Below is the text of Mr Major’s speech to businessmen in London on Wednesday 10th January 1996. A copy of the press release following the speech is available at http://www.johnmajor.co.uk/page1212.html.
Peter, Good Morning and thank you for taking the trouble to organise this event. It has been such a quiet and dull political period over Christmas that I have been looking forward to this morning with great anticipation.
As you said a moment or so ago, Peter, we have gathered here in this room a very substantial number of the most senior businessmen representing the largest corporations and newspapers throughout the United Kingdom. Here are many of the people who make many of the crucial decisions about where investment goes and what actually happens to the future prosperity of this country. And so I want to spend most of the time speaking to you this morning about matters economic in one form or another, and then leave as much time as possible for you to ask the questions that concern you.
Let me just back-track for a few moments and look over the last years to perhaps put today and tomorrow in a slightly better context. No-one doubts how difficult the last few years have been, the recession was longer than it was expected, it was deeper than we expected, it had a more profound psychological effect upon thinking in this country than many people anticipated when it began or even as it continued and seemed at one stage to be going on almost forever.
Not just of course a problem for the United Kingdom, it was a recession that spread throughout all of the Western world and some parts of the rest of the business world as well. But it is behind us now and what I want people to concentrate on at the moment are the circumstances that face us at the moment and to wipe away the mindset that we have had for so much of the past 3 or 4 years.
There is a tendency in human nature generally that if things are difficult they are going to go on being difficult forever; if things are excellent they are going to go on being benevolent forever. Neither of those things are true. We did have, as a country, in company with the rest of Western Europe, a very difficult economic period. But we have actually been out of recession technically for over 2 years and in reality out of recession quite substantially for a very substantial period now.
What we need to do is to look at where we are, uncluttered by the memories of what happened, and look at the prospects that lie immediately ahead of us at the present time. And I say that because if we don’t do that, if we, government and business, leave ourselves with the mindset of 1992 and 1993 then we will miss the opportunities of 1997 and the years that follow it.
Let me try and break some of the distorting prism of opinion that occasionally entraps people when they think about our prospects. I suppose you might call it an alternative news summary, some of the things that get less publicity than they might unless they appear in a brown sealed envelope.
You touched upon some of them, Peter. Inflation probably, I think certainly, under more secure lock and key than we have known certainly in my political lifetime, and I don’t just mean in Parliament, I mean since I first entered politics as a 16 year old. We are certainly going to be well within our inflation targets. I suspect if the election is when I anticipate it will be that we will have met our 2.5 percent target that we set ourselves for inflation by the time we reach the next election. It is no longer, almost for the first time in the memory of most of the people round this room, a material problem to future investment because there is an acceptance that inflation is now under proper control.
If we have broken the inflationary psychology, and I pray that we have, then both in the short term and the long term I think that is one of the most remarkable and benevolent changes for British industry and commerce that we have seen literally for decades.
Secondly, interest rates, not quite at an historic low, but certainly by comparison with most of the last quarter of a century low and no serious risk in the short term that they are going to be significantly higher and we hope, all things being well, that it may be possible to reduce them.
Mortgages at their lowest level for 30 years. Unemployment now having fallen for 26 months in a row, down to 8 percent. Our nearest neighbours, perhaps the closest economy – France – with unemployment stuck at around 12.8 percent, no major European economy having either unemployment as low as us in the United Kingdom or, and perhaps this is a better measure, no other major European country with as high a proportion of its adult population in work as we have in the United Kingdom. We have now beaten Germany on both those counts for the first time that I can! ever remember. And of course tax at its lowest level we have seen for 50 years.
Now that wasn’t easy to achieve. It didn’t happen by magic. It did happen because throughout the past 3 or 4 years, often when we were invited to take decisions that would have been popular in the short term but damaging in the long term, we didn’t take those damaging long term decisions, instead we took the short term unpopularity and as a result of that we have the economic opportunities that lie immediately ahead of us at present.
They are opportunities, they are yet to be taken, but I believe they are opportunities that put us well on track for the doubling of living standards in 20 years that I set out as our objective 18 months or so ago.
