences of unemployment and poverty and its symptoms but the underlying causes — being aware more than ever before of just how employment, skills and enterprise backed up by investment in innovation and infrastructure are the route out of poverty and deprivation for individuals, towns and cities and regions.
And while it is right in this third generation of regional policy for central government to establish clear long term goals, the people closest to the ground in the regions and our local communities should be equipped and empowered with maximum local flexibility and discretion to innovate, respond to local conditions and meet special needs.
So what is the policy agenda that follows from our recognition that policy should be geared to high and stable levels of growth, employment and sustainable development; and that only a focus on local people, their jobs, skills, enterprise and creativity is the way to building strong sustainable local communities?
First, the Treasury and central government generally will continue to devolve power away from the centre.
Leading the way, John Prescott has sponsored regional development agencies, given them responsibility to promote enterprise, employment, skills and regeneration in their regions – and the resources to do so. They now have budgets worth in total £1.8 billion a year, £2.3 billion by 2008 with, I believe, unprecedented freedoms – within a single budget without the old ring fencing – to decide how to use these resources.
Now backed by a £100 million fund, the three northern RDAs are working with business on what is called the ‘Northern Way’ — tackling the £29 billion gap in output between the North and the rest of the UK and creating a corridor for jobs and growth from Newcastle in the North, to Hull in the East, and Liverpool in the West.
Across the country, local authorities are being given additional freedoms and flexibilities alongside new pilot Local Area Agreements that enable local bodies – including councils, primary care trusts, local police and private and voluntary organisations – to work in partnership to target resources on local priorities.
And the true devolution of power also means going beyond regional and local devolution to public authorities and devolving more power from government altogether and into the hands of local communities. Giving local people the tools to make improvements to their own neighbourhoods through programmes like sure start, the new deal for communities and the safer communities initiative.
Second, Finance Ministries must do more to sponsor and support policies to regenerate local environments.
Following the recommendations by Lord Rogers, highlighted by John Prescott yesterday, the Deputy Prime Minister and I have developed a series of measures to renew run down local high streets and urban estates including:
a 150 per cent accelerated tax credit to clean up contaminated land and bring it back into productive use;
100 per cent capital allowances to enable owners and occupiers to obtain full tax relief when creating flats for letting over shops and other commercial premises;
breaking with flat rate VAT by targeted VAT reductions to encourage the renovation and conversion of existing properties to bring vacant homes back into use; and
measures to tackle the crime that hits businesses, particularly retailers, in inner city areas;
showing that our objectives for growth and employment are not at odds with but complementary to our objectives for environmental care and protection.
As all of you who have travelled here today know, transport is critical. And this will be discussed in other sessions at this conference.
Good management of public spaces and high standards of design are key to creating communities that are attractive, sustainable places to live in, invest in and do business in. That is why, in the Spending Review last July, we introduced a new target to make communities cleaner, safer and greener – in recognition of the way in which what people call ‘liveability’ can drive a neighbourhood up or down. And through building regulations, planning guidance, our new Code for Sustainable Buildings and the Community Infrastructure Fund we are determined to drive up standards of energy and water efficiency, increase housing density and green space and tackle flood risk, while protecting and increasing the area of Green Belt.
To reverse decades of neglect, the Government has invested over £35 billion more in housing since 1997. We are implementing Kate Barker’s recommendations to increase housing supply. And because the renaissance or our cities and communities depend on us addressing the problems of low demand and the challenge to be more flexible, we have not only established pathfinders to improve the choice and quality of housing available – including refurbishing over 15,000 homes in the north-west – but we are establishing within each region a single body responsible for managing housing markets and housing investment.
Creating a society with opportunity for all demands that we get to grips with the vicious cycle of deprivation in our most deprived estates — where worklessness, poor education, high crime and poor housing are all linked and mutually reinforcing.
So we are investing more than £1.6 billion to improve our poorest neighbourhoods through the new deal for communities, neighbourhood renewal fund, neighbourhood management pathfinders and neighbourhood wardens – all excellent examples of policy areas where local communities are in the driving seat. Within a strategic national framework, including challenging floor targets, local strategic partnerships are being given both responsibility for deciding what is needed in their area and discretion for deciding how it will be delivered.
And I particularly welcome the Deputy Prime Minister’s announcement at this conference that he will pilot the development of mixed community estates in Leeds, London and here in Manchester – a comprehensive strategy to overcome deprivation by mixing housing tenures and incomes, regenerating housing stock to attract new residents, and improving local public services and the local environment.
Third, in pursuit of indigenous economic strength – the route to sustainable communities in every city, town and rural area of our country – Finance Ministries should do more to back local enterprising people and local enterprising firms.
The facts we have to confront are shocking.
For decades many areas have been no-go areas for enterprise.
As late as 2000 the rate of business creation in our high unemployment communities was one tenth of that in our prosperous areas with all the consequences for fewer jobs, less prosperity and less income for local authorities.
If the same rate of business creation prevailed in our poorest areas as in our richest areas we would have over a hundred thousand more small businesses in Britain.
But we have to recognise the problems faced by many people trying to start up businesses in high unemployment communities and the need to put in place the right incentive structure to stimulate business-led growth.
When we considered the challenge we recognised that inner cities areas cities and old industrial areas should not be seen as simply “problem” areas but as new markets where businesses can thrive because of the competitive advantages they often offer – with strategic locations, untapped resources, a high density of local purchasing power and the potential of their workforce. And we want to remove all unnecessary barriers to unlocking this potential.
This has led to our policies for enterprise at the local level to help firms start up, invest, hire and expand, including:
encouraging investment through the Phoenix Fund, new regional venture capital funds and the Small Firms Loan Guarantee Scheme – now more generous to start ups;
more help with hiring, employing and training – the special work of the New Deal and training programme;
support and advice for business – the remit of the new Small Business Service;
cuts in small business tax, corporation tax and capital gains tax;
reductions in red tape by removing the independent audit requirement on small firms, introducing a new flat rate VAT scheme and removing or reforming over 400 separate regulations;
and 2000 enterprise areas in the most deprived wards in the country where we encourage home grown economic activity through stamp duty exemptions, incentives for renovating business premises, fast track planning and community investment tax relief.
Together, these measures offer a systematic and coordinated attempt to create a stronger economic base in previously run down and high unemployment areas.
And in the Budget we will do more to break down the barriers to enterprise and spread an enterprise culture – with Britain now putting in place the best incentives for small business creation, backing a new generation of venture capital for expanding businesses, encouraging every school to value enterprise… and building on the success of enterprise areas we are now consulting with entrepreneurs, business and local and regional government on what more we can do to support, incentivise and remove the remaining barriers to enterprise in our most deprived areas.
And to achieve this requires the devolution of more power to the regions. So regional development agencies now have greater responsibilities for boosting enterprise and science. And from April the business link service will be locally administered by the RDAs – improving the delivery, effectiveness and coordination of business support at the regional level.
But the best ambassadors for this change are not me or you but local people themselves.
Because all their business rates income went to central government, in the past local authorities had no direct financial incentive to encourage new business creation.
Now under our business growth incentive scheme local authorities keep a proportion of the additional business rate income generated by new business creation.
Based on historical data we estimate that in total as a result of this measure local authorities could gain up to £1 billion over the next three years.
A further incentive to encourage local indigenous business creation.
Every community across the country benefiting from more businesses and more jobs.
But encouraging enterprise is also about encouraging innovation and creativity.
And every successful region must encourage its scientists, its inventors and its innovators.
We found in Britain when we looked at the gap between rich and poor regions that some regions spend just 1 per cent of GDP on R&D compared to 3 per cent in others.
In one region it was £650 per head on R&D in another just £100.
With the Government’s 10 year plan for science – and the one billion pounds of additional public investment in science over the next three years – as the foundation, we are already moving from centrally administered R&D policies to the encouragement of local technology transfer between universities and companies and the development of regional clusters of specialisms. And I believe we can do more to encourage the development of new local science and industry partnerships.
Regional development agencies are rightly taking the lead – recognising the importance of science and innovation as drivers of regional growth, and putting science and innovation at the heart of their regional economic strategies.
Building on the model pioneered here in the North West, all regions have now established science and industry councils to forge better links between businesses, universities and other regional agencies and support the development of hi-tech industry clusters.
And in the Budget I will renew our commitment to the best incentives for research and development, with backing for science cities and for stronger links between higher education and the hi-tech firms of the future.
Fourth, Finance Ministries must do as we, the Treasury, plan to do: step up our efforts to boost employment and skills.
Sustainable communities are not just about places but about people — as entrepreneurs, as skilled workers, as employed men and women.
It is about a Britain of ambition and aspiration where there is no cap on potential, no ceiling on talent, to limit to progress. A Britain of ambition and aspiration where because the aspiration and ambition is so enthusiastically shared by all that all have the chance and are challenged to do well.
So any solution based on renewing economic activity must tackle the persistent, often chronic, problems of employment and employability.
When we came to power, seven years ago, our new programme – the New Deal – was not only based on the principle that work was the best route out of poverty and the need for rights and opportunities to work to be accompanied by new responsibilities and obligations to work, but the new deal and our new tax credits were designed to offer special help to people and areas left behind.
As a result of the New Deal and our other employment programmes, 2 million more people are in work than in 1997. And it is a measure of the achievement of the New Deal – for which I thank business small and large, local authorities, voluntary and charity groups and the public services – that in the 1980s 330,000 young people were long term unemployed, today the figure is just 6,000.
But this is not the time to relax our efforts but to step them up.
And after eight years of a national programme I am more convinced than ever that if we are to get more of the long term unemployed and inactive back to work, and more successfully fill local vacancies we need to match our national framework of incentives and sanctions with more local discretion and flexibility.
If we raised employment rates in the three northern regions to the level in the South East, for example, nearly half a million more people would be in work – a huge prize. And we would be closer to full employment than ever, making our goal of full employment come true not just for the country as a whole, but even for previously depressed regions.
So it makes sense for local job centres with local knowledge to develop programmes more sensitive to, and tailor made for, local and regional conditions and to have greater local powers and new resources to match vacancies to jobs more quickly, to meet local employment and skills needs and of course to help all those out of work realise their full potential.
And just as we have tackled unemployment, so too we must tackle inactivity. 90 per cent of people coming onto incapacity benefit want to get back to work. Our task as a government is to help them to do that, building on the successful pathways to work approach, through an active, positive strategy offering incentives backed up by responsibilities so people can meet their own aspirations. The Secretary of State for Work, Alan Johnson, is today setting out details of reforms based on obligations as well as opportunities to give more incapacity benefit claimants the opportunity to work.
