Tag: 2011

This is the text of George Osborne’s speech made at the 2011 New World, New Capitalism seminar in Paris on 6th January 2011.

Let me start by saying thank you to Minister Besson for inviting me to speak here today.

This is my second visit to Paris since becoming Chancellor and builds on the Anglo-French Summit in London last year.

It is a great privilege to be given the opportunity to address such a prestigious audience.

In my remarks today I would like to briefly touch on what I see as some of the key economic challenges in 2011.

What are the three key questions facing the international community this year?

The first challenge facing economic policy-makers relates to the future of the international financial institutions.

How can institutions created in the 20th Century be relevant in the economy of the 21st Century?

Or to put it another way – how can the IMF, the WTO or the FSB remain relevant during the economic recovery?

In an economic crisis, different countries face a common problem, so it is easier to find a common solution.

Now we need to create a system that can manage the new pressures.

There has been considerable progress already – on financial regulation, with Basel 3, and on reform of the IMF governance, for example.

Two years ago few people would have said that these deals were possible.

I think this year there is a great opportunity for the French Presidency of the G20, and I welcome their ambitious vision.

I am aware that the issue of how to manage the huge flows of capital circulating around the world economy, and the issues around the international monetary system, will be a major challenge.

But the starting point must be strong, legitimate and well-resourced global economic and financial institutions.

We need an IMF that is more focused on identifying the major risks, especially from the systemic economies and the interaction between them.

That’s why the G20 Finance Ministers need to deliver on what we promised in Seoul, to help us identify any build up of large global imbalances.

We need a World Trade Organisation that can drive forward liberalisation of trade in goods and services.

We now have a critical window of opportunity to conclude the Doha trade round, and as the G20 agreed conclude it we must.

The Financial Stability Board has proved to be a flexible and useful platform for reform, as we have seen in the agreement of Basel 3.

All members of the G20 must now make sure that Basel 3 is implemented.

We also need to give the FSB more muscle, by making sure it is better resourced and more accountable.

There is a huge G20 agenda ahead of us, and I want to say very clearly that the British Government wants to work with the French Presidency so that we can make good progress in 2011.

There are very good signs that the French G20 agenda is going to be ambitious and significant.

But there is also a great responsibility to make it successful.

I wish you all the best in this endeavour.

The second key question facing us in 2011 relates to the problems in Europe.

And I want to be clear – I include the UK in my definition of Europe.

Last year I was the first ever British Chancellor to attend a meeting of the Eurogroup – so that alone must tell you that something wasn’t quite right.

Over the past year we have been seen instability and uncertain across the Eurozone.

We really do not want to be back here, a year from now, in January 2012, still discussing the future of the euro.

We need a comprehensive package early this year to address this.

The Eurozone must follow the logic of the single currency and stand behind the euro in a more convincing way.

Britain, of course, is not a member of the euro.

But Britain wants the euro to be a complete success and we will support you in achieving that.

Ultimately that cannot happen, however, without a credible plan to reform and strengthen Europe’s banks.

That is the next challenge facing European governments.

The inability of many European banks to absorb losses on their balance sheets was at the heart of the crisis and underpins much of the current market uncertainty.

Dealing with this issue will first require an understanding of the depth of the problem.

It is rather revealing that the stress tests conducted last July identified a capital shortfall, across the whole of Europe, of just €3.5billion.

A few months later the Irish banks alone required ten times that amount – €35billion.

That is why the UK has already gone much further with tougher stress tests and now has banks that are well capitalised.

As well as tackling today’s problems, we need to strengthen Europe’s banks so that they, and not taxpayers, pick up the bill for future crises.

Basel 3 does this by increasing bank capital, introducing new liquidity requirements, moving to a binding leverage ratio, and ending the double-counting for certain financial instruments.

Don’t forget – this was a package put together by Europeans.

These proposals were developed under the leadership of three of the Eurozone’s most distinguished central bankers: Mario Draghi, Jean-Claude Trichet, and Nout Wellink.

Their work has ensured that Europe’s concerns are reflected.

Having agreed this balanced package, it is vital that we do not now weaken the measures as they are translated into European law.

This is an urgent task for ECOFIN this year.

Any talk of “European specificities” not already accounted for, and any delay to the agreed timetable will simply reaffirm markets’ suspicion that we are failing to address the difficult issues.

Similarly, let me say the following about the competitiveness the financial services sector in Europe.

Badly thought-through regulations will needlessly undermine European competitiveness in financial services.

Talk of competition between London, Paris and Frankfurt misses the point.

It is the relative competitiveness of Europe and rival centres in Asia and America that is the real issue.

And alongside a more competitive financial sector, we also need a structural reform programme to make our whole economies more competitive.

Opening up product markets, liberalising labour markets, promoting enterprise and reforming welfare states – those must be our priorities.

We need an ambitious structural reform plan to kick-start growth and boost employment, including in new growth sectors such as green goods and the digital economy.

But of course the biggest challenge this year is perhaps a domestic one.

We need to get our own houses in order.

The rest of the world does not owe Europe a living.

If we are to calm the fears around the solvency of sovereigns across our continent, action at a European level needs to be matched by difficult domestic decisions.

The sense of crisis may have eased since the start of last year, but wide spreads and high market interest rates still stalk several European economies.

Countries need plans to reduce deficits, tailored for their circumstances, based on credible institutions that can underpin market confidence, especially in countries with large financial sectors.

Here the British experience offers a useful insight.

When we came into Government in the UK, we were predicted to have the largest budget deficit in the G20.

Until Ireland overtook us, we were going to have the largest budget deficit in the European Union.

The affirmation of the UK’s triple-A credit rating and the fall last year in our market interest rates, at a time when other countries’ are going up, demonstrates that it is possible to earn credibility with a convincing deficit reduction plan.

This week saw the plan start to take effect with the tough but necessary step of increasing Value Added Tax to 20%.

And deficit reduction can also go hand-in-hand with greater structural reform across our economies.

We are investing in our priorities – early years education, transport infrastructure and, almost alone in the world, putting resources into meeting our 0.7% target for international aid.

I would like to finish on an optimistic note.

Because despite these challenges, I remain profoundly optimistic about the future.

The opportunities offered by the modern world economy are immense.

Because every day around the world, in places like China, India, Brazil, Indonesia and Vietnam, millions of people leave the grinding poverty that has trapped their families for generations and become connected to the global economy.

They leave behind subsistence farming and go to work in factories.

And so nations of manufacturers are taking their first step in their journey to prosperity.

And as they become richer, they will become nations of consumers, hundreds of millions of people who will want to buy the things that British and French companies can sell them.

Our pharmaceutical firms will provide them with modern medicines and branded goods.

British and French companies will sell them insurance, banking, accountancy.

Over time they will become consumers of tourism and visit Paris and London.

And they will hopefully fly here on Airbus planes with Rolls Royce engines.

The whole world can be our market place.

And that is why we should be optimistic about this world we have helped create.

Thank you.

Below is the text of the speech made by the Chancellor of the Exchequer, George Osborne, at the Mansion House in London on 15th June 2011.

Lord Mayor, a year ago, standing here just five weeks after the Government had come to office, I spoke about the financial crisis and I quoted what Winston Churchill had said in this very room in the middle of the war.

