Tag: 2014

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in London on 18th June 2014.

Ladies and Gentlemen,

We all share an interest in greater economic relations between the UK and China. And nowhere is that more important than in finance.

That’s why I wanted to hold this conference here in London – the world’s leading financial centre.

As someone who is a passionate believer in the importance of the UK-China relationship, can I begin by expressing my huge thanks to Premier Li for joining us this morning.

Premier Li – your passion and your leadership is driving radical reform in China.

It is a hugely exciting agenda that you set out in the Third Plenum – one that I am confident will bring prosperity and economic security to the people of China, and to the global economy.

I want Britain to play a major role in helping you achieve those reforms – and I look forward to hearing from you today about the opportunities for closer financial cooperation.

Yesterday, with Premier Li and Prime Minister David Cameron we spent many hours writing the next chapter in the story of the UK-China partnership.

We have seen historic agreements between our countries.

Agreements on energy – with multi-billion pound contracts for UK companies, and further steps towards a historic deal that could bring billions of pounds of Chinese investment into our new civil nuclear programme.

We have seen agreements on science investment and research partnerships – as two nations dedicated to expanding the frontiers of human knowledge.

But today we focus on finance, and the momentous progress that China, and the UK and China together, have made in this arena.

Modern finance is constantly changing.

But the number of historic changes in our financial world are relatively few: the emergence of the dollar as the world’s reserve currency after the First World War, is one; a second was the disintermediation of banks and growth in securities markets in the 1980s as savers sought higher returns.

And I believe the emergence of China’s currency as one of the world’s leading currencies will be the next huge change.

And, bluntly, I want the City to facilitate that change and be central to it.

In the last three years, Renminbi has overtaken 23 other currencies to become the seventh most used currency in international payments.

And that presents huge opportunities – both to China, who benefits from more investment, greater returns, and more diversification – and also to the UK.

We are the world’s leading financial centre.

And since coming to office I have been determined to make sure we capitalise on that position – and lead the way in this exciting new market.

In 2011 there was almost no offshore Renminbi activity in London.

Now we account for two thirds of Renminbi trading outside China and Hong Kong.

Two years ago we saw the first UK bank, HSBC, issuing an RMB bond.

Last year, with the permission of the Chinese government, we saw the first Chinese bank do the same. And now Chinese banks will soon be able to apply to set up wholesale branches here.

We have made huge steps forward – and I am hugely grateful to my Chinese colleagues with whom we have worked so closely over the last four years.

I have worked in partnership with my good friend Governor Zhou in particular on many occasions, and I look forward to continuing that strong relationship.

We are so pleased to welcome you today, and my colleague, Finance Minister Lou Jiwei.

Today we build on the progress we have made so far.

First, I am delighted that yesterday the People’s Bank of China, with the Bank of England’s agreement, selected China Construction Bank as the Renminbi clearing bank in London.

That makes it the first RMB clearing bank outside of Asia.

It’s hugely important in underpinning the future growth of London’s RMB business.

Second, I am very pleased to announce that UK Export Finance will now provide guarantees for transactions denominated in RMB.

That’s a huge boost for UK businesses looking to export to China.

This week UK Export Finance signed an agreement to commence work on its first transaction involving an RMB guaranteed loan, with a view to completing a major transaction later this year.

Third, I welcome the news that the Chinese authorities have awarded new licenses to UK companies so they can make RMB denominated investments into China.

Licenses will go to UK asset managers, HSBC Asset Management and Blackrock’s UK subsidiary.

This was a major outcome of my visit to Beijing last October.

And now that agreement is being put into practice, giving UK investors more opportunities to invest directly into Chinese securities.

And finally, I welcome the news that the People’s Bank of China will launch direct trading between sterling and Renminbi on the China Foreign Exchange Trading System.

Another boost to bilateral trade and investment – building further economic ties between our two great nations.

We have made huge progress in the last four years.

Everyone here has played a role in making the London RMB market what it is today.

And I would like to thank you for the many contributions that you and your firms have made.

And to thank the City of London initiative for all that they have done over the past three years.

But of course, what we have achieved so far is just the beginning.

And today we gather to work out what the next steps in our relationship should be.

Here are some of my ideas:

Firstly, I want to see the links between our financial markets grow further.

For example, Hong Kong and Shanghai are developing arrangements to connect their stock exchanges. I want London to explore something similar.

Secondly, we have already secured licenses for asset managers in London to invest RMB directly into China.

I now want us to explore ways for Chinese individuals and institutions to invest RMB into London’s global capital markets.

Thirdly, I want to see more British businesses grow in China, including in the very exciting Shanghai Free Trade Zone.