And in the Budget, reforms in maternity rights – higher pay, more time off, better children’s benefits – will be matched by closing the loopholes that prevent mothers benefiting from these new rights.
Improving employment means improved employability. And because some regions have 18 per cent of the working population with no formal qualifications compared to just over 11 per cent in others, at the coming election we will make a historic promise: for the first time guaranteeing to every single member of the workforce and every unemployed man and women who is without basic skills, the resources and the learning facilities to acquire the skills they need, giving them the choices they need to make the most of their talents.
Building on the 100,000 individual success stories of those given time off for training through the employer training pilots – the majority of them women, the majority of them with no prior skills, the vast majority of them successfully attaining their qualifications – we are rolling them out to the whole country creating for the first time a national employer training programme.
But we increasingly understand that policies to engage many thousands of businesses and millions of adults with new opportunities for skills cannot be run from central departments or agencies but must directly engage with regional priorities, local needs and individual businesses and workplaces.
Already 90 per cent of the learning and skills budget is devolved to the regions and the new regional skills partnerships will play a key role in setting priorities for expenditure and making the right connections within each region between skills needs and the wider productivity agenda, with regional development agencies and local learning and skills councils working much more closely together.
So in conclusion I want to match the radical environmental, social and quality of life improvement to which you are all contributing with these major changes, economically, over the next few years in our communities that will help enhance the quality of life:
more people moving into jobs and more skilled jobs with the work ethic reinvigorated in every community of Britain as we advance to full employment not just in one region, but in every region;
more people able to transfer their ideas and hopes into small firm start ups and growing businesses as we encourage a new spirit of enterprise and create a Britain of high and stable levels of growth and sustainable development where enterprise is open to all.
more people living in better quality housing in safe and sustainable communities;
all these measures underpinned by devolution of power and responsibility – local people making local decisions about meeting local needs – as the way forward.
And just as this conference has already shown that public space, quality of life, the built environment and quality infrastructure can help create world class communities, so too I hope I have shown that new economic and employment policies can contribute to community regeneration with Britain leading the world in its commitment to full employment and enterprise for all.
More importantly I believe this conference shows that working together – central and local government, business, voluntary organisations and local communities – we can, and will, deliver our aim that prosperity should be not for some but for all in every city, every town, every community in our country.
The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 4 February 2005.
Let me welcome distinguished guests who have come here today from every continent to join our dialogue on global economic change.
The starting point of this conference today is that no country can take its future prosperity for granted.
Nations will rise and fall depending on their willingness and their capacity to face up to the difficult long-term decisions about the future.
And I believe that if here in the United Kingdom we – business and government – listen and learn from each other, work closely together, and forge a shared long term economic purpose, we have the strength – because of our stability, our scientific and creative culture, our commitment to education, our global reach – to be one of the most successful enterprise centres of the world.
Over the last year I’ve made it my business to meet as many businesses as possible from as many continents as possible – and many of you are here today. You’ve told me how much you value the stability we’ve created in Britain since 1997. You’ve told me about the importance of removing all barriers to an enterprise culture. And you’ve also told me that change in the new world is so fast in its pace and so pervasive in its impact – and now the rise of China, India and Asia so important – that an economy like ours has to become more flexible, more adaptable, more skilled and more outward looking.
The facts that we will hear this morning from our guests from China, India and Asia are that within twenty years half the world’s manufactured exports could come from developing countries and within a decade 5 million US and European jobs could be outsourced. Indeed China is already consuming half the world’s cement, over a quarter of the world’s steel and a third of the world’s iron ore. And between them China, India and the rest of Asia already account for nearly a quarter of the world’s trade.
And so for companies like yourselves, there is hardly a product or increasingly a service you produce that is not subject to global competition. And these global competitive pressures are now such that at every point you have to look not just at where you source your materials, labour and skills but where your competitors source their materials, labour and skills.
And in this global restructuring that focuses advanced industrial nations away from low skill, low tech products and processes to the technology driven and high value added, Britain will not only have to be more enterprising and recognise there is no escape from an uncompetitive position by resorting to protectionist shelters or tolerating the old inflexibilities but we must also understand that as emerging economies their technologies – even now India and China produce 125,000 computer science graduates a year and Britain only 5,000 – Britain will only attain a new and competitive place for ourselves if we strive for, and win, world leadership in science and skills and enterprise.
Churchill warned of countries facing change who were so timid that they were ‘resolved to be decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all powerful to be impotent’. And he also said that instead of building the present upon the image of the past, we must face up directly to the challenges of the future.
Indeed to those who want to postpone long term decisions and want guarantees about the status quo and then tell us that there should be no change without security, we all know the answer: there can be no security without change.
So there are important long term choices about our economic future as a nation which – because these decisions need to be made, acted upon and followed through on a sustained basis – require a consistency of purpose and direction in the British national interest that goes beyond one year or even one parliament and demands a shared vision and a common purpose – in a non-partisan way – across all sections of British society: a shared commitment to become world leaders in stability, science, skills, enterprise and the creative industries.
I can tell you that at a time of rapid global change and uncertainty I agree with Alan Greenspan who will address us this afternoon, with Mervyn King and with all of you who run businesses, that the precondition for Britain’s economic success is locking in economic stability for the long-term.
To those who question whether Britain’s seven high growth years must inevitably be followed by lean years, let me answer directly: our new monetary and fiscal framework, this British model we have created – strategic decisions we took to make the Bank of England independent, impose a symmetrical inflation target, cut the national debt and entrench long term fiscal rules – will continue to make us well placed to cope with the ups and downs of the economic cycle.
In the last seven and a half years inflation – once more volatile than almost any other industrial nation – has been consistently nearest to target and the least volatile of any country.
Of the major industrialised economies, only Britain, once the stop-go economy of the industrialised world, has maintained growth free of recession in every quarter.
And we not repeat the mistakes of the past and will do nothing to put at risk our new won and hard won stability.
Any government in which I am Chancellor will complement monetary vigilance with fiscal discipline.
Let me tell you where we stand today. Debt has risen to 44 per cent of national income in America, 46 per cent in France, 55 per cent in Germany, and 84 per cent in Japan. But in the UK debt is just 35 per cent.
The deficit in France is 3.7 per cent of national income, in Germany it is 3.9 per cent, in America 4.4 per cent, in Japan 6.5 per cent. Our deficit is just under 3 per cent falling to 2 per cent. 10 years ago the deficit in Britain was the equivalent in today’s money of £90 billion, today it is just a third of that —- and we will meet our fiscal rules.
So while at this stage in the economic and political cycle past governments have resorted to short-termism in fiscal policy and raised the rate of spending in a pre election spree, I can assure that we will not go down that short term road.
You – leaders of business – know that it is right to invest sensibly for the long term and that to fail to do so often catches up with you. And if you run a company you know you have to make decisions on priorities. So in can confirm that while we will be prudent in borrowing for investment we will maintain the national debt at a low level and we will achieve over this and the next economic cycle a current balance or surplus.
But world leadership in stability is not enough to guarantee success in the new global economy. It is a necessary but not sufficient condition for economic prosperity.
So if I can encapsulate my message today and my mission in government in one thought it is this: we want Britain to be not only the most stable environment but the most attractive location to do business and to create new business.
And to win this prize, we are prepared to remove any unacceptable barrier, legislate any necessary reforms and introduce far reaching new incentives.
This is not rhetoric: it is our considered and determined view.
We have much to build on.
The fact – and this might surprise you – that of 800 multinational headquarter relocations since 2002 Britain has secured 20 per cent, 50 per cent more than the USA, more than any other country.
With 1 per cent of the world’s population we have over 11 per cent of the world’s most cited scientific papers.
And more than at any time since the first decades of the industrial revolution we are now turning our scientific genius into technology led economic growth for Britain.
I can tell this audience – and this too may surprise you – that today a higher share of our growth is delivered by science-based innovations than in any other industrial nation including the United States of America. And Britain has the highest share of R and D coming from all over the world than any of our major competitors.
And because of our successes in business and financial services, today the UK exports twice as much business services as we import and four times as much financial services.
All of this shows us that we in Britain now have the chance, if we make the right long term decisions, to become the best location for scientific research and development and world leaders in the new enterprises of the future.
Measures I will announce in the Budget will reinforce our determination that our incentives to attract research and development are the worlds best, our universities are world class, and we should aim to lead the world in strengthening the links between higher education and the hi-tech firms of the future.
I can tell you that more than ever our investment effort, both for inward and indigenous investment, will focus on encouraging and stimulating creative firms that are high value added, research based, and technology led.
We will continue to welcome qualified people with skills from other nations to study in and contribute to Britain.
And I want Britain to lead the world in resolving the controversial issues of genetic research, animal experimentation and GM foods — so we can value and celebrate science and the joy and excitement of scientific discovery.
We are developing plans for science cities. And the ten year framework for the advancement of British science – announced last year and which has already led to £2.5 billion pounds more science investment – will be constantly updated to meet the challenges of a rapidly changing world of knowledge.
As part of our commitment to make the UK one of the leading world centres for pharmaceuticals, biotech and the life-sciences, the newly created UK clinical research collaboration already embraces the NHS, business and universities. Our aim is to make the UK the premier location for new research from medical trials to the tracking of results. And we will also take the necessary steps to become the world’s number one research centre for genetic and stem cell research.
I want Britain to be not only a centre for the science-based industries of the future but also the hub for creative industries as a whole.
Here too we can build from solid foundations. In the last decade Britain’s knowledge intensive sector has grown twice as fast as the overall economy.
By adopting new digital media and harnessing the entrepreneurial flexibility which makes our inner city areas new ‘knowledge factories’, we are creating a critical mass of creative industries with global reach – so that one in every five new jobs here in London is now in these sectors.
Creative industries from digital electronics and communications to film, design and fashion – once only 1 per cent of GDP – now contribute 8 per cent of the UK GDP.
This growth highlights extraordinary talent. And the opportunity now is to build on its extraordinary promise —– by backing risk takers with new incentives for new enterprise and with a new generation of venture capital for expanding business.
And our challenge is not just to encourage creative industries, our priority is to encourage all industries to be creative. It is both about maintaining the entrepreneurship and creativity within established large businesses and about doing more to enable those who want to start up new businesses to turn their ideas and ambitions into reality.
In Britain today 4,000 new businesses start every week. There are 300,000 more businesses now than in 1997. But with our rate of business creation still half that of the USA, we still have a long way to go.
If we are to have enterprise in our boardrooms it must start in our classrooms. In 1997 less than 15 per cent of schools offered enterprise education. Now half of all schools do. By 2006 every school will.
Today only 1 per cent of college or university students are engaged in enterprise. I want to see every college and every university twinned with a ‘business champion’.