Let us look at some of the other indicators that are now becoming apparent. At last, much slower, much later than I would have hoped, we are beginning to see house prices having increased for each of the last 5 months. After having had to put up taxes because of the size of the fiscal deficit, and it was frankly a choice between taxes going up or interest rates going up, and think it was right to deal with it, taxes are reversible when the time is right and we now have personal taxation back I hope on a downward trend. Sales rising. And although it isn’t directly an economic matter, it affects many people in this room, for the first time in 40 years the clearest possible indication that crime is now on a downward trend. And for those cynics who say, and there are sadly cynics in public life, that the crime statistics are rubbish, it is simply that people are not reporting crime, I would refer them to the insurance companies and the statistics that they have released for theft of motor cars for example. Because I think it is very hard to argue that anyone who has had their motor car stolen would not actually report it to the insurance company in order to make a claim. And that shows a distinct downward trend as well and you can see that elsewhere across crime.
If I may make some other points. We have, despite the criticism of privatisation, the best single method of giving people a personal stake in society I would have thought, a shareholding stake in society, despite the criticism there has been of the privatised industries, some of it justified, some of it not, the reality is that the price of utilities, crucial to the living standards of people right across this country, are more stable than we have known them at any stage before and in most of the cases, in real terms, the price is actually falling.
And if I may make a political point for a moment. That has been achieved over the past 4 years with a tiny parliamentary majority, all of which, as we have occasionally seen, not absolutely steady on parade on every single occasion, it has been achieved in a hostile economic environment and with a totally opportunistic and destructive political opposition.
We have immediately ahead of us some legislation that is crucial for the future. It is very fashionable to take the view that there is an empty legislative programme. I don’t regard a Finance Bill that cuts taxes as being empty; I don’t regard an Education Bill that extends opportunity and choice as being empty; I don’t regard a Broadcasting Bill that begins to prepare us better than we have been prepared for, for the IT revolution that is taking place as being empty; neither do I regard the rest of the parliamentary programme as being anything other than absolutely necessary.
We are now within 16 months or so of a general election. And if the principal opposition party can force it, of course they would like that election a good deal earlier. And I will tell you why. They would like the election earlier because like me they know they know that the economy is improving, they know that that is beginning to become apparent to people, they know that there is now going to be a rising level of net disposable income and people will feel noticeably better than they have done in the past and they would like to have the election early before that becomes increasingly apparent to people up and down the country.
But there is at this election a great deal at stake, not just the protection of the remarkable changes that have been made throughout the last 16 years, not just the protection of those for they have made to our competitiveness a dramatic difference over that period, but much else besides. And I would say to those people who may be tempted by an alternative, it is a very dangerous proposition to play Russian roulette with all the barrels loaded, and no-one should assume that the advances that we have made would be safe with any alternative government. So people, not just business, but people up and down this country have a great deal to lose if they decide upon a reckless gamble of that sort.
Let me touch upon some of those points and then I want to come to something which is very current at the present time. Benign circumstances, certainly; huge opportunities for the future, beyond a doubt, but they won’t necessarily be there with the wrong policies or with the wrong government. Does one really accept, do the people out there in the country really believe that Gordon Brown would have the same rigorous control over inflation that we have accepted, with great political unpopularity? Do people really believe that Robin Cook would defend our position in Europe with the same vigour that we have done over recent years? Are there people present who believe that Margaret Beckett is so concerned about competitiveness that she would ditch her personal wish to return much of the old trade union legislation that existed in the past? Is there anyone present, or indeed in the country, who seriously believes that Jack Straw would take a tougher line on crime than Michael Howard?
Well I don’t think that there are. I could go on, I have overlooked John Prescott. Now I come to think of it, this is one of the things Tony Blair and I have in common because we both overlook John Prescott, I don’t invite him to meetings either and I appreciate why Tony doesn’t.
It is worth concentrating on the fact that a government requires 18 Members in the House of Commons and something up to 30 in the House of Lords. And the mindset of most of our opponents, there may be a leader with one view but where is the heart of the party elsewhere? While the majority of the Labour Party still sings the red flag, the Leader may be humming Mandelson rather than the red flag, but the instinct of the party is where the instinct of the party has been in the past.
Over the last few months it has been interesting to try and see the way in which political programmes for the future have been set out and I will return to our plans for making the United Kingdom the enterprise centre of Europe in a few moments. But just a few days ago, in Japan, the Leader of the Labour Party set out his plans for what he called a stakeholder society. It is not entirely clear what he meant by that. As with his reversal of Clause 4, there was a hint in his speech and his spin-doctors then explained what it was that he might have meant by what it was that he almost said.
But a stakeholder society is either a soundbite too many or alternatively it is the beginnings of the return to some form of corporate society. And I will set out for you why I believe that is so. Perhaps it is meaningless, who can tell? We certainly in the past have frequently seen spin-doctors elaborating on what has been said, that is the style of the Labour Party. But if it is old-style corporatism then I think we had better flush that out before people just overlook it and we skim on. Because what that potentially is is very damaging for the United Kingdom.