And finally, as Chinese companies go global, I want them to find London the most attractive place to set up their international headquarters.

But more than that, as Premier Li set out last night, I want UK and Chinese companies to be working together in third countries.

Because that is the true sign of a successful partnership.

These are just some of my thoughts, but there will be many others discussed at this conference.

It’s a hugely exciting agenda, where the future belongs to those ambitious for reform.

Let me be clear.

Our long term economic plan is working, but the job isn’t done.

We need to export to fast growing economies like China, and attract more investment to our shores.

To do that we need to make sure China’s currency, as it emerges onto the world stage, is used and traded here – as that will not only be good for China, but good for UK jobs and investment too.

Together – the people here in this room – we’ll work to make that happen.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at the Mansion House, London, on 12th June 2014.

My Lord Mayor, Ladies and Gentlemen, it is again an honour to attend this wonderful dinner and to speak to you as Chancellor for the fifth time.

Lord Mayor, I remember coming here to Mansion House, just weeks after the government was formed in 2010 – with Britain on the brink of an economic crisis – to give my first major speech on the task ahead.

I set out for you the economic plan we would follow, and I drew on the words Winston Churchill had uttered in this very hall, to say that while Britain could not pretend our travails were at an end, we were at least at the end of the beginning.

In the four years since, supported by the resolution and sacrifice of the British people, we have worked through that plan.

Now we are starting to see the results:

Britain growing faster than any advanced economy in the world.

A record number of people in work.

Now strong business investment on the back of low business taxes.

And a budget deficit this year set to be half what it was.

Last week, the IMF said that our resolute fiscal policy had been in their words an ‘anchor for the British economy’ that had maintained confidence and stability in the face of the storm.

And I want to say to the business and financial community: you did not waver; you stuck with us and I thank you.

But the task is far from complete; and there are many risks to the progress we have made.

Abroad, the risks stem from the weak eurozone, unpredictable geopolitics and the slowdown in some emerging markets.

At home, our economy is still too unbalanced, so I am the first to say we need to continue our efforts to boost business investment, exports and housing supply.

But the biggest risk comes from the tendency in parts of our body politics – the left and now too the populist right – to wage a war on enterprise, regulate prices, propose penal taxes, close Britain to business and return to the old ways of borrow and spend.

We must win this battle.

And go on confronting Britain’s problems with long term answers that will build an economy for everyone.

So while I know this is my fifth speech to you as Chancellor; I hope it is not my last.

For I want to finish the job.

Lord Mayor, tonight we are joined by someone attending their first Mansion House dinner.

Our Governor of the Bank of England.

Mark, we all thank you for the integrity, intelligence and international reach you have brought to the challenges of the last year.

And we look forward to what you have to say.

Our 3 new Deputy Governors – Jon Cunliffe, Ben Broadbent and Minouche Shafik, together with Andrew Bailey, complete what I immodestly think is the strongest team of any central bank in the world.

The Court continues the oversight of the Bank’s work, and at the end of this month Anthony Habgood will replace David Lees as its Chair.

David, thank you for helping steer the Bank through the big reforms of recent years and the appointment of a new Governor.

And thank you too to Charlie Bean for the 6 years he has given our nation as Deputy Governor.

We are lucky that one of our greatest economists has chosen to dedicate his life to public service for so long.

The Bank of England now sits back where it belongs, at the heart of our financial system – supervising the prudential regulation of our banks and insurers, thanks to the reforms I announced in my first speech here at the Mansion House in 2010.

And in each speech since, I have set out new steps to strengthen the resilience of our economy and the financing that underpins it.

2011, Ringfencing our retail banks

2012, launching funding for Lending

Last year, restructuring the Royal Bank of Scotland and firing the starting gun on the sale of our stake in Lloyds.

It would be tempting this year, at the Mansion House, to pause for breath.

But our task is far from complete – and today I will announce further changes to build that resilient economy for all and the strong, competitive financial services that should contribute to it.

Lord Mayor, the City of London has emerged from the wreckage of what went so badly wrong, stronger and better regulated, more international and more responsive to the needs of customers here at home.

Our financial exports grew 10% last year, and our surplus in finance and insurance has reached £45 billion – twice as much as our closest competitors.

We’ve welcomed to Britain the headquarters of some of the world’s largest insurance firms.

And we have been chosen as the location for the International Forum of the world’s Sovereign Wealth Funds.

In my first Mansion House speech, I said I wanted British financial firms and markets to be at the heart of financing China’s extraordinary expansion.

Now two thirds of all Renminbi payments outside of China and Hong Kong now take place in London.