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

I believe that sentiment of cautious optimism has been borne out by events in the twelve months since then.

The British economy is recovering.

Output is growing.

The necessary rebalancing of the economy, away from debt-fuelled consumption towards investment and exports has gained momentum.

Half a million new private sector jobs have been created, the second highest rate of net job creation in the whole G7.

Today’s unemployment figures showed a fall of 88,000 – the fastest pace for more than a decade.

Our budget deficit is now falling from its record highs.

Stability has returned.

Britain is on the mend.

But it is taking time.

External shocks have made that recovery more difficult.

The dramatic and debilitating rise in the world’s oil price – up almost 60% since last June.

The terrible Japanese earthquake and the impact on the supply chain.

The on-going crisis in the Eurozone, our largest market for British goods and services.

The softness in the US economy.

Across the world, choppy economic waters have become choppier still.

But the truth is this.

Even without these substantial headwinds, the journey the British economy has to travel would be a hard one.

As I said at the time of the Autumn Forecast last November: “recovery was always going to be more challenging than after previous recessions”.

For we are seeing the unwinding of debts built up over an entire decade.

Of all the major economies in the world, Britain’s was the most over-borrowed.

Our families were more in debt than any other in the G7.

Our house price bubble was bigger than America’s.

Our government deficit higher than that of Greece.

And the balance sheets of our banks went from around 300% of GDP in 1998 to a staggering 550% just a decade later.

Now those bank balance sheets are shrinking.

Not just because of new rules from regulators.

But because the markets themselves demand it.

So money and credit growth remain weak.

And that acts as a powerful drag anchor on recovery.

Here is a striking fact about the British economy over the last six quarters since the recession ended – a fact little understood but crucial to understanding our challenge.

For five out of those six quarters, the financial sector has continued to contract.

While our economy as a whole has grown by 2.5%, the financial sector has shrunk by 4%.

Take the financial sector out of the equation, and economic growth in the rest of the economy during the recovery has actually been above its average rate of the last two decades.

Put the financial sector into the equation, and economic growth has been below trend.

Our banking system fuelled the boom.

Now it is slowing the recovery from the bust.

That might surprise you. Look around the City today, and activity is growing.

The investment banks are hiring again – and they’re hiring here in London.

There are some 25,000 more jobs in the Square Mile than a year ago.

I’ve seen it – I’ve been at the openings of new headquarters and new buildings.

Funds are out there investing.

Law firms, accountants and insurance are busy.

And this year, for all the doomsayers who warn of decline, London has topped the global league table of financial centres.

We’re officially the number one place to do business – so instead of talking ourselves down, let’s agree to go around the world and say so.

Of course, we’ve got to stay in pole position.

That’s why, even in these straightened times, we’ve committed to the multi-billion pound Crossrail link – the greatest urban infrastructure investment in the western world today.

We’ve changed our taxation of overseas earnings, so that multinationals are moving back to Britain instead of leaving it.

I’ve made it clear that the 50 per cent tax rate I inherited must only be temporary – not permanent, as some politicians now propose.

And this week we’re publishing plans that end the uncertainty over tax residence rules and the treatment of non-domiciles, and set out new plans to encourage their investments.

All the activity and wealth creation you see in the City today is very welcome.

But sadly it does not compensate for the many billions of pounds being shed from the balance sheets of our banks.

Economists like Ken Rogoff and Carmen Reinhart warned us that this would be the case – that recoveries from recessions with a financial crisis are always slower than recoveries from other less severe recessions.

How can Government respond?

For a start, we have to avoid that now well-trodden path from banking crisis to sovereign debt crisis.

Unsustainable borrowing in our banks must not lead to unsustainable borrowing by the government.

I promised you a year ago that we would take conscious and determined action.

And we have.

The benefits are there to see.

In a world where so many countries are seeing their credit ratings put on negative outlook or downgraded, our country’s triple-A rating has come off negative outlook and been affirmed.

We have a deficit larger than Portugal, but virtually the same interest rates as Germany.

That is the huge stimulus our plan delivers to our economy.

And abandoning our deficit reduction plan would take that stimulus away.

That was the IMF’s verdict last week.

In the recovery from a banking crisis, stability and low market rates are precious, hard-won achievements.

And we will do nothing to undermine them.

Instead, we should try to manage the nature and pace of the deleveraging.

A large part of the rapid build up of borrowing within our banking sector consisted of lending from one part of the financial system to another.

That can be reduced without directly impacting the real economy, even if it reduces the measured contribution of banking to GDP.

What is crucial is that this inevitable process of deleveraging does not strangle the supply of credit to businesses and families who need it.

We are taking action to ensure this doesn’t happen.

We are resolving regulatory uncertainty and encouraging new capital investment in our banking system, so that deleveraging is not only achieved through smaller balance sheets.

In the G20 and the Basel Committee, Britain has successfully argued for higher capital and liquidity standards, but crucially for standards that are phased in over long time periods.

And the new Financial Policy Committee has been mandated to take an overview of our financial system, and watch that our own regulators do not act in a pro-cyclical way.

We have struck the Merlin deal with the banks to prevent small and medium sized businesses becoming the innocent victims of shrinking balance sheets.

I very much welcome the commitments from the BBA’s taskforce and the new Business Growth Fund that is now investing in Britain’s businesses.

But the banks should also be in no doubt that I will use every tool available to me to hold them to the published lending commitments they made.

Lord Mayor, the Government can also actively help to rebalance our economy by being unequivocally pro-business and pro-enterprise.

Our Plan for Growth set out a new wave of supply side reforms to restore Britain’s competitiveness.

We’re investing in apprenticeships, cutting employment tribunal costs, reforming pensions and anti-growth planning rules, reducing regulation, creating a Green Investment Bank, reforming the welfare system and taking low paid people out of tax.

And we’re actively pursuing the lowest business tax rates of any major western economy – a 5% reduction in the rate of corporation tax in the space of just four years.

From Shanghai to Seattle, investors can see that Britain is open for business.

So while the gradual unwinding of the debts built up in the boom creates powerful headwinds, all of this demonstrates that we are not powerless to respond.

But the legacy of the financial crisis does confront us with a very simple dilemma – what you might call ‘the British Dilemma’.

As a global financial centre that generates hundreds of thousands of jobs, a successful banking and financial services industry is clearly in our national economic interests.

But we cannot afford to let it pose a risk to the stability and prosperity of the nation’s entire economy.

We should strive for global success in financial services, but that success should not come at an unacceptably high price.

We should be clear that we want Britain to be the home of some of the world’s leading banks, but those banks cannot be underwritten by the British taxpayer.

I said here last year that the uncertainty hanging over your industry was causing real damage; that it couldn’t be resolved overnight, but that I owed you a process that would lead to a conclusion.

And one year on, I believe we are much closer to a consensus on how we can achieve both successful, competitive financial services and a healthy, balanced economy.

That consensus is about:

What is the right culture of regulation;

How the international rules apply;

And where successful banks fit in.

First, the culture of regulation.

The failure of the tripartite system was not a series of unfortunate accidents – it was hard-wired into its design.