And if the UK could achieve the same levels of female entrepreneurship as the US – and today’s action plan is designed to improve business creation rates – Britain would gain three quarters of a million more businesses.
I want a Britain of ambition and achievement where there is no ceiling on talent, no limit to potential, no cap on aspiration.
And, celebrating enterprise, we are today, after a nationwide competition, naming the rejuvenated town of Ollerton in Nottinghamshire as Britain’s town of enterprise for 2005.
Every one of you here who runs a company – large or small – knows that you must draw on the potential of everyone in your company to be successful; its no different for a country. Skills are the new commanding heights of the economy. And by acquiring better skills employees can become the beneficiaries not victims of globalisation.
Our mission not just that of British government but that of the whole British society must be to make our people the best educated and most skilled in the world.
I believe this is the shared and settled view of every section of British society
And together we are prepared to support the long-term decisions necessary to achieve this aim.
So I commit us to moving our education system up a gear: demanding, in return for investment, the highest standards in our schools and colleges; making university and college funding a priority in the next Parliament; working with you – the leaders of business in this country – to invest in employee training… all the time encouraging and incentivising a work-your-way-up ethos of self improvement and self reliance.
What happens in schools is critical to our long-term future. But we cannot just leave education to the schools. Of the workforce we will have in 2015, 80 per cent have left school and are already in work. And it is their skill levels and flexibility that will, over the next decade, determine the prosperity of our country.
Learning from successful training policies amongst our European competitors, we have already witnessed over 100,000 individual success stories of those given time off for training through the employer training pilots – the majority of them women, the majority of them with no prior skills, the vast majority of them successfully attaining their qualifications. And I would like to congratulate all the businessmen and women who have contributed to this success. Now we are able to go further and announce their roll out to the whole country creating for the first time a national employer training programme.
I said earlier that the modern task of government is not only to make all necessary reforms but also to remove all unnecessary barriers: with our emphasis on stability, education and science to do what needs to be done but to do no more than what needs to be done.
So let me tell you how the Budget and our programme will reflect this – our shared agenda.
Planning: we must make our planning laws quicker, more flexible and more responsive – and we will.
Transport: we must work with you – private and public sectors together – to tackle decades of under-investment and lack of commitment —- and we will.
Flexibility: we must and will do more to encourage local and regional pay flexibility.
Competition: we must and will build upon what we have already created – the most open competition regime in the world.
Regulation: a problem raised in every industrial country for many years where there is, as you know, always invariably a tension between the flexibility you need and the standards the public request.
It is because we recognise the limits of government that we have already removed the independent audit requirement on small firms and moved to a more simplified system of VAT.
And for all businesses large and small we have removed or reformed over 400 separate regulations; the Financial Services Authority have introduced a series of reforms to reduce compliance costs; and in the budget we will do more.
I have set in train a major review – led by Philip Hampton – of the complex, often out of date systems by which regulations are inspected and enforced.
And in the Budget I will set out proposals not just about the burden of regulations but about the volume and flow of regulations.
My position is that in this new global economy government must of course do all – principally through stability, education and infrastructure – that it is necessary to do but no more – and we will continue to remove barriers that are not justified.
So it is in the national interest that we continue to resist inflexible regulation from the European Union.
Flexibility is the best way forward so we have agreed with Ireland, the Netherlands, Luxembourg, Austria and Finland to put regulatory reform at the heart of our six EU Presidencies through to 2006, putting every new and existing regulation through strict new tests for their impact on enterprise and competitiveness.
And in our Presidency of the European Union we not only hope to sign up all 25 EU countries to our deregulation initiative but I want to consult at every stage with you, the businesses of Europe.
As we tackle regulation to create the best environment for business to thrive, we also have to design our tax system to encourage and reward work, savings, investment and enterprise.
To pay for improvements in health care we have raised national insurance by 1 per cent – but to put the costs in context, business costs for health care have been rising much faster in the US – by more than 10 per cent each year – and in France employers pay health insurance of around £60 a week for an employee on average earnings and in Germany around £30 a week, compared to just over £10 a week in the UK.
But as far as corporation tax, capital gains tax, small companies tax and personal income tax, we have cut corporation tax from 33 pence to 30 pence, cut long term capital gains tax for business assets from 40 pence to 10 pence, cut small companies tax from 23 pence to 19 pence and we have also cut the basic rate of income tax by 1 pence.
And we will continue to look with you at the business tax regime so that we provide incentives for investment in wealth creation and rewards for success.
Indeed, we have an opportunity before us now to create a consensus on tax as well as well as on stability to make the Britain the best place to do business.
Twenty years ago companies thought mainly of national markets and were considering new opportunities in European markets.
Today the success stories are companies who have transformed themselves to succeed in global markets.
Britain was the pioneer of free and open trade.
Now to take advantage of the vast opportunities global markets offer we must lead the way again in breaking down international barriers to trade and commerce.
We are pressing for a successful and ambitious conclusion to the world trade talks.
Because 55 per cent of our trade is with the European Union we will, in our presidency of the EU, push forward our proposals to liberalise the single market, the greatest single market in the world.
Because transatlantic economic relations are worth over $2.5 trillion dollars each year, I can tell this audience that we will use our EU Presidency to push forward a new transatlantic trade and investment partnership to remove regulatory and other barriers between the European Union and the USA including in financial services.
Today we welcome to our conference representatives from four of the major emerging market economies – China, India, Brazil and South Africa. Because only 1 per cent of our exports go to China and only 1 per cent to India – now two of the largest economies in the world – we are instituting a new Asia Taskforce – business and governments together working to maximise trade – and in the fast expanding financial services, we will match the successful UK-China Financial Dialogue with a new UK-India Dialogue that India and the UK are agreeing today.
Conclusion
And what has been, and can be, achieved in this area and other areas at the Treasury for employment, investment and prosperity must be centre stage in the national debate on our future in the months to come. And I look forward to it being the central issue we will take forward in the coming Parliament.
I said at the outset that together we have to rise to the global challenge. And to do so we have to build a shared economic purpose.
Successful companies achieve this.
The successful countries of the future will have to achieve this.
And my vision is that if we, government and business, work together, we can build in Britain a progressive consensus.
World leaders in stability.
World leadership in science, skills and enterprise.
A Britain that looks outwards to Europe and the international economy.
Then globalisation is indeed made for Britain and British prosperity.
And we can be one of the global economy’s greatest success stories and look forward to a twenty first century of British achievement.
The speech made by Gordon Brown, the then Chancellor of the Exchequer, in Beijing on 21 February 2005.
It is a pleasure to be here in Beijing, to have been invited to address this distinguished audience at this distinguished Academy of Social Sciences, and to be able to do so at the end of a memorable day in which I have had the privilege of meetings with Premier Wen Jiabao and Finance Minister Jin Renjing.
Indeed it is a great privilege to be able to see – even in such a short visit – so many of your historic places; to have the chance to witness at first hand so many of the important developments here in China; to have been welcomed with such kindness for which I am grateful; and to have the special privilege of discussing with your leaders all the important issues that effect the future of our global economy.
This, I believe, reflects the growing and deepening partnership between China and Britain:
today there are more than 4000 joint ventures involving UK companies and Chinese partners;
each year an additional 400 new joint ventures are being entered into;
the UK is the largest European investor in China – investing almost $20 billion a year;
indeed trade between our two nations has grown by 230 per cent in the last five years
bringing to fruition the hope expressed by Premier Wen during Tony Blair’s visit to China two years ago of Britain becoming China’s leading European partner.
And our partnership is reinforced by the work we have entered into together over the last few years – in financial services, science, industry, the environment, international development and many other areas.
My theme today is: while the next stage of global economic changes brings insecurities as well as challenges, great opportunities now arise for China and Britain together.
The context is a global economy undergoing the most rapid and extensive transformation the world has ever seen – in pace of change, in scale of change, in the impact of change.
It is a measure of the global economic change that is now taking place that over the past decade global trade has increased twice as fast as output.
In just one decade world trade in services has risen by over 60 per cent and world trade in goods by 70 per cent.
In 1980 less than a tenth of manufacturing exports came from developing countries.
Today it’s almost 30 per cent.
In twenty years time probably 50 per cent.
So we are witnessing the most rapid shift in the global balance of production the world has ever seen.
Twenty five years ago, only a quarter of the exports of developing country were manufactured goods: today 80 per cent.
And with 3.5 million American jobs and as many as 5 million European and American jobs in total likely to be moved offshore between now and 2020, we are undergoing a global economic and employment transformation that will dominate the first decades of the 21st century.
Twenty years ago, China had less than 1 per cent of world trade. Today it is 7 per cent and Asia now has 23 per cent – soon to equal the euro area.
So we are seeing economic change on a continental scale – the potential for Asia to be the 21st century’s equivalent of America’s rise in the 20th century.
Two hundred years ago a British politician George Canning said that the new world had been brought into being to redress the balance of the old.
Today a new economic world is already in existence challenging the old.
Globalisation is now rapid in its impact, so pervasive in its effects, that nations will rise and fall with speed depending upon their ability to adapt.
The rapidity and pervasiveness of change brings both unparalleled new opportunities and an unprecedented degree of insecurity.
So no country can take its future prosperity for granted.
All nations must adapt and modernise or fall behind.
And as global restructuring continues apace – focusing advanced industrial nations away from low skill, low tech products and processes to the technology driven and high value added – all countries will increasingly only have a competitive edge if they develop world leadership in the most technologically intensive and science based industries and services.
For most of the last twenty centuries China led the world….and so today we are seeing China’s re-emergence to its rightful place as a leading world economy.
Indeed the scale of this extraordinary change is here for all to see in Beijing.
This morning I visited Beijing Airport Expansion Project – one of the world’s largest construction projects in the world and one of 50 new airports being built in China.
I congratulate you on winning the Olympics in 2008. We will attempt to emulate you by winning the 2012.
Already China is the world’s largest user of cement, steel, copper, iron ore and tin – today now consuming, for example, half the world’s cement, over a quarter of the world’s steel and a third of the world’s iron ore. China has been responsible for one third of the recent growth in demand for oil.
25 per cent of the world’s washing machines are produced in China
30 per cent of the world’s television sets
40 per cent of the world’s microwaves
50 per cent of the world’s cameras,
70 per cent of the world’s photocopiers
90 per cent of the world’s toys
And the question businesses everywhere around the world are asking before placing a contract is what are the costs of goods produced in China, ‘what is the China price?’
But China is not just competing on the basis of low costs. You are also already a 21st century player with very significant hi-tech achievements.