Chinese bonds are being issued here, Chinese assets are being managed here, Chinese banks will be able to apply for branches here, a Chinese clearing bank is soon to be appointed here – and next week, when the Chinese Premier visits, we will take the next big step forward in the economic partnership of our two great, historic trading nations.

I can also confirm tonight our intention in the next few weeks, subject to market conditions, for Britain to be the first western nation to issue a sovereign sukuk – an Islamic bond.

For I want Britain to be not just the western hub of Chinese finance – but of Islamic finance too.

It is with these active steps that together we are making Britain the undisputed centre of the global financial system.

But all this can so easily be put at risk.

By badly-conceived EU rules that only reinforce the case for reform in Europe.

By populist proposals for self-defeating bonus taxes and punitive income tax rates.

And by the potential break up of our nation.

Edinburgh is even stronger as a world-renowned centre for asset management because it is part of a United Kingdom that is a world-renowned centre of finance.

And let us hope it remains so, for we are better together.

We should be candid tonight about another risk.

The risk that scandals on our trading floors call into question the integrity of our financial markets.

People should know that when they trade in London, whether in commodities or currencies or fixed income instruments, that they are trading in markets that are fair and effective.

The revelations about the manipulation of LIBOR added further damage to reputation of financial services, here and abroad.

In Britain, thanks to the leadership of Martin Wheatley and Andrew Tyrie, we acted swiftly to punish the wrongdoers and fix the system.

Let us not wait for the next wave of scandals in financial markets to hit us before we respond.

The integrity of these markets matters to us. London is home to 40% of the global foreign exchange business; 45% of over-the-counter derivatives trading; and 70% of trading in international bonds. And Mark Carney and I intend to keep it that way.

So today I can announce that the Treasury, the Bank of England and the Financial Conduct Authority will conduct a comprehensive review of standards in our fixed income, currency and commodity markets.

The Fair and Effective Markets Review will be chaired by the new Deputy Governor, and former Deputy Managing Director of the IMF, Minouche Shafik – and she will be joined by Martin Wheatley and Charles Roxburgh.

This Review must work closely with industry. So I am establishing a panel of market practitioners, chaired by Elizabeth Corley, chief executive of Allianz Global Investors.

The Review will produce its report in a year’s time.

And some of its recommendations may require international agreement.

In the meantime, we will act here at home.

I am today announcing that we will extend the new powers we put in place to regulate LIBOR to cover further major benchmarks across foreign exchange, commodity and fixed income markets – many of which are currently entirely unregulated.

Based on the Review’s conclusions we will publish and consult on the full list of benchmarks to be covered by this autumn, and we will have the new regime in place by the end of the year.

I am also extending the senior managers regime to cover all banks that operate in this country, including the branches of foreign banks.

And I can also announce that we will introduce tough new domestic criminal offences for market abuse, rather than opt into European rules we do not think suitable or sufficient for our needs.

For let me make this clear, so no one is in any doubt.

The integrity of the City matters to the economy of Britain.

Markets here set the interest rates for people’s mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy.

I am going to deal with abuses, tackle the unacceptable behaviour of the few, and ensure that markets are fair for the many who depend on them.

We’re not going to wait for more scandals to hit– instead we are going to act now, and get ahead.

Ladies and Gentlemen,

Robust financial markets are an important part of building a resilient economy.

But tonight, I want to address another market which can create a risk to Britain’s economic stability and prosperity.

Not a new risk, but an old and very familiar one to us in this country – and that’s our housing market.

The challenge is that we want several things which don’t sit comfortably together.

For most people, their home is the biggest investment of their lifetime. And, of course, they want that asset to increase in value over time.

But a home is also a place to live and build our lives – and we want all families to be able to afford security, comfort and peace of mind. That means homes have to be affordable – whether you’re renting or buying.

The only way that can be achieved over the long term is by building more, so supply better matches demand.

But we are a small and crowded island, keen to protect our green spaces and ready to object to new development.

So the British people want our homes to go up in value, but also remain affordable; and we want more homes built, just not next to us.

You can see why no one has managed yet to solve the problems of Britain’s housing market.

Instead we have the repeated cycle of financial instability driven by high household debt; and we see the social injustice of millions of families denied good homes.

But that should not deter our generation from trying to fix the housing challenge – for the price of failure is too high.

So my message today is this.

As Chancellor, I have never shied away from confronting Britain’s problems.

The housing market is no exception.

I’m determined to back aspiration in every way I can, including the aspiration to own your own home.

But I’m not going to opt for the easy route of some of my recent predecessors: duck the issues, risk a housing boom, and keep my fingers crossed that it won’t damage the economy.

So no irresponsible gambles with stability; no short-term fixes.

Housing is a long term problem – and our economic plan will provide long term answers.

Here’s how.