The decision to divide the responsibility for assessing systemic financial risks from the responsibility for applying that assessment to particular financial institutions created a world in which no one was in charge.

Yet at the same time the system required endless box ticking and costly processes.

We had the worst of both worlds

This new Government proposes, therefore, a completely new culture of regulation.

Tomorrow we publish our White Paper and the detailed draft legislation.

A permanent Financial Policy Committee will be established inside the Bank of England.

Its remit will be set by Parliament and refined by the Chancellor on an annual basis.

And its job will be to monitor overall risks in the financial system, identify bubbles as they develop, spot dangerous inter-connections and deploy new tools to deal with excessive levels of leverage before it is too late.

This has never been done before.

The Committee will work alongside a new Prudential Regulation Authority that will also sit in the Bank of England.

This will assess the safety and soundness of individual firms.

I’ve heard your argument that insurance companies face different risks, so I can announce that we will set a specific statutory objective for them.

The operation of markets, and the protection of consumers, will be the responsibility of a new Financial Conduct Authority.

I am delighted that Martin Wheatley, who brings valuable experience as Hong Kong’s market regulator, will be the new CEO.

Here too we’ve listened to representations, and I confirm tonight that as well as protecting consumer interests, the Financial Conduct Authority will have a new primary duty to promote competition.

If the result of all these changes is simply that some brass plates on some doors have changed, then we will have failed.

We don’t undertake the institutional change for the sake of it. We do it to change the culture.

We want to move away from the tick-box mentality of the current system, where there’s no shortage of costly regulation but too little room for invaluable judgement.

In its place we will have clear lines of accountability and the space for regulators to exercise judgment.

You will have the freedom to innovate, grow your businesses, and compete in the world.

You will be constrained if you put taxpayers or consumers at undue risk.

A new culture of regulation is the first step towards solving the British Dilemma.

But getting supervision right in one country is not enough.

As the world’s leading financial centre, we are particularly exposed to financial instability elsewhere in the world.

And you are all exposed to fierce overseas competition.

For both these reasons, global standards are strongly in our national interest.

So we want to see the full implementation of the new Basel standards, right around the world, including here in European Union.

It’s vital that those European rules give national regulators the discretion to add to the Basel requirements when national circumstances require it.

This is what the de Larosière committee themselves recommended. It would help the FPC do their job.

We need European coordination, to enforce common rules in a single market, and it’s good news that the headquarters of the new European Banking Authority is here in London.

We support their efforts to make this year’s stress tests mode credible than last year’s.

But we will always fight hard against badly thought-through European regulation that undermines Europe as a location for wholesale finance, or London’s role as this continent’s pre-eminent global centre for it.

That’s a fight we won on the regulation of hedge funds, and we’re still fighting on EMIR, the new derivatives regulation.

Pay in the financial services sector should also be regulated internationally, to avoid a race to excess.

Britain now has world-beating standards of transparency.

The Financial Stability Board have come up with good principles and must now focus on their consistent implementation.

So, Lord Mayor, these are the first two steps towards solving the British Dilemma:

A new culture of regulation that judges unacceptable risks, while creating the space for innovation and commercial success.

And an agreed set of international rules that makes the global financial system safer and protects us from competitive arbitrage by other financial centres.

But history teaches us that that risk can never be reduced to zero.

We cannot hope to abolish boom and bust.

So the British Dilemma will remain as long as taxpayers are first on the hook if things do go wrong.

When this Government came to office there was no agreement in Britain about how this ‘too-big-to-fail’ problem should be addressed.

Indeed, I’ve sat as a guest at this very dinner in years past listening as one speech from this lectern was completely contradicted by the speech that followed.

That’s why when I first spoke here, I announced the names of five highly respected individuals whose job it would be to listen to all sides of the argument, propose a solution and help bring an end to the uncertainty.

The Independent Commission on Banking has now published its Interim Report and I would like to pay tribute to Sir John Vickers and his fellow Commissioners for the excellent job they have done.

It has commanded respect at home and huge interest abroad.

The Independent Commission on Banking has put forward two particularly important proposals.

Bail-in instead of bail-out – so that private investors, not taxpayers, bear the losses if things go wrong.

And a ring fence around better capitalised high street banks to make them safer, and to protect their vital services to the economy if things go wrong.

Today I have told the Commission that the Government endorses both these proposals in principle.

Of course, the Commissioners are still consulting and preparing their final report – and I won’t pre-empt their conclusions.

We will judge their final proposals in practice against the following conditions:

All banks should be allowed to fail safely without affecting vital banking services;

Without imposing costs on the taxpayer;

In a manner applicable across our diverse sector;

And consistent with EU and international law.

In line with the interim report, we agree with the need for further capital requirements on systemically important banks, but I agree with the Commission that outside the ring-fence this is best done internationally.

I also strongly welcome the Commission’s proposal on increasing competition in retail banking.

For healthy competition is a powerful defender of consumers’ interests.

Lord Mayor, we will make these changes to banking to protect taxpayers in the future.

But we still have to clear up the mess of the past.

Taxpayers today own a large part of the banking system, and underwrite guarantees to parts of the rest.

It’s time we started to plan our exit.

So I’ve opened the Credit Guarantee Scheme to early redemption.

I’m pleased that banks are taking up the opportunity and they are ahead of schedule in repaying the Bank of England’s special liquidity support.

This is a sign of confidence in our banking system.

And I remind everyone with deposits that we have increased the level of deposit insurance to 100% for sums up to £85,000 and we have made clear that there is no implicit taxpayer guarantee for sums above that level.

Once all these other forms of subsidy are removed, our direct shareholdings in banks still remain.

It will take some time – possibly several years – before we can sell them all.

But we can start that process.

I can announce tonight that on behalf of you the British taxpayer, I have decided to put Northern Rock up for sale.

Images of the queues outside Northern Rock branches were a symbol of all that went wrong, and its chaotic collapse did great damage to Britain’s international reputation.

Its return now to the private sector would help to rebuild that reputation.

It would be a sign of confidence and could increase competition in high street banking.

We could start to get at least some of our money back.

The sale process will be open and transparent and in line with state aid rules.

Any interested parties can bid for it, including mutuals, which this Government is actively committed to promoting.

We will continue to own Northern Rock Asset Management, the separate “bad bank”, whose assets are being run down over time.

This does not mean that other options to return Northern Rock to the private sector have been ruled out.

But the independent advice I have received is that a sale process is likely to generate substantially the best value for the taxpayer and should be explored as a first option.

And it would be a very important first step in getting the British taxpayer out of the business of owning banks – and a sign of confidence in the industry.

Lord Mayor, last year I came here with debates raging about all these questions of regulation and the future of banking.

I was not the cause of them – but I told you that it was my job to resolve them.

And I said that our goal should be a new settlement between our financial system and the British people.

A new settlement where the City is able to be the leading financial centre in the world, without putting at risk the entire economy.

I believe we are now within touching distance of that new settlement.

If we achieve it, then we will have answered the British Dilemma – and put our country on the path to prosperity.

I want the City of London to be a thriving centre of enterprise, more interested in serving its customers than in what Government might do to it next.

Resolving the British Dilemma is the way to do that.

Thank you.