China’s re-emergence as a leader in scientific research should surprise nobody. The country that invented paper, printing, gunpowder and the compass is now producing 2 million graduates a year including 270,000 in science and engineering. In 2003 you put your first person in space. You are decoding DNA. 50 per cent of industrial GDP in the industrial heartland of Shenzhen – which I will be visiting on Wednesday – is now accounted for by hi-tech companies. And with Chinese companies now investing back in Western economies, and with the hi-tech, higher value added sector in China now growing rapidly, this is a global economic transformation that will dominate the first decades of the 21st century.
Taken together China is now exporting more than France, Italy and Britain and now is the world’s number one destination for foreign direct investment.
Some people in the advanced industrial economies view the rise of China and the next stage of globalisation as simply an economic threat to the advanced industrial economies.
That leads to calls for protectionism against lower cost imports and protectionist attitudes against outsourcing and off-shoring.
But let us be clear that this is not only a sterile attempt to stop the clock and resist inevitable change. This is to also misunderstand the contribution made by the rise of China and in recent years the emerging market economies.
China has been responsible for keeping the world economy growing as the advanced industrial economies went into a downturn.
China has itself contributed more growth to the world economy in the last few years than all the G7 combined.
Indeed without China, world trade growth which slowed more than at any time in recent world downturns would have been negative for more than one year.
China’s role as a major economic player stabilising the world economy should never now be discounted.
So I am here not only as Finance Minister of Britain but as Chairman of the International Monetary and Finance Committee to support China’s increasingly important role as a stabilising force in the world economy.
This year Britain chairs the G7.
And China chairs the G20.
And it is right to agree a shared agenda about the challenges – in macro economic policies, in trade, technology, the environment, labour markets, and corporate standards – we – and the whole world economy – face entering the next stage of global economic change.
But while others may wish to see China and globalisation as a threat, I see the rise of China and the new stage of globalisation not as a threat but as an opportunity.
An opportunity because China is a huge market with huge opportunities for British companies; a dynamic market which challenges Britain to be equipped for the new world and to respond.
An opportunity because China’s development helps us understand the need for change and to persuade British people to change.
In the last century in the last industrial revolution Britain realised all too late that other countries were not only catching up with us but doing better in applying technology to products and processes.
Now that we can see clearly the challenge ahead – the changes in both technology and in trade – arising from the global sourcing of goods and fast increasing global flows of capital – there are big questions all of us must ask ourselves about how each of us can benefit from the next stage of global economic change and how the benefits of globalisation can flow not just to some people but to all people
So my task here in China in this speech is to identify how we can together adopt the right global economic policies to help our countries meet and master the challenges of change in this new world – and how can we work together to ensure that globalisation offers opportunities fair for all.
In a world of ever more rapid global financial flows, the first policy conclusion is the need to entrench stability in macroeconomic policy.
Capital is, of course, more likely to move to environments which are stable and least likely to stay in environments which are, or become, unstable.
So for every country, rich or poor, macroeconomic stability is not an option but an essential pre-condition of economic success.
And for the world economy, creating the conditions for entrenching stability in each continent is an important task for the international institutions.
It is important therefore that as we look forward to the coming challenges Britain and China as Presidents of the G7 and G20 in 2005 work together to address these challenges.
And I am pleased that today we have agreed to work together to study and address macroeconomic and structural vulnerabilities in the world economy.
A joint policy paper from Britain and China will be submitted to the G20 Meeting in October.
This paper will analyse the global economic challenges that we are facing,
The paper will identify areas where countries can learn from each others experience.
And it is already clear that if we are to maintain stability and growth, each continent has a role to play: America in addressing its deficits; and Europe and Asia in addressing the vexed questions of structural economic reform.
In the new global economy there will be a changing role for the international institutions. Founded sixty years ago, they must continue to adapt to support the stability that is vital to the modern economy. And as G20 and G7 Presidents we are committed to re-examining the strategic role of the IMF and World Bank for the years to come – in particular the importance of a more independent role for the IMF in the vital task of the surveillance of the world economy.
Greater stability in world economic arrangements should be accompanied by greater attention to policies for national economic stability.
Starting with the independence of the Bank of England and then the adoption of new British monetary and fiscal objectives, rules and systems of accountability, Britain has sought to develop a modern British way to economic stability that make sense for the far more open liberalised capital markets of an increasingly globalised economy.
I know that China is pushing forward fundamental reforms to expenditure management and the banking sector.
And I welcome your Government’s decision to publish the IMF Article IV reports on your economy for the first time.
The debate continues on the importance of codes and standards. The agreed position of the membership of the International Monetary Fund is that – because for every country, rich or poor, macroeconomic stability is not an option but an essential pre-condition of economic success – it is in the interests of stability that we seek a new rules-based system for the global economy: a reformed system of economic government under which each country, rich and poor, has a responsibility to adopt agreed codes and standards for fiscal and monetary policy for the financial sector and for corporate governance.
In a modern open economy capital account liberalisation is the way forward but so that it is not destabilising it will be best achieved in a sequenced way.
So from experience a sequenced approach can benefit not only China but the global economy as a whole.
Second, openness to trade is crucial if the world economy is to expand to the benefit of all.
The importance of open trade is a lesson we have learned from our own history.
In December in Hong Kong vital decisions will have to be made to finalise a global trade round. And as globalisation continues apace, it is not protectionism but trade – and competition – that will be the main drivers of productivity, growth and economic development.
So 2005 is a crucial year for making progress towards a freer and fairer world trading system that delivers real improvements in market access. Like our Agricultural Minister Margaret Beckett, I want to tackle the waste and excesses of agricultural protectionism. And I believe that it is critical that China and the UK continue to work together to achieve an ambitious outcome to the Doha development trade talks by the WTO Ministerial in December.
People often talk of trade as a global public good because all of us can gain when trade flows successfully. In the modern world the same can now be said of structural economic reform. As we consider the global economic imbalances and differential growth rates between continents the importance of structural economic reform can no longer be discounted. Balanced growth will arise when continents like Europe enhance their structural economic reform with greater labour, capital and product market flexibilities and when continents like Asia engaged in wider and deeper structural economic reform to substantially raise their productivity levels.
Indeed today, more so than even trade, innovation is the driver of change, forcing structural reform on to the agenda. It took nearly forty years for the first 50 million people to own a radio, just 16 years for the first 50 million people to own a PC, but just 5 years for the first 50 million to be on the internet.
Seven years ago when we came into government in Britain there were no DVDs, no digital TV, no broadband, a fraction of the number of people with mobile phones.
And the speed of change in the next ten years will be even more dramatic. Indeed people think it will be even more dramatic than the changes of the last two hundred years.
With the global sourcing of goods and now services, the nations that are the most innovative and flexible will be the most successful in securing comparative advantage and value added.
So the advance of science, technology and innovation will be absolutely crucial in determining which nations are successful and which fail in the next stage of globalisation.
And it is because I am clear that the nations that are the most innovative, enterprising, adaptable and flexible that will be the winners that we must push forward with new policies to become world leaders in science, technology and creative industries.
I do not believe that in the next stage of the global economy success for one country need mean failure on the part of the other.
Globalisation is not a zero sum game where one country or continent will only succeed at the expense of another.
But I do believe that if we are to make the most of the opportunities that arise from global economic change wide deep and extensive structural economic reform will be essential.
Indeed to be successful each country must summon up the resolve and demonstrate the strength of character and economic purpose to meet and master the challenges ahead – seeking out what gives it comparative advantage.
And I believe that if we do so and make the right decisions this next stage of globalisation is made for Britain and China.
As I have said, the UK comparative advantage in the 21st century starts with the strength that comes from our economic stability.
But to succeed we must become world leaders not only in stability but in science, enterprise, education and trade.
So Britain must make the right decisions in its policies to promote science, enterprise, skills and trade – to make globalisation work for us
We must be prepared to make any necessary reforms, implement any legislative changes, and introduce any additional incentives to secure the comparative advantage we seek.
And we want to work with business – often getting out of the way and concentrating on what government can do best – education, public investment in science, skills, our infrastructure and welfare – to ensure businesses and people can respond.
So in the globalisation game, we see Britain’s comparative advantage as our stability, our scientific genius, our world class universities and our global connections. But if Britain is to continue to thrive in the future, it is not enough just to rely on established historic advantages.
It is also in our nature as British – and part of the British entrepreneurial spirit – always to explore, to seek out new markets, to boldly search out new opportunities where others have hesitated to go. We look out not in. And we have done so for many centuries.
Strongly anti-protectionist on trade, we are pioneers of free and open trade and today its greatest exponents.
And we are fiercely anti-protectionist too in our attitudes and open to new ideas, new influences and new people and we seek to be a beacon for talent not just British but from the rest of the world. And it is precisely because we are anti-protectionist that we are aware too of the continuing need to be flexible.
So while Britain has always been internationalist in its approach to the world and has always seen the English Channel as a highway and not a moat, I want us to think of a Britain in this new global age that leads the world in championing free trade against protectionism and that is open to new ideas new influences and new people – a Global Britain always looking outwards with connections in every continent and seeing change not as an enemy but as a friend. Indeed our commitment to the future of the European Union is because we want Europe to be less like a trade bloc looking in on itself and more like a Global Europe looking out to the rest of the world.
So one of our greatest comparative advantages in the new global economy could be our ability to respond flexibly, quickly and openly to global change.
And I can say that this Global Britain will show by the structural economic reforms we are prepared to make that we can and will respond to change with enhanced flexibility and through structural reform we will encourage the expanding elements of the new global economy where we can secure comparative advantage – to celebrate and not constrain scientific exploration and discovery, to nurture the new creative industries, to continuously innovate in new financial products and services and to create a skilled and adaptable workforce in a Britain of ambition and aspiration where there is no cap on potential and no ceiling on talent.
Over the next few days, as part of these structural economic reforms, I am publishing plans in three areas – financial services, science and education – showing where Britain is and plans to be a world leader in the future and showing in particular where cooperation with China will yield beneficial results for both economies. Their development will help us double exports to China by 2007 and quadruple exports by 2010.
Our financial services sector is the best in the world – London, a pre-eminent financial centre. We are already taking our skills and knowledge to the rest of the world and the rest of the world is coming to us. And we are determined to lead in the new services that will be a feature of the decades to come.
Tomorrow I will publish our plans for developing our financial services links with China.
I am delighted that our banks and insurance companies sell products here in China. I am delighted that China’s companies list on the London Stock Exchange.
Now we wish to see more companies from China and around the world listing in London.
And we will also seek to develop from the City of London our financial services, and business and management services.
My speech by video to a science conference in Manchester in Britain earlier today highlighted our ambitions for scientific and medical research – that Britain lead the world as a location for R and D, for world class universities, and for effective technology transfer between education and business.
