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Category: Economy

  • Rishi Sunak – 2023 Speech on the Economy

    Rishi Sunak – 2023 Speech on the Economy

    The speech made by Rishi Sunak, the Prime Minister, in Enfield on 20 November 2023.

    I’m here today to talk about the central purpose of our economic policy:

    To give you the opportunity to build a wealthier, more secure life for you and your family.

    We should not be apologetic about that.

    About the nobility of aspiration, the rewards of hard work, the dreams we have for ourselves and our children:

    Owning our own home.

    Starting a business.

    A healthy, happy retirement.

    And leaving our children a more comfortable life.

    But I know that right now, that dream feels out of reach for too many.

    So the most urgent choice our country faces, is how we change that.

    [Please note: Political content redacted here]
    Our approach is different.

    One that gets inflation down and keeps it down.

    One that believes the private sector grows the economy…

    …and where government has a role, it must be limited.

    One that believes in cutting taxes – but doing so carefully and sustainably.

    And one that is ambitious about the unprecedented opportunities for this country…

    …from the new wave of technology. Our approach starts with controlling inflation.

    High inflation eats away at your pay packet.

    It makes mortgages more expensive and stops you getting on the housing ladder.

    It makes pensions and savings worth less.

    In other words, inflation is a tax.

    And it erodes that dream of a wealthier, more secure life that we want for everyone.

    And that’s why we’ve provided unprecedented support for people’s energy bills and the cost of living.

    And it’s why at the start of this year, I committed to halve inflation.

    Back then, inflation was around 11%.

    And now, in October, the Office for National Statistics confirmed it fell to 4.6%.

    Now I’m not saying the job is done.

    But it does mean we have met our commitment to halve inflation.

    Prices are no longer rising as quickly.

    Energy bills have fallen significantly.

    And for many, wages are now rising faster than prices.

    And it shows something else:

    That when we make a major economic commitment, we will deliver it.

    It would’ve been far easier to give into the strikes with inflationary pay rises…

    …or any number of calls for higher spending and borrowing.

    But we held firm.

    And with inflation halved, we can now look forward…

    …towards the future economy that we want to build.

    As we do so, the country faces a critical choice about how we grow the economy.

    Do we continue with the big government, high spending, high borrowing, and high taxes, that were necessary through the pandemic?

    Or, as we believe, should we change our approach, and grow the economy through the dynamism of the private sector?

    Nothing shows the difference between those two visions more than the people asking you to believe in them.

    I’ve spent most of my career working and investing in businesses, large and small.

    The Chancellor spent his life before politics starting and running businesses.

    That’s where we learnt about the economy.

    My approach is rooted in what I learned growing up, working in Mum’s pharmacy.

    She worked so hard – we all worked so hard – not just because that was where our living came from.

    But because it was ours; we owned it; we all had a stake in its success.

    If we worked hard and took pride in our work and provided a good service, then business would improve.

    If we didn’t, it wouldn’t.

    The economy is about people, free to pursue their own ideas, in their own interests, in their own way.

    To support themselves and their families through the dignity of their own work.

    I’m not saying government has no role.

    My record is not that of a market fundamentalist.

    When a crisis hits, governments must intervene – just as we I did with furlough.

    The state must step in where the private sector won’t.

    Not least to provide high quality public services like the NHS…

    Or to improve public health with our plan to create a smoke-free generation…

    Or to invest in our future growth, with infrastructure, skills, and the incredible opportunities of science and technology.

    And in a world where Putin is willing to weaponise energy…

    …and we face the strategic challenge of a more assertive China…

    …we must be smarter about protecting our economic security.

    But our opponents are profoundly wrong to argue…

    …that the shocks we’ve seen in the last few years, or the need to transition to Net Zero…

    …mean we should borrow £28 billion a year, and permanently have bigger government.

    We should be as clear-eyed about government failure as we are about market failure.

    So the bar to intervene in people’s lives should be high.

    Because history tells us that if it’s not, the inevitable conclusion is…

    …higher spending, higher borrowing, higher mortgage rates, and higher taxes.

    Greater regulation and intervention, stifling people’s energy and initiative.

    Less trade, meaning less choice and higher prices.

    And economic power concentrated in the hands of a small government elite…

    …allowing more influence for vested interests and the trade unions.

    This is a recipe for stagnation, not growth.

    And it would take our country backwards, not forwards.

    So we choose a different path to deliver growth.

    Where we back people and businesses.

    Where the state is there for you during the bad times but gets out of the way during the good.

    And where the path to prosperity lies not in ever more government intervention…

    …but in creating the conditions for businesses to thrive.

    And so to grow the economy, we will take five long-term decisions.

    Reducing debt.

    Cutting tax and rewarding hard work.

    Building domestic, sustainable energy.

    Backing British business.

    And delivering world-class education.

    The first long-term decision is to reduce our debt…

    …to keep inflation falling and get mortgage rates down to affordable levels.

    Without financial security, we can’t do anything to support families and workers when they need it most.

    When Covid struck, we could only act because our public finances were in good shape…

    …thanks to the difficult but responsible decisions we’ve taken over the last decade.

    I’ll always be proud of being the Chancellor who protected nine million jobs…

    …in a moment of danger, fear, and uncertainty, people turned to this government…

    …and did not find us wanting.

    I’m proud of the support we provided to the NHS, with record levels of funding.

    I’m proud too, of helping households pay their energy bills when Putin cut off the gas.

    But the only way to give people the peace of mind that government will be there in future crises…

    …is to pay down our debts now.

    And if we don’t, we’re just leaving our children to pay the bill.

    Last September was a stark reminder why this matters so much.

    The country was rocked by a financial crisis caused, in part, because investors didn’t believe the UK had a plan to control our debt.

    That’s why the Chancellor and I have taken difficult decisions to control our debt.

    That wasn’t the easy thing to do – but it was the right thing to do for our country.

    And that’s what leadership means.

    It takes political courage to take the difficult but right decisions for the long-term.

    I will do what is necessary to get our debt down and provide financial security. The second decision we’re taking is to cut tax and reward hard work.

    Now I want to cut taxes.

    I believe in cutting taxes.

    What clearer expression could there be of my governing philosophy than the belief…

    …that people, and not governments, make the best decisions about their own money?

    But doing that responsibly is hard.

    We must avoid doing anything that puts at risk our progress in controlling inflation.

    And no matter how much we might want them to, history shows that tax cuts don’t automatically pay for themselves.

    And I can’t click my fingers and suddenly wish away all the reasons that taxes had to increase in the first place.

    Partly, because of Covid and Putin’s war in Ukraine.

    And partly because we want to support people to live in dignity in retirement…

    …with a decent pension and good healthcare – which will cost more as the population ages.

    But my argument has never been that we shouldn’t cut taxes.

    It’s been that we could only cut taxes once we’ve controlled inflation and debt.

    First cut inflation, then cut taxes.

    And that’s why I made the promise to halve inflation.

    And the official statistics show, that promise has now been met.

    So, now that inflation is halved…

    And our growth is stronger, meaning revenues are higher…

    …we can begin the next phase, and turn our attention to cutting tax.

    We will do this in a serious, responsible way…

    …based on fiscal rules to deliver sound money…

    …and alongside the independent forecasts of the Office for Budget Responsibility.

    And we can’t do everything all at once.

    It will take discipline and we need to prioritise.

    But over time, we can and we will cut taxes.

    Rewarding hard work also means reforming our welfare system.

    We believe in the inherent dignity of a good job.

    And we believe that work – not welfare – is the best route out of poverty.

    Yet right now, around two million people of working age are not working at all.

    That is a national scandal and an enormous waste of human potential.

    So, we must do more to support those who can work, to do so.

    And we will clamp down on welfare fraudsters.

    Because the system must be fair for the taxpayers who fund it.

    And by doing all of this…

    By getting people off welfare and into work…

    …we can better support those genuinely in need of a safety net.

    That is what a compassionate, welfare system looks like.

    Our third long-term decision is to build domestic, sustainable energy.

    Energy security is national security.

    It underpins everything in our economy so there can be no plan for growth without it.

    And the transition to net zero will create whole new sectors…

    …and hundreds of thousands of good, well-paid jobs right across the country.

    Yet there is almost no better example of how British politics has failed in recent decades…

    …than our inability to develop a serious strategy for energy.

    We’re now correcting those mistakes, with new nuclear power plants.

    Record investment in renewables.

    And upgrades to our electricity grid infrastructure.

    But there is no path to energy security…

    …and indeed no credible path to net zero…

    …without secure supplies of oil and gas.

    Never again can we allow our energy security to be compromised.

    I believe British energy will deliver British energy security.

    Now I deeply believe that when you ask most people about climate change, they want to do the right thing.

    And I’m proud that since 1990, Britain has reduced our emissions faster than any other major economy.

    But it can’t be right to impose such significant costs on working people…

    …especially those already struggling to make ends meet.

    And to interfere so much in people’s lives without a properly informed national debate.

    Instead of following the path of ideological zeal, reaching Net Zero no matter what the cost.

    Or to build new supplies of domestic, sustainable energy…

    …to grow the economy and cut the cost of Net Zero for working people.

    The fourth decision we’re taking is to back British businesses to invest, innovate, and trade.

    Now that might sound obvious or uncontroversial.

    We want to support businesses to invest, innovate and grow through lower taxes and simpler regulation…

    …and where we provide support, it should be targeted and strategic.

    So yes, we’re investing in roads, railways, broadband and mobile networks, right across the country.

    Yes, we’re delivering one of the biggest ever transport upgrades for the north and midlands, in Network North.

    And yes, we’re delivering the right homes in the right places to support the labour market.

    But growth is all about getting the private sector to invest, too.

    That’s why the Chancellor is cutting taxes directly on investment.

    It’s why we’re cutting taxes to encourage innovation…

    …because new ideas and ways of doing things are the most important ways to raise our productivity.

    And it’s why we’re seizing the freedom and flexibility of Brexit.

    We’ve already cut Brussels red tape to save small businesses a billion pounds a year.

    We’re creating more agile regulation to support innovation and competition…

    …particularly in growth sectors like financial services, life sciences, and agri-tech.

    And we’re building new trade deals with the fastest growing regions in the world, like CPTPP.

    So this is our message to business:

    The Chancellor and I spent most of our careers in business.

    We understand, we care, we get it, and we’re acting to make this the best country in the world to do business.

    Now, our final long-term decision is about delivering world-class education…

    …so young people have the skills they need to get good jobs.

    Education is about opportunity.

    About giving people the knowledge and skills to get on in life and fulfil their aspirations.

    And about preparing the country for the profound transformation technologies like AI will bring.

    I’m incredibly proud of our record since 2010.

    Higher standards; more choice for parents; more powers for teachers.

    And the result?

    State schools in some of the most deprived parts of our country are now producing some of the best results.

    And we are doing more.

    Our new qualification, the Advanced British Standard will:

    For the first time, put technical education on an equal footing with academic courses.

    Dramatically increase time spent in the classroom.

    Teach Maths and English to every child through to 18, with extra help for those struggling most.

    And give students the chance to study a much broader range of subjects.

    We know that brilliant teachers make for a brilliant education, so we’re going to back them.

    We’ve doubled the grants for new teachers in key subjects to £30,000 over five years…

    …and for the first time extended those grants to colleges as well as schools.

    To conclude, the first time many of you saw me was during Covid, when I stood up at a Press Conference to announce the furlough scheme.

    From that moment until today, whether you like me or not…

    …I hope you know that when it comes to the economy…

    …when it comes to your job, your family, your incomes…

    …I’ll always take the right decisions for our country.

    I promised you we would halve inflation.

    We took the difficult decisions and have delivered on that promise.

    Now you can trust me when I say we can start to responsibly cut taxes.

    And we will now move to the next phase of our plan, to grow our economy by…

    Reducing debt;

    Cutting tax and rewarding hard work;

    Building domestic, sustainable energy;

    Backing British business;

    And delivering world-class education.

    You can trust me to take the right long-term decisions and that’s how we’ll build a brighter future for our children.

    Thank you.

  • Jeremy Hunt – 2023 Autumn Statement

    Jeremy Hunt – 2023 Autumn Statement

    The speech made by Jeremy Hunt, the Chancellor of the Exchequer, in the House of Commons on 22 November 2023.

    Mr Speaker. After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track. We have supported families with rising bills, cut borrowing and halved inflation.

    Rather than a recession, the economy has grown. Rather than falling as predicted, real incomes have risen. Our plan for the British economy is working. But the work is not done. Under this Prime Minister we take decisions for the long term.

    In today’s Autumn Statement for Growth our choice is not big government, high spending and high tax because we know that leads to less growth, not more. Instead we reduce debt, cut taxes and reward work. We deliver world class education. We build domestic sustainable energy.

    And we back British business with 110 growth measures – don’t worry, I’m not going to go through them all – but in summary they…

    …remove planning red tape

    …speed up access to the national grid

    …support entrepreneurs raising capital

    …get behind our fastest growing industries

    …unlock foreign direct investment

    …boost productivity

    …reform welfare

    …level up opportunity to every corner of the country

    …and cut business taxes.

    The Office for Budget Responsibility say that the combined impact of these measures will raise business investment, get more people into work, reduce inflation next year and increase GDP. A dynamic economy depends on the energy and enterprise of people more than any diktats or decisions by ministers.

    So, today’s measures do not just remove barriers to investment, they reward effort and work.  I will go through the measures in three parts.

    In the first, I will use updated OBR forecasts to show the progress we are making against the Prime Minister’s economic priorities.

    The second part sets out growth measures to back British business.

    Finally, I conclude with measures to make work pay.

    Progress on the Prime Minster’s priorities

    Before I start with the forecasts, I want to express my horror at the murderous attack on Israeli citizens on October 7th and the subsequent loss of life on both sides. I will remember for the rest of my life – as I know many other hon members will – being taken to Auschwitz by the Rabbi Barry Marcus and the remarkable Holocaust Educational Trust. But I am deeply concerned about the rise of antisemitism in our country. So, I am announcing up to £7m over the next three years for organisations like the Holocaust Educational Trust to tackle antisemitism in schools and universities. I will also repeat the £3m uplift to the Community Security Trust.

    When it comes to anti-Semitism and all forms of racism, we must never allow the clock to be turned back.

    I now move on to the OBR’s economic and fiscal forecasts, and I thank Richard Hughes and his team for their sterling work in preparing them. Three of my Rt Hon Friend the Prime Minister’s five pledges at the start of the year were economic: to halve inflation, grow the economy and reduce debt. Today I can report to the House that we are delivering on all three.

    Inflation

    Let’s start with inflation. When the Prime Minister and I took office, inflation was at 11.1%. Last week, it fell to 4.6%. We promised to halve inflation and we have halved it. Core inflation is now lower than in nearly half of the economies in the EU.  And the OBR say headline inflation will fall to 2.8% by the end of 2024, before falling to the 2% target in 2025.