Below is the text of a speech made by the Chancellor of the Exchequer, George Osborne, at the 2011 Institute of Directors annual convention on 11th May 2011.

Good afternoon.

Thank you Miles for the very kind words of introduction.

Thank you for your hard work at the helm of the Institute of Directors over the past 7 years.

You have done a great job – and been a powerful voice for business. We all wish you well for the future.

My message today is straightforward – this coalition Government is unequivocally pro-business.

Our approach is based on the simple truth that when you succeed, we will succeed, and the country will succeed.

By promoting enterprise and rewarding aspiration we will enable you, the wealth creators of Britain, to generate the jobs and growth our country needs.

The truth is – we have to be realistic about where we’re coming from and optimistic about where we’re going to.

First the realism.

We are recovering from the biggest banking crisis our country has ever seen.

We are coming out of the deepest recession in living memory.

And we are dealing with the largest budget deficit in our peacetime history.

And that is why, as I warned last year, the recovery will be choppy.

High commodity prices, the earthquakes in Japan and uncertainty in the Eurozone are all weighing down on growth across the world.

Yet while we must remain realistic about the challenges, I think we can also be optimistic about the future.

For despite these headwinds, progress has been made in the last twelve months .

400,000 private sector jobs have been created.

89,000 people have come off unemployment rolls.

Manufacturing up almost 5%.

Business investment is up 11%.

Export volumes are up 16%.

I am glad that the Bank of England is forecasting a steady recovery. As the Governor said this morning, they “expect that the recent softness in activity will prove temporary”.

This is all part of essential rebalancing of our economy:

From imports to exports;

From debt to investment;

From public to private;

And it lays the foundation of a competitive, business-led growth we need to see.

This would simply not be possible without the crucial steps we’ve taken to instil confidence in Britain’s ability to pay its way in the world.

Let’s not forget where we were exactly one year ago to the day. May 11th 2010.

A country with the highest budget deficit of any in the G20 – and whose credit rating was on negative outlook.

This at a time when the sovereign debt crisis was raging in Europe.

It was a moment of real economic danger. But we overcame it.

We made a firm commitment to tackle the nation’s debts.

Within 50 days we had put in place a credible deficit reduction policy.

A year on, much of it has been legislated for, and its first measures have taken effect.

Our credit rating has come off negative outlook – when other countries are facing downgrades.

We have brought much-needed stability at home and attracted near universal confidence abroad.

To anyone still wondering whether we needed to take these difficult decisions, I say – just look at what has happened to other countries over the past year.

First Greece, then Ireland, then Portugal, and now Greece again.

Three countries which failed to convince the world that they could pay their way.

Now they are all being bailed out at huge cost.

In the US, now itself with a credit rating on negative watch, President Obama has unveiled a deficit reduction proposal that actually goes faster than our own.

I want to thank the Institute of Directors for your steadfast support on this issue.

It has proved vital.

Miles, you were right to say this morning that you remain “absolutely supportive of the speed and extent of [public spending] cuts” while “not enough recognition has been made of the upside … of reducing public debt”.

The real practical impact of what we have achieved together is there to be seen in the interest rates you – the businesses and families of Britain – face today.

The market interest rates in Britain are now at 3.4%. In Italy they are 4.6%, 5.3% in Spain, 9.7% in Portugal, 10.6% in Ireland and over 15% in Greece.

And over the past year, the gap between Britain’s market interest rates and those in Germany has narrowed – to just about a quarter of a percentage point – while for France, Italy and Spain the gap with Germany has widened.

In other words, we have the interest rates of Germany, despite having a bigger budget deficit than Greece and Portugal.

That is our achievement. And let me make this clear one year on.

This Government, is as united today in our mission to reduce Britain’s deficit as we have ever been.

We are unwavering in our commitment to economic stability and recovery. Last year, this year and for the four years to come.

Every business in this country depends on a strong Government and a credible economic policy – and we will deliver just that for the next four years.

But we know that stability on its own is not enough.

You and others rightly made the point that alongside a plan for the deficit, we also needed a plan for growth.

In this year’s Budget we answered those calls.

Let’s face it – over the past decade, Britain’s economy lost ground compared to our competitors.

Our tax system became uncompetitive, our businesses were constrained by red tape, and we fell behind the rest of the world in the skills of our workforce.

We simply could not go on like that.

So we have set four economic ambitions for Britain.

First, we want Britain to have the most competitive tax system in the G20 bar none – and I know on this that Miles has been a tireless advocate.

For a good reason – a decade ago we had the third lowest corporate tax rate in Europe. By last year, we had the seventh highest.

That had to change – and last month the main rate of corporation tax came down from 28% to 26%.

It will keep coming down each of the next three years to reach 23% in 2014 – the lowest rate ever and the lowest in the G7.

Instead of going ahead with the last Government’s planned increase in the small companies rate to 22%, we’ve cut it to 20%.

That’s not all.

We have also made the taxation of international profits far more competitive.

Britain has become a place for international business to move to – not to leave.

We are introducing a patent box – an ultra competitive 10% rate that will attract knowledge industries from around the world.

We have started the enormous task of simplifying the tax system, by abolishing over 40 complex tax reliefs in the Budget.

We’ve also begun the work of merging the systems for income tax and national insurance – a huge reduction in payroll red tape for businesses, and we need your help to make it happen.

And, as I said at the Budget, high personal taxes can be as damaging to growth as high corporate taxes, so I am clear that the 50 pence tax rate would do lasting damage to our economy if it were to become permanent, as some suggest.

It should be a temporary measure.

Our second economic ambition is that Britain should be the best place in Europe to start, finance and grow a business.

Over the last decade, the UK fell behind in the Global Competitiveness Index, going from 4th in 1998 to 12th in 2010.

So how are we going to regain this lost ground?

On regulation, in this Budget we stopped £350m of costly business regulations.

Vince Cable and I have now imposed a moratorium on new domestic regulations on small businesses.

On planning, one of the great obstacles to growth that no government has had the courage to tackle, we are now shifting the balance from delay and objection towards development and expansion.

On research and development, we have just increased the support available to SMEs through R&D tax credits from 175% to 200%. Next year it will go up again to 225%.

On finance for start-ups, I have made it easier to attract enterprise investment capital, including with an increase in income tax relief from 20% to 30%, which has already come into effect.

We have also delivered on the promise – that I made here to your conference last year – to scrap the most damaging part of the planned increase in employer’s National Insurance.

Since last month, it is cheaper for businesses to employ anyone earning under £21,000 a year.

And when the day comes when you want to sell your business, we have doubled and then doubled again the level of entrepreneurs’ relief.

Cuts in business taxes. Increases in entrepreneurs’ relief. More tax breaks for investment. None of these things are easy to do when you have a high budget deficit.

But they are this Government’s priority. And we want you to make the most of them.

Our third ambition is for Britain to become a more balanced economy, by encouraging exports and investment.

Consider this shocking statistic – during the boom years before the bust, private sector employment actually fell in a region as important as the West Midlands.

We want private sector jobs and growth that is spread across the country.

That is why we are establishing 21 new Enterprise Zones to give an extra boost to areas with real potential – and I hope your members get involved in them.