While today more Nobel prices than any country except America and a higher share of British growth delivered by science-based innovations than in any other industrial nation including the United States of America, Britain is determined to win in the science based and high value added products and processes of the future. And we are determined to drive up our lead in creative industries from film, fashion and design to communications and digital electronics, now in total accounting for 8 per cent of our national output.
And the proposals I am outlining tomorrow will make it possible for more British universities and research institutes to develop links with their counterparts in China, more British high-technology firms to develop links with their Chinese counterparts and more skilled researchers and students to move between our two countries, making the best use of the facilities we both have to offer.
Britain is determined to lead the world in the provision of educational services. In future years we see it as one of our greatest export earners.
In just five years the value of British education as an export has almost doubled, from £6.5 billion to £10.3 billion. Education and education related services are our fastest growing export earner and have already eclipsed food, tobacco and drink exports, insurance, and ships and aircraft. Indeed, I believe that if we continue to make the right decisions, by 2020 education exports could contribute over £20 billion a year to the UK economy.
Nowhere is the expansion of education as a British export happening more quickly and with greater results than here in China.
Today English language lessons are a requirement from age six in Chinese schools with 20 million more children a year starting lessons. In Beijing alone 200,000 people also take English lessons outside the school system. It is estimated that over 300 million Chinese people currently speak English. And in twenty years time the number of English speakers in China is likely to exceed the number of speakers of English as a first language in the all of the rest of the world.
I believe this is a huge opportunity for Britain and I am today setting out proposals to make education one of Britain’s lead exports.
UK education and training providers providing education abroad – facilitated by new technology and offshore campuses – could rise from the 200,000 students covered today to more than 800,000 by 2020…an increase of more than 300 per cent.
And, if the sale of education products overseas including books, IT packages and broadcasting follows the overall trend in export growth it could be worth £10 billion by 2020.
Our aim is to encourage UK education and training providers to work internationally in partnership with business
We want to make the UK an international leader in the creative and supportive use of IT for education
We want to promote the role of our universities as international hubs for learning and research
And we want to promote further expansion in the number of international students at UK further and higher education institutions – both in Britain and in off-shore campuses abroad like those already being pioneered here in China by Nottingham University and Napier University.
Education exported to Europe. Education exported to America. Education exported to Asia.
And today I am setting out a five point plan to raise Britain’s earnings from exporting education, particularly in the Chinese market.
First, our ambition is that every school college and university in England to be ‘twinned’ with a school college or university overseas within the next five years. This is made possible by the expansion the Department of Education is announcing of our global gateway – an international website providing a one-stop shop for schools – and from this year universities and colleges – seeking a twinning partner. 150 schools in Britain already have links with schools here in China – and I saw one such link-up in practice today.
Second, we will expand English language teaching overseas and in particular expand the ‘in2english’ website run by the British Council, the BBC and China Central Radio and TV – set up to help people in China learn English – which is already attracting 60,000 unique visits per month.
Third, we will help universities, colleges and business providers of educational products to win in the growing market in English education abroad. To make this happen, the brand Education UK website has a fully searchable database of 240,000 courses in the UK and offers students from across the world the opportunity to enquire about and apply for a course online.
Fourth, our aim is to establish the UK as an international leader in the use of ICT for education. We will invest £2.5 million in the E-China scheme which enables English Higher Education institutions to work with their Chinese counterparts to develop joint e-learning programmes.
Fifth, with global demand for international higher education student places forecast to grow from 2.1 million in 2003 to some 5.8 million in 2020, I can announce that we will make it possible for Chinese students to stay and work in our economy for a year after Higher Education. I have proposed a reciprocal arrangement for China so that British students can stay here in China for a year to work. We will also expand scholarship programmes such as the Chevening Programme and Overseas Research Students Award Scheme, which fund students from overseas to study in the UK.
Stability. Open trade. Structural economic reform. But it is also essential for governments such as ours to do all we can to ensure opportunity, prosperity and the chance of a good life is available not just to some of our citizens but to all of our citizens.
And our desire for a globalisation that works for everyone in all parts of the world means we must all take into account the inequalities that globalisation brings and the needs of all developing countries.
There are those who define the next stage of globalisation as an inevitable growth in insecurity and inequality.
This depends on the decisions we make.
I believe that with the right decisions globalisation can address inequality, tackle economic discrimination and root out unacceptable unfairnesses. Properly managed globalisation has the potential to make the world a safer place, breaking down boundaries and uniting people. And I believe that in the long run that prosperity like peace is indivisible — and that to be sustained it has to be shared.
So we must address the problems that arise when a rapid opening up of the global economy brings in its wake extremes of inequality both between and within countries.
And we must ensure that developing countries can participate in the global economy with both a level playing field and on terms that address the needs of their most vulnerable
When Premier Wen visited the UK last year, the UK and China committed to work together to help developing countries in addressing poverty and other development-related problems so as to better manage challenges posed by globalisation.
We welcome China’s support for the UK’s proposal for an International Finance Facility which would leverage up development aid commitments on the international capital markets to raise an additional $50 billion dollars a year to enable us to tackle global poverty and meet the 2015 Millennium Development Goals for education, health, gender equality and reductions in deprivation.
And today I can tell you that China and the UK have agreed to work towards a joint statement by the Spring Meetings setting out the objectives and priorities we have on international development and achieving the Millennium Development Goals, including progress on innovative financing mechanisms such as the International Finance Facility.
So I propose greater cooperation on economic stability, the opening up of trade, on structural economic reform and on a new deal for the poorest of the world.
Just last month your Finance Minister spoke at a conference I chaired in London. He spoke of enterprise and of global trade. We both shared strong and positive ideas. And it is strengthening cooperation between Britain and China that can enable Britain to make the most of its advantages.
That is why I have committed Britain to make all the changes necessary to become more enterprising, flexible, creative, adaptable, skilled and educated a nation than ever before.
If we get it right the benefits are huge.
Britain and China have much in common. Together we can show that globalisation can deliver real tangible benefits.
Benefits that make us stronger.
Benefits that bring us closer.
A shared long term economic purpose.
My message is of optimism and opportunity. We should not fear globalisation. We must embrace it. But we must all make the necessary changes to make globalisation work for us.
Thank you.
The statement made by the Bank of England on 17 March 2022.
The Bank of England condemns Russia’s unprovoked invasion and the suffering inflicted on Ukraine. The Bank is working closely with the UK Government to support its response in coordination with international authorities. The Bank’s Monetary Policy Committee (MPC) supports this condemnation and welcomes these actions.
The MPC sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 16 March 2022, the MPC voted by a majority of 8-1 to increase Bank Rate by 0.25 percentage points, to 0.75%. One member preferred to maintain Bank Rate at 0.5%.
In the MPC’s central projections in the February Monetary Policy Report, published before Russia’s invasion of Ukraine, UK GDP growth was expected to slow to subdued rates during the course of this year. This in large part reflected the adverse impact of the previous, already large, increases in global energy and tradable goods prices on UK real aggregate income and spending. As a result, a margin of spare capacity was projected to open up and the unemployment rate to rise to 5% by 2025. CPI inflation was expected to peak at around 7¼% in April 2022. Upward pressures on inflation were expected to dissipate over time and, conditioned on the rising market-implied path for Bank Rate expected at the time of the February Report and the MPC’s current forecasting convention for future energy prices, CPI inflation was projected to fall back to a little above the 2% target in two years’ time and to below the target by a greater margin in three years.
Developments since the February Report are likely to accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze on household incomes.
Regarding inflation, the invasion of Ukraine by Russia has led to further large increases in energy and other commodity prices including food prices. It is also likely to exacerbate global supply chain disruptions, and has increased the uncertainty around the economic outlook significantly. Global inflationary pressures will strengthen considerably further over coming months, while growth in economies that are net energy importers, including the United Kingdom, is likely to slow.
Turning to economic activity, UK GDP in January was stronger than expected in the February Report. Business confidence has held up and labour market activity data have remained robust. Consumer confidence has, however, fallen in response to the squeeze on real household disposable incomes. That impact on real aggregate income is now likely to be materially larger than implied by the projections in the February Report, consistent with a weaker outlook for growth and employment, all else equal.
Twelve-month CPI inflation rose from 5.4% in December to 5.5% in January, which triggered the exchange of open letters between the Governor and the Chancellor of the Exchequer that is being published alongside this monetary policy announcement. Inflation is expected to increase further in coming months, to around 8% in 2022 Q2, and perhaps even higher later this year. The projected overshoot of inflation relative to the 2% target to an increasing extent reflects global energy prices, with some further material contribution from tradable goods prices. Service price inflation has also picked up, although to a lesser extent than other components, with core services prices returning to their pre-Covid trend. Underlying nominal earnings growth is estimated to have remained above pre-pandemic rates, and is still expected to strengthen over the coming year.
If sustained, the latest rise in energy futures prices means that Ofgem’s utility price caps could again be substantially higher when they are reset in October 2022. This could temporarily push CPI inflation around the end of this year above the level projected for April, which was previously expected to be the peak. Further out, inflation is expected to fall back materially, as energy prices stop rising and as the squeeze on real incomes and demand puts significant downward pressure on domestically generated inflation. That judgement also reflects that monetary policy will act to ensure that longer-term inflation expectations are well anchored around the 2% target.
The MPC’s remit is clear that the inflation target applies at all times, reflecting the primacy of price stability in the UK monetary policy framework. The framework also recognises that there will be occasions when inflation will depart from the target as a result of shocks and disturbances. The economy has recently been subject to a succession of very large shocks. Russia’s invasion of Ukraine is another such shock. In particular, should recent movements prove persistent, the very elevated levels of global energy and tradable goods prices, of which the United Kingdom is a net importer, will necessarily weigh further on UK real aggregate income and spending. This is something monetary policy is unable to prevent. The role of monetary policy is to ensure that, as this real economic adjustment occurs, it does so consistent with achieving the 2% inflation target sustainably in the medium term, while minimising undesirable volatility in output.
Given the current tightness of the labour market, continuing signs of robust domestic cost and price pressures, and the risk that those pressures will persist, the Committee judges that an increase in Bank Rate of 0.25 percentage points is warranted at this meeting.
Based on its current assessment of the economic situation, the Committee judges that some further modest tightening in monetary policy may be appropriate in the coming months, but there are risks on both sides of that judgement depending on how medium-term prospects for inflation evolve. The MPC will review developments in the light of incoming data and their implications for medium-term inflation, including the economic implications of recent geopolitical events, as part of its forthcoming forecast round ahead of the May 2022 Monetary Policy Report.
The statement made by the Bank of England on 5 May 2022.
Monetary Policy Summary, May 2022
The MPC sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 4 May 2022, the MPC voted by a majority of 6-3 to increase Bank Rate by 0.25 percentage points, to 1%. Those members in the minority preferred to increase Bank Rate by 0.5 percentage points, to 1.25%.