Who are the stakeholders to be? Are the stakeholders to be 30-odd million adults? And if they are to be the stakeholders, why are they not to be stakeholders in the form we have built up over the last 16 years, with their own personal pensions, with their own homes, with the lowest level of taxation, with shareholdings, more shareholders now than there are trade unionists in this country? That is a genuine stake. People have a real interest, literally a share in this nation that is personally theirs and not determined by some other body on their behalf telling them that they, the body, are looking after their interests for them.
But if the stakeholders, as I suspect from what we hear, are quite different bodies then we are in a different ballgame. And I rather suspect, as so often, that Margaret Beckett was revealing the truth of what is planned when she said just the other day, and I quote: “There is growing concern that the many interest groups, in particular the general public, consumers and so on”, she wanted to soften it of course, “are excluded from some of the thinking in industry in the past and there is a general exploration of how we can create more common ground, how we can make sure that all interests are taken into account when we look at stakeholders.”
Well I will tell you who they really mean. They mean the special interest groups, they mean the trade unions, they mean the people that so often are covered by so much of the social chapter type of thinking in this country. That is what I suspect they mean when they actually talk about stakeholders.
What I believe we are seeing is the tip of a plan which is nothing better than a fancy packaging for new burdens on business of one sort or another. And although some of those burdens that have already been apparent that sound benign, they are not. A minimum wage does sound benign, particularly to those who are very poorly paid, but it is not benign because it often means that those who are poorly paid would not be paid in a job at all if you had a minimum wage legislation. A training levy, which I think would be a great mistake to introduce. The social chapter – the problem with the social chapter is twofold, it is not just what is in the social chapter at the moment, damaging enough though that is, the real danger were the United Kingdom to sign up to the social chapter in Europe and leave it free across the whole of Europe is not so much what is in it now but what would then be brought into the social chapter because that is the ambition of nearly all the rest of our European partners to bring much of their domestic social legislation, under the social chapter heading, in order to remove their competitive disadvantage against the United Kingdom in particular and other countries in general.
And I will not sign up to that, and I will not sign up to that for a moral reason and I will tell you the moral reason. When our political opponents talk of the social chapter they talk of it in very benign terms from the point of view of someone who is in work getting greater protection. Well I gloss over the fact that few of them would be in work. But I would put this question to you.
If you make it more expensive to employ people who are in work, the employer will firstly employ less and it will be correspondingly more difficult for those not in work ever to get themselves into work. It is politicians across Europe, using employers’ money to buy popularity for themselves and the losers are the people not in work who, as a result of that, might never get into work or certainly would have their chance of getting into work greatly reduced.
And I have to tell you, I don’t just think that is economically wrong, I think that is plain immoral when you actually look at what the practical effect would be. Right the way across the European Union there is too much unemployment. 20 million or so adults in the European Union are unemployed. And if you look at the trend from 1950 onwards, it doesn’t matter whether it is good days or bad days, boom or bust, you have had that underlying growth in unemployment. And why, when the rest of the world has been creating jobs? Because we have become relatively less competitive. It does not matter a tuppenny damn within the European Union if there are minor changes in competitiveness.
What does matter is if throughout the whole of the European Union we become less competitive to Japan, to the United States, to Latin America, to the Pacific Basin countries, and that over 30 years is what has been happening. And that is the matter, the principal matter, that so many people in the European Union ought to be turning their mind to rather than so many of the narrow and institutional questions that have bothered people so much over the last few years.
Now let me turn to the ambitions that I would wish to see this country achieve. Let me firstly put our position in context. The government, on behalf of the public, spends at the moment about 42 percent of the national income. I compare that 42 percent to the average of 52 percent elsewhere in the European Union – 52 percent elsewhere, 42 percent here. But that 42 percent also needs to be compared with our other competitors around the world, and it is too high, and the expenditure plans that we have will bring it down below 40 percent and then I believe there is scope to reduce it a little further, though precisely how far I wouldn’t care to judge at this moment, but certainly we will get it down below 40 percent and then lower still if we can to open up the prospects of greater competitiveness and lower tax burden on both industry and on individuals. And I believe that is eminently achievable providing we keep a proper grip on inflation and the sort of economic policies that we have followed over the past few years.
Where are the priorities? When? And I make no promise about the date, nobody say I am making distinct tax promises, but let me set out the objectives that we will reach when it is affordable.