That is why we have continued to invest in our science and transport networks – over the next four years we will invest some £30billion in transport projects, more than during the past four years.

And next week, we will launch the new £2.5billion Business Growth Fund, paid for by the banks as part of the Merlin deal, which will provide equity finance for growing businesses.

But a more balanced economy also means more exports and investment across every sector of our economy.

That’s why we’ve got Stephen Green, one of Britain’s global business leaders, to become our Trade Minister.

This week he set out his plans to boost exports to new markets, supported by a newly focused Foreign Office, whose presence is felt in countries like China and India.

Our fourth ambition is to have a more educated and better skilled workforce – something I know the IoD has campaigned on this year.

Between 2000 and 2009, Britain fell from 4th to 16th place in the world league tables of science, 8th to 28th place in mathematics.

In this global economy – where we must compete on skills and innovation – that is a recipe for long-term decline.

So this Government has embarked on radical reforms to education.

More academies have been created in the last 12 months than in the last 13 years.

We have taken the difficult, but absolutely essential decision, to reform student finance to ensure that our universities continue to be well funded.

Many would have ducked that challenge. We did not.

And we are addressing the long-standing issue of poor vocational training, with 100,000 work experience places for young people, 250,000 more apprenticeships, and at least 24 University Technical Colleges.

So more competitive taxes. More support for businesses. More balanced growth. And a better educated workforce.

That is our Plan for Growth

There is one more thing that I will say.

Delivering this will not be easy.

The forces of stagnation will try to stand in the way of the forces of enterprise.

For every line item of public spending, there will be a union defending it.

For every regulation on business, a pressure group to defend it.

Your voice, the voice of business, needs to go on being heard in the battle.

Let me give just one example of an issue which businesses have raised with me many times over the years – the costly impact of our employment laws and regulations.

For many years, no Minister was willing to tackle this issue and make the argument that yes, employees have rights and they should be respected, but what about the right to get a job?

What about the right to start a business and not be sued out of existence or drowned by paperwork?

Well, this Government has had the courage to answer those questions.

Not only did Vince Cable announce earlier this year that there will be fees and reforms to deter vexatious claims at employment tribunals.

I can tell you today that the Government will publish a detailed timetable for the wholesale review of employment law in this country.

It includes plans to:

Review the unlimited penalties currently applied in discrimination Employment Tribunals;

Simplify the administration of the national minimum wage;

Review the TUPE regulations;

And reform the consultation period for collective redundancies;

Some of these may be controversial. Unions and interest groups may oppose them.

So I say to the business community – to all of you in this room – don’t be passive observers.

Don’t stay on the sidelines. Get stuck into the argument and support us in making the case for growth.

An enterprising Britain cannot be built by government alone.

An enterprising Britain can only be built on the endeavour, aspiration and ambition of the people in this room.

So let us get on and build that enterprising Britain together.

Thank you.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, to the Festival of Business Conference on 16th September 2011.

Good morning and thank you Damian for those kind words of introduction.

Let me congratulate the Telegraph for organising this Festival of Business.

The people in this room come from all parts of our country – from Aberdeen to Devon, from here in the North West to the South East.

You run businesses that offer totally different services and goods – from components engineering to video production, to retailing to accounting.

But you have one thing in common.

You epitomise the spirit of enterprise.

You – together – are the engine room of the British economy.

Most of the businesses represented here today are not the largest in our country, nor are they the smallest.

You are somewhere in between.

The medium of small and medium businesses.

You have market caps of millions not thousands or hundreds of millions.

You are not sole traders or one-man bands.

You employ dozens or hundreds of people but not thousands.

And often – because you are neither the biggest nor the smallest – you get overlooked by governments and policy-makers.

I know your type of company very well.

I grew up with one.

Over 40 years ago my father set up his own business, manufacturing and selling home furnishings.

Over the years it’s grown to employ a couple of hundred people.

Growing up, the rhythms of the business’s life and the rhythms of my family life were one and the same.

I remember the ups and downs.

The new orders won. The new collections launched. The excitement when the first sales were made in America.

And I know the kind of pressure that you are under.

To compete, to stay ahead and to make a profit.

But from that pressure great things can emerge – new ideas, new products, new jobs.

That is why your businesses are the real engine of growth.

You are working flat out for our economy.

And let me tell you – this Government is working flat out to help your businesses not only survive but thrive.

You know as well as I do that these are very challenging economic times.

In recent months we have seen the succession of bad economic news across the world.

The oil price has soared.

And our biggest export markets, in Europe and America, have all but stopped growing.

There is a lack of belief in the ability of political systems in the Eurozone and North America to respond.

All these factors are weighing down on global confidence and having an impact at home in the UK.

But these are just some of the symptoms.

They all have the same root cause – excessive levels of debt across the world.

What started as a debt crisis in the banking sector in 2008 has now turned into a wider crisis of sovereign, banking and private sector debt.

And Britain cannot blame the rest of the world for these debts – for we were one of the biggest contributors to them.

We need a much better international response.

The agenda for coordinated global action should be clear – deal with the debts, sort out the banks, become more productive and free up trade.

Immediately after this event I will be flying to Poland for a meeting of European finance ministers.

At this meeting, crucial discussions about the crisis in the Eurozone are due to take place.

Britain is, of course, not in the euro – and I fought hard with others to keep us out.

Let us take no relish at all from their problems – let’s have no schadenfreude.

A successful euro is massively in our interest.

So at today’s meeting I will be looking for my Eurozone colleagues to send a clear signal that they truly recognise the gravity of the situation and are dealing with it.

Time is short. The Eurozone must now:

– implement as quickly as possible their 21st July agreement;

– resolve the uncertainty with respect to Greece;

– specify how they intend to fulfil the commitment made at last week’s G7 meeting to “take all necessary actions to ensure the resilience of banking systems and financial markets”.

Crucially, my European colleagues need to accept the remorseless logic of monetary union that leads from a single currency to greater fiscal integration.

Here at home we are not immune to what is going on at our doorstep.

America and the Eurozone are our two biggest export markets.

But I am confident that we can weather this storm.

We had an Emergency Budget last summer on our own terms, not this summer on the market’s terms.

That decisive action put us ahead of the curve.

It has delivered record low interest rates. Protected our credit rating. Given us stability when many countries had none.

Our plan was designed for both good times and tough times.

Flexible enough to let the automatic stabilisers work.

Strong enough to command the confidence of world markets.

If we abandoned it now there would be a collapse in that confidence and a surge in interest rates.

Look at our neighbours.

In Greece markets interest rates are almost 23%.

In Italy 5½%.

Our market interest rates this week were the lowest they have ever been in our history.

Below 2½%.

Every business in this country depends on a strong Government and a credible economic policy – and this coalition will always deliver just that.

But that stability on its own is not enough.

We also need growth.

You – the wealth creators and innovators of Britain – can deliver that.

But only when we in Government create an environment in which your business endeavour is supported not stifled.

At this year’s Budget in March I published our Plan for Growth.

It was based on four economic ambitions for Britain.

First, we want Britain to have the most competitive business tax system of any of our major competitors.

So I have already cut corporation tax – from 28% to 26%.