Global inflationary pressures have intensified sharply following Russia’s invasion of Ukraine. This has led to a material deterioration in the outlook for world and UK growth. These developments have exacerbated greatly the combination of adverse supply shocks that the United Kingdom and other countries continue to face. Concerns about further supply chain disruption have also risen, both due to Russia’s invasion of Ukraine and to Covid-19 developments in China.
UK GDP is estimated to have risen by 0.9% in 2022 Q1, stronger than expected in the February Monetary Policy Report. The unemployment rate fell to 3.8% in the three months to February, and is likely to fall slightly further in coming months, consistent with a continuing tightening in the labour market and with a margin of excess demand at present. Surveys of business activity have generally remained strong. There have, however, been signs from indicators of retail spending and consumer confidence that the squeeze on real disposable incomes is starting to weigh on the household sector. The level of GDP is expected to be broadly unchanged in Q2.
Twelve-month CPI inflation rose to 7.0% in March, around 1 percentage point higher than expected in the February Report. The strength of inflation relative to the 2% target mainly reflects previous large increases in global energy and tradable goods prices, the latter of which is due to the shift in global demand towards durable goods and to supply chain disruptions.
The Committee’s updated central projections for activity and inflation are set out in the accompanying May Monetary Policy Report. The projections are conditioned on a market-implied path for Bank Rate that rises to around 2½% by mid-2023, before falling to 2% at the end of the forecast period. Fiscal policy is assumed to evolve in line with announced Government policies. Wholesale energy prices are assumed to follow their respective futures curves for the first six months of the projections and remain constant beyond that, in contrast to futures curves, which are downward sloping over coming years. There are material risks around this assumption.
In the May Report central projection, CPI inflation is expected to rise further over the remainder of the year, to just over 9% in 2022 Q2 and averaging slightly over 10% at its peak in 2022 Q4. The majority of that further increase reflects higher household energy prices following the large rise in the Ofgem price cap in April and projected additional large increase in October. The price cap mechanism means that it takes some time for increases in wholesale gas and electricity prices, and their respective futures curves, to be reflected in retail energy prices. Given the operation of the price cap, consumer price inflation is likely to peak later in the United Kingdom than in many other economies, and may therefore fall back later. The expected rise in CPI inflation also reflects higher food, core goods and services prices.
Underlying nominal earnings growth has risen by more than projected in the February Report and is expected to strengthen in coming months, given the further tightening of the labour market and some upward pressure from higher price inflation. Companies generally expect to increase their selling prices strongly in the near term, following the sharp rises in their costs, with many reporting confidence that they will be able to rebuild at least some of their margins.
Nonetheless, in the May Report central projection, UK GDP growth is expected to slow sharply over the first half of the forecast period. That predominantly reflects the significant adverse impact of the sharp rises in global energy and tradable goods prices on most UK households’ real incomes and many UK companies’ profit margins. Although the unemployment rate is likely to fall slightly further in the near term, it is expected to rise to 5½% in three years’ time given the sharp slowdown in demand growth. Excess supply builds to 2¼% by the end of the forecast period.
With monetary policy acting to ensure that longer-term inflation expectations are anchored at the 2% target, upward pressure on CPI inflation is expected to dissipate over time. Global commodity prices are assumed to rise no further in the central projection, global bottlenecks ease over time, and the weakening in demand growth and building excess supply lead domestic inflationary pressures to subside.
Conditioned on the rising market-implied path for Bank Rate and the MPC’s current forecasting convention for future energy prices, CPI inflation is projected to fall to a little above the 2% target in two years’ time, largely reflecting the waning influence of external factors, and to 1.3% in three years, well below the target and mainly reflecting weaker domestic pressures. The risks to the inflation projection are judged to be skewed to the upside at these points, given the risks of more persistent strength in nominal wage growth and domestic price setting than assumed.
The MPC’s remit is clear that the inflation target applies at all times, reflecting the primacy of price stability in the UK monetary policy framework. The framework also recognises that there will be occasions when inflation will depart from the target as a result of shocks and disturbances. The economy has recently been subject to a succession of very large shocks. Russia’s invasion of Ukraine is another such shock. In particular, should recent movements prove persistent as the central projections assume, the very elevated levels of global energy and tradable goods prices, of which the United Kingdom is a net importer, will necessarily weigh further on most UK households’ real incomes and many UK companies’ profit margins. This is something monetary policy is unable to prevent. The role of monetary policy is to ensure that, as this real economic adjustment occurs, it does so in a manner consistent with achieving the 2% inflation target sustainably in the medium term, while minimising undesirable volatility in output.
Recent developments have exacerbated materially both the near-term peak in CPI inflation, and the prospective negative impact on activity and medium-term inflationary pressures. Nevertheless, given the current tightness of the labour market, continuing signs of robust domestic cost and price pressures, and the risk that those pressures will persist, the Committee voted to increase Bank Rate by 0.25 percentage points at this meeting.
Based on their updated assessment of the economic outlook, most members of the Committee judge that some degree of further tightening in monetary policy may still be appropriate in the coming months. There are risks on both sides of that judgement and a range of views among these members on the balance of risks. The MPC will continue to review developments in the light of incoming data and their implications for medium-term inflation.
The Committee reaffirms its preference in most circumstances to use Bank Rate as its active policy tool when adjusting the stance of monetary policy. As Bank Rate is now being increased to 1%, and consistent with the MPC’s previous guidance, the Committee will consider beginning the process of selling UK government bonds held in the Asset Purchase Facility. The Committee reaffirms that the decision to commence sales will depend on economic circumstances including market conditions at the time, and that sales would be expected to be conducted in a gradual and predictable manner so as not to disrupt the functioning of financial markets. The Committee recognises the benefits of providing market participants with clarity on the framework for any potential sales programme. The Committee has therefore asked Bank staff to work on a strategy for UK government bond sales, and will provide an update at its August meeting. This will allow the Committee to make a decision at a subsequent meeting on whether to commence sales.
The statement made by Alistair Darling, the then Chief Secretary to the Treasury, in the House of Commons on 11 June 1997.
With permission, Madam Speaker, I should like to make a short statement about our approach to public spending in the medium term and to the comprehensive spending review promised in our manifesto.
We set out our spending plans for this year and next in our manifesto. We made it clear that tough decisions would be needed, but that such an approach was essential. We shall maintain that approach. This statement looks beyond the next two years to the medium term.
We will deliver prudent and sound management of the public finances to provide a stable platform for investment and growth; and we will ensure that public spending achieves the objectives that we have set ourselves—objectives which are based on our key principles of opportunity, fairness, employment and investment. To achieve that, we must put the public finances into proper shape.
Since 1990, public sector debt has almost doubled as a proportion of national output. In 1994, we were told there would be a Budget balance in 1998–99; in 1995, we were told it had slipped a year to 1999–2000; and last year, it slipped again to 2000–01. As a result, after five years of growth, we are still borrowing to cover our current spending: the current deficit was about £20 billion last year and the last Budget forecast that we would stay in deficit for the next two years, despite making some questionable assumptions. In order to rebuild public trust in the management of the public finances, my right hon. Friend the Chancellor has asked the National Audit Office to review the forecasting assumptions he set out in the House on 20 May.
The public have a right to know not only that total spending is affordable and prudent, but that their money is being spent on their priorities, that it is being spent efficiently and that the spending is effective. The Government spend more than £300 billion, equivalent to over £5,000 a year for every man, woman and child in the country. We will reorder that £300 billion to meet our objectives, which were endorsed by the people on 1 May.
Public spending needs to be clearly focused, and we will achieve that objective. There is no better time for a root-and-branch reappraisal of public spending priorities than at the start of a new Government.
We showed the way when we were in opposition. We said that we would provide nursery places for all four-year-olds, and we will find the money by scrapping nursery vouchers. We promised to cut waiting lists in the national health service, and we will release the funds by releasing savings from red tape and bureaucracy. We promised to reduce class sizes for five, six, and seven-year-olds, and we will find the money to pay for it by abolishing the assisted places scheme.
We have already made a start in delivering those promises, within weeks of the election. We will continue this approach in government, stripping out ill-targeted programmes that benefit only the few, and redirecting spending towards the priorities of the many.
The comprehensive spending review I am announcing today will carry on that process. It will set out clear objectives for all Departments. It will examine how we can achieve our objectives of improving standards in education, modernising the welfare state and getting people into work—in short, delivering our manifesto commitments as efficiently and effectively as we can.
Every Department will scrutinise its spending plans in detail from a zero base, and ask, how does each item of spending contribute to the Government’s objectives as set out in our manifesto? Why are we spending this money? Do we need to spend it? What is it achieving? How effective is it? How efficiently are we spending it?
Every objective will be costed and Departments’ effectiveness in achieving them will be scrutinised. We will make sure that we know how much we are spending on each objective, and that we can demonstrate to the public what we have achieved as a result.
We will consider how best to provide services. What should be provided by the public sector, the private sector, or a combination of both in public and private partnerships? As my right hon. Friend the Prime Minister has said, what counts is what works.
As well as looking at spending in each Department separately, we will look at issues that cross departmental boundaries. Those cross-departmental reviews will ensure that we are not hidebound by the existing structure of government. The review will be co-ordinated by the ministerial committee on public expenditure, which will look at spending across Departments.
We will look in particular at Departments’ efficiency in making the best use of their assets. We have asked Departments to draw up an inventory of their assets—something that no Government have ever achieved before. We need to know what the Government own, and whether they need those assets. If not, we shall reallocate the proceeds where they are needed most.
The review will be thorough and far reaching. All Departments and all Ministers will be involved. It will take 12 months to complete and its conclusions will inform a new set of public spending plans for the rest of this Parliament—a set that reflects our priorities and meets the country’s needs beyond that. It will take the long-term view.
The review process is already under way. Terms of reference for the departmental reviews will be published shortly. The Government have already shown their determination to achieve their objectives. The comprehensive spending review will provide us with a clear sense of direction and the long-term view that every Government need. We will ensure that the Government spend public money wisely and fairly, so that public spending matches the people’s priorities.
The speech made by John Glen, the Economic Secretary to the Treasury, on 4 April 2022.
Ladies and Gentlemen,
Thank you, all.
And let me start by conveying the Chancellor’s apologies – and disappointment – that due to other commitments he can’t be here himself today.
Because fintech is a fast-moving and exciting sector… in large part, because of your ideas, your hard work and expertise… and it’s absolutely at the forefront of the Chancellor’s mind as he thinks about the future… about supporting the economic recovery… and about making the UK the world’s preeminent financial centre.