    I will not take risks with inflation, and the OBR confirm that the measures I take today make inflation lower next year than it would otherwise have been. I thank the Independent Bank of England Monetary Policy Committee for their crucial role in bringing down inflation.  We will continue to back them to do whatever it takes until the job is done. But as we do, we will continue to support families in difficulty.

    Today I add four further measures to help with the cost of living. Firstly, for those on the lowest incomes. I understand the concerns some have about the effect on work incentives of matching benefit increases to inflation.

    I know there has been some speculation that we would increase benefits next year by the lower October figure for inflation. But cost of living pressures remain at their most acute for the poorest families. So instead, the government has decided to increase Universal Credit and other benefits from next April by 6.7% in line with September’s inflation figure, an average increase of £470 for 5.5m households next year.  Vital support to those on the very lowest incomes.

    Second, because rent can constitute more than half the living costs of private renters on the lowest incomes, I have listened closely to many colleagues as well as the Institute for Fiscal Studies, the Resolution Foundation, Citizens Advice UK and the Joseph Rowntree Foundation who said unfreezing the Local Housing Allowance was an ‘urgent priority’.

    I will therefore increase the Local Housing Allowance rate to the 30th percentile of local market rents. This will give 1.6 million households an average of £800 of support next year.

    Third, although I am going to increase duty on hand-rolling tobacco by an additional 10% above the tobacco duty escalator, I know that for many people going to the pub has become more expensive. I have listened closely to the persuasive arguments on alcohol duties from my Honourable Friend for Moray and my Rt Hon Friend for Dumfriesshire, Clydesdale and Tweeddale, fierce champions of the Scotch whisky industry. I’ve also listened to defenders of the great British pint such as my Rt Honourable Friends for the Vale of Glamorgan and Buckingham; in my constituency to Councillor Jane Austin who is a big supporter of the Jolly Farmer pub in Bramley; and indeed to The Sun newspaper. So, as well as confirming our Brexit Pubs Guarantee, which means duty on a pint is always lower than in the shops, I have decided to freeze all alcohol duty until August 1st next year. That means no increase in duty on beer, cider, wine or spirits.

    Finally, pensioners. The triple lock has helped lift 250,000 older people out of poverty since it was instituted in 2011 and been a lifeline for many during a period of high inflation.  There have been reports that we would uprate it by a lower amount to smooth out the effect of high public sector bonuses in July, but that would have been particularly difficult for one million pensioners whose only income is from the state.

    So instead, today we honour our commitment to the triple lock in full. From April 2024, we will increase the full new state pension by 8.5% to £221.20 a week, worth up to £900 more a year. That is one of the largest ever cash increases to the state pension – showing this government will always back our pensioners.

    Including today’s measures, our total commitment to easing cost of living pressures has risen to £104 billion. That includes paying around half the cost of the average energy bill since last October and amounts to an average of £3700 per household.

    We are able to do that only because we reduced the deficit by 80% ahead of the pandemic.

    Borrowing and debt

    Next, I turn to my Rt Hon Friend the Prime Minister’s pledge to reduce debt.  Before I took difficult decisions at last year’s Autumn Statement, debt was predicted to rise to almost 100% of GDP by the end of the forecast. Since then, the economy has outperformed expectations and I have taken difficult decisions to reduce borrowing. As a result, headline debt is now predicted to be 94% of GDP by the end of the forecast. The OBR today forecast underlying debt will be 91.6% of GDP next year, 92.7% in 2024-25, 93.2% in 2026-27, before declining in the final two years of the forecast to 92.8% in 2028-29. That is lower in every year compared to forecasts in the Spring. We therefore meet our fiscal rule to have underlying debt falling as a percentage of GDP in the final year of the forecast, with double the headroom compared to the OBR’s March forecast.

    And we continue to have the second lowest government debt in the G7 – lower than the United States, Canada, France, Italy or Japan.

    I turn to borrowing. According to the OBR, borrowing is lower this year and next, and on average across the forecast by £0.7 billion every year compared to the Spring Budget forecasts.  It falls from 4.5% of GDP in 2023-24, to 3.0%, 2.7%, 2.3%, 1.6% and 1.1% in 2028-29. That means we also meet our second fiscal rule – that public sector borrowing must be below 3% of GDP – not just by the final year, but in almost every year of the forecast. Some of this improvement is from higher tax receipts from a stronger economy, but we also maintain a disciplined approach to public spending.

    As I set out in the Spring Budget, resource spending will increase by 1% a year from 2025-26 in real terms and we are sustaining the record 2020 increase in capital spending in cash terms until the end of the forecast. Within this, we will meet our NATO commitment to spend 2% of our GDP on defence, critical at a time of global threats to the international order most notably from Putin’s evil war in Ukraine. We also support a group of people to whom we owe our freedom: our brave veterans. I will extend National Insurance relief for employers of eligible veterans for a further year and provide £10m to support the Veterans’ Places, Pathways and People programme. We have shown that we are prepared to increase funding for vital public services, with record numbers of police officers, doctors, nurses and teachers. We are nearly doubling the numbers of doctors and nurses we train, having given the NHS its first ever long-term workforce plan, as I promised to do a year ago. We are also tackling the greatest single preventable cause of mortality the NHS has to deal with by bringing forward plans for a smokefree generation. But alongside extra funding and support, we need to see reform. We need a more productive state not a bigger one.

    That is why I want the public sector to increase productivity growth by at least half a percent a year, the level at which the size of our state starts to reduce as a proportion of GDP. I have already announced plans to cap and reduce the size of the Civil Service to pre-pandemic levels. Today I pay tribute to the excellent former Chief Secretary to the Treasury, the Rt Hon Member for Salisbury, who started our Public Sector Productivity Programme.  It will now be pursued by his formidable successor, the Rt Hon Member for Sevenoaks who has already been with me to meet police, fire and ambulance personnel to understand where bureaucracy is holding them back. Through this vital work we will ensure that over time the growth in public spending is lower than the growth in the economy whilst always protecting the services the public value. I will also provide HMRC with the resources they need to ensure everyone pays the tax they owe, raising an additional £5 billion across the forecast period.

    Growth

    My Rt Hon Friend the Prime Minister also promised to grow the economy. Since 2010, we have presided over faster growth than many of our major competitors including Spain, Italy, France, Germany or Japan. But all of us have faced a pandemic and energy shock. As a result, last autumn the OBR forecast a recession in which the economy was expected to shrink by 1.4% in 2023.  Instead, it grew – in fact it has grown faster than the Euro area. Revised numbers from the ONS now say the economy is 1.8% larger than pre-pandemic.

    And looking ahead, the OBR expects the economy to grow by 0.6% this year and 0.7% next year. After that, growth rises to 1.4% in 2025, then 1.9% in 2026, 2% in 2027 and 1.7% in 2028. If we want those numbers to be higher, we need higher productivity.  The private sector is more productive in countries like the United States, Germany and France because it invests more – on average 2 percentage points more of GDP every year. The 110 measures I take today help close that gap by boosting business investment by £20 billion a year. They unlock investment with supply side reforms that back British business in the following areas.

    Growth measures

    Skills

    First, skills. No economy can prosper without investing in the potential of its people.  Despite strong opposition, we took the difficult decisions to reform our schools. England’s 9-10-year-olds are now the 4th best readers in the world and since 2015 our 15–16-year-olds have risen 7 places in the OECD rankings for maths, thanks not least to the efforts of the brilliant Rt Hon Member for Bognor Regis and Littlehampton. But 9 million adults in England still have low basic literacy or numeracy skills. Last month the Prime Minister set out the new Advanced British Standard to ensure all school leavers reach minimum standards in maths and English.

    So following engagement with Make UK and others, I am announcing funding of £50m over the next two years to pilot ways to increase the number of apprentices in engineering and other key growth sectors.

    Infrastructure, housing and planning

    Next, planning. It takes too long to approve infrastructure projects and business planning applications. Many businesses say they would be willing to pay more if they knew their application would be approved faster. So, from next year, working with the Communities Secretary, I will reform the system to allow local authorities to recover the full costs of major business planning applications in return for being required to meet guaranteed faster timelines. If they fail, fees will be refunded automatically with the application being processed free of charge.

    A prompt service or your money back – just as would be the case in the private sector.

    Many planning applications are for housebuilding so today we take further decisions to unlock the building of more homes. We will invest £110m over this year and next to deliver high quality nutrient mitigation schemes, unlocking 40,000 homes. We will invest £32m to bust the planning backlog and develop fantastic new housing quarters in Cambridge, London and Leeds which will lead to many thousands of additional dwellings. We will allocate £450m to the Local Authority Housing Fund to deliver 2400 new homes. And we will consult on a new Permitted Development Right to allow any house to be converted into two flats provided the exterior remains unaffected.

    It is also taking too long for clean energy businesses to access the electricity grid. So, after talking to businesses such as National Grid, Octopus Energy and SSE, we today publish our full response to the Winser review and Connections Action Plan. These measures will cut grid access delays by 90% and offer up to £10,000 off electricity bills over 10 years for those living closest to new transmission infrastructure. Taken together these planning and grid reforms are estimated to accelerate around £90 billion of additional business investment over the next 10 years.

    FDI

    Next, foreign direct investment. I am extremely grateful to Lord Harrington for his excellent report on how to increase foreign direct investment. We accept all his headline recommendations. In particular, we will put in place a concierge service for large international investors modelled on the best such services offered by our competitors and will increase funding for the Office for Investment to deliver it.

    Pension fund reforms

    I now turn to pension fund reforms that will increase the flow of capital going to our most promising growth companies in a way that also improves outcomes for savers. I will take forward my Mansion House reforms starting with measures to consolidate the industry. By 2030, the majority of workplace DC savers will have their pension pots managed in schemes of over £30 billion and by 2040 all local government pension funds will be invested in pools of £200 billion or more.

    I will support the establishment of investment vehicles for pension funds to use including through the LIFTS competition, a new Growth Fund run by the British Business Bank and opening the PPF as an investment vehicle for smaller DB pension schemes.

    I will also consult on giving savers a legal right to require a new employer to pay pension contributions into their existing pension pot if they choose, meaning people can move to having one pension pot for life. These reforms could help unlock an extra £75 billion of financing for high growth companies by 2030 and provide an extra £1000 a year in retirement for an average earner saving from 18.

    Alongside this, I am also progressing further capital market reforms to boost the attractiveness of our markets, and the UK one of the most attractive places to start, grow and list a company. As part of this I will explore options for a Natwest retail share offer in the next 12 months subject to supportive market conditions and achieving value for money. It’s time to get Sid investing again.

    Innovation industries

    Next, I move on to measures to support our most innovative industries. In the last decade we have grown to become…

    …the third largest technology sector in the world, double the size of Germany and three times the size of France

    …the biggest life sciences industry in Europe

    …Europe’s third largest generator of renewable electricity after Germany or Norway

    … and the eighth largest manufacturer in the world

    When it comes to tech, we know that AI will be at the heart of any future growth. I want to make sure our universities, scientists and start-ups can access the compute power they need.

    So, building on the success of the supercomputing centres in Edinburgh and Bristol, I will invest a further £500m over the next two years to fund further innovation centres to help make us an AI powerhouse. Our creative industries already support Europe’s largest film and TV sector. This year’s all-Californian blockbuster Barbie was filmed in the constituency of the Hon Member for Watford, where the sun always shines. I know that even more could be invested in visual effects if we increased the generosity of the film and high-end TV tax credits, so I will today launch a call for evidence on how to make that happen. British-discovered vaccines and treatments saved more lives across the world during the pandemic than those from any other country and I’m incredibly proud of our Life Sciences industry. To further support research and development, I am creating a new simplified R&D tax relief, combining the existing R&D Expenditure Credit and SME schemes.

    I will also reduce the rate at which loss-making companies are taxed within the merged scheme from 25% to 19% and lower the threshold for the additional support for R&D intensive loss-making SMEs that I announced in Spring, to 30%, benefiting a further 5,000 SMEs.  And because 2028 marks the centenary of the invention of penicillin by Alexander Fleming I am giving £5m to Imperial College and Imperial College Healthcare NHS Trust to set up a Fleming Centre to inspire the next generation of world-changing innovations.

    For our advanced manufacturing and green energy sectors, international investors say the biggest thing we can do is to announce a longer-term strategy for their industries.

    So, with the Secretaries of State for Business and Trade and Energy Security and Net Zero, I am today publishing those plans. I confirm that we will make available £4.5 billion of support over the 5 years to 2030 to attract investment into strategic manufacturing sectors.

    That includes support of £2 billion for zero emission investments in the automotive sector, something that has been warmly welcomed by Nissan and Toyota; £975m for aerospace, building on decades of success from firms like Airbus and Rolls Royce; and £520m for life sciences to build on the strength of world-class British pharma companies like AstraZeneca and GSK.  We will also provide £960m for the new Green Industries Growth Accelerator focused on offshore wind, electricity networks, nuclear, CCUS and hydrogen. These targeted investments will ensure the UK remains competitive in sectors where we are already leaders and innovative in areas where we are not. Taken together across our fastest-growing innovation sectors, this support alone will attract an estimated £2 billion of additional investment every year over the next decade.

    Levelling up

    One of the reasons we support our manufacturing and clean energy sectors is they help to level up growth across the United Kingdom, so I now turn to further levelling up measures.  In the Spring, I announced that we would deliver 12 new Investment Zones – 12 mini-Canary Wharfs – where government, industry and research institutes collaborate across the UK.  Since then, the Exchequer Secretary – the Hon Member for Grantham and Stamford – has done outstanding work across government to bring this vision to fruition. Following tenacious representations by the Hon Member for Ynys Mon and the unstoppable Mayor of Tees Valley, I have today decided to extend the financial incentives for Investment Zones and tax reliefs for Freeports from 5 years to 10 years. I will also set up a new £150m Investment Opportunity Fund to catalyse investment into the programme.

    On Monday, I confirmed a new Investment Zone in West Yorkshire. Today having listened to representations from the West Midlands salesman-in-Chief, Andy Street, as well as the Hon Member for Mansfield and the Hon Member for Bury North I am also announcing three further Investment Zones focused on advanced manufacturing in the West Midlands, East Midlands and Greater Manchester. Together, local partners expect these will help catalyse over £3.4 billion of private investment and 65,000 new jobs.

    And having listened to the Hon Member for Wrexham and the Hon Member for Clwyd South, I can announce a second Investment Zone in Wales in the fantastic region of Wrexham and Flintshire, which I will visit tomorrow. We are publishing new devolution deals with four areas including Hull and East Yorkshire and offering devolved powers to even more county areas.

    On Monday we saw the announcement of £1 billion of funding through Round 3 of the Levelling Up Fund, supporting projects following the campaigning efforts of the Members for Keighley, Dewsbury, Doncaster, Scunthorpe …and of course, Mr Speaker, Chorley.