Certainly we retain the objective of a 20 pence basic rate of tax. I can offer you no promises of changing the 40 pence, I don’t think that is a priority and I don’t wish to pretend to you that it is. But to get a 20 pence basic rate of tax does seem to me to be a very attractive priority.
I think in terms of enterprise taxes, and I will have a lot to say about enterprise over the next few months so I won’t concentrate on too much of that this morning. But in terms of enterprise, as it becomes affordable, let me repeat what I have said in the past. I believe it is in the country’s interest, economic, socially and certainly in terms of competitiveness, to over time abolish both inheritance tax and capital gains tax. I believe that the impact that the change in those taxes will have on the flow of investment will be of great benefit to many of the people who will wish for themselves and their children to have secure and growing employment prospects. I know it will be criticised as being aid to fat cats, of course that is always the politics of envy argument that can be used. But the best aid to people is to make sure that they actually have the opportunity of a decent job with decent prospects for the future, and that doesn’t magically appear without using the private sector to generate the investment that is necessary. And if people themselves earn success and rewards for that investment, I am not going to object to that. I would prefer to look not at the gains that they may get but at the opportunities that that investment by then will provide for many other people to be in proper and gainful employment. So I see those changes.
Clearly there is a great deal more to be done on deregulation. It is, I have to tell you frankly, like wrestling with a greasy pig, every time you deregulate here there is a new regulation that pops up elsewhere that is often gold plated because the people determining the regulations say well if I don’t gold plate it and something happens to go wrong, when the inevitable inquiry occurs I will be blamed. And so there is a great deal of gold plating of regulation and I think business is right to be critical of that fact over the years and we must look further to see how we can deregulate.
I just want to indicate one other point about the social chapter. I said how damaging it could become, but let me just illustrate in terms of social on-costs what it might mean. You employers, many of you round here in the United Kingdom, for every 100 pounds in wages that you pay out you would pay out an extra 18 pounds in on-costs of one sort or another. In Germany it wouldn’t be 18 pounds, it would be 32 pounds. In Spain it would be 34 pounds. In France it would be 41 pounds. And in Italy it would be 44 pounds. Is it any surprise when you begin to hear those figures and see the reality of what it means, that we are the principal centre for inward investment across the whole of Europe and that it is this country that is creating new jobs and seeing unemployment fall, and our European partners who are losing jobs and seeing unemployment remain at a stubbornly high level?
We have immediately ahead of us, and because I wish to leave questions for it I will not enlarge on it in any detail, some crucially important decisions for this country. Just because we have an economy that is benign doesn’t mean there aren’t very big decisions to be taken. There will be important decisions on European matters on a number of fronts – the Intergovernmental Conference, the single currency in due course, difficult questions on defence and the way in which NATO evolves and also its relationship with the Western European Union and conceivably the European Union itself. And most crucial of all in many respects, the way in which enlargement of the European Union is itself handled, something that I regard of critical importance. Again, while so much of the debate and discussion has been about institutional matters within the existing Europe, the opportunity for this generation of politicians to fundamentally improve our security in the future by extending the borders of the European Union, of the free market and embracing in the democratic embrace of Western Europe lots of countries of Central and Eastern Europe, the opportunity for doing that is greater than we have known in the past, and if this generation of politicians misses that opportunity the time may come in the future when people would curse us for our short-sightedness in not having ensured democracy in those countries that only escaped from a communist embrace within the period of the last few years.
They are big questions, apart from the domestic questions of continually expanding and unfolding the entrance into what was once the secret garden of education so that parents have proper choice and opportunity. These are matters of crucial importance to our future, they are matters where the choice between the parties is very great.
You asked me, Peter, at the beginning, was this election there to be won, and the answer is yes it is. I have not a shred of doubt in my mind that the opinion poll figures are wholly illusory, neither do I have a shred of doubt in my mind that we can and that we will win that general election. Of course it is going to be a fight. I recall what I think it was John Paul Jones said when faced with a particularly difficult naval battle: “Fight”, he said, “I have not yet begun to fight”. And there is up to 16 months before the general election with a growing difference between the parties. The stakeholder speech the other day may well open red water between the two parties because I believe, if it means the corporatism I think it means, it is a fundamental political error that the Labour Party have just made.
So yes we are going to fight for this election, not just because we want another period of power, we have had 16 years of power, but we are going to fight for this election because we have built up in the last 16 years a greater stock of improvement in the life standards of the average Briton than we have seen in any 16 years of government by any political party at any stage in this century.
And I don’t wish to see that thrown away, I do wish to see it built on over the next few years, and I intend to see that it is and I intend to be there to do it.