Iain Duncan Smith – 2003 Speech at the Chartered Insurers Institute Conference

The speech made by Iain Duncan Smith, the then Leader of the Opposition, on 18 September 2003.

The new political year has just begun.

And I can almost hear you groan!

Well, the outlook from 10 Downing Street is certainly bleak.

The Labour Party is divided from top to bottom:

…on Iraq and relations with the United States…

…on the euro and relations with the European Union…

…on foundation hospitals, tuition fees, and the whole direction of public service reform.

Throughout Whitehall, political will has been replaced by political infighting.

Ministers’ commitment to their country has been replaced by concern for their jobs.

And that concern is valid.

The Hutton Inquiry has exposed to the public’s view the inner workings of this Government.

And the public have had enough of it.

However, I do not intend to make a speech about the immediate difficulties of the Government.

Beyond all the serious charges in the Hutton Inquiry…

… – Hoon versus Gilligan, Blair and the mistreatment of Dr Kelly – …

…there are the serious failures of this Government that affect the everyday lives of the British people.

Labour’s mismanagement of the economy is one of its least reported failures.

It is under-reported because the growing weaknesses of the UK economy, are growing beneath the surface.

Like an iceberg we can only see the tip of the uncompetitiveness and supply side rigidities that Labour is creating.

Last year, business investment fell at its fastest rate for nearly 40 years.

Manufacturing is losing 10,000 jobs a month, without gaining in competitiveness:

…we have had a trade deficit in each and every month since August 1997.

The UK stock market has fallen – and fallen further and faster than in other advanced countries.

Since May 1997, the FTSE 100 has been outperformed by the Dow Jones by over 40 per cent…

…and by the French stock market by over 30 per cent.

GDP growth has slowed…

…and Gordon Brown’s forecasts may well prove over-optimistic for a third time in a row.

Next March, with falling tax receipts squeezing his spending programmes, the Chancellor will face a dilemma:

He can choose more tax and borrowing, or – for the first time – he can choose real reform to the public services.

I have an idea which he will go for.

The most striking feature of our economy since 1997, of course, is the increase in the burden of tax.

There have been sixty tax rises since Labour came to power.

Since 1997…

…the overall tax take has increased by 50%…

…and as I reminded the Prime Minister in Parliament yesterday, that includes a 70% rise in Council Tax…

…the savings ratio has fallen by 50%…

…and the amount of the average personal pension has also fallen by 50%.

It is not plausible to claim – as Gordon Brown does – that these facts are unrelated.

High taxation damages the economy and erodes the incentive to save.

Households now put aside less than 5% of their income for the future.

This is hardly surprising.

Gordon Brown has imposed a five billion pounds a year tax on pensions.

The withdrawal of the dividend tax credit has imposed a downward pressure on equities…

…further eroding the value of pensions invested in the stock market.

And the unstoppable advance of the means-test, higher and higher up the income scale…

…has seen the incentive to save grow smaller and smaller.

According to the New Economics Foundation, British citizens on average owe 120% of their disposable incomes – at a time when real take-home pay is actually falling.

In seeking to boost saving, it is important that savings and investment products are properly explained and marketed.

I am glad that the Financial Services Authority is turning its attention to financial promotions…

…though I hope that statutory regulation will not be necessary.

We have had enough of that already.

Membership organisations like the Chartered Insurance Institute…

…which has been setting professional standards for financial services for over a hundred years…

…are often better placed to monitor best practice than Government is.

And I strongly commend the work you are doing alongside the FSA to improve professional practice.

The central plank of our election platform is that Conservatives offer a fair deal for everyone.

You will hear a lot about that fair deal in the coming months – and I would like briefly to outline what we mean by it.

Earlier this week I addressed an important Conservative conference on poverty.

I pointed out that economic inequality has widened since Labour took office.

And that over the last five decades – the life of the welfare state – upward social mobility has become harder, not easier.

Labour has failed to tackle poverty.

Conservatives have a different way.

We want a society in which no-one is left behind – where no-one has to put up with second-rate housing or education or healthcare.

And we want a society in which no-one is held back from realising their potential.

That includes entrepreneurs – the people who create the wealth which Governments tax and redistribute.

You are the agents of social justice in this country.

You are the people this country depends on for a better and fairer future.

But Labour has hurt wealth creation.

The sad fact is that productivity growth has halved since 1997.

The combined cost of Labour’s tax and red tape has been estimated by the CBI at £15 billion a year.

And as Digby Jones of the CBI commented recently, business people feel, and I quote:

“that the most dominant feature of running a business [today]… is no longer creating wealth – it is dealing with regulations.”

So when Conservatives talk about a fair deal they mean a fair deal for everyone:

…for the poor, trapped in poverty…

…for the taxpayer, denied value for money…

…and for business people, taxed and regulated to despair.

These are not contradictory messages.

They are a single message.

A fair deal for everyone.

How will we go about delivering the fair deal?

As far as your industry is concerned, we urgently need to revive the culture of long-term responsibility – the culture of saving.

That is why we propose what we have called the Lifetime Savings Account.

This would allow people to save in an escrow account with the benefit of a matching Government contribution.

They could withdraw the money if they needed it, and re-invest at a later date without sacrificing the Government contribution.

But this country also needs sounder economic foundations.

I should emphasise that we cannot, at this stage, anticipate the economic situation in two or three years’ time.

But Conservatives will always be a lower tax party than Labour.

In order to achieve this, the first thing we must do is tackle the problem of high taxation at its root –

…the culture of profligacy and waste which is found in our unreformed public services.

The Chancellor likes to boast of his ‘investment’ in our schools and hospitals.

But as we know all too well, most of the Government’s public expenditure is not ‘investment’ at all.

It is spending to stand still.

Inputs rise, but outputs remain the same.

Figures from the Office of National Statistics show Government’s current spending has increased by 50% since 1997…

…but that the value of Government outputs has increased by only 15%.

Since Labour came to power, public service productivity has actually declined by 5%.

This is most evident in the NHS.

Since 1999 we have seen a 22 per cent increase in health spending, but a meagre 1.6 per cent increase in the number of patients treated…

…and an actual fall – of half a per cent – in the number of hospital admissions.

These figures pre-date this year’s National Insurance rise, which has fallen especially hard on large employers like the NHS.

Labour are taxing… spending… wasting… and failing.

We must reverse this trend, and improve the efficiency of our public services.

And by reforming them, Conservatives will provide proper value for taxpayers’ money, and make savings which can be returned to the people.

I want to end with a word on the euro.

On Sunday Sweden rejected the single currency.

Not a single country has yet endorsed the euro in a referendum.

I believe that after the Swedish vote the prospects for a referendum in this Parliament are remote.

Of course, if we win the next election, the prospects for a referendum in the next Parliament will be non-existent.

And that is why I urge the business community to support us in that election.

Many of you will have a different view from me on the single currency.

But I hope you agree that what the British economy needs most is certainty.

Mr Blair is incapable of providing it.

He has promised his colleagues in Europe that he will call a referendum.

But he knows that he would lose it if he did so.

So there is only one alternative route for him – the route he always chooses.

The route of the third way: ambivalence.


Calculated indecision.

One Cabinet minister authorised to say one thing, another instructed to say the opposite.

Well, that might be the way the Labour Party operates.

But after six years of mixed messages and confusion, the British people, and British businesses in particular, are entitled to a little certainty.

They will get it with the Conservative Party.