    I can also confirm we will proceed with over £50m of funding for high-quality regeneration projects in communities such as Bolsover, Monmouthshire, Warrington, and Eden Valley all of which have particularly effective local MPs as their champions.

    And I’m announcing £80m for new Levelling Up Partnerships in Scotland, £500,000 to support the Hay Festival in Wales and £3m of additional funding to support the successful Tackling Paramilitarism programme in Northern Ireland.

    Small businesses

    Next small business. I ran my own one for 14 years and have always known that every big business was a small business once. The Federation of Small Businesses say that the biggest thing I could do to help their members is end the scourge of late payments. The Procurement Act we have passed means that the 30-day payment terms which are already set for public sector contracts will automatically apply throughout the sub-contract supply chain.

    But from April 2024 I will also introduce a condition that any company bidding for large government contracts should demonstrate they pay their own invoices within an average of 55 days, which will reduce progressively to 30 days. Any small business will also tell you the biggest frustration is the tax you pay before making a penny of profit – not least business rates. This government has already taken a third of properties out of rates completely through Small Business Rates Relief. We have frozen the tax rate for the last three years at a cost of £14.5 billion. We have removed downwards caps from Transitional Relief.

    And for retail, hospitality and leisure businesses we have introduced a one year 75% discount on business rates up to £110,000. These measures have saved the average independent shop over £20,000. It is not possible to continue with temporary support measures forever. But whilst the standard multiplier, which applies to high-value properties, will rise in line with inflation, I have today decided that we will freeze the small business multiplier for a further year. And following extensive discussions with the FSB and many colleagues in the House, I have also decided to extend the 75% business rates discount for Retail Hospitality and Leisure businesses for another year. This will save the average independent pub over £12,800 next year and at a cost of £4.3 billion, it is a large tax cut which recognises the role of pubs and high street shops in our communities. I thank the Members for Stockton South, Barrow and Furness and East Devon for their tenacious campaigning on this issue.

    Finally, I turn to the smallest of all businesses – those run by the self-employed. These are the people who literally kept our country running during the pandemic. The plumbers who fixed our boilers in lockdowns. The delivery drivers who brought us our shopping. The farmers who kept food on our plates. As part of our plans to grow the economy I want to reform and simplify the taxes paid by the self-employed. So today I am announcing a major reform of one of those taxes. It is one most people haven’t heard of, but it is a big deal for those who have to pay it. Class 2 National Insurance is a flat rate compulsory charge, currently £3.45 a week, paid by self-employed people earning more than £12,570 which gives state pension entitlement. Today, after careful consideration and in recognition of the contribution made by self-employed people to our country, I can announce we are abolishing Class 2 National Insurance altogether, saving the average self-employed person £192 a year.

    Access to entitlements and credits will be maintained in full and those who choose to pay voluntarily will still be able to do so.  But this change simplifies and cuts tax for nearly 2 million self-employed people whilst protecting the interests of those on the lowest pay. Because we value their work, I’m also taking one further step for the self-employed. They also pay Class 4 National Insurance at 9% on all earnings between £12,570 and £50,270. Today, I have decided to cut that tax by 1 percentage point to 8% from April. Taken together with the abolition of the compulsory Class 2 Charge, these reforms will save around 2 million self-employed people an average of £350 a year from April.

    Mr Speaker, we are backing small business by freezing their business rates, extending retail, hospitality and leisure relief, abolishing compulsory Class 2 National Insurance payments and reducing Class 4 National Insurance by one percentage point in today’s Autumn Statement for growth. Small businesses work so hard for us, so tis government is working hard for them.

    Full expensing

    I turn now to my final measure to back British business, Mr Speaker. Since 2010, we have seen the second highest growth in investment of any G7 country.  However, if we are to raise productivity, we need to increase business investment further. In 2021, my Rt Hon Friend the Prime Minister introduced the super-deduction for large businesses to further stimulate business investment, and this Spring, I introduced “full expensing” for three years.

    This means that for every million pounds a company invests, they get £250,000 off their tax bill in the very same year.

    The CBI, Make UK, Energy UK and 200 other business leaders from companies including BT Open Reach, Siemens and Bosch have said making this measure permanent would the “single most transformational” thing I could do for business investment and growth. The Centre for Policy Studies say it would ‘maximise business investment, boost productivity and deliver higher levels of GDP.’ But because it costs £11 billion a year, I made clear that I would only do so when it was affordable. Well, with inflation halved… borrowing down… and debt falling, today I deliver on that promise. I will today make full expensing permanent. That is the largest business tax cut in modern British history. It means we have not just the lowest headline corporation tax rate in the G7 but its most generous capital allowances.

    The OBR say it will increase annual investment by around £3 billion a year and a total of £14 billion over the forecast period. The way to back British business is to increase the incentives to invest.  We do that today by introducing one of the most generous tax reliefs anywhere in the world, a huge boost to British competitiveness in an Autumn Statement for Growth. Skills, planning and infrastructure reform, pension fund reform, support for innovation industries, levelling up, backing small business and full expensing… Taken together, the overall impact of today’s growth measures will be to increase business investment in the UK economy by around £20 billion a year within a decade, nearly 1% of GDP at today’s level. That is the biggest ever boost for business investment in modern times, a decisive step towards closing the productivity gap with other major economies and the most effective way we can raise wages and living standards for every family in the country.

    Work

    As well as backing business, you need to back the people without whose effort no businesses can succeed. The entrepreneur taking risks. The builder working weekends. The nurse working nights. And the jobseeker leaving benefits behind. I therefore conclude with three further supply-side reforms designed to improve the incentives to work in a modern, dynamic economy.

    Welfare

    I begin with welfare, and I start by thanking the outstanding Work and Pensions Secretary for his help in developing these reforms. He builds on the work of my Rt Hon Friend for Chingford and Woodford Green who introduced Universal Credit. Those reforms helped to reduce unemployment, which has fallen by over one million.  But post-pandemic we still have over seven million adults of working age, excluding students, who are not working despite nearly one million vacancies in the economy. Many can and want to work – but our system makes that too hard.

    In the Spring Budget I introduced 30 hours of free childcare for working parents of 1- & 2-year-olds. That plan, still opposed by the party opposite, starts rolling out in April. It will help tens of thousands of parents return to work without having to worry about damaging their career prospects.

    Today we focus on helping those with sickness or disability and the long term unemployed. Every year we sign off over 100,000 people onto benefits with no requirement to look for work because of sickness or disability. That waste of potential is wrong economically and wrong morally. So, with the Secretary of State for Work and Pensions, last week I announced our Back to Work Plan. We will reform the Fit Note process so that treatment rather than time off work becomes the default. We will reform the Work Capability Assessment to reflect greater flexibility and availability of home working after the pandemic. And we will spend £1.3 billion over the next five years to help nearly 700,000 people with health conditions find jobs. Over 180,000 more people will be helped through the Universal Support Programme and nearly 500,000 more people will be offered treatment for mental health conditions and employment support.

    Over the forecast period, the OBR judge these measures will more than halve the net flow of people who are signed off work with no work search requirements. At the same time, we will provide a further £1.3 billion of funding to offer extra help to the 300,000 people who have been unemployed for over a year without having sickness or a disability.

    But we will ask for something in return. If after 18 months of intensive support jobseekers have not found a job, we will roll out a programme requiring them to take part in a mandatory work placement to increase their skills and improve their employability. And if they choose not to engage with the work search process for six months, we will close their case and stop their benefits. Taken together with the labour supply measures I announced in the Spring, the OBR say we will increase the number of people in work by around 200,000 at the end of the forecast period, permanently increasing the size of the economy. We should unlock the potential we have right here at home, which we do with the biggest set of welfare reforms in a decade in today’s Autumn Statement for Growth.

    Ending low pay

    Mr Speaker, if we are to incentivise work, we must also tackle low pay. People who get up early, put in the hours and work hard for their families deserve to be paid fairly. Since 2010, those on the minimum wage – now the National Living Wage – have seen their hourly wage go up from £5.80/hour to £10.42/hour. That’s a real terms increase of more than 20%. Because we’ve also doubled the threshold at which you pay tax or national insurance, their after-tax income has gone up not by 20% but by 25% – more than any other income group.

    Today, I confirm we will go further and accept the Low Pay Commission recommendation to increase the National Living Wage by 9.8% to £11.44 an hour.

    That is the largest ever cash increase in the National Living Wage, worth up to £1800 for a full-time worker. Since the National Living Wage has been introduced, the proportion of people on low pay, defined as earning less than two thirds of national median hourly income, has halved. But at the new rate of £11.44 an hour it delivers our manifesto commitment to eliminate low pay altogether. That means by next year someone working full time on the National Living Wage will see their real take-home after-tax pay go up not by 25% but by 30% compared to 2010. The best way to tackle poverty is through work. By reforming the welfare system, reducing workless households and tackling low pay we have helped lift 1.7 million people out of absolute poverty since 2010 because a central part of our plan for growth is to make work pay.

    Tax

    And so I move to the final supply side measure in today’s Autumn Statement for Growth. Because of the difficult decisions we have taken in the last year, today’s OBR forecast shows that…

    …borrowing will be lower than forecast in the Spring …

    … debt as a proportion of GDP will be lower than forecast in the Spring…

    … inflation will continue to fall…

    …and our fiscal headroom has doubled.

    I said we would cut taxes when we could – but only responsibly and only in a way that did not fuel inflation. The OBR today confirm I can deliver a package which does just that. For businesses, I have today delivered the biggest business tax cut in modern British history with the most competitive investment allowances of any large economy.

    For the self-employed, I have simplified and reformed their taxes by abolishing the compulsory Class 2 charge and cutting Class 4 National Insurance. But high employment taxes on 27 million people working in the public and private sectors also disincentivise the hard work we should be encouraging. On top of income tax at 20%, they pay 12% National Insurance on earnings between £12,570 and £50,270 – that’s a 32% marginal tax rate. If we want people to get up early in the morning, if we want people to work nights, if we want an economy where people go the extra mile and work hard then we need to recognise that their hard work benefits all of us. So today, Mr Speaker, I am going to cut the main 12% rate of employee National Insurance.

    If I cut it by 1 percentage point to 11%, that would be an extra £225 in the pockets of the average worker every year. But instead, I’m going to go further and cut the main rate of Employee National insurance by 2 percentage points from 12% to 10%. This change will help 27 million people. It means someone on the average salary of £35,000 will save over £450. For the average nurse, it is a saving of over £520 and for the typical police officer it is a saving of over £630 every single year. Mr Speaker, I would normally bring in a measure like this for the start of the new tax year in April, but instead tomorrow I’m introducing urgent legislation to bring it in from January 6th, so that people can see the benefit in their payslips at the start of the new year.

    The OBR say reducing a tax on work means more people in work – and today’s measures ON JUDT National Insurance will lead to the equivalent of 94,000 more full-time employees in our economy. Because lower tax means higher growth.

    We cut taxes to help bigger businesses invest. We cut taxes to help smaller businesses grow. We cut taxes for the self-employed who keep our country running.

    And from January, we cut taxes for 27 million working people whose hard work drives our economy forward.

    Conclusion

    Mr Speaker, the best universities, the cleverest scientists and the smartest entrepreneurs have given us Europe’s most innovative economy. We can be the most prosperous too.

    In the face of global challenges, we have halved inflation, reduced our debt and grown our economy. As a country we are sticking to a plan that is working. This Autumn Statement for Growth will attract £20 billion additional business investment a year in the next decade…

    … bring tens of thousands more people into work

    … and support our fastest growing industries.

    In a package which leaves borrowing lower…

    … debt lower…

    … and keeps inflation falling…

    We are delivering…

    … the biggest business tax cut in modern British history…

    … the largest ever cut to employee and self-employed National Insurance…

    … and the biggest package of tax cuts to be implemented since the 1980s.

    An Autumn Statement for a country that has turned a corner.

    An Autumn Statement for Growth, which I commend to the House.

  • Jeremy Hunt – 2023 Speech to Conservative Party Conference

    Jeremy Hunt – 2023 Speech to Conservative Party Conference

    The speech made by Jeremy Hunt, the Chancellor of the Exchequer, in Manchester on 2 October 2023.

    Good afternoon.

    The last time I spoke at Conference was as Foreign Secretary five years ago. After that I thought my time in government was over. So, it’s great to see the PM getting the over 50s back into meaningful work.

    I do, however, have some very youthful under 50s in my ministerial team so thank you John Glen, Andrew Griffith, Vicky Atkins, Gareth Davies, JoJo Penn, Mark Fletcher, Paul Howell, Anthony Mangall and Andrew Stephenson for their brilliant work.

    And it’s great to be in Manchester. Since 2010 this great region has seen unemployment halve, nearly 200,000 more jobs and six new tech unicorns. Labour mayors talk up the problems but it’s Conservatives who chalk up the jobs.

    Now, our friends at the Office for National Statistics have recently changed their mind about the size of the British economy.

    They had been saying we were the worst performing large European economy since the pandemic.

    But we weren’t the worst.

    We were one of the best.

    Since the pandemic we’ve recovered better than France or Germany.

    We’ve grown faster than both of them since we left the single market.

    And since 2010 we’ve grown faster than France, Germany, Italy, Spain, Austria, Finland, the Netherlands, and Japan…

    …so to all the pessimists and declinists who’ve been talking us down, we say this: don’t bet against Britain – it’s been tried before and it never works.

    Conference it’s nice to set the record straight. But Rishi Sunak and I care more about the future than the past. And our plan’s very simple.

    We’re going to make Britain a global leader in the industries of the future – the world’s next Silicon Valley.

    And it’s already happening.

    Last year we became only the third trillion dollar tech economy in the world.

    Our tech sector is now double the size of Germany’s and three times France.

    British-discovered vaccines and treatments saved seven million lives across the world in the pandemic – more than from any other country.

    We do more offshore wind than anywhere in Europe.

    We’ve got three huge electric car factories being built.

    We’re Europe’s biggest film and TV production centre – and next time I want to see Barbie wearing a Union Jack because that too was filmed in Britain.

    My Mansion House reforms are part of that because they’ll help fast growing companies source billions of pounds of extra capital. We don’t just want them to start here, we want them stay here because as we become a science superpower there’s nowhere better to be.

    All this happens not from quick fixes but long term decisions. Which is what you get with Rishi Sunak.

    We Conservatives know if you get the economy right, everything else comes right too.

    So right now we’re focused on bringing down inflation.

    Nothing hurts families more when it comes to the weekly shop, heating bills or pump prices – which is why the Prime Minister has pledged to halve it.

    And we’re getting there. It was over 11%. It’s now down by 40%.

    The plan is working – and now we must see it through just as Margaret Thatcher did many years ago.

    Conference, when we halve inflation, that’s not a one percent income tax cut, it’s a 5% boost to incomes compared to if it stayed the same.

    But just as we’re succeeding, what’s Labour planning? Some £28bn a year of new borrowing.

    The Institute for Fiscal Studies say borrowing on that scale risks fuelling inflation and keeping interest rates higher.