It will come down again next year, and again in 2013 and again in 2014 to reach just 23%.

That’s the lowest ever rate in the UK and the lowest in the G7.

I have also cut the small companies rate to 20%.

I am making the taxation of international profits a lot more competitive.

Cutting tax on profits arising from patents developed in this country.

That should help keep multinationals and knowledge industries in this country.

When the day comes when you want to sell your business, we have doubled and then doubled again the level of entrepreneurs’ relief.

We have also delivered on our promise to scrap the most damaging part of Labour’s planned jobs tax.

Cutting business taxes is not politically popular. It doesn’t win me any votes.

But it is essential to the competitive future of our country and a sign of our commitment to your companies.

Our second economic ambition is that Britain should be the best place in Europe to start, finance and grow a business.

Over the last decade the UK fell behind in the Global Competitiveness Index, going from 4th in 1998 to 12th in 2010.

But here’s some good news at last – last week we re-entered the top ten.

Britain is becoming once again a competitive place to do business.

Why?

Because we’re tackling the suffocating burden of red tape.

In the first half of this year, we scrapped over £3 billion worth of unnecessary regulation.

We’ve imposed a moratorium on new regulations on small businesses.

And we are battling with Europe – the origin of so much new red tape – to make them stop and realise that if they carry on then they will price our entire continent out of the world economy.

We are also making it easier for start-ups to attract finance and investment capital, including with an increase in income tax relief from 20% to 30%, which has already come into effect.

Another area where action is needed is planning.

Planning delays also cost the economy around £3 billion a year.

Over half of small firms who applied for planning permission in the last two years found the process too complex.

Almost every serious independent study of the British economy has said the planning system is holding back growth.

So we are changing it.

Replacing over 1,000 pages of planning guidance with around 50.

Putting in a presumption in favour of sustainable development.

Helping you to grow and create jobs.

Helping young families get their own home.

These changes have been opposed by some – including the newspaper hosting this conference.

That’s fine. That’s their democratic right. But let’s have a reasonable debate based on facts not myths.

We are not destroying England’s beautiful countryside.

The Green Belt, Areas of Outstanding Natural Beauty, National Parks are all protected.

We are not taking decisions away from local communities – we are giving them the power to create their own local plan.

What we are doing is making sure our economy can grow and our people can be housed.

Don’t underestimate our determination to win this argument.

That is part of our Plan for Growth and let us hear the loud and clear support of the business community for it.

Our third ambition is for Britain to become a more balanced economy, by encouraging more exports, investment and private sector employment.

We are doing this by introducing new Enterprise zones – including one right here at Manchester Airport.

By investing in our science base – like the fantastic technology park near here in Daresbury.

We are putting money into transport.

Let’s take Manchester.

Here alone we are investing in the A556, increasing capacity on the M60 and the M62.

And we are also funding an extension to Manchester Metrolink and creating a link between Manchester’s two main railway stations, enhancing the Manchester Rail Hub.

And, of course, our High Speed Rail proposals will almost halve the journey time between London and Manchester.

We are investing in the country’s infrastructure – and we are doing so without delay.

As Nick Clegg announced on Wednesday, we will identify up to 40 top priority growth enhancing infrastructure projects across the transport, broadband and energy sectors.

We will then focus on unblocking any barriers to delivery.

A more balanced economy also means more exports.

That’s why we’ve got Stephen Green, one of Britain’s global business leaders, to become our Trade Minister.

He is the man who will help companies of your size enter new markets, with new export products like trade finance services and specialised trade advice designed to support you.

If you want help on how to start exporting abroad, speak to UK Trade and Investment – there is a stall here today.

Our fourth ambition is to have a more educated and better skilled workforce.

In today’s global economy you can only compete on skills, innovation and know-how.

That is why this Government has embarked on radical reforms to education, including:

– 700 Academies opened since April;

– 24 Free Schools opened in the past month;

– the largest ever investment in apprenticeships – 100,000 more than last year;

– and we have taken the difficult but essential decision to reform student finance to ensure our universities continue to be well funded.

Many would have ducked these challenges. We did not.

So there it is.

More competitive taxes. Better business support. More balanced growth. And a better skilled workforce.

That is our plan for growth.

And I will be announcing further measures alongside the Autumn Forecast at the end of November, including a package of support for mid-sized companies.

Because when you look at the British economy, there is an obvious gap in the way Government supports business.

It’s a gap that exists between our successful SME sector and our world-class large corporations.

In that gap there are many mid-sized companies that are often at the heart of local communities.

Between them they employ millions of people, and turn over billions of pounds.

But they don’t always get the same focus as the smallest or the largest.

As a result, they find it hard to grow and meet their full potential.

This has been a well-known problem for Britain.

The issue might be growing your exports – we know mid-sized businesses often find this harder than large firms.

It might be finding the right source of finance.

Or it might be finding the right staff or skills.

So I think the time has come to fill that gap – starting today.

We should all learn the lessons from the successful Mittelstand model which has operated in Germany for many decades – the medium sized companies that are such a source of strength for that country.

In the UK, mid-sized businesses like yours are often at the centre of our supply chains.

Your prospects depend on the decisions of larger firms at the top of the chain.

And the success of those larger firms in turn depends on having reliable and efficient suppliers.

So today I can tell you that some of Britain’s biggest businesses have agreed to share their global success with their supply chain.

It is a simple idea.

Today’s successful firms helping you grow into the big companies of tomorrow.

It’s in your interest, it’s in their interest, and it’s in the interest of the UK economy.

I can tell you today that Tesco, Centrica, Virgin, GSK, Network Rail, GE, Carillion and BAE Systems have already signed up to work with us – and we hope that other big British firms will join this endeavour.

We would like to set a shared aspiration to secure support, advice and practical help from each of these companies.

The Government and the CBI will work with these firms to develop that offer of support.

We hope it will include:

– opening up new export opportunities, helping British businesses access new markets around the world where the big name is already established;

– sharing expertise, with opportunities to work shadow top executives, access training courses, and build apprenticeship opportunities;

– creating new intellectual property by sharing R&D facilities and collaborating on new technology;

– building more sustainable models of financing and payment arrangements that help access to working capital;

– and many other exciting opportunities, which we will set out in full later this autumn.

I hope many of you in this room will benefit from this initiative.

Government helping business to help business.

That is our agenda.

It’s an agenda for jobs. For business. For growth.

Making Britain more competitive is not easy.

Many obstacles stand in our path.

For every wasted pound of government spending, there will be a pressure group that pops up on the radio to defend it.

For every totally unnecessary piece of regulation, a trade union that will fight to keep it.

We need your support to overcome the forces of stagnation that hold our country back.

Help us.

Work with us.

You are the forces of enterprise and together we will get this economy moving and put Britain on the path to prosperity.

Thank you.

Below is the text of the speech made by the Chancellor of the Exchequer, George Osborne, at Google Zeitgeist on 16th May 2011.

It’s great to be at Google Zeitgeist today.

When I was last here, in 2009, I was asked to speak about the economy.

Today, I’d like to use the Q&A session to answer questions on the economy, and use this speech to talk about a subject that’s hopefully much more exciting:

You.

The impact that you are having – as internet entrepreneurs, innovators, technologists – on the world of government and politics.