And that last point is crucial.
Financial services make an enormous contribution to this country in many different ways.
And within that… with every passing month… fintech is punching higher and harder.
Year-on-year investment growth in UK fintech was up more than 200% in 2021.
We’re the leading European fintech hub… and second only to the U.S. worldwide.
Almost half of the fintech unicorns in Europe are based in the UK… and last year, the sector attracted more investment than France, Germany, Sweden, and the Netherlands combined.
That matters. Because, as the Chancellor told you last year, part of the way we become that pre-eminent financial centre that he describes is by having the technology here to do things better.
So be in no doubt: the Chancellor and I value all of you immensely… and will continue doing everything we can to support you.
That’s why we commissioned Ron Kalifa to undertake an independent review on UK fintech… and why we’re straining every sinew to implement his recommendations.
The FCA has already expanded and reinforced its world-leading Regulatory Sandbox… it’s piloting the new ‘scalebox’, which offers enhanced support to newly authorised firms… and just a few weeks ago, Innovate Finance announced the launch of their International Fintech Group, which they will co-chair with the Department for International Trade.
One of the Kalifa Review’s central recommendations was the creation of a new, national fintech body: the Centre for Finance, Innovation, and Technology… a force for turbocharging UK fintech… and I’m delighted that the CFIT Steering Committee, chaired by Ron himself, met for the first time last week.
Another of the great UK and fintech success stories has been ‘Open Banking’… with technology that is supporting innovation and empowering consumers.
And, here too, we’re setting direction for how the UK can build on its successes so far… notably through a new regulatory oversight committee that will work with industry to agree and implement the vision for the future of open banking in the UK.
UK fintech is in a great place. And it’s our job, as a Government, to ensure that success continues…. a mission to which we are very much committed.
But there’s more.
The Chancellor didn’t ask me to come here to thank you and congratulate you.
The Chancellor, the Treasury, and I have a specific message… on new technologies.
Ladies and Gentlemen,
Never in the history of commerce has there been invention as hyped and misunderstood as Distributed Ledger Technology and Blockchain.
For simplicity’s sake, I’m going to use the catch-all term ‘crypto’ or ‘crypto-technologies’.
But what I mean is the extraordinary, mercurial, underlying technology which makes ‘crypto’ possible… and which we can be pretty sure is going to have profound effects across multiple domains.
And that doesn’t happen very often.
It’s a challenge… and it’s an opportunity… and today I want to tell you how here in the UK we’re going to respond.
Because we want this country to be a global hub – the very best place in the world to start and scale crypto-companies.
If there is one message I want you to leave here today with, it is that the UK is open for business – open for crypto businesses.
We’re still right on the cusp of this technology breaking through.
But there isn’t even consensus on what the implications of crypto are… when or whether we’re going to reach some kind of steady state… or even whether crypto itself is a good thing.
There’s a massive debate between the sceptics and the evangelists, and there are a wide range of views in between.
Some people worry deeply about crypto… and about how it’s going to harm consumers… or provide a platform for illicit activity free from government oversight… or drive-up carbon emissions.
Others say it’s is the best thing ever. They argue that crypto could do things like revolutionise global finance… by making financial exchanges more transparent, efficient and democratic, and placing currency in the hands of people not nations.
That leaves us here in the UK with a big question to answer: How are we going to respond?
Our answer is this:
If crypto-technologies are going to be a big part of the future, then we – the UK – want to be in, and in on the ground floor.
In fact, if we commit now… if we act now… we can lead the way.
We hear the concerns… some of which are valid.
That’s why, in this country, we’ve already said that we’ll seek to protect consumers by legislating to bring certain cryptoassets into the scope of financial promotions regulation… and it’s essential that investors understand the risks they are taking.
And, as the Bank of England’s Financial Policy Committee recently noted, we’re also mindful that as crypto-technologies grow and become more interconnected with the core financial system we’ll need to ensure that regulators have the right tools to manage the associated risks.
We’re aware too that cryptoassets have proven attractive to criminals and hostile states. Which is why we’ve taken proactive steps to prevent their misuse.
Since January 2020, crypto-asset firms operating in the UK have been subject to the Money Laundering Regulations, and we recently consulted on implementing the Financial Action Task Force’s Travel Rule for transfers of crypto-assets.
We have a very robust system in place, and we won’t compromise on those high standards.
On Russia specifically, the Office of Financial Sanctions Implementation has published a joint statement with the FCA and Bank of England reiterating that crypto-asset firms are required to play their part in ensuring that sanctions are enforced, and offering guidance on how to do that.
The UK is also playing a leading role in negotiations on the new OECD Crypto-assets Tax Reporting Framework, ensuring enhanced tax transparency and consumer confidence in the sector, and enabling a level playing field in tax reporting globally.
On carbon footprint , the UK is a world-leading centre for green finance… so, of course, we will be looking closely at energy usage associated with certain crypto-technologies.
Those are all perfectly reasonable things to question.
But, equally, we see enormous potential in crypto… and we want to give ourselves every chance to take maximum advantage. We aren’t going to lower our standards, but we are going to maintain our technologically-neutral approach. Having robust and effective regulation won’t hinder innovation, it’ll actually boost it – by giving people and businesses the confidence they need to think and invest for the long-term.
How are we going to do that?
Well, there are three key things in our favour.
We have a detailed plan… we are, I am, determined to learn quickly… and the government will lead the way in harnessing the potential of blockchain and supporting the development of a world-best crypto ecosystem.
First, a detailed plan.
Our view is that crypto is going to impact many different sectors – including financial services.
Change is going to be dynamic… which means that the way we regulate crypto-technologies needs to be dynamic too. Just as it should be for other financial activities and products.
We shouldn’t be thinking of regulation as a static, rigid thing.
Instead, we should be thinking in terms of regulatory ‘code’ … like computer code… which we refine and rewrite when we need to… tailored and proportionate, yes… but also nimble and tech-neutral… shaped by your input and advice… and with the Treasury and regulators, through the Cryptoassets Taskforce, working together to create a dynamic regulatory landscape which works for everyone.
Of course I am very aware of recent reporting on the temporary regime. This is a new world for the newly regulated and the regulators. We need to work together, learn from each other, to maintain those high standards while being flexible and working at the pace that the speed of innovation demands
We consulted, last year, on how to regulate so-called ‘stablecoins’, which some companies are keen to develop for payment purposes.
Today, we’re publishing our response… as part of which I can confirm that we will be legislating to bring certain stablecoins into our payments framework… creating the conditions for stablecoin issuers and service providers to operate and grow in the UK.
This will also enable consumers to use stablecoin payment services with confidence… and the government will introduce this legislation, as part of an ambition to deliver a world-leading regulatory regime for stablecoins.
We wanted, in the first instance, to focus on areas of immediate potential and concern in the crypto sphere – hence our work on stablecoins.
But we are now widening that gaze.
We think the market has changed sufficiently for us to look at regulating a broader set of crypto activities including trading of tokens like Bitcoin… and we will consult on a world-leading regime for the rest of the crypto-market too… a regime that will facilitate safe and sustainable, and I hope rapid, innovation.
Looking ahead, the legal landscape will also be crucial.
English Law and our world-leading legal services and courts are already a huge asset, and can play a big part in making the UK an attractive hub for all things digital and for new technologies more generally.
And I want to thank the UK Jurisdiction Taskforce, chaired by Sir Geoffrey Vos, for its important work on the application of English Law in this field.
I also want to thank the Law Commission for all the work they’ve done on digital assets and smart contracts… and am delighted to announce that we are asking them to undertake a new project… to consider the legal status of Decentralised Autonomous Organisations.
These projects are helping ensure that we remain at the cutting edge of legal innovation, just as we did with the limited liability companies in the 19th century, and the legal framework for derivatives and securitisation markets in the 1990s. English law can and should provide the legal foundation for the use of these borderless technologies.
Of course, all of this activity is happening against a backdrop of exciting, transformative innovation around the next evolution of the internet: Web3, as many call it
No-one knows for sure yet how Web3 is going to look. But there’s every chance that blockchain is going to be integral to its development… with a more decentralised, open and user-owned ecosystem.
And we want this country to be there, leading from the front… seeking out the greatest economic opportunities.
The Government is already working with digital regulators to understand what issues will need to be considered in order to achieve maximum benefit for the public.
We’ll also be engaging with you all closely on changes we want to make to the tax system.
On balance, we don’t think the tax code will need major surgery to make it work more easily for crypto.
But we’re going to look at and resolve specific issues like the treatment of DeFi loans and staking. We will be amending the Investment Manager Exemption to remove disincentives to UK fund managers including disincentives to UK fund managers including cryptoassets in their portfolios.
Above all, we want to position the UK as a pro-innovation jurisdiction… which is attractive to inward investment, and to firms who don’t yet have a settled base.
The second thing we have going for us is that we are determined to learn quickly.
The UK already has a strong track record of facilitating experimentation through the FCA’s regulatory sandbox, which has supported more than 50 firms using blockchain.
The FCA have announced today that they will be organising the first of a series of ‘crypto-sprints’ next month, involving scores of industry experts.
The sprints will inform FCA policy thinking in real time, and participants will be tasked with wrangling some of the legal, technical and regulatory challenges the industry faces, and then coming up with practical solutions which, we the government, will take forward as quickly as we can.
We will also deliver the Financial Market Infrastructure Sandbox… which the Chancellor announced last year, and on which we are making very good progress.
The Sandbox – to be run by the Bank of England and the FCA – will allow firms to experiment and innovate in providing the services that underpin markets. In particular, this will enable them to test new technologies that could transform financial markets by delivering greater efficiency, improved liquidity, enhanced transparency, and greater security.
We intend to have this up and running next year. And if it teaches us that we need to update the relevant legislation, then we will do that too.
In the same spirit, we will also be establishing a high-level industry group, the Cryptoasset Engagement Group, to help guide us on the next steps in road ahead.
A direct, open channel of communication
Chaired at ministerial level – with senior representatives from the FCA, the Bank of England as well as from business – it’ll meet up to eight times a year, and have a full and proactive agenda.
Not just talk… talk then determined, concrete action. Informing and accelerating work being done elsewhere, including by regulators…
Our third and final crucial advantage is the leading role the government is going to play.
Unlike the EU and US, the UK has a small number of regulators, and central government sets the overall framework and can take decisive action. So, we can move very nimbly.
And, trust me, we have a determined, unified, single-minded government that is going to prioritise this.
For instance, we’ll be undertaking a programme of work to explore whether it’s possible to apply DLT to the debt issuance process.
Could the UK one day issue a debt instrument using DLT? I don’t yet know the answer … but let’s find out.
And we will lead by example.