    Labour can change the fiscal rules, they can dress it up as ‘responsible,’ but if they increase borrowing, they increase debt and that means higher taxes, higher mortgages and higher inflation for families…

    …that’s not an economic policy, it’s an economic illusion.

    And it underlines the elemental choice in British politics, the choice behind all other choices.

    Sound money under the Conservatives or run out of money under Labour. Never again Conference, never again.

    Conservatives will always protect public services, but we’re also honest about the taxes that pay for them.

    After a once in a century pandemic and the biggest energy crisis in a generation, the level of tax is too high.

    We were right to protect jobs and families – and thanks to Rishi’s furlough scheme we recovered faster from the pandemic than others. But with an ageing population and a war in Europe, public spending is still growing faster than the economy.

    Some say that is inevitable. The Institute for Fiscal Studies said last week it’s likely to be a ‘decisive and permanent shift to a higher tax economy’. Conference they are wrong.

    We need a more productive state not a bigger state.

    If we increase public sector productivity growth by just half a percent, we can stabilise public spending as a proportion of GDP. Increase it by more and we can bring the tax burden down.

    Half a percent.

    For those of us with private sector backgrounds that doesn’t seem too much, does it? In the public sector, I’m telling you, it’s harder – but we are up for the challenge.

    So I’ve commissioned my deputy, John Glen, to restart the process of public service reform.

    He wants to know why teachers say more than half of their time is not actually teaching.

    …why police officers complain they spend longer filling out forms than catching criminals.

    …and why doctors and nurses say they spend up to half their time not with patients but on admin.

    Of course we need modern working practices and better IT. But the Treasury too needs to change its focus from short term cost control to long term cost reduction.

    And we’re going to start with the Civil Service.

    We have the best civil servants in the world – and they saved many lives in the pandemic by working night and day.

    But even after that pandemic is over, we still have 66,000 more civil servants than before.

    New policies should not always mean new people.

    So today I’m freezing the expansion of the civil service and putting in place a plan to reduce its numbers to pre-pandemic levels.

    This will save £1 billion next year.

    And I won’t lift the freeze until we have a proper plan not just for the civil service but for all public sector productivity improvements.

    That means, amongst other things, changing our approach to equality and diversity initiatives. Smashing glass ceilings is everyone’s job – not a box to be ticked by hiring a diversity manager.

    But I’m going to surprise you with one equality and diversity initiative of my own, trust me you’ll like this one: nobody should have their bank account closed because someone else decides they’re not politically correct. We’ll tighten the law to stop people being debanked for the wrong political views.

    The Lib Dems are wrong to want to overturn a democratic Brexit vote. But they still need a cashpoint to withdraw their euros.

    The SNP are wrong to ignore a democratic vote for the Union. But they still need a bank account to pay for their motorhomes.

    And even Keir Starmer, who’s wrong on just about everything, needs his trade union cash so he can too have a bank account… just never the keys to Downing Street.

    There’s somewhere else where we need to rethink the way the state works: our welfare system.

    I’m proud to live in a country where, as Churchill said, there’s a ladder everyone can climb but also a safety net below which no one falls.

    That safety net is paid from tax. And that social contract depends on fairness to those in work alongside compassion to those who are not.

    That means work must pay… and we’re making sure it does. From last year, for the first time ever, you can earn £1,000 a month without paying a penny of tax or national insurance.

    But despite that even when companies are struggling to find of workers, around 100,000 people are leaving the labour market every year for a life on benefits.

    Mel Stride gets this 100% which is why he’s replacing the Work Capability Assessment.

    And we’re going to look at the way the sanctions regime works. It isn’t fair that someone who refuses to look seriously for a job gets the same as someone trying their best.

    Now Labour have pledged to end sanctions. Have they learned nothing? When they left office we had more children in workless households than nearly anywhere in Europe. Since then, those households are down by a million – and Conference we are never ever going back.

    So to make sure work continues to pay, today I take a step forwards towards completing another great Conservative reform, the National Living Wage.

    Since we introduced it, nearly two million people have been lifted from absolute poverty after housing costs.

    Not by tax credits or benefits but by removing the barriers to work. Boosting salaries, cutting tax… making work pay.

    We promised in our manifesto to raise the National Living Wage to two thirds of median income – ending low pay in this country.

    At the moment it is £10.42 an hour and we’re waiting for the Low Pay Commission to tell us next year’s recommendation.

    But I confirm today, whatever that recommendation, we will increase the National Living Wage to at least £11 an hour next year.

    That’s a pay rise for 2 million workers.

    And the wages of the lowest paid over £9,000 higher than they were in 2010 – because if you work hard a Conservative government will always have your back.

    It’s easy to support higher growth, better public services and lower taxes.

    Harder to make it happen.

    In Britain today there’s only one party prepared to make those difficult decisions.

    Our party.

    And our Prime Minister.

    Whose diligence and tenacity have given us the Windsor Framework, the Atlantic Declaration, the Trans-Pacific Trade Deal and the NHS Workforce Plan.

    Whose own life story shows just what’s possible with education, aspiration and hard work.

    His story… and our story.

    More growth.

    More jobs.

    More doctors.

    More nurses.

    Better schools.

    Less poverty.

    Less crime.

    Conference it’s time to roll up our sleeves…

    …take on the declinists;

    …and watch the British economy prove the doubters wrong.

    Thank you.

  • Liz Truss – 2023 Speech at the Institute for Government

    Liz Truss – 2023 Speech at the Institute for Government

    The speech made by Liz Truss, the former Prime Minister, in London on 18 September 2023.

    It’s great to be here at the Institute for Government today. I’m having a rather more relaxing September than I did last year. And you might well ask, Why am I back talking about the same topic? But it’s one year ago that I launched my government and our economic policy. And I’m speaking here today, not because I want to relive the events of last year. I certainly don’t. It’s not because I’m keen to be back in Downing Street. I’m certainly not. It’s because one year after saying that economic growth was the central issue for our country. Since then, we’ve heard a lot of people say that right across the political spectrum. That still is not agreement, or what has caused the problems of a lack of economic growth, but also what on earth we’re going to do about them.

    And I think these issues are only getting more urgent. The reality is that over time, we’re not bringing in as much money as a country. We have the highest debt interest payments in the developed world. And according to the Growth Commission, the average person in the UK is now £9,100 worse off than the average person in the United States.  I believe the reason that we have this problem is 25 years of economic consensus that has led to a period of stagnation and I believe that we need to shatter that economic consensus if we’re to avoid worse problems in the future.

    The fact is the British public know that the consensus isn’t working, Lord Ashcroft’s poll on the state we’re in released on 4th September. revealed that 72% of people in Britain agree that Britain is broken, people are getting poorer, nothing seems to work. We need big changes to the way the country is run, whichever party is a government. And yet despite the dissatisfaction the poll also reveals that people don’t agree on why we’ve got the problems and what the fundamental cause of the malaise in which we’re living is.

    Now there are some people who claim that this is a crisis of capitalism, that we’ve had too much free markets, but quite the opposite is true. The fact is that since Labour was elected in 1997, we have moved towards being a more corporatist social democracy than we were in the 70s, in the 80s and the 90s. State spending now accounts for 46% of GDP, higher than it was in every year in Britain except for 1975 and up from 34.8% in the year 2000. No other European country has seen this level of growth in state spending, apart from Greece and Spain.

    There’s also a growing burden of regulation. The cost of regulations introduced in 2022 alone is 10 billion pounds according to the government, and I believe that is an underestimate in the sectors that are key arteries of the economy, whether it’s energy, housing and banking, there is less competition or more government involvement than there was 25 years ago. The government still owns a 40% stake in NatWest. The cost of energy in Britain are twice what they are in the United States, and we have a severe shortage of housing.

    The cost of welfare and pensions has ballooned by 50% in real terms, since the turn of the millennium, and even on an income of 50,000 pounds, it’s still possible to claim Universal Credit. Our tax system has become more complicated, with many facing high marginal tax rates when they seek to earn more income. Somebody earning 100,000 pounds with a student loan faces a marginal tax rate of 71%. We’ve had cheap money for over a decade, with nearly 900 billion pounds pumped into the system by the Bank of England through quantitative easing in an era of the near zero interest rates, something that’s completely unprecedented in 300 years of UK central banking. So how on earth did we get to this situation? Well, my view is that after the successful monetary policy, and supply side reforms of the 1980s, and the winning of the Cold War by the West, we were all optimistic and upbeat about our future and we took our eye off the ball.

    Free market economists went off to lucrative jobs in the city, allowing academic institutions and think tanks to be captured by the left. Demand management crept back in alongside Neo-Keynesian dominated monetary policy. And we Conservatives allowed the debate to be framed and led by the left whether it was the anti capitalist arguments of the Occupy movement, whether it was the diversity policies, or whether it was the statist environmental solutions.

    We’ve all got to admit that it’s the left that made the running. And we’ve seen that regardless of which government has been in power, from the energy price gap to the 2050 climate change target to the ESG agenda in companies. There’s been a cultural shift across both business and the public sector. Towards a lot more left wing policies. And despite the long record of failure of industrial policy, it’s back in vogue again, people are talking about it. And at the heart of this was the basic belief by politicians that the good times would go on forever. The discussion was about sharing the proceeds of growth. It was about general well-being and happiness rather than GDP. The only question seemed to be how we will get to redistribute the pie. Not about growing the pie in the first place. But the problem is that 25 years later, we have seen a growing size and scope of the state. And that growing size and scope of the state has slowed down economic growth itself.

    Levels of tax and regulation, are now too high to generate the amount of economic activity we need to help people’s incomes get bigger and to fund government services and that means our economy is now stagnating people talk about the productivity puzzle, but it’s really not a puzzle.

    If there’s not enough incentive to go out and set up a business to take risks to compete, or even work. That’s a problem. People are delaying starting a family because housing is too expensive. And the cost of bringing up children is so high. Public Sector productivity is woeful, and millionaires are voting with their feet. The UK is third after Russia and China for the departure of high net worth individuals. And despite all of the evidence that these incentives have a major impact. There’s been a fatalistic consensus that these levels of growth in Britain are inevitable. And the economic models of the Treasury and the OBR reflect that they’re overly static and short term missed.

    They underestimate the effect the tax and regulation have on people’s behaviour. And they tend to focus on one or two or at most five years of the effects of policy. I call this approach abacus economics. The failure to factor in the dynamic effects of policy stalls out risks and problems for the future. So what we see is parts of the country that need investment don’t get it because the emphasis is on saving time or money now, rather than creating the conditions for growth in the future. We see energy projects being cancelled, because the costings are based on yesterday’s energy prices, not on future energy security. And the Treasury is always allergic to giving up its levers of control, and so objects to more local decision making a more low tax zones.

    This pattern of high spending, high tax and high regulation and low growth isn’t just taking place in the United Kingdom. It is taking place across Western Europe and across the United States, particularly the coastal states. And when we look at the counter examples of high growth in places like Poland, the Baltic states or Florida and Texas, they’re largely places with low regulation and low taxes in Poland Corporation taxes 19% and income taxes are extremely flat. And yet despite all this evidence, the global left wants to double down on this strategy for statism and in fact, they appear to be meeting at the moment in Canada.

    That is what Bidenomics is, it’s about injecting more top down subsidies, increasing debt and trying to reduce competition by levelling up taxes across the West. More regulation through the Environment Protection Agency amongst others. And to fund this federal spending is at 40% More than pre-COVID levels. And it’s set to go up even more this year. Soon the United States will be spending more money financing its debt than it spends on its entire defence budget.

    And Wall Street has just clocked on to this. Just recently they downgraded US debt which is meant to be the safest in the world. And despite the fact that it’s very clear that the West cargo on borrowing forever. The Labour Party have said that they want to copy and paste Biden’s policies onto the UK statute book. They’re calling their version of Biden’s policies. The green prosperity plan is not a green prosperity plan.

    It’s a green de-growth plan. And it’s just a new name for the failed subsidies and high taxes of the past. Real economic security would mean incentives. So oil and gas producers want to come to the North Sea. And so people want to invest in the United Kingdom. And above all, real security means controlling public spending.

    Now last autumn, I sought to take on this consensus and try and get the British economy on a better trajectory through a three pronged approach of targeted tax freezes and reductions, supply side reform and holding down public spending. It was clear that interest rates were going to go up and they would go up further. We’d had artificially low rates for too long, and they were rising across the world.

    Therefore, in order to dampen inflation, and stave off a recession, the only tool we had at our disposal was doing all we could to fix the supply side of the economy and increase our productive capacity. As far as I was concerned.

    This was an urgent task. And the growth plan which subsequently became known as the mini budget, sought to do this through targeted tax cuts supply side reform and spending restraint. I felt we needed to reform our tax system with mothers to make it more business friendly, and to make the UK a more attractive place to invest.

    We needed to reverse the impending hike in corporation tax. We needed to cut the top rate of income tax to show that Britain was open to talent reforming IR35 would cut red tape for small businesses and return to VAT free shopping would make our cities more attractive.

    Independent calculations suggested that cutting the higher rate of income tax and the tourist tax would have increased rather than decreased revenues within five years. Those are calculations by the CEBR. So when people describe my policies as unfunded tax cuts, that is not an accurate description. In fact, quite the opposite of being unfunded these tax cuts could have include increased funding for our public services. The OBR also say for the cost of freezing corporation tax was much less than the Treasury suggested. Their costing of the measures was £25 billion over five years, not £45 billion and regrettably, the static models used by the OBR failed to acknowledge this.

    The second part of the plan was supply side reform, with some of the biggest constraints to growth in the UK economy, being in energy housing and the labour market. On energy there was a risk of household bills going up to 6000 pounds due to decades of short term US energy policy that have failed to ensure our security. That’s what we introduced the energy price guarantee, while we work to open up fracking and the North Sea to make the UK energy independent.

    Again, including by abolishing the windfall tax, again due to static costing, the cost of this was vastly overestimated. It will actually cost 27 billion pounds, less than half the £55 billion forecast by the OBR in the autumn of 2022. On planning we instituted Canary Wharf style investment zones with planning freedoms and tax breaks for a decade that would help drive new jobs and opportunities in left behind areas. And we sought to make property ownership a reality for young people again, by reducing costs on developing the get passed on to renters and buyers. Whether it be through planning reform, reduced regulation, or speeding up planning decision. We also wanted to cut red tape on childcare to make it more affordable for families.

    The third part of the plan was about public spending restraint. Now we were deliberately careful about discussing public spending, given the very difficult politics of it. What I tried to do as prime minister was navigate between the economic reality and what realistically we could get support for in Parliament. Having been chief secretary I know it’s very difficult to cut spending in year and it’s often counterproductive. In the past, we’ve cut things like capital, and then it’s come back to bite us later. Therefore, what I tried to do was change the trajectory of spending by holding spending down now in an inflationary environment, not reopening.

    The Spending Review represents a tough approach. I also wanted as was widely publicised at the time to increase welfare benefits by wages, not prices. These two measures would have meant that compared to what we are spending now, we would have saved 35.5 billion over two years. 18.4 billion in 2023 24 and 17 billion in 2025. But even these modest savings did not command the support of the Conservative parliamentary party. And it’s a very serious issue for us who wants to see smaller government that currently making significant changes to spending simply doesn’t have enough political support.

    So those were the three key parts of the plan: targeted tax reductions, supply side reform and public spending restraint. Of course, the growth plan was a starting point, a signal of direction further changes were needed, given the scale of the challenge we face. CEBR analysis at the time suggests that if those policies have been kept in place, GDP growth would be 2% higher than otherwise by 2030. And investment would have been up 10% and could have been even stronger. These impacts are even greater in the long term. The 20 year GDP impact is normally three to four times bigger.

    I think we can see from the evidence on the ground, the impact the policies would have had. Investment would not have faltered in the North Sea were it not for the windfall tax. We would have got moving on fracking and lower energy bills would have been on the horizon. A more competitive rate of corporation tax would have persuaded the likes of AstraZeneca to locate in the UK and there would have been more duty free shoppers and a boom in the number of self employed.

    The policies are welcomed by business groups and voters like them as well. And since last year, virtually all of the policies in the mini budget have been called for 38 councils want to proceed with full fat investments aims, city firms are demanding more freedom to invest. Companies have called for lower corporation tax. There’s an entire campaign in the Daily Mail for tax free shopping and the self employed want IR35 reforms. So why didn’t it happen? Why didn’t these policies which people wanted and would have resulted in economic growth not happen? Well, the reality is it was the reaction. So although I did get rid of the health and social care levy a new tax which would have no doubt expanded over time.

    Unfortunately, most of the policies weren’t implemented. And they weren’t implemented because there was a reaction from the political and economic establishment, which fed into the markets, markets that were already destabilised by the Bank of England slowness. to hike interest rates and the failure to regulate LDIs. And I was effectively forced into a policy reversal under threat of a UK meltdown.

    Now some people say we were in too much of a rush. And it’s certainly true that I didn’t just try to fatten the pig on market day. I tried to rear the pig, fatten the pig and slaughter the pig on market day. I confess to that. But the reason we were in a rush is because voters had voted for change. They voted for change in 2016 and they voted for change again in 2019. And I wanted to deliver that change, and I knew we had limited time. I knew with the level of resistance or the lack of preparation, that things weren’t going to be perfect.

    However, given the situation the UK was in, it was important to take action and not to do nothing. Because I went into politics to get things done, not to do public relations. And to all the people who said that, if we’d spent more time rolling the pitch or we’d done things in a different way. Or we delayed things, we would have been able to deliver our programme. I asked them to look at what has happened since. By October the seventh through the OBR was already leaking their calculations that there was a 70 billion pound hole in the budget.

    These numbers of course subsequently proved wrong. But the leak would have made delivery of the corporation tax freeze untenable. And since last year, no major supply side reforms or tax cuts have been allowed to happen. Whether it’s on financial services, childcare planning, or on the environment. In fact, 150 Conservative MPs have written to the prime minister saying there should be no change in net zero legislation.

    So although there’s no doubt that the communication could have been better, and the operation better honed I think we all have to acknowledge in the room that this wasn’t just a process problem. There was unquestionably a reaction to the policies themselves. And the fact is that supply side economics and a belief that the size of the state needs to be reduced are ideas that no longer command widespread support and understanding. The anti-growth coalition is now a powerful force, comprising the economic and political elite, corporatist parts of the media, and even a section of the Conservative parliamentary party. The policies I advocate simply are not fashionable on the London dinner party circuit.

    In fact, what is interesting is when you look at the polling evidence, the people who want change and support these policies are less likely to be comfortably off in London and the Southeast. The law of Ashcroft poll shows very clearly, those who want to see lower taxes and smaller government and who are tougher on welfare tend to live in less affluent areas. Many of those are people who started voting Conservative in 2019. And, in addition to that, there are some of the policies I advocate that just don’t have very much public support at all. such as cutting the tax top tax rate, building more homes, of getting or getting rid of process when building infrastructure projects. But frankly, we need to find a way of doing these things. Otherwise, we’re not going to get the prosperity and the opportunity that people want.

    And we can see that policies I advocated working right now, in places like Texas, Florida and the Czech Republic. Even Germany, is now cutting corporate taxes and reducing regulation. If the situation was urgent last year, it’s even more urgent now. The UK is in a serious and precarious position and there is a real risk of a downward spiral. The national debt was £525 billion in 2005. By 2022, it had quintupled to £2.5 trillion, and it’s set to hit £3 trillion within three to four years.

    I believe we can get out of this. But the only way to get out of the debt spiral is to get a grip on public spending while implementing policies to grow the economy. I urge the government to be bold and to set out a clear vision of how the UK can get to sustained 3% annual growth within a decade. This should set out a clear tenure trajectory for reducing the size of the state as a proportion of our economy through a combination of growth and spending control. We should aim to get that ratio we achieved at the turn of the millennium. Before Blair and Brown turned on the spending taps and excess regulation made us uncompetitive and we need to give people hope that things can get better. We need to spell out what 3% growth would mean in terms of improved standard of living and opportunities for an average family. A new car or holiday abroad, more support for your children.

    And ministers need to go out and explain the why as well as the how we need to make the case for free market economics and omit the state has got too big, partly as a result of excess spending during COVID. We need to show an enterprise economy is good for everyone. Conservatives can’t just assume people have read Milton Friedman. We need to spell out our philosophy and that would contrast with Labour’s lack of ideas or force them to defend the stale economic consensus started under Blair and Brown.

    Now in order to deliver this, there’s going to be big change required. We need a new supply side revolution, the supply side revolution in the 1980s was all about taking a long productive industry and the unions, which held the whip hand over the elected government of today of the day. The supply side revolution now has to take on the burden of regulation and an overlarge over powerful bureaucracy which has the whip hand over the elected government. This supply side revolution has to encompass changes to tax regulation and the size of the state. The government needs to take on the OBR over the impact of tax policy, and we need to see much more sophisticated levels of analysis from the Treasury about long term economic growth. This needs a wide variety of thinkers, including monetarists and supply siders. We can’t afford to be uncompetitive internationally. We need corporation tax back at 19%. And we should also refuse to implement the OECD minimum tax agreement which I previously labelled a cartel of complacency.

    It won’t be implemented in the US and even if it was it would make the entire West uncompetitive. We also need to reduce marginal tax rates to make it worthwhile to work at every income level. Further changes like abolishing the tourist tax, abolishing the windfall tax and sorting out IR 35 needs to be made. We also need to get a grip on the ballooning welfare and pensions bill.

    This means slowing the rates of increased benefits and tougher work. Requirements. It means raising the retirement age further. And as a party we have to deal with a difficult issue of the increasing costs of pensions. The current trajectory is not sustainable. We need more competition and less corporatism in key sectors of the economy like energy and finance. I favour a single utilities regulator to get rid of the Balkanization and capture that we’ve seen under organisations like off water and OFGEM.

    The government needs to divest its shares in banks and withdraw from micromanagement in sectors like transport. And in the energy sector, we need to get on with fracking and abolish the windfall tax in the housing market that should be tax breaks in return for having new developments in homes in your area, a much simpler zoning process and speeded up infrastructure projects. That’s what the original investment zones I proposed are about we should diverge properly from the EU. So we can increase competitiveness in areas like financial services. And finally, we should as many other Western countries already doing delay implementing net-zero commitments such as the ban on new petrol and diesel vehicles from 2030. Other environmental regulations which are hiking the cost of living, like enforcing the replacement of gas and oil boilers should also be abandoned. Ladies and gentlemen, in conclusion, there is a growing consensus that we need to grow. But although people will the ends, they don’t necessarily will the means.

    In order to grow, we need to change and that starts with acknowledging that we have a problem. It means abandoning the stale economic consensus. It means politicians doing the right thing even if it’s unpopular. This will not be easy, but it will be worth doing. With determination to turn things around, we can make Britain grow again. Thank you.

  • Jeremy Hunt – 2023 Mansion House Speech

    Jeremy Hunt – 2023 Mansion House Speech

    The speech made by Jeremy Hunt, the Chancellor of the Exchequer, at the Mansion House in London on 10 July 2023.

    My Lord Mayor, Governor, Ladies and Gentlemen – it is an honour to be with you at the Mansion House tonight.

    While some may be distracted by events in Windsor, we all know that Walbrook is the place to be this evening.

    Thank you to the City of London Corporation for hosting us so generously. It is a privilege to follow the Lord Mayor’s excellent address and to give my first Mansion House speech as Chancellor.

    Tonight, I want to talk about long term reforms to our competitiveness, but let me start with the immediate challenge of tackling inflation.

    Following the pandemic and energy shock, like other countries, the UK faces difficult challenges.

    It has shown itself more resilient than many predicted, but that resilience is itself one of the reasons for higher inflation.

    In a cost-of-living crisis, that leads to great concern for many families who see the cost of their weekly food shop or the price of petrol go up.

    But with the levers of fiscal and monetary policy, wholesale food and energy prices falling and a government that has made the battle against inflation its number one priority, there is nothing insurmountable in the current situation.

    Let me be clear again tonight. Working with the Bank, we will do what is necessary for as long as necessary to tackle inflation persistence and bring it back to the 2% target.

    Delivering sound money is our number one focus. That means taking responsible decisions on public finances, including public sector pay, because more borrowing is itself inflationary.

    It means recognising that bringing down inflation puts more money into people’s pockets than any tax cut.

    And it means recognising that there can be no sustainable growth without eliminating the inflation that deters investment and erodes consumer confidence.

    Tackling inflation therefore unlocks the Prime Minister’s two other economic priorities – growing our economy and reducing debt – but because it is a prerequisite for both, it must come first.

    As we tackle inflation, we must always remember our responsibilities to those struggling the most, so I am therefore grateful to our banks and mortgage lenders for their help in developing last month’s Mortgage Charter.

    I agree with the Governor that margin recovery benefits no one if it feeds inflation.

    And I will continue to work with regulators to make sure the needs of families are prioritised in a tough period.

    This evening, though, I want to look further ahead.

    I want to lay out our plans to enable our financial services sector to increase returns for pensioners, improve outcomes for investors and unlock capital for our growth businesses.

    We start from a position of strength.

    The financial and related professional services industry employs over 2.5 million people. Although two thirds of them are outside the South-East, it has made London the world’s second largest financial centre and one of the most dynamic cities on the planet.

    It generates more than £100 billion in tax revenue, paying for half the cost of running the NHS.

    A strong City needs a successful economy, and a strong economy needs a successful City.

    Recent challenges have led to some lose hope and even peddling a declinist narrative.

    They are profoundly wrong.

    I am proud that since 2010, we have one million more businesses and one million fewer unemployed.

    And we’ve grown faster than France, Italy, Japan or Germany.

    In the last decade we have become Europe’s largest life science sector, Europe’s largest technology sector, its biggest film and TV sector and its second largest clean energy sector.

    But as we emerge from our current challenges, the Prime Minister and I have big ambitions for the British economy.

    We want to be the world’s next Silicon Valley and a science superpower, embracing new technologies like AI in a way that brings together the skills of our financiers, entrepreneurs and scientists to make our country a force for good in the world.

    That means making sure our financial services sector, traditionally so nimble and agile, has the right architecture to provide the best possible security for investors as well as capital for businesses, and the best talent right here in the UK to make that happen.

    The structures put in place after the financial crisis have served us well and financial stability will always be our top priority.

    But we can further improve the functioning of capital markets, so this evening I set out the government’s Mansion House reforms.

    They build on the Edinburgh Reforms I announced in December and the vision for financial services which the now Prime Minister spoke about here in 2021 of an open, sustainable, innovative and globally competitive sector.

    Firstly, I am announcing a series of measures to boost returns and improve outcomes for pension fund holders whilst increasing funding liquidity for high-growth companies.

    Second, I will set out ways to incentivise companies to start and grow in the UK by strengthening our position as a listings destination.

    And finally, we will reform and simplify our financial services rulebook to ensure we have the most growth-friendly regulation possible without compromising our commitment to stability.

    Pensions

    I begin with pensions.

    The UK has the largest pension market in Europe, worth over £2.5 trillion. It plays a critical role in providing safe retirement income as part of the social contract between generations.

    Government policy, such as autoenrollment, has strengthened it but so too has confidence in the expertise of our financial institutions to manage investments wisely.

    However, currently we have a perverse situation in which UK institutional investors are not investing as much in UK high-growth companies as their international counterparts.

    At the same time on their current trajectory, some defined contribution schemes may not provide the returns their pension fund holders expect or need.

    Whilst many defined benefit funds are in surplus, their returns are lower than some international peers and some are still underfunded.

    So alongside our outstanding Economic Secretary Andrew Griffith and brilliant Pensions Minister Laura Trott I have engaged with some of our largest pension schemes, insurers, asset managers and experts to put together tonight’s Mansion House reforms. I am also immensely grateful to Sir Jon Symonds and Sir Steve Webb for their advice on how to construct this package. And I’m also very grateful to Gwyneth Nurse and her brilliant team in the Treasury. Gwyneth is of course the real Chancellor as we Official Chancellors come and go.

    Tonight I lay out the direction of travel. Sometimes consultations will be necessary, but all final decisions will be made ahead of the Autumn Statement later this year.

    And as we make those decisions, I will be guided by three golden rules.

    Firstly everything we do we will seek to secure the best possible outcomes for pension savers, with any changes to investment structures putting their needs first and foremost.

    Secondly we will always prioritise a strong and diversified gilt market. It will be an evolutionary not revolutionary change to our pensions market. Those who invest in our gilts are helping to fund vital public services and any changes must recognise the important role they play.

    The third golden rule is that the decisions we take must always strengthen the UK’s competitive position as a leading financial centre able to fund, through the wealth it creates, our precious public services.

    I start with Defined Contribution pension schemes, which in the UK now invest under 1% in unlisted equity, compared to between 5 and 6% in Australia.

    Today I am pleased to announce that the Lord Mayor and I joined the CEOs of many of our largest DC pension schemes – namely Aviva, Scottish Widows, L&G, Aegon, Phoenix, Nest, Smart Pension, M&G & Mercer – for the formal signing of the “Mansion House Compact”.

    The Compact – which is a great personal triumph for the Lord Mayor – commits these DC funds, which represent around two-thirds of the UK’s entire DC workplace market, to the objective of allocating at least 5% of their default funds to unlisted equities by 2030.

    If the rest of the UK’s DC market follows suit, this could unlock up to £50 billion of investment into high growth companies by that time.

    Secondly, we know funds can only optimise returns from a balanced portfolio if they have the scale to do so. We will therefore facilitate a programme of DC consolidation, to ensure that funds are able to maintain a diverse portfolio of bonds, equity and unlisted assets and deliver the best possible returns for savers.

    Tomorrow, the Department for Work and Pensions will publish its joint consultation response with the Pensions Regulator and the FCA on the Value For Money framework, clarifying that investment decisions should be made on the basis of long-term returns and not simply cost.

    Pension schemes which are not achieving the best possible outcome for their members will face being wound up by the Pensions Regulator. We will also set out a roadmap to encourage Collective DC funds, a new type of pension fund which we believe holds great promise for the future.

    Third, we need to ensure that all schemes have access to a wide range of investment vehicles that enable them to invest quickly and effectively in unlisted high growth companies.

    We have launched the LIFTS competition, and will consider closely the bids that have already started to come in for up to £250 million of government support.

    Alongside that, we will explore the case for government to play a greater role in establishing investment vehicles, building on the skills and expertise of the British Business Bank’s commercial arm which has helped to mobilise £15bn of capital into over 20,000 companies.

    Ahead of Autumn Statement, we will test options to open those investment opportunities in high-growth companies to pension funds as a way of crowding in more investment.

    I now move on to Defined Benefit schemes which number over 5000 and operate under a different regulatory regime. Their landscape is also too fragmented.

    I recognise the important role played by insurers offering buy-out schemes, which will continue to be an essential part of the way we improve security for pension members in this market.

    But in addition, we will set out our plans on introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new scaled-up way of managing DB liabilities.

    Having engaged closely with a range of experts, we will launch a call for evidence tomorrow on the role of the PPF and the part DB schemes play in productive investment – whilst always being mindful of the second golden rule to protect the sound functioning and effectiveness of the gilt market.

    Fifth, we will look at the culture of investment decisions and improve the understanding of pension trustees’ fiduciary duty across both DB and DC schemes. DWP and HMT will jointly launch a call for evidence to explore how we can overcome barriers and ensure a focus on good saver outcomes.

    And finally, government must lead by example, so we will consult on accelerating the consolidation of Local Government Pension Scheme assets, with a deadline of March 2025 for all LGPS funds to transfer their assets into local government pension pools and ensure greater transparency on investments.

    To make sure we are delivering the maximum benefits of scale, we will invite views on barriers to achieving better investment returns across the LGPS as well as setting a direction that each asset pool should exceed £50 billion of assets.

    We will also consult on an ambition to double the existing local government pension scheme allocations in private equity to 10%, which could unlock a further £25 billion by 2030.

    Today’s announcements could have a real and significant impact on people across the country.

    For an average earner who starts saving at 18, these measures could increase the size of their pension pot by 12% over their career – that’s worth over £1,000 more a year in retirement.

    At the same time this package has the potential to unlock an additional £75 billion of financing for growth by 2030, finally addressing the shortage of scale up capital holding back so many of our most promising companies.

    Increasing borrowing through £28 billion a year of unfunded spending commitments, as some are suggesting, would entrench inflation and push up interest rates.

    These reforms, conversely, unlock capital from the private sector delivering growth not by subsidy, but by increasing support for entrepreneurs and investors who take risks to create long term value.

    Listings

    I now move onto listings. The UK has the largest stock market in Europe and in 2021 attracted the most global IPOs of any stock market outside the US.

    But between 1997 and 2019, there was a 44% decline in the number of domestic listed companies in the UK, part of a wider trend across western markets, with the US and France seeing even steeper falls.

    I want the world’s fastest growing companies to grow and list right here, making LSE not just Europe’s NASDAQ but much more. As David Schwimmer and Julia Hoggett say, we want it to be the global capital for capital.

    So today we are publishing draft legislation on prospectus reforms, delivering another milestone of Lord Hill’s UK Listing Review. This will create a more effective regime than its EU predecessor, giving companies the flexibility to raise larger sums from investors more quickly.

    The government welcomes Rachel Kent’s excellent Investment Research Review published today and has accepted all recommendations made to it. We therefore welcome the FCA’s commitment to start immediate engagement with the market to inform any rule changes on removing the requirement to unbundle research costs by the first half of next year. This will ensure we are better able to fund quality research into the new Silicon Valley sectors.

    Last week, we abolished protectionist rules inherited from our time in the EU such as the Share Trading Obligation and Double Volume Cap so UK businesses can now access the best and most liquid markets anywhere in the world.

    And, in a highly innovative step which represents a global first, we will establish a pioneering new “intermittent trading venue” that will improve private companies access to capital markets before they publicly list. This will be up and running before the end of 2024, and put the UK at the forefront of capital market innovation.

    Smart regulation

    Finally, behind all those plans must sit a financial services sector ready to innovate faster with regulators willing to support them as they do.

    We have one of the most robust regulatory regimes and some of the best regulators in the world. Brexit gives us the autonomy to put their skills to even better use as we seek to become leaders in the industries of the future.

    So I am delighted that we have just last month passed into law the landmark Financial Services and Markets Act, which will ensure our regulators have an appropriate focus on growth and competitiveness alongside their wider responsibilities.

    The Act also unlocks wholesale reform of our approach to regulation and today I can announce that we are commencing repeal of almost 100 pieces of unnecessary retained EU law, further simplifying our rulebook whilst retaining our high regulatory standards.

    Alongside this, last month I was delighted to sign the new UK-EU financial services Memorandum of Understanding as we build a new relationship with our European partners.

    We are working closely with the Bank of England to reflect on lessons from recent events to ensure the UK has the best possible arrangements in place to improve continuity of access to deposits when a bank fails even if it is not a systemically important one.

    And I want to make sure we remain at the forefront of payments technology. So I am launching an independent review into the future of payments – led by Joe Garner – to help deliver the next generation of world class retail payments, including looking at mobile payments.

    We are laying new legislation to give regulators the powers they need to reform rules on innovative payments and fintech services, and, together with the Bank of England, we are exploring potential designs for the digital pound should we decide to introduce it.

    Conclusion

    My Lord Mayor, Governor, Ladies and Gentlemen.

    Pension industry and listings reforms, backed by smart regulation, to unlock better returns for savers and more growth capital for businesses.

    That is what today’s Mansion House reforms deliver.

    British growth driven by British financial firepower, providing higher living standards and better funded public services.

    With cooperation between government, regulators and business closer than ever…

    … we will deliver not just more competitive financial services but a more innovative economy.

    More money for savers.

    More funding for our high-growth companies.

    And more investment to grow our economy.

    That is the vision I have set out today – let’s deliver it together.

    Thank you.

  • Jeremy Hunt – 2023 Speech to the Centre for Policy Studies

    Jeremy Hunt – 2023 Speech to the Centre for Policy Studies

    The speech made by Jeremy Hunt, the Chancellor of the Exchequer, on 12 June 2023.

    Introduction

    It is a pleasure to be with you this evening and a privilege to deliver this speech for an organisation founded 49 years ago.

    Over that time the CPS can be proud of the profound impact it has had on the way we think about freedom and enterprise.

    And I am delighted – as Chancellor – that even though you will soon reach the ripe old age of 50, there is absolutely no prospect of you taking early retirement, something impossible to imagine under the energetic leadership of Lord Spencer and Rob Colvile.

    Today, I want to talk about one of the government’s five priorities – growing our economy – which alongside reducing inflation and bringing down debt, is central to our economic mission.

    Because just as when the CPS was founded, it is growth that will prove declinists wrong, unleash prosperity through enterprise and give families confidence in their prospects.

    Rob himself pointed this out in his excellent essay, “the morality of growth” when he said:

    “If there is one thing that we all need to do – it is to remind people ceaselessly of the importance of growth.”

    Productivity and growth

    Growth is critical for many reasons.

    It is the way we increase people’s living standards.

    It is the way we increase opportunity with high wage, high skilled jobs based on the innovation that will define this century.

    And it is the way we make sure our private sector is not strangled by an ever-expanding state.

    According to the OBR’s long-term forecasts for the public finances from the end of this decade, our economy’s long term trend growth rate is 1.6% but public spending – even excluding debt interest – will grow by 2% a year.

    So every year, the OBR’s projections suggest that the size of our state will be growing by nearly half a percent more than the size of the economy.

    Now we are not the only ones facing this dilemma. OECD projections say Germany, Italy and Japan will have even lower growth over the next 25 years, with France about the same and the US only marginally ahead. Many of those countries have even steeper demographic challenges than we face and all face pressure to increase the burden on taxpayers.

    You don’t need brilliant Treasury analysts to tell you the consequence of a state growing faster than the economy: higher borrowing, higher taxes or a combination of the two.

    The OBR’s analysis suggests that without any action, the result of these demographic pressures could be a public sector debt of 217% of GDP by 2071, more than double the current proportion.

    I think it is wrong – morally and economically – to pass on that level of debt to future generations.

    Others might look to tax as the solution to this problem.

    But to keep up with projected spending pressures that would mean increasing annual tax revenues by £200 billion by 2071 in today’s money, or to think of it more simply at least doubling the basic rate of income tax and main rate of employee National Insurance.

    I reject that prospect, because that is the path to socialism: less freedom, less enterprise and less prosperity.

    But to borrow an extra £28 billion would have exactly the same impact.

    Higher inflation would lead to higher interest rates and higher debt repayments.

    Rachel Reeves herself said such an approach would spook the markets.

    It would be an illusory dash for growth which would increase the burden on taxpayers, shake confidence in the UK and pass on unsustainable debt to future generations.

    So we need to find a smarter way out of the challenge faced by so many advanced economies.

    Tackling inflation relentlessly must be the immediate priority. High growth needs businesses and investment and consumer confidence, none of those are possible with inflation.

    High growth needs low inflation.

    But tackling inflation is the starting point not the end point.

    Higher living standards means growth in GDP per head, not just growth in GDP. That means growth driven by increases in productivity.

    If we were as productive as Germany, our GDP per head would be £6,000 higher per annum. If it reached US levels, it would be £8,000 a year higher.

    In my Bloomberg speech in January I identified the four pillars necessary to achieve productivity-rich growth. I called them the four ‘E’s: Education, Enterprise, Employment and Everywhere. Education, so we tap into people’s talents by investing more in skills; building an Enterprise economy by reducing the burden of tax and regulation; removing the barriers to Employment so businesses can recruit; and spreading growth Everywhere so all parts of the country are levelled up.

    Now the productivity challenge applies to both the public and the private sector.

    If we increase our productivity growth in the public sector by 0.5% a year, we stabilise the proportion of GDP consumed by the state by closing the gap between anticipated growth and anticipated spending up to 2050.[1]

    And if we replicate that productivity growth in the private sector we start to increase living standards as well.

    That would mean a boost not just to GDP, but GDP per capita. It would mean increasing tax revenues without increasing tax rates.

    And it would put us on a sustainable path to lower taxes.

    It is also the route through which union reforms, privatisations and support for competition delivered lasting growth and productivity.

    Public sector productivity

    Let’s start with the public sector. It is the sector over which governments have the most direct control – and that matters because, excluding benefit system transfers, it accounts for about 20% of our national output.

    The long-term pressures, whether an ageing population or the need for stronger armed forces, won’t change.

    But the way we meet those pressures can change. We can be much, much more efficient.

    We start, I am afraid to say from a low base. Public sector output is 5.7% lower than pre-pandemic compared to private sector output which is 1.3% higher.

    What does that tell you? Our innovators, job creators, entrepreneurs and risk takers have bounced back but the public sector is still feelings the effects of a once-in-a-lifetime pandemic.

    But now, with that pandemic behind us, we need a renewed focus on public sector reform.

    Patricia Hewitt’s review into how we significantly reduce the number of top down-targets in the NHS made a series of recommendations to help empower local leaders, something I am pleased the NHS has already started to take forward.

    A recent review by the National Police Chiefs’ Council (NPCC) has already identified that 443,000 officer hours are spent filling in forms and dealing with unnecessary administrative tasks.

    And it was recently highlighted that 10,000 public sector workers are focused predominantly on equality, diversity and inclusion initiatives, with nearly 800 of those in local councils alone.

    Breaking down barriers for disadvantaged groups should be everyone’s responsibility not something you tick a box to achieve at further cost to taxpayers.

    So I have asked John Glen, the Chief Secretary to the Treasury, to lead a major public sector productivity programme across all government departments which we will report on in the Autumn.

    He will assess how we can increase public sector productivity growth, both in the short and long term, and look at what it would take to deliver that additional 0.5% every year that would stop the state growing ever bigger as a proportion of our output.

    We also need to be better at measuring productivity.

    The UK is one of the few countries to include public sector output measures as well as input data in its productivity statistics, which is a good start. But we can still do better.

    Crime, for example, is down approximately 50% since 2010, great achievement. That excluded fraud and computer misuse (which wasn’t measured then.) But it barely makes a dent on their policing productivity figures because our productivity figures don’t capture crime outcomes.

    Likewise on defence we measure what we spend, but not how safe that makes us.

    And where we do measure outputs and the quality of delivery, mainly in the NHS, we count the number of hospital treatments but not the value of preventative care, even though that saves lives and reduces cost.

    So I have asked the National Statistician to review how we can improve the way we measure public sector productivity which he has agreed to do.

    I want this to be the most ambitious public sector productivity review ever undertaken by a government, with the Treasury acting as an enabler of reform. So we will spend time getting this right.

    But if we do, the rewards are clear.

    More innovation in the NHS, building on the success, for example, of the new surgical hubs that reduce waiting times and will give us 1 million extra procedures by 2024-25.

    More innovation in our education system, building on the success of places like Oak Academy which has helped deliver over 150 million online classes.

    And more innovation across our public services by harnessing the potential of AI to boost public sector productivity, building on cutting edge initiatives like the NHS AI lab and the Foundational Model Taskforce.

    More innovation. Better public services. Less pressure on the public purse. A growth mindset that delivers more for less not just more for more.

    Private sector productivity

    Nor will we limit our ambitions to public sector productivity. When it comes to the private sector we can only enable reform rather than direct it, but we will play our part.

    That’s why in my Bloomberg speech I announced the four pillars of our productivity plan: Education, Enterprise, Employment and Everywhere.

    On education we have a huge skills programme in place already, including an expansion of apprenticeships, T levels and boot camps. Sir Michael Barber is advising me and the Education Secretary of where we need to go even further on the implementation of our reform programme.

    For an enterprise economy we need more business investment, so we introduced full expensing of capital allowances in the budget, long championed by the CPS and making us the only major European country to do so. We are following this up by looking closely at the way our pension funds operate to consider avenues for reform.

    On employment we know businesses need to be able to recruit the labour they need. So in the budget we set out one of the most comprehensive ever plans to address labour shortages including cutting the cost of childcare by up to 60% for many families and abolishing the lifetime allowance on pensions.

    Finally to make sure we level up the benefits of growth to everywhere in the UK, we are launching 12 investment zones in left-behind areas, mini-Canary Wharfs which will bring clusters of fastest growing industries to areas where they are most needed.

    It has long been thought that emerging economies should be investment-led but advanced economies consumption-led. But if we are to emerge from the low growth trap facing Western economies we should re-examine that orthodoxy because increasing investment is one of the biggest ways we can raise productivity in both the public and private sectors.

    Conclusion

    So I finish where I started: meeting Rob’s challenge to explain to the country why growth is so important.

    Growth gives hope to young people about their prospects.

    It gives security to older people about the public services they need.

    It gives reassurance to taxpayers about the burden they are being asked to bear.

    But it needs productivity. A relentless focus on efficiency and innovation across both the public and private sectors.

    A dynamic, high growth future is ours for the taking – and productivity will be at the heart of it.

    Thank you.

  • Jeremy Hunt – 2023 Comments at the IMF Article IV Press Conference

    Jeremy Hunt – 2023 Comments at the IMF Article IV Press Conference

    The comments made by Jeremy Hunt, the Chancellor of the Exchequer, on 23 May 2023.

    Intro

    Thank you, Kristalina, for being here today. It’s a pleasure to welcome you to London for the first in-person Article IV mission since 2018.

    I welcome the publication of your statement today, which provides a timely, independent assessment of the UK economy from the IMF.

    The backdrop for your visit is one of challenge and opportunity.

    Since the Fund’s last assessment of the UK economy in February 2022, our world and our economy has been challenged fundamentally by Putin’s illegal war in Ukraine, and the whole continent is feeling the knock-on effects.

    And so since becoming Chancellor, my central mission has been to restore macroeconomic stability and deliver our priorities to halve inflation, grow our economy and get debt falling.

    Today, the IMF’s assessment shows that we are on the right track.

    Macroeconomic Outlook

    Their report forecasts growth of 0.4% in 2023 – a 0.7 percentage point upgrade versus their April forecast.

    That is even higher than the Bank of England’s forecast – published last week – for 0.25% growth in 2023.

    The IMF say that we have acted decisively to fight inflation, which will “substantially” reduce to around 5% by the end of the year.

    And the IMF say that our approach to fiscal policy will help to significantly reduce the deficit over the forecast – by 3% of GDP between 22/23 and 27/28.

    Together, these forecasts demonstrate that we are on the right path, but the job is not done yet.

    Growth Measures

    Growing our economy is one of this government’s top priorities.

    I was pleased to see that the IMF agree with the need for “ambitious evidence-based structural reforms” to support growth because that is exactly what we are delivering.

    At Spring Budget, I announced measures to grow the economy focusing around four key areas – Employment, Education, Enterprise, and Everywhere.

    The OBR judged these policies – including a major expansion of childcare support – will result in 110,000 more individuals in the labour market by 2027-28, directly increasing employment by 0.3% and GDP by 0.2%.

    The OBR also say that full expensing would boost business investment by almost 3.5% in 2024-25 and 2025-26.

    Today the IMF say that the supply-side measures in the Budget “should have a positive effect on medium-term growth” and we will continue this work in the months ahead.

    Fiscal Policy

    But despite this positive news, I know that high inflation and energy prices – issues shared internationally – remain key challenges.

    People are worried about the cost of living, which is why I announced the extension of the Energy Price Guarantee in the Spring; why we are delivering cost of living payments to more than 7 million households; and why we are freezing fuel duty to keep more money in people’s pockets.

    Like the government, the IMF recognise inflation is a major challenge for the UK economy and affirm that we are taking the right strategy to support the Bank of England in their efforts to combat inflation.

    And I know the IMF agree that we have among the best macroeconomic institutions and frameworks anywhere in the world to respond to these challenges.

    Reducing Uncertainty and Promoting Long-term Growth

    Finally, I am pleased the IMF have recognised our work to reduce uncertainty for households and businesses in the face of some of the biggest challenges we face.

    That includes agreeing the Windsor Framework which the IMF say will “favourably impact business investment” …

    … setting the conditions for long-term growth, with world-leading ambitions and legal frameworks for our net-zero goals…

    … and ensuring that our banking sector remains well capitalised and resilient to shocks.

    Final Remarks

    We are working hard every day to grow our economy and deliver on this government’s priorities, and the IMF today show we are doing just that.

    Thank you, Kristalina, to you and your team for your work.

    I will now hand over to you.

  • Andrew Griffith – 2023 Speech to the Innovate Finance Global Summit

    Andrew Griffith – 2023 Speech to the Innovate Finance Global Summit

    The speech made by Andrew Griffith, the Economic Secretary to the Treasury, on 17 April 2023.

    Good morning, everyone.

    Let me start by thanking Innovate Finance for inviting me and for organising such a fantastic conference.

    As ever, you really are kicking off UK Fintech Week in style.

    And it’s wonderful to be in this beautiful space – Guildhall – a venue constructed in the fifteenth century. It is a reminder of the proud and storied history of the financial services industry in this country.

    As Economic Secretary, my objective is to ensure that the UK is the most innovative, most international and most business-friendly economy anywhere in the world.

    I want the UK to prioritise growth, risk taking and wealth creation and to celebrate it for the moral good that it is.

    And as we chart our way forward with the ability of being able to make our own rules for the first time in decades, it has never been more important that financial services are at the heart of those efforts.

    That is certainly the objective that the Chancellor, the Prime Minister and I all share for the sector.

    Innovation – all of you in the dynamic fintech community – has a huge role to play.

    Bank accounts, payment services, the ability to borrow, save into a pension or other investments, buying insurance, or the provision of tools to understand finances better or to shop around offer enormous benefits to their users.

    They create ladders of opportunity, the ability to transfer wealth over a lifetime, the chance to provide for our old age or they can shield us from some of the adverse events that life can throw at us.

    Whilst I am proud to have many large and longstanding firms in the sector, it is rare that legacy firms have the ability to innovate at the pace required to make the most of changing technologies and keep us internationally competitive.

    Our Fin Tech community is vital for the economy in improving productivity, creating choice, and reaching into new under-served segments of the market.

    Which is why I am glad that as a location for Fin Techs to base themselves, on many fronts the UK is leading the way.

    Indeed, the sector continues to go from strength to strength.

    Data from Fintech Labs shows that almost half of Europe’s fintech unicorns are based here in the UK.

    And Innovate Finance found that last year, the sector attracted more investment than the next thirteen European countries combined.

    Our own commitment to supporting UK fintech is reflected in the actions we took, working with the Bank of England, to facilitate the private sector sale of the UK arm of Silicon Valley Bank to HSBC last month.

    I know many of you in this room were directly affected by the collapse of SVB and I am glad that we were able to act decisively to secure an outcome which protected your capital and ensured continuity of banking services.

    Throughout that intense period, I and other Ministers were accessible and constantly communicating with the sector.

    Government isn’t perfect but I hope that when the chips were down we demonstrated the benefits of being a sovereign nation with the agility to make its own decisions fast.

    But that is just the start.

    Our belief in this sector is also evident in the proactive steps we are taking to ensure that you continue to thrive in the years ahead.

    Importantly, the Government will reflect on the submissions to the Payment Services Call for Evidence and introduce an agile regulatory framework for payments and e-money that promotes growth and supports an internationally competitive payments sector.

    We’re also fostering innovation by making the UK a safe jurisdiction for cryptoasset activity.

    We set out plans in our wide-ranging consultation published in February, and we want to pro-actively support the use of distributed leger technology and tokenisation where it makes sense.

    At the same time, I was pleased to launch the Treasury’s joint consultation with the Bank of England, on how to move forwards with a sovereign or central bank digital pound.

    Private wholesale digital currencies are likely to come to market first and we are already creating the legislation to enable those which are fiat backed and used for settlement in the current Financial Services Bill going through Parliament right now.

    And we have the upcoming Financial Market Infrastructure Sandbox, which will help industry adopt and scale digital solutions that could radically change the way markets operate. That will be up and running this year.

    CFIT

    One of the most important steps we have taken to support financial innovation over the past two years has been implementing Ron Kalifa’s fintech review.

    Since being appointed, I have upped the pace of delivery and a few weeks ago we launched the new Centre for Finance, Innovation, and Technology – CFIT – in Leeds, a city where fintech adds £710 million to the local economy.

    CFIT is backed by £5 million of Treasury seed funding, along with an additional £500,000 from our partners at the City of London Corporation.

    It’s central task is to bring together industry players – entrepreneurs, policymakers, investors, and academics – into coalitions to address some of the trickiest challenges facing the sector.

    I am delighted to announce today that CFIT’s first coalition will look at Open Finance and how unlocking financial data can benefit SMEs and consumers.

    Everyone in this room understands how data can radically empower individuals and businesses alike.

    McKinsey estimate that opening up financial data could boost UK GDP by a useful 1.5% by 2030 so CFIT has my full support as they go after that opportunity.

    Open Banking

    Open finance would obviously be the next development beyond the existing Open Banking ecosystem, which is one of the most dynamic and exciting anywhere in the world.

    There are over 7 million regular active users of Open Banking in the UK and over a billion successful API calls every month. It’s spawned thousands of new businesses and products.

    Those who are close to it, know that this is a key moment for the Open Banking regulatory regime.

    We’ve done a lot of work over the last year through the Joint Regulatory Oversight Committee to set out the next steps to ensure Open Banking continues to go from strength to strength.

    This morning, the Committee set out its recommendations, with a vision of a data sharing market which is competitive and scalable for the long term.

    To achieve this, we will move Open Banking on to a sustainable regulatory framework, which the Government intends to develop through the Data Protection and Digital Identity Bill which has its second reading in Parliament today.

    Open Banking will also transition to a new entity, with a broad-based, equitable funding model and high standards of corporate governance. Today we set out how we plan to get this transition started this year.

    But we can’t spend all our time and energy on governance models.

    So we also set out an ambitious roadmap of actions for the next few years, again starting immediately. By Q3 this year, there will be tangible progress across the board, on key themes such as mitigating the risks of financial crime and promoting new services, including variable recurring payments.

    Let me be clear as I know some folk have been worried: this will be the year of delivery on the next generation of Open Banking.

    Our plan is ambitious but achievable, and I am committed to maintaining our country’s leadership in this field. We won’t rest on our laurels, and I want to encourage all of you to work with me to build on the success that Open Banking has been so far.

    Artificial Intelligence

    If data is one limb that has the potential to transform the financial services sector, the application of artificial intelligence is the other.

    Although there are already many deployments and uses in the financial sector, my belief is that we are barely getting started.

    AI can help firms to identify and prevent fraudulent transactions, detecting suspicious patterns in real time.

    By analysing data on market trends, customer behaviour, and other factors, AI algorithms can identify potential risks and provide recommendations for risk mitigation strategies.

    It can help investment managers to make more informed decisions, driving better returns for savers.

    And AI can power new customer service features, such as chatbots, which can deliver personalised support quickly and efficiently.

    This technology has immense potential to transform the financial services sector.

    And that is why the Government recently published its White Paper on AI which details our plans to make the UK the most trusted and pro-innovation system for AI governance in the world.

    This builds on our recent £900 million investment to build an exascale supercomputer and to establish a new AI Research Resource. These will provide significant compute capacity that many in this room may wish to take advantage of.

    Launch of the UK Fintech Census

    But even as we support the fintech community here in the UK, it is vital that we help our firms to expand internationally.

    That’s why my final announcement today is the launch of the UK Fintech Census, in collaboration with the City of London Corporation and Innovate Finance.

    It is designed to tailor our support for you as we make the most of the UK’s access to international markets.

    When you think about it, no other country on earth combines a seat on the Permanent Council of the UN with membership of NATO and AUKUS, a trade deal with the EU, accession to the Comprehensive and Progressive Trans-Pacific Partnership and being a founder member of the Commonwealth.

    The Census aims to help you make the most of these opportunities by seeking your feedback on three simple points:

    What international markets do you want to break into?

    What are the main challenges that you face?; and

    What further support and services would you like to see?

    The Census opens today and will run for five weeks, aiming to reach all 2,500 fintechs in the UK.

    And, in order to make it a useful and actionable data set, we will repeat the Census annually.

    Conclusion

    In conclusion, ladies and gentlemen I hope you are as excited about the opportunities as I am for you.

    UK fintech is in a great place today.

    But it’s our job, as a Government, to ensure that that success continues and we reach new heights… a mission to which, I assure you, we are utterly committed.

    I am a do-er by nature: I have worked in disruptive businesses for most of my life and I want to deliver concrete actions that help this sector to thrive.

    You’re already effective at telling us what you think – and I challenge myself and the team on a daily basis what more we can do to help.

    So please let’s keep working well together so that at next year’s Global Summit – and many more to follow – we’ll all be able to look back on many more fantastic years for UK fintech.

    Thank you very much.

  • Andrew Griffith – 2023 Speech to the Lord Mayor’s Financial Literacy and Inclusion Summit

    Andrew Griffith – 2023 Speech to the Lord Mayor’s Financial Literacy and Inclusion Summit

    The speech made by Andrew Griffith, the Economic Secretary to the Treasury, at the Mansion House in London on 12 April 2023.

    Good afternoon and thank you Lee for that introduction.

    It’s good to be here today to discuss this vitally important topic – and thank you Lord Mayor for everything you have done in a short number of months.

    On this and on other aspects of our financial services you have been banging the drum for the City of London so loudly that I’m sure it has left our competitor countries ears ringing.

    Not that, of course, we want that.

    But we do live in a globally competitive world, and, frankly, I want us to come out on top.

    Like you, I want us to be the most innovative, most international and most business-friendly economy anywhere in the world.

    I want us to prioritise growth, risk taking and wealth creation and to celebrate it for the moral good that it is.

    And as we chart our way forward in these uncertain times but with the agility of being able to make our own rules for the first time in decades, it has never been more important that financial services are at the heart of those efforts.

    That is certainly the objective that I, the Chancellor and the Prime Minister all share for the sector.

    Your theme today is Financial Literacy and Inclusion. How we ensure that financial services deliver for everyone.

    Bank accounts, the ability to borrow, a pension, savings, insurance, or the use of financial technology offer enormous benefits to their users.

    They create ladders of opportunity, the ability to transfer wealth over a lifetime, the chance to provide for our longevity or infirmity or they can shield us from some of the adverse events that life can throw at us.

    So, it is important that we do everything possible to ensure no one is excluded – whether through lack of understanding or lack of access – from financial products which could help them succeed in life.

    We can only do this by working together. You know that. It is why we are all here today.

    But let me address myself particularly to the role of government and what specifically we can do to support financial inclusion.

    I believe there are four things.

    First, we can intervene directly to help those who do end up excluded in some way.

    Second, when legislating, we can design regulations that are proportionate. Regulations that are mindful of the very real potential unintended consequences for financial inclusion.

    Third, we can support financial literacy.

    And fourth, we can create the environment in which innovators can bring forward new products that overcome financial exclusion.

    Let me take each in turn.

    On the first, I would humbly say that, although there is always more to do, this government is doing more than any of its predecessors.

    We are continuing to maintain record levels of funding towards free-to-client debt advice provision in England via the Money and Pensions Advice Service bringing their budget this year to £93 million.

    We have legislated so that every single person in this country must be able to open a fee-free bank account if they wish to.

    There are more than 7 million of these accounts open today and something we should all be proud of is that more than 70,000 Ukrainian refugees in the UK have been helped to open one of these accounts over the last year.

    Meanwhile, the Age Agreement, signed by the Treasury, the ABI and BIBA, helps older consumers who struggle to access motor and travel insurance by signposting them to appropriate insurers.

    Originally signed in 2012, I’m pleased to say it will be renewed this year to continue supporting older consumers.

    One of the largest interventions we have made is to support affordable credit.

    We’ve given £100 million of dormant assets funding to Fair4All Finance to support their work on financial inclusion, on top of a further £45 million of dormant assets funding to the organisation to address the cost of living.

    We’ve even provided Fair4All Finance with £3.8m of funding to pilot an entirely No-interest Loans Scheme.

    And this isn’t the only work being delivered through dormant assets. DCMS recently consulted on another tranche of dormant assets funding, worth an estimated £738 million over time.

    In its response, the government confirmed that youth, financial inclusion and social investment would continue as causes under the scheme.

    As the Minister responsible for financial capability, I look forward to working with DCMS in exploring how building financial education and capability can be supported in the future as an additional aspect within the financial inclusion cause.

    Finally, at the recent Budget, we extended the Help to Save scheme by another 18 months to 2025.

    We will shortly be consulting on how we can simplify to make it even better and reach more people.

    So as with Covid or energy bills, we won’t hesitate to help the most vulnerable – but most people don’t want a handout or a special product from the government.

    They want to be able to access to same products with the same features and benefits as everyone else.

    And that brings me to my second point about government’s role. Which is that as legislators, we must be careful when making regulations that they are proportionate.

    It is too easy to have well intentioned regulations which potentially increase financial exclusion.

    Examples could be client onboarding requirements which push the cost of advice out of reach for many who would benefit or mandatory affordability tests that actually reduce access to credit for some of those needing it the most.

    It’s something that my officials and I are very conscious of.

    It is why it is so important that you do respond to our consultations and it why every piece of legislation has a Regulatory Impact Assessment which is independently scrutinised.

    Perhaps a good example of where I hope we are getting it right is on Credit Unions.

    Ever since the 18th century, mutual societies have helped meet the needs of local communities.

    Given their distinct business models, credit unions face a less onerous set of regulations than non-mutual retail banks.

    For example, credit unions have exemptions from the requirements of the Consumer Credit Act 1974, which enables them to offer credit at affordable rates to their members who might otherwise be excluded from credit.

    To help further the growth and sustainability of credit unions in Great Britain, the government is bringing forward amendments to the Credit Unions Act 1979.

    For example, credit unions will be able to offer products such as car finance and distribute insurance to their members for the first time.

    It’s a good example of proportionate regulation – or deregulation – being used to improve inclusion.

    On financial literacy, I know that you heard earlier from Sam at National Numeracy who deliver programmes to support the millions of people who have low confidence with numbers.

    I’m looking forward to supporting their National Numeracy Day on the 17 May and I am delighted that they are part of the Lord Mayor’s Appeal this year.

    There couldn’t be a more important issue for all of us.

    It is terribly concerning to hear the statistic that around 8 million adults in England only have the numeracy skills of a primary school child.

    We know lack of numeracy is a barrier to using financial products and it is one of the main reasons why people get into problem debt.

    The Prime Minister has been clear that numeracy is a personal mission for him too. At the start of this year, he said:

    “One of the biggest changes in mindset we need in education today is to reimagine our approach to numeracy.

    “In a world where data is everywhere and statistics underpin every job, our children’s jobs will require more analytical skills than ever before.

    “Letting our children out into the world without those skills, is letting our children down.”

    He laid out the path to introducing maths education up until the age of 18 by the end of the next Parliament.

    Many of us are worried about the growth of a compensation culture impacting the sector. It’s a growing cost and has the potential to hold us back competitively.

    Tackling some of the practices of claims management firms is one part of the solution.

    But improving the level of financial literacy and an understanding of risk by the consumer can only help us return to greater role for ‘caveat emptor’.

    There’s one final role for government. And that’s creating an environment which fosters innovation. Light touch regulation, a culture of supporting risk takers or simply regulatory sandboxes that are open for business.

    The whole UK fintech sector is a great success story, with around 2,500 firms supporting tens of thousands of skilled jobs across the country.

    In 2022, the sector attracted $12.5 billion of investment. This means that fintechs in the UK attracted more funding than those in any other country bar the US.

    Much of what they do delivers for the financially excluded. For example, through new payments options or new tools and apps helping individuals manage their budgets or better understand their finances.

    Artificial Intelligence offers huge possibilities for inclusion.

    Alternative credit scoring to develop more accurate credit profiles for currently underserved groups.

    Micro insurance to deliver low cost coverage;

    And better fraud prevention as sadly fraud often hits the least resilient the hardest.

    Let me finish with a specific example.

    Access to cash is a topical subject bringing together many of the themes I’ve spoken about.

    Nobody in this room needs reminding that as a society, we are moving increasingly from cash to electronic payments – with non-cash transactions now accounting for around 85% of UK payments.

    Nor is it just the young: 8 out of 10 people of retirement age are using contactless card technology at least once a month.

    The trend has benefits in convenience, security and for the environment.

    However, we will not leave behind rural communities, the elderly or those who use cash as a way to manage their personal finances.

    That is why, for the first time since the ancient Celts began minting coins in the British Isles, this year will see communities benefit from a right of access to cash, enshrined in law via the Financial Services and Markets Bill currently going through Parliament.

    The right will cover not just withdrawals but also the ability to make cash deposits, something that is particularly important to small businesses.

    Their continued ability to accept cash depends upon knowing they can deposit it safely. Putting this in statute is a huge step forward.

    We have already made legislative changes to support cashback without a purchase. That turns every single corner and high street shop into a potential source of free cash withdrawal.

    So, we won’t hesitate to legislate where necessary, but we delude ourselves if we believe that is the whole answer.

    Like the trend away from the horse pulled carriage or domestic coal fires, we cannot hold back change for all time.

    As I said before, innovation has a huge role to play.

    So, I pay tribute to UK Finance, their member banks, LINK and the Cash Access group who have come up with a whole series of innovations to help the vulnerable. Community cash machines, shared banking hubs and more.

    ‘Tap and go’ technology for charities can eliminate the jeopardy from losing the old collection tins and even yield higher donations.

    With the right controls, payment cards could help those with carers or in care. We have the popular ‘Go Henry’ cards for parents – why not ‘Go Harold’ or ‘Go Hilda’ for the elderly?

    Earlier this year, together with the City of London Corporation, we launched a new government-seed funded national hub – the Centre for Finance, Innovation and Technology.

    They are operationally independent, but I did put to Charlotte and Ez when we last met that financial inclusion was a big agenda that would be worth their consideration.

    Let me conclude Ladies and Gentlemen by restating my commitment to work with you all on this agenda.

    Thank you, Lord Mayor and the City of London Corporation for bringing us all together today.

    The UK is immensely fortunate to have the great financial services sector that it does.

    But part of growing sustainably and reaching our full potential is making sure that we include everyone and that is why the work of everyone here today is so important.

    Thank you.

  • Andrew Griffith – 2023 Speech at the Funds Congress

    Andrew Griffith – 2023 Speech at the Funds Congress

    The speech made by Andrew Griffith, the Economic Secretary to the Treasury, in London on 30 March 2023.

    Introduction

    Thank you, John. As a former public company CFO, it’s certainly a relief to know that you’re introducing rather than interrogating me today.

    And thank you to everyone here at the Funds Congress for having me this morning.

    I was, of course, delighted to be asked to speak at London’s largest asset management conference.

    And even better that I can be with you today in person, given this is the first time Funds Congress has met physically since 2020.

    What a lot has changed since then. But what hasn’t changed is the vital importance the asset management industry holds for the UK and the global economy.

    An engine for UK growth and long-term economic prosperity. A world leader in portfolio management and sustainable finance. The second largest asset management centre in the world with a market share higher than France, Germany and Switzerland combined. And an innovative spirit coupled with a diversity of expertise unrivalled anywhere to boot.

    Growth: The role of the asset management

    Before I come on to what we can achieve together, let us consider where we are today.

    A major source of high value jobs in the UK – employing 42,000 people directly and supporting many tens of thousands in adjacent services.

    A unique lynchpin of the UK financial services ecosystem, existing at the heart of many concentric circles of value in the industry across the UK.

    But more importantly, the performance that you deliver to help lift up the standard of living of millions, tens of millions are benefitting today as they save for a pension through auto-enrolment.

    You generate close to 1% of the UK’s GDP.

    And 3.6% of total UK service exports.

    But that data doesn’t do justice to your impact today, let alone what we could achieve.

    And while we have the legacy to lead in this space, we can’t be complacent.

    Productive Finance

    As the Chancellor outlined in his Bloomberg Growth speech, we want the UK to be among the most prosperous countries in Europe.

    We want to spur economic growth.

    And we have a plan to get there.

    I want to pay particular attention to the role of enterprise.

    Within this, I want to highlight reward for risk, access to capital and smarter regulation.

    Because enterprises need funding, just as all our long-term priorities do.

    It’s why we’ve been working hard to better facilitate investment in long-term assets that will be a crucial ingredient in the UK’s economic success over the years ahead.

    Because we all know that there are global and domestic priorities we need to tackle. It’s why we’re a leader in green finance, it’s why we are working to level up, it’s why we want to be the next Silicon Valley – but these priorities need to be funded.

    Currently, the UK has the fourth largest pensions market in the world.

    If we can unlock just a fraction of Defined Contribution pensions schemes’ capital for investment into productive finance assets, ordinary pension savers could retire with more security and money to enjoy.

    And simultaneously, we would increase the supply of private finance for innovative companies, and productive assets.

    When talking about productive UK assets I mean infrastructure, I mean growth, I mean venture capital.

    It’s why the launch of the Long-Term Asset Fund – or LTAF – is such an important step in unleashing long-term investment.

    At the beginning of December, I spoke about how, together, we have created the LTAF to help unlock access to long-term illiquid assets.

    Our conclusion is that it will lead to a significant boost to the productive capacity of the UK economy – including much-needed infrastructure and decarbonisation products.

    Because we know that client demand for illiquid investments is increasing. So it’s welcome that additional work such as the Productive Finance Working Group’s guides to illiquid investments is helping to set direction for DC pension schemes.

    And I’m excited to hear of firms that are formally submitting their LTAF applications to the FCA.

    It may sound like a niche, technical area to get animated over. But it’s far from it. It has the power to be transformative for our sector, the economy and society as a whole.

    Funds Regime

    The work on LTAFs is best understood alongside the wider work to review the UK’s funds regime.

    Here our ambition is to further build on the UK’s world-leading position in asset management by making the UK a much more attractive place for funds to domicile.

    And by ensuring the investors can access a suitably wide range of fund vehicles, so they can pursue the exciting investment strategies of tomorrow from the UK.

    With your support and expertise we will continue striving to make this a reality. We will make the taxation of funds more efficient. We will expand the range of investment products available in the UK. And we will facilitate the kind of innovation which helps investors and the wider economy.

    Global Opportunities

    My responsibility is to ensure the UK financial services industry is the very best that it can be.

    On making sure we have agile and effective regulation.

    The Edinburgh Reforms take forward the government’s ambition for the UK to be the world’s most innovative, open and competitive global financial centre.

    To drive growth and competitiveness in this crucial sector, while retaining our commitment to high international standards.

    The Chancellor has committed to move rapidly to review retained EU law over the next year to identify reforms which have the greatest potential to unlock growth in key areas, including in financial services.

    The Edinburgh Reforms themselves, of course, do not directly impact many of you here today. But what they show is our direction of travel: to use our new freedoms to tailor regulation to our industries and untether parts of our economy that have been held back.

    To what end? To becoming the most innovative, productive, well-oiled financial services sector in the world that delivers for communities across all four nations of the UK.

    I want to harness your strengths, unlocking institutional investment so that we can channel money to where it can do the most good: infrastructure, technology and innovation, the journey to net zero.

    I want our country to be the best country in the world for businesses to invest, grow and flourish.

    And I need your help in directing ever-more investment to these cutting edge-firms and long-term priorities.

    On the subject of long-term priorities, could anything be more important than our country’s security?

    It is my view that our security and freedom might just rely on our willingness to invest in defence over the long-term. So, I ask, as a sector, are we undervaluing defence and if so, what can each of us do about it?

    FSM Bill

    And the truth is we need to think long-term. We live in a globally competitive landscape. Our competitors are not taking a break.

    Our Financial Services and Markets Bill, therefore, has competitiveness baked into it, aiming to enhance the UK’s position as a global leader in financial services.

    The Bill introduces secondary statutory objectives for the PRA and the FCA to provide for a greater focus on growth and international competitiveness.

    Technology

    If we are to realise that ambition, we need to also ensure that UK financial services are at the forefront of technological advancements. To unlock the untapped potential new technology can bring to every town and city, and to grow the economy.

    It’s already enabling us to embrace green finance – on which we want to lead the world – and exploit the great opportunities provided by AI, Quantum Computing.

    And the asset management industry has the unique capability to harness the opportunities of innovative technologies, and one development I’d like to highlight is on digital assets – those made possible by the rise in blockchain technology.

    We are establishing a framework for regulating cryptoassets and stablecoins.

    This includes ensuring that the Treasury has the powers to regulate cryptoassets within the existing financial services framework which could cover those relating to the trading and investment of cryptoassets.

    Just last week, we published a consultation setting out comprehensive proposals for regulating the sector.

    At the end of last year, we made regulations to expand the Investment Manager Exemption tax rules to include transactions in cryptoassets, to remove disincentives to UK fund managers investing on behalf of overseas investors from including cryptoassets in their portfolios.

    This will provide greater tax certainty for UK fund managers and foreign investors and put the UK at the forefront of the developing global cryptoasset fund management sector.

    Sustainable Investments

    Finally, I cannot speak about the global context without acknowledging ESG and the importance of sustainable investment.

    I want the UK to be the best place in the world for sustainable finance and we have taken world-leading action to green the financial system.

    London was recently ranked as the world’s leading hub for sustainable finance for the third consecutive time.

    And I’m very proud that so many asset managers are signatories to the Financial Reporting Council’s Stewardship Code and members of the Net Zero Asset Managers Initiative – reflecting the importance the Government places on responsible and productive stewardship of capital.

    Conclusion

    I’ll end by repeating my thanks to you all for having me at the Funds Congress.

    It’s an exciting time for asset management and we’re depending on this trusted industry to invest in the future of the UK.

    I know we will work closely as we continue to promote growth and enable a competitive, thriving financial services sector. Thank you.