Recent events in the Middle East and North Africa demonstrate just how powerful the internet can be as a tool in the fight against oppression.

In fact, look at almost any big social change of the past 200 years and you will see that it has been driven by a paradigm shift in communication technology.

Newspapers. Radio. Telephony. Television.

And now – most dramatically of all – the internet.

For politicians of my generation, the incredible disruptive impact of the internet is not a threat – it’s an opportunity.

An opportunity to build societies that are more open, more innovative and more prosperous.

As we all know, virtually every walk of life is being affected in some way by the internet and new technology.

That’s why, over the course of this conference, you are going to be hearing from experts talking about how the internet is changing the economy, affecting our culture and transforming society.

In my view, the impact that the internet is having on government is equally profound.

That’s what I’d like to focus on today.

I’d like to look at three of the most dramatic ways that the internet age is changing government.

The way it is:

Changing accountability.

Changing policy making.

And changing public services.

Let me take each in turn.

First, changing accountability.

You don’t need me to tell you how the internet has eroded traditional information asymmetries.

We’re all so used to talking about “the democratisation of information” that perhaps sometimes it’s easy to forget what a fundamental change it has brought about.

For centuries, access to the world’s information – and the ability to communicate it – was controlled by an elite few: the powerful, the wealthy and the well educated.

Today, billions of people can access more information than entire governments could just a generation ago.

And of course, the globalisation of these information flows, thanks in large part to mobile internet access in sub-Saharan Africa and the developing world, is increasing every day.

This is rapidly eroding traditional power and informational imbalances.

And it is irrevocably increasing the accountability of politicians and governments to the people they are supposed to serve.

There was a brilliant example of this during the Prime Minister’s trip to India last year.

As part of the trip, we thought we would organise a hack day at the Google offices in Bangalore.

So we flew over some British coders, and stuck them in a room with Indian developers and social entrepreneurs, to see what they could build together over the course of a few hours.

They decided to create a new tool that would help make the Indian police more accountable.

Here’s how.

In India, giving someone a quick “missed call” is a bit like “poking” on Facebook.

You call someone, let it ring for a second, then hang up, and it’s a cost-free way of saying “hi” or “I’m thinking about you”.

What our team of programmers did was start building an app that lets people in India give a missed call to a special number saved in their phone whenever they have a dissatisfactory encounter with the police.

This missed call gets plugged into a heat map showing the rough location of people’s complaints – so highlighting for the first time the parts of India where people are most unhappy with their local police.

This heat map can then be used by civil society or by government to put pressure on underperforming forces to change their ways.

It’s a brilliant initiative, and just one of thousands of examples of how new technology is improving accountability across the world.

For a long time, the British government was much too slow to accept this.

It tells you something about the culture of secrecy in Whitehall over the past decade that Tony Blair says in his autobiography that the Freedom of Information Act was his “biggest regret” in government.

I’m sure we could all think of a few things he really ought to regret more.

From day one of the coalition Government, we have chosen to take a different path, and to embrace the accountability revolution enabled by the internet age.

And already it seems incredible that this time last year, the British public couldn’t access even some of the most basic information needed to hold the government to account.

Spending data broken down on an item by item basis.

The contracts signed by central and local government.

Government procurement tender documents.

The salaries of senior government officials.

Incidents of crime in your neighbourhood, broken down on a street by street basis.

Thanks to our efforts, these government datasets – and over 6,000 others – are now freely available to be analysed, interrogated and mashed up.

But this is only the beginning.

Over the next 12 months, we’re going to unlock some of the most valuable datasets still locked away in government servers.

This is the raw data that will enable you, for the first time, to analyse the performance of public services, and of competing providers within those public services.

So a year from now, websites and services will use this data to help the public find the answers to important questions like:

Which is the right GP for my family?

How well are the different departments in my nearest hospital performing?

What is the quality of teaching like in my local school, broken down by subject area?

Was the person who broke into a car on my street ever apprehended by the police, and if so, what happened next?

Our ambition is to become the world leader in open data, and accelerate the accountability revolution that the internet age has unleashed.

Because let’s be clear, the benefits are immense.

Not just in terms of spotting waste and driving down costs, although that consequence of spending transparency is already being felt across the public sector.

No, if anything, the social and economic benefits of open data are even greater.

Take medicine, for example.

A few years ago Sergey Brin, the co-founder of Google, took a DNA test that revealed that he may have up to a 75 percent chance of developing Parkinson’s over the course of his life.

His response?

To use the power of open data to search for a cure.

He has funded the collection of a huge amount of health data, drawn from over 10,000 people, which is now being analysed to yield new insights into the linkages between drugs, patient behaviour and disease.

This approach – using large datasets to search for possible correlations and causations – shows the massive potential for open data to transform scientific research.

The economic impact of this open data revolution will be similarly profound.

The annual global market for financial services data analytics is estimated to be worth over $20 billion.

According to a new McKinsey report, the market for health analytics could be even larger – as much as $300 billion a year in the United States alone.

And as we all know, with internet enabled sensors increasingly embedded in cars, in smart meters and in our electrical appliances, the amount of data being produced is increasing rapidly.

This so-called “internet of things” opens up the possibility of new services and tools, from the self-drive cars being developed by Google to powerful dynamic energy efficiency applications.

I want the UK to be at the forefront of this new wave of innovation.

That is why we will have a specific focus on open data over the coming months, to ensure that we maximise the business opportunities at hand.

And that’s also why it’s great to be able to announce today that two of our leading universities, Imperial College London and University College London are developing plans for an unprecedented partnership to create a new Research Centre focused on the massive amounts of data – energy data, transport data, social data – being generated in the world’s metropolises.

This “smart cities” Research Centre will develop new technologies, in partnership with leading companies, to harness and exploit these huge new datasets, and support the businesses and technologies of the future.

And as part of the Tech City initiative, the Research Centre will be based in Shoreditch, and will be a fantastic boost to the East London technology cluster.

If the first impact of the internet age on government has been to change accountability, the second has been to change the nature of policy making itself.

Just as the old asymmetries of information have been eroded, so too have the perceived asymmetries of wisdom.

I genuinely believe that in almost all areas of government, we do a better job when we open up policy making and open ourselves up to the ideas of the crowd.

We’ve done it in tax policy, where wherever possible we publish detailed tax changes months before the Budget so that experts can crawl over the drafting and spot errors and implementation problems.

We’re doing it with legislation more generally, through our Public Reading Stage, which will give people the opportunity to highlight drafting and technical errors during the Parliamentary process.

But we’ve also done it to generate new ideas and policy proposals.

In the run up to last year’s Spending Review, we didn’t leave it to Treasury officials alone to look for efficiency savings and ways to save money.

We opened up the entire process in an unprecedented way.

First we launched a website enabling public sector workers to feed in their ideas about how to save money and redesign processes, based on their own experiences.

The response was incredible: over 10,000 proposals submitted in the first 24 hours alone.

We had a team poring over these suggestions, and the best ones were fed straight into the Spending Review process.

I met public sector workers who had taken part, and they were thrilled to know that their ideas were finally being listened to.

Once this process had been completed, we opened it out to the entire public.