First, we have to be clear-eyed about where the risks to economic stability lie today.

The risks come when people borrow too much to pay for rising house prices.

In excess, that debt can cause serious difficulties for them and the banks who lent to them.

And it can cause difficulties for the economy as a whole if an overhang of debt suppresses consumer spending.

Now, today, house prices are still lower in real terms than they were in 2007 – and are forecast to stay below that peak for some years to come.

At the same time debt-servicing costs remain at near record lows and rental yields are in line with long term trends.

So there is no immediate cause for alarm.

Indeed the most recent data shows that mortgage approvals have actually slowed in the last couple of months.

But we need to be vigilant.

For there are on the horizon things that should give us some causes for concern.

If London prices were to continue growing at these rates that would be too fast for comfort.

And the rate of price rises is now beginning to spread beyond London. Across the country, the ratio of house prices to incomes is high by historical standards.

And while average loan to value ratios for new lending are still well below normal, average loan to income ratios have risen to new highs.

Let me spell it out: does the housing market pose an immediate threat to financial stability today? No, it doesn’t.

Could it in the future? Yes, it could, especially if we don’t learn the lessons of the past.

So we act now to insure ourselves against future problems before they can materialise.

Because economic security comes first.

The first challenge is to be clear about the issue, and we are.

The second is to act on it.

When I spoke to you in 2010, I said one of the weaknesses of the system of financial regulation I’d inherited was that no one was looking for broader risks across the economy, in areas like housing.

So no one saw the rising debt levels – or had the tools to do anything about them.

I have changed that.

The new Financial Policy Committee in the Bank of England has been given the authority and the macro-prudential tools to act.

They have also insisted on the toughest stress tests for our banks, so that this time round they can withstand the worst.

Before Christmas, the Bank acted with the Treasury to refocus the Funding for Lending Scheme away from mortgages towards small business lending.

And earlier this year, our regulators put much more rigorous mortgage standards in place.

These are all important steps.

The FPC already have further tools in their armoury. But today we go further.

I want to make sure that the Bank of England has all the weapons it needs to guard against risks in the housing market.

I want to protect those who own homes, protect those who aspire to own a home, and protect the millions who suffer when boom turns to bust.

So today, I am giving the Bank new powers over mortgages including over the size of mortgage loans as a share of family incomes or the value of the house.

In other words, if the Bank of England thinks some borrowers are being offered excessive amounts of debt, they can limit the proportion of high loan to income mortgages each bank can lend, or even ban all new lending above a specific loan to income ratio.

And if they really think a dangerous housing bubble is developing, they will be able to impose similar caps on loan to value ratios – as they do in places like Hong Kong.

It’s important that decisions to use these powerful tools are made independently of politics by the Bank of England.

We saw from the last crisis the dangerous temptations for politicians to leave the punch bowl where it is and keep the party going on too long. And just in case there is any doubt.

I say today, very clearly: the Bank of England should not hesitate to use these new powers if they think it necessary to protect financial stability.

And I commit that while the Bank and the Treasury will need to design how these powers will work in detail, and will want to consult on them, I will make sure that they are legislated for and in place before the end of the Parliament.

And I also commit today that if the Bank does act in future to limit mortgage lending then the same rules will be applied to every single Help to Buy mortgage.

I know that some would take a more ideological position and end the Help to Buy scheme altogether.

They would return to the situation where only those first time buyers lucky enough to have rich parents would be able to afford the large deposits demanded by the banks.

My approach will be dictated by the facts, not by ideology.

And the facts show that Help to Buy is working as intended.

As the IMF concluded last week, it is helping lower income families, overwhelmingly first-time buyers outside London, to buy homes priced well below the national average.

It is not fuelling house price inflation in London or at the top of the market.

It is helping families, and that is how we intend to keep it.

So today I’ve taken big new steps to protect financial stability, strengthen the new role of the Bank of England and completed the range of tools at their disposal.

This addresses the economic problem of how we stop rising house prices leading to an unsustainable rise in household indebtedness, and threatening the wider economy.

But it does not address the social problem of how we stop young families being priced out of the housing market altogether.

That requires a third pillar to our housing strategy, alongside the clear analysis and new financial weapons.

We need to see a lot more homes being built in Britain.

The growing demand for housing has to be met by growing supply.

The alternative, as in any market, is that prices will rise so that homes become unaffordable to many of our citizens and take up ever more of their incomes.

We’ve already taken big steps to deliver those new homes.

We’ve reformed our antiquated planning system.

The changes were hard –fought and controversial, like all things worth battling for in politics, and now they are already starting to work.

Last week we saw permissions for new homes rising by 20% in a year.