We are already effectively using crypto-technologies to make government more efficient. We are developing opportunities to use distributed ledger technology for Customs and International Trade, to ease the import of goods, and we will continue to support further opportunities to deploy that technology.
Finally, I am announcing today that the Chancellor has asked the Royal Mint to create a non-fungible token – an NFT… to be issued by the Summer, an emblem of the forward-looking approach we are determined to take… and there will be more details available very soon.
So Ladies and Gentlemen,
There’s a genuine opportunity to build on our strengths in fintech, seize the capitalist energy which has already made UK financial services what it is… and use it to unleash the potential of crypto-technologies.
It’s not going to happen overnight… much though I appreciate many of you will want it to. But we will get there as quickly as we reasonably and responsibly can.
So what does the future of crypto here in the UK look like?
No-one knows for sure.
But we think that by making this country a hospitable place for crypto we can attract investment… generate swathes of new jobs… and create a wave of ground-breaking new products and services
We’re on the cusp of something important.
We have the opportunity to shape and lead it.
And that is what we’ll do.
The speech made by Rachel Reeves, the Shadow Chancellor of the Exchequer, in the House of Commons on 23 March 2022.
Thank you, Mr Speaker. Today was the day that the Chancellor could have put a windfall tax on oil and gas producers to provide real help for families, but he did not. Today was the day he could have set out a proper plan to support businesses and create good jobs, but he did not. Today was the day that he could properly have scrapped his national insurance hike, but he did not. Labour said it was the wrong tax at the wrong time, and the wrong choice; and today the Chancellor has finally admitted that he got that one wrong. Inflation is at its highest level for 30 years, and rising. Energy prices are at record highs, and people are worried sick. For all his words, it is clear that the Chancellor does not understand the scale of the challenge. He talks about providing security for working families, but his choices are making the cost of living crisis worse, not better.
The situation following Putin’s criminal assault on Ukraine remains gravely serious. Just one month after the invasion, so much has changed, and there will be repercussions for years to come. The Chancellor has today failed to explain why he chose to sign off on a reduction in our country’s armed forces last October. Will he confirm whether the Government’s target Army size is still being reduced by 10,000 troops? I say this to the Chancellor: Labour will support whatever is needed on defence and security, in order to keep our country safe.
The tremors following Putin’s aggression will impact Britain, including economically, but the cost of living crisis predates Putin’s attack on Ukraine. In October, inflation was already forecast to be double the Bank of England’s target, yet the Prime Minister said that fears of inflation were unfounded. Today we learn that inflation has reached 6.2%, and it is expected to go higher in the coming months. People are rightly looking to their Government to help them weather this storm. Labour will support sensible measures to ease the pressure, but what the Chancellor has announced today says everything we need to know about his priorities.
The cost of living crisis is hitting people particularly hard because incomes have been squeezed during the past 12 years of Conservative Governments. Ordinary families, disabled people, and pensioners are facing difficult choices. Mums are skipping meals so that their children do not. Families are struggling to buy new school shoes and uniforms for their children. Older people are hesitating to put the heating on, because they are worried about the cost.
At the weekend, the Chancellor was asked about fuel poverty, and he did not even know the numbers. That is shameful, because when Martin Lewis predicts that 10 million people could be pushed into fuel poverty, the Chancellor should sit up and listen. We know that pensions and social security will not keep up with inflation, and pensioners and those on social security will be getting a real-terms cut to their income. What analysis has the Chancellor done on the impact of benefits being uprated by less than inflation? How many more children and pensioners will drift into poverty because of the choices of this Government?
Who does the Chancellor’s prioritise?
He continues to defend the record profits of the oil and gas producers who themselves admit that they now have “more money than they know what to do with.”
BP describes this crisis as a ‘cash machine’ for them, but it is British people who are paying out.
And it is deeply regrettable that the SNP have joined the Tories in wanting to shield oil and gas producers from Labour’s progressive measures.
When I set out Labour’s plans for a windfall tax in January, we estimated that it would have raised £1.2 billion.
Now, because of the continued rise in global oil and gas prices, it would today raise over £3 billion.
That’s money that could be used to help families, pensioners and businesses.
With a cut to VAT – a real Brexit dividend that would help working families and pensioners across our country.
And a targeted Warm Homes Discount that would see families and pensioners on the lowest and modest incomes being supported by £600.
Today the Chancellor comes along after 12 years of failure on energy efficiency and announces a VAT cut on building materials.
This is wholly inadequate.
A proper energy efficiency scheme like the one we have set out could cut bills by £400 to people from next year.
And the silence from the Chancellor on our energy intensive manufacturing industries is appalling.
At this time of national crisis, people and businesses need a government that is on their side.
Now the Chancellor spoke of difficult choices. And I agree – there are always choices to be made.
Like who to tax and who to shield.
Despite the Chancellor’s reluctant measures, the facts are that he is taking money out of people’s purses and wallets with an increase in national insurance contributions.
The changes he is making today, begs the question why did he embark on these changes in the first place?
Despite the warnings from the Labour Party and many, many others.
Now it’s one thing for the Prime Minister and Chancellor to disagree with each other, but the centre piece of the statement that the Chancellor has delivered today is based on a disagreement with himself.
And for all his tax rising on the millions in the middle, where is the increased tax contribution from the very wealthiest in society?
A landlord with a large number of properties won’t be paying a penny more in taxes.
But their tenants will.
Someone with significant income from buying and selling stocks and shares won’t be paying any more in tax.
But those people powering our economy will.
The Chancellor has made the wrong choices.
Now, the Chancellor says he can’t help everyone. And that’s absolutely true.
But who has the Chancellor been helping out?
Those who have been swindling the taxpayer.
The Chancellor left open the vaults for widespread waste, crony contracts and a frenzy of fraud.
It was, as his former Tory Treasury minister put it: “happy days if you are a crook”.
7 billion items of PPE not usable and now being burnt. Taxpayers’ money literally going up in smoke.
£3.5 billion worth of contracts awarded to friends, donors and pub landlords.
It gets worse.
The Chancellor has been signing cheques to fraudsters – including organised criminals and drug dealers.
Let’s put the Chancellor’s fraud failure in context.
He has lost a staggering £11.8 billion of public money to fraud.
This is twice the amount a previous Conservative government lost on Black Wednesday.
As a result of – let’s face it – this jaw-dropping incompetence, the Conservatives have been funding crime instead of fighting it.
And now the Chancellor has the audacity to come to British taxpayers asking them to pay more to fill his black hole.
But there can be no cover-up to hide political embarrassment.
Let’s call in the National Crime Agency to investigate.
We need answers.
People held to account.
Because let’s be clear: taxpayers want their money back.
The truth is Mr Speaker, people can no longer afford the Conservatives.
Working families can’t. Pensioners can’t. Businesses can’t.
The weak growth forecasts we’ve seen today should be flashing red on the Chancellor’s desk.
And the Chancellor, says that ‘the work starts today’.
Is he serious?
The Conservatives have been in government now for 12 years, not 12 hours.
What’s taken them so long?
Because since his party entered government, the UK has experienced the biggest downgrade in growth of any major economy.
With the last Labour government economic growth was 2.1% a year.
12 years of the Conservatives and growth has averaged 1.5%.
And now we know that growth has been downgraded this year too.
Growth is essential for funding our public services, keeping taxes under control, and keeping a handle on public finances too.
That’s why Labour have announced a tough set of fiscal rules to get our debt and deficit down.
But the truth is that because of this government’s failure to get the economy growing, it’s this Chancellor that has put up taxes on families and businesses a staggering 15 times.
This Chancellor has raised taxes more in the last two years than any Chancellor in the last 50.
He says it’s all down to the pandemic.
But the truth is the Conservatives have become the party of high taxation because they are the party of low growth.
Now, I understand the Chancellor has a portrait of Nigel Lawson above his desk.
Well, today we’ve got an energy price crisis.
Record prices at the pumps.
Inflation is back.
And the truth is, he’s not Nigel Lawson, Mr Speaker.
He’s Ted Heath with an Instagram account.
Labour would be getting the economy firing on all cylinders. Ensuring we buy, make and sell more in Britain.
Scrapping business rates and replacing them with a fairer system fit for the 21st Century.
Something that small businesses and high street businesses are crying out for, and the Chancellor mentioned it not at all in his statement today.
A Climate Investment Pledge to decarbonise the economy, create good jobs in every part of Britain, and strengthen our energy security too.
Businesses are seeing unprecedented increases in their costs right now, but all we hear from this Chancellor today is a promise of jam tomorrow rather than the support that is needed now.
And today’s statement lacks a long term plan for productivity, skills and growth. Where is it Chancellor?
Mr Speaker I can’t help but feel that in both the Chancellor’s recent Mais Lecture and in his statement today, we are presented with increasingly incredible claims.
Perhaps the Chancellor has been taking inspiration from the characters in Alice in Wonderland. Or should I say – ‘Alice in Sunakland’.
Because nothing here is quite as it seems either.
It’s the sort of place where a Chancellor celebrates giving people £200 to help with spiralling energy bills,
before explaining that he needs it all back.
In Sunakland, the Chancellor proclaims “I believe in lower taxes.” While at the same time hiking Alice’s National Insurance contributions.
Alice asks the Chancellor: when did ‘lower’ taxes mean ‘higher’ taxes? Has ‘down’ really become the new ‘up’?
The Chancellor follows Humpty Dumpty’s advice and says “when I use a word, it means just what I choose it to mean — neither more nor less.”
Alice knows that under the Conservatives, taxes are at their highest level in decades – as a result of the policies of this very same Chancellor!
In fact this Chancellor was the only G7 Finance Minister to raise taxes on working people during this crucial year of recovery.
Curiouser and curiouser.
As Alice climbs out of the rabbit hole to leave Sunakland, she recalls the words of the White Rabbit, and concludes that perhaps the Chancellor’s “reality is just different from yours.”
The actual reality, Mr Speaker, is that this Chancellor’s failure to back a windfall tax and his stubborn desire to pursue a National Insurance tax rise are the wrong choices.
In eight days’ time, people’s energy bills will be rising by 54%.
Two weeks today the Chancellor’s latest tax hike will start hitting working people and their employers.
His National Insurance tax rise was a bad idea last September, and he’s admitted it’s an even worse one today.
The Chancellor is making an historic mistake.
Today was the day to scrap the tax rise on jobs.
Today was the day to bring forward a windfall tax.
Today was the day for the Chancellor to set out a plan to support British businesses.
But on the basis of the statement today – and the misguided choices of this Chancellor – families and businesses will from now on endure significant hardship as a result.
The Chancellor has failed to appreciate the scale of the challenge that we face.
And he is yet again making the wrong choices for our country.