By the end, hundreds of thousands of people had taken part.

To those that say that people are disengaged from the work of government, and want their representatives to take care of everything, this is a powerful riposte.

We’re applying this commitment to openness to government procurement too.

At the launch of Tech City in East London last November, one young entrepreneur called Glenn Shoosmith told the Prime Minister about a problem he’d encountered.

He’s invented a low-cost technology that allows people to book slots online at their sports centre or swimming pool.

When he pitched it to the Olympics team he was told to find the relevant tender document and fill it in.

But the system didn’t know about the product, so there was no tender – and no way for Glenn to sell his innovative product to government.

This problem happens time and again – so we’re using open processes to try to fix it.

Last month, we launched an open procurement competition – the Innovation Launch Pad – encouraging small companies to pitch to government their innovative new technologies and services.

In other words, instead of having to wait for the right public sector tender document to come along – because it often never does – you can send your prototype directly to government.

Leading technology experts such as Mike Lynch, the founder of Autonomy, and angel investor Sherry Coutu are helping us judge the entries and work with the companies to help them compete for and win deals with Government.

We’ve applied a similar logic to the challenge of reducing regulation.

Instead of simply relying on government hierarchies to decide which regulations should be reformed or abolished, we’ve opened up the process to the wisdom of the crowd.

We call it the Red Tape Challenge, and here’s how it works:

We’re publishing, sector by sector, almost every piece of regulation on the books so that business and the public can feed in comments.

What works, what doesn’t, what should be scrapped, how things could be simplified or done with less regulation.

Every single suggestion is looked at – and if any sensible proposals are rejected, Ministers will have to explain why.

In other words, we’ve turned the default on its head.

Instead of government deciding whether or not to listen to the public, we’re forcing it to listen.

We want to remain at the cutting edge of open source policy making.

So I’m pleased to be able to tell you that we have just recruited Beth Noveck, who used to work at the White House running President Obama’s Open Government Initiative, to help us take this agenda forward.

I can’t think of a better person to help us with this.

After all, Beth literally wrote the book – ‘Wiki-Government’ – on how policy making needs to change in the internet age.

She’s a genuinely world class recruit, and she’ll be working alongside the likes of Martha Lane Fox, Tim Kelsey and Tom Steinberg to harness new technologies to make government more innovative and accountable.

So if the second impact of the internet age on government has been to change the way we make policy, the third impact I’d like to talk about is the way it’s changing the way we design and run public services.

This is in part thanks to the massive potential for cost savings.

It used to cost government over £10 to process a driving license application or a self-assessment tax form.

Online, the cost is less than £2.

Efficiencies like that are too powerful to be ignored.

So if we make the most of this opportunity, there is no doubt that we can significantly reduce the cost of government

Martha Lane Fox, the Government’s Digital Champion, argues that shifting just 30% of public service contacts to digital channels has the potential to deliver annual savings of more than £1.3 billion.

If we think about how internet banking has gone from a standing start to the mainstream in just over a decade, there’s no reason why public services can’t be the same.

Obviously, it won’t happen of its own volition.

That’s why we have made the bold commitment that all our public service reforms will be ‘digital by default’.

In other words, in all our reforms we assume that public service delivery can be shifted online – and officials and ministers have to justify why any aspect needs to be delivered through traditional offline channels.

This is a huge culture shift for government.

And it’s beginning to have an impact across the public sector.

We’re designing the universal credit system with online delivery in mind right from the start – not as an expensive afterthought.

My department – the Treasury – has already moved to online only corporation tax returns, significantly reducing administrative costs.

In the Budget I announced that over the next couple of years we will be doing the same for all the main business taxes.

And we’re creating a single government website – you can find the prototype at www.alpha.gov.uk – that will enable us to redesign government services from the bottom up and put the user in charge.

Because we all know, new technology doesn’t just enable us to reduce costs, it can help us drive up standards too.

For over a century, the dominant assumption in policy making was that in every walk of life, we needed people at the centre micromanaging public services.

Why? Because the public was considered to lack the information and tools to take more control themselves.

The internet age has shattered that cosy consensus.

And it’s opening up new possibilities to open up public services, empower citizens and unleash massive innovation.

To give you just three examples:

Personal budgets will be able to be managed by individuals online, choosing the tailored public services they need.

Patients will be able to access and share their personal health records, and take greater control over their treatment.

And communities will be able to use online platforms to engage with the local planning system, and come together to decide on issues like zoning and use of space in their neighbourhood.

Of course, this age of digitised public services creates challenges alongside opportunities.

The challenge of ensuring the security of personal data and financial information, for example.

The hacking into Sony’s online PlayStation network, and the theft of millions of users’ credit card details, is a high profile example of the need for robust online security.

This applies equally to government as to the private sector.

In any given month there are over 20,000 malicious emails sent to government networks.

Here is a salient story from my time as Chancellor.

During 2010, hostile intelligence agencies made hundreds of serious and pre-planned attempts to break into the Treasury’s computer system.

In fact, it averaged out as more than one attempt per day.

This makes the Treasury one of the most targeted departments across Whitehall.

At some point last year, a perfectly legitimate G20-related email was sent to HM Treasury and some other international partners.

Within minutes it appeared that the email had been re-sent to the same distribution list.

In fact, in the second email the legitimate attachment had been swapped for a file containing malicious code.

To the recipient it would have simply looked like the attachment had been sent twice.

Fortunately, our systems identified this attack and stopped it.

We are not taking this challenge lying down.

At the Spending Review last year I announced that we would invest £650m in a new National Cyber Security Programme to enhance our online security.

We are determined to get the security question right, so that we can maximise the opportunities that the internet age presents.

Another challenge that we need to address is to ensure inclusive access as public services are increasingly migrated to the internet.

After all, there are still nine million adults in the UK who have never been online.

We can, and will, address this challenge, and get as close as we can to a 100 per cent connected Britain.

Over the past few months, we have been working with some of the world’s leading technology companies to ensure that the next generation is equipped with the digital skills they need to flourish in the digital age.

Thanks to this engagement:

Hutchison Whampoa has agreed to support a pilot of the successful Digital Maths programme developed by Stanford Research Institute, which will provide digital tools to support maths teaching in UK schools.

Blackberry has agreed to launch an apps challenge for UK schools, teaching kids how to design new online tools.

Intel will run a range of schemes to support young people to set up their own online businesses.

And YouGov is sponsoring a Start-up Summer programme to provide mentoring, research, funding and cash prizes to encourage university students to set up internet companies.

Taken together, these schemes will benefit thousands of young people in the years ahead.

And they show how the government is working with leading businesses to turn the challenge of change to our advantage.

The same is true across all areas of government.

As we’ve seen, the internet is forcing us to rethink government from the bottom up.

It’s changing accountability.

Changing policy making.

And changing public services.

These changes are opening up incredible new opportunities for progress.

The opportunity to embrace new technology to improve public services and tackle old social problems in new ways.

The opportunity to make our societies more open, more fair and more prosperous.

And the opportunity to spread freedom and open markets to new corners of the world.

Together, we can make the most of these new possibilities.

And use the power of new technology to redesign government and build a brighter tomorrow.

Thank you.