We’ve got the biggest programme of new social housing in a generation; we’re regenerating the worst of our housing estates; and we’ve got the first garden city for almost a century underway in Ebbsfleet.

Now we need to do more. Much more.

We have beautiful landscapes, and they too are part of the inheritance of the next generation. To preserve them, we must make other compromises.

If we want to limit development on important green spaces, we have to remove all the obstacles that remain to development on brown field sites.

Today we do that with these radical steps.

Councils will be required to put local development orders on over 90% of brownfield sites that are suitable for housing.

This urban planning revolution will mean that in effect development on these sites will be pre-approved – local authorities will be able to specify the type of housing, not whether there is housing.

And it will mean planning permission for up to 200,000 new homes – while at the same time protecting our green spaces.

Tomorrow, Boris Johnson and I will jointly set out plans for new housing zones across London backed by new infrastructure, so that we see thousands of new homes for London families.

And we’ll take the same approach in the rest of the country; with almost half a billion pounds of financial assistance in total set aside to make it work.

Now I suspect there will be people who object to new building, even on the brownfields of our cities.

But let me be clear.

I will not stand by and allow this generation, many of whom have been fortunate enough to own their own home, to say to the next generation: we’re pulling up the property ladder behind us.

So we will build the houses Britain needs so that more families can have the economic security that comes with home ownership.

And today I will give the Bank of England the powers it needs over mortgages, so that Britain’s economic stability always comes first. And that is what our long term economic plan is delivering.

Lord Mayor, Ladies and Gentlemen,

Insisting on the integrity of our financial markets.

Confronting the risks from our housing market.

Tackling the long term challenge of housing supply.

These are the further actions I take today to ensure that we learn from the mistakes of the past and build a resilient economy for all.

These last four years have required difficult decisions.

We embarked on the hard task of rebuilding our economy; and making sure our country could pay its way in the world.

That task is not complete.

Our national prosperity is not yet secure.

But if we carry on working through our long term economic plan then we can say with confidence that brighter days lie ahead.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Brazil on 7th April 2014.

Thank you for inviting me here today.

It is great to be back in Brazil – but it has been a long time. Too long.

I have not been to this country for 25 years.

As a student I took a river boat from Benjamin Constant along the Amazon, stopping at villages along that great water course as far as that great capital of the rainforest, Manaus. It was one of the most extraordinary travels of my life. But I wish I had travelled further.

I wish I had made it to Rio or to São Paulo.

I wish I had appreciated then that you were laying the foundations then for 25 years of extraordinary economic growth and extraordinary social progress and the consolidation of an open, vibrant democracy.

And I wish that others in Britain had better appreciated your achievements.

I wish more British Finance Ministers had visited Rio and São Paulo.

Today, Britain and the British government and this Finance Minister are determined to put that right. It’s why I’m here now. Why my friend, our Foreign Secretary William Hague was here in February.

This is the most pro-Brazil British government for over 70 years; because being pro-Brazil means being pro-British too.

We both flourish, we both succeed, we both grow, both create jobs when we do business and work together.

We have woken up and understood that.

What you have achieved over the last 20 years is one of the most impressive and important economic transformations in the global economy.

We are in awe of the tremendous growth you have achieved over this generation – twice what we have achieved in Europe. We admire your record at conquering inflation, and bringing down your debts – thanks to the efforts of President Cardoso’s reforms and continued ever since.

We marvel at your achievement in lifting 35 million people out of poverty and improving access to healthcare and education for millions who had previously been marginalised – thanks in particular to the reforms of Lula and now President Dilma.

And we applaud the success in the last decade of your fight against deforestation.

What you have achieved in the last 20 years is incredible.

And I wish that Britain had been a bigger part of it – and I deeply regret that we were not.

In 2010, just 1% of our exports came here.

We were doing twice as much trade with Denmark, a country almost seven times smaller.

We are still exporting less to Brazil than France and Italy – and our trade with Brazil is almost four times less than Germany’s. We are committed to changing that. We want to be a big part of your future – just as we were a big part of your past.

And how did we get to this point?

Britain and Brazil were once extremely close allies and trading partners.

It was one of our greatest British Foreign Secretaries, George Canning, who helped to negotiate Brazil’s independence in 1822 – and who persuaded others in Europe to accept it.

It was Britain who helped lead the campaign for the abolition of slavery – in Brazil and around the world.

And it was British finance and British business which provided the capital and the expertise – not to mention the raw materials – for your industrial revolution.

The entire São Paulo railway, the pumps and mines of Minas Gerais, and the pillars of the Manaus Opera House are all built with British steel.

We even introduced you to football – although we quickly came to regret that one.

And we both benefited from close trading links. One hundred years ago around a quarter of your exports came to Britain. And 50% of foreign investment in Latin America as a whole came from Britain.

But in recent decades we’ve exported less and less. Our investments abroad went to Europe and North America.

We never made a conscious decision to turn our back on Brazil. It’s just we never made an active decision to raise our eyes from our nearest neighbours and see what was happening in the world.

We didn’t make the deliberate effort to connect with the fast growing emerging economies, not just here in Brazil – but in India and China and other parts of Latin America too.

That was a huge mistake. And it is the determined objective of the government to put it right.

That is why I am here this week, the first British finance minister to visit in over 15 years.

It’s why the British Foreign secretary has just made his second visit.

And it’s why our Prime Minister made coming to Brazil an early priority – only the second Prime Minister to make a bilateral visit in our history.

And it is not just about Ministers visiting.

It is about our efforts across the whole of British government, across British business to breathe new life into old partnerships, build new trade relationships, export more, invest more and connect our nation to the fast growing, successful economies of the world.

That energetic effort is starting to pay off.

In the last four years our exports to Brazil have gone up by two-thirds – and the number of companies UKTI is helping do business here has grown five-fold.

Twice as many Brazilians are now coming to Britain on holiday.

The number of Brazilian students studying there has gone through the roof.

We are now the fourth largest foreign investor in Brazil.

But there are so many exciting opportunities to do more together – and that’s why I’m here this week.

I’m here to be an unabashed salesman for the best of British – the best of British science, the best of British finance, the best of British engineering. I’m here to say: let Britain and Brazil be partners in each other’s economic transformation, and the social progress it will bring.

I’m seeing that partnership in practice here this week.

I’m seeing the best of our engineering prowess later today when I visit Rolls Royce to unveil a major new investment they will be making in a marine facility at Duque de Caxias to build the latest engines and thrusters for the rigs and drillships and platforms that help your country pull oil and gas from under the seabed of the Atlantic – one of many British companies using the expertise we developed in the North Sea to become the very best offshore industry in the world, now put to use for the benefit of the people of Brazil.

Britain and Brazil as partners.

And Brazilian companies are playing a massive role in the UK too. The largest company in Northern Ireland, for example, is the Brazilian firm Marfrig.

And today I’m also promoting the best of British finance – visiting Lloyds of London, now the largest overseas reinsurer in Brazil – to announce new British companies investing in Brazil to support Brazilian businesses and Brazilian families, giving them the best products and financial protection in the world from the best financial centre in the world.

Britain and Brazil working as partners.

And I’m here to support the British companies who, helped by my colleague Paul Deighton the Chief Executive, who put on, in my impartial and unbiased view, the best Olympic Games ever, in London 2012, and who will work with you as the hosts to make the Rio games brilliant too.

How could they not both be brilliant in a country as beautiful as this and with a people as passionate about sport as yours? Paul is with me here in Brazil, so too are British firms working on 60 separate contracts worth over £150 million.

Britain and Brazil working as partners.

And on Wednesday I will see the best of British and Brazilian science, when I visit São Paulo University which has strong links with several British universities. I will announce new funding to support that scientific collaboration.

Funding that could help companies like Oxitech – a new spin out from Oxford University that are in the process of opening a new factory here so we can work together on tackling mosquito borne diseases. Saving lives with science.

Brazil and Britain as partners.

In engineering and oil exploration, finance and infrastructure, science and sport, there is much we are doing – but so much more we can do.

And I want you to understand that this is not some add-on to my economic policy, not something on top of our economic plan.

This is our economic plan.

This is integral to my efforts to fix what went wrong in Britain, address the historic weaknesses that were so cruelly exposed when our economic boom turned to bust.

We thought, like some other Western economies, that we could borrow more and more money from the rest of the world in order to buy the things they made for us.

So exports went down and deficits went up.

As we have learnt to our cost: that economic model was not sustainable.

It was not sustainable for us, and it was not sustainable for the global economy either.

Later this week I will join my good colleagues Guido Mantega and Alexandre Tombini at the Spring Meetings of the IMF in Washington, along with other finance ministers and central bank governors of the world.

We will assess the risks in the global economy today. The situation in the Ukraine will feature. So too will the challenge of how to manage the withdrawal of Western monetary stimulus – and we should agree both that those monetary authorities like the Federal Reserve and the Bank of England should continue to communicate their exit plans clearly with forward guidance; but that emerging markets must also continue with their crucial structural reforms.

We will look to see what more we can do together to build resilience in our financial systems and support growth in our economies.

Roberto Azevedo has already achieved a tremendous amount as Director General of the World Trade Organisation. The historic Bali trade deal that he secured is really important – and I congratulate him, and Brazil.

Now let Britain and Brazil lead the efforts to complete the EU-Mercosul free trade agreement that could add £2.5bn to our economy, with even greater benefits to yours.

And let’s implement the reforms we have agreed to in our international institutions like the IMF so that countries like Brazil have the enhanced status and say that your economic strength earns you the right to.

The failure of the US Congress to ratify the agreed IMF reforms is bad for the institution and bad for the international community.

I urge the Administration and Congress to act to pass them now.

But ultimately it is not international cooperation alone that can deliver for our peoples – it is action at the domestic level that will determine whether we can build sustainable growth.

In Britain our GDP had fallen sharply, our banks were weak and our public finances were in a mess. It would have been easy to give up and duck the challenge, but thanks to the hard work of the British people we are rising to it.

We’ve put in place a long term economic plan – and now the British economy is growing faster than almost any other Western economy and creating a record number of jobs.

We will see tomorrow what the latest IMF forecast holds for the UK, but we’re clear that the progress we’ve made – and the progress we now need to make depends on working through our plan.

That plan means tough decisions to achieve sound public finances: a more competitive business environment; investment by business and in infrastructure; and more exports so we see ‘made in Britain’ around the world. Let me examine what each mean for you and jobs.

First, we’ve learnt that we all need to maintain sustainable public finances.

What the world needs are stable economies – and an end to sovereign debt crises.

So I congratulate successive Brazilian governments for bringing down public debt from 72% of GDP in 2002 to 64% now.

As we say in Britain, you were fixing the roof while the sun was shining.

We weren’t.

Our deficit was forecast to be larger than any other in the G20.

So we had to cut public spending to bring down our deficit.

But that was not easy.

Our critics said that our strategy would mean borrowing going up. Instead, this year it will be down by a half.

They said it would reduce growth. Instead, there is no economy in the G7 growing faster.

They said it would mean more unemployment. Instead we now have a record number of jobs.

Sound public finances are necessary for sustainable growth – but they alone are not sufficient.

We also need to make our nations competitive – that is the second requirement.

Every country has to take its own judgement about how to do that.

But I can tell you about the approach I am taking in the UK.

Just last week, I cut our corporate tax rate again – down from 28% to 21%.

One of the most competitive rates in the world.

But we’re not stopping there – this weekend we’ve been cutting all the main business taxes, making our employment laws more flexible but also family friendly, and reforming our welfare system so work always pays.

Being competitive also means providing the best schools and hospitals for our citizens. That is right at the heart of our economic plan in the UK.

I congratulate Brazilian governments on their determination to improve health and education.

Brazil is a country determined to improve its skills, and looking to the world to help it do so.

I congratulate President Dilma on launching over 100,000 students abroad in the Science Without Borders programme.

I am delighted that the UK is the second most sought after country in the world by those students. We have already received 6,000 and I look forward to more.

The third thing we both need to do is invest more in our infrastructure.

In the UK we’ve underinvested for decades. But we’re starting to turn that around.

Now the largest infrastructure project in Europe, Crossrail, is being tunnelled under London.

And we’re building new high speed rail links.

The biggest investment in our railways in a century.

Massive upgrades to our roads.

A huge commitment to science.

New high speed broadband networks.

New nuclear power.

New exploration for shale gas – and new renewable energy investment too.

That’s how we’re building Britain’s economic future.

And what we are doing mirrors many of the ambitious infrastructure plans of the Brazilian government here.

With our expertise and our capital and our shared vision, we are natural partners on infrastructure.

And I want to make sure that becomes a reality.

We must invest more, but we must also export more – that is the final requirement for growth.

For we can grow more prosperous – each of us apart, and all of us together – through trade and our economic cooperation. So I welcome the Brazilian government’s greater openness on capital markets.

And I want to end today by talking about new reforms I am pursuing to boost British exports.

Because for decades we have not been exporting enough – not just to Brazil, but to all the fastest growing markets in the world.

So I am confronting that historic weakness head-on.

In my Budget last month I fundamentally reformed our export regime.

I cut the tax on flights to emerging markets, including Brazil, so that you don’t pay more to fly to Rio or São Paulo, or indeed Beijing, than Washington or New York.

And I massively extended the financial support we give to our exporters.

I am doubling the amount of government lending for exports and cutting the interest rates on that lending, by a third.

I am clear: Britain will no longer have some of the least competitive export finance in Europe. We are going to have the most competitive export finance in Europe.

But the job is never done and so today I can announce further reforms.

Where Budget boosted government lending – today we will boost private lending too.

Banks will now have access to a special Bank of England facility that will make it much less risky for them to extend loans to our exporters.

That should mean billions of extra lending will be made available to our exporters.

And it will mean cheaper lending – saving potentially millions of pounds for large projects.

That’s how we make British exporters competitive.

And to make sure our businesses can make the most of that new facility, our export arm -UK Trade and Investment – is going to treble the number of advisers able to help our mid sized firms export. We’ve already increased our trade promotion presence in Brazil by 40% since we came to government – and that’s helped our companies win over a billion pounds of new business last year.

Today we’re expanding our presence again – here in Brazil and across Latin America.

When we say trade and investment with this continent is our priority – we mean it.

We put our money where our mouth is.

Maintaining sustainable public finances. A more competitive economy. More investment and more exports.

These are the challenges that we both face.

And I want our two nations to work together, to draw on our shared history, our shared interests, our shared values so that Britain and Brazil are partners.

Partners so that we give to all our citizens the security that comes with a job.

Partners so that we give to people the best education and healthcare available.

Partners so that together we provide peace of mind and prosperity to the people of Britain and the people of Brazil.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at the Laboratory of Molecular Biology in Cambridge on 25th April 2014.

It’s a great pleasure to be here at the Laboratory of Molecular Biology today.

To be here in this tremendous building.

This lab has a fantastic pedigree – the discovery of DNA by Watson and Crick; 9 Nobel prizes; various spin out companies. And now here you are, the heart of the Cambridge Biomedical campus.

You are testament to the world leading science and innovation that we have in Britain. And particularly here in Cambridge. What you have achieved, together with the rest of the British scientific community, is one of Britain’s greatest and most exciting success stories.

I’m here to talk about British science because it is something that I am personally passionate about.

I get that this is something Britain is brilliant at – and that it is vitally important to our economic future.

So I have made it my personal priority in government to support you in your endeavour. I’ve made difficult decisions elsewhere in order to protect the science budget.

And now over the rest of this decade we are going to invest more in science than ever before.

And I’ve come here with our brilliant Science Minister, David Willetts, to explain more about that.

Our scientific achievements are extraordinary – and I want to celebrate that today.

But we must also confront the hard truths. For decades we have done too little to turn British ingenuity into commercial success. Again and again we have seen the best research in the world developed here in the UK – and then commercialised overseas.

We’re getting much better at avoiding this – we’re making real progress. But we’ve still got a long way further to go.

This support for and application of science is right at the centre of our long term economic plan.

Because that plan is not just about fixing what went wrong in the crisis. It’s about building a resilient recovery.

It’s about creating a balanced economy, that can provide prosperity and economic security for the people of Britain in a global race.

A more productive economy where we invest more, export more, and manufacture more.

And only by capitalising on our great science, can we be the best in the world at manufacturing, at pharmaceuticals, and at technology.

That is the way that we will export more – that is how we will invest more.

That is how we will provide the best jobs and opportunities in the world.

That is the goal of our long term plan for science. Right at the heart of our long term economic plan.

Of course, scientific endeavour is inherently worthwhile in its own right.

It is driven by our deep curiosity about the world around us. Our urge to understand – a mark of our humanity, shared across history and cultures.

And I am hugely proud that Britain has contributed so much to that quest for knowledge – with extraordinary scientific achievements from Newton and Darwin to Higgs and Hawking.

I am proud that we continue to lead the way, even as the race to understand intensifies. Whether exploring the first moments of the universe, or the deep structure of matter, or the power of genetic code – scientists in Britain are leading the way.

Over the past century we have won 78 Nobel prizes. In the past decade alone we have won 12. We have had at least one UK scientist receiving a Nobel Prize in Stockholm every year since 2009.

These British Nobel Prize winners were born in Batley and Hampshire and Newcastle. But we are also a home of world class scientists born in places like Russia and Cyprus. I have been privileged to meet both Konstantin Novoselov and Andre Geim, the co-discoverers of graphene. Both born in Russia, both working in Manchester, and both now knights of the realm. Britain has continued to play a leading role in international projects.

As scientific research becomes ever more global – our openness and diversity makes us ever stronger.

Almost half of our scientists now publish with an author abroad.

We play a leading role in projects like the Large Hadron Collider.

We are now taking a key role in the Square Kilometre Array, the big international radio astronomy project of the next half century.

And next year we will at last have a British astronaut on the International Space Station. These are all massive global projects and it is right that Britain plays a big part in them.

All of this is a source of great excitement for me and for many others.

I’ve seen that excitement in the crowds at the Science Museum, at exhibitions like Collider.

I’ve felt that excitement at places like the new Imperial West campus – where I saw a heart muscle beating on a Petri Dish.

And recently we were honoured to have the British-made Mars Rover vehicle parked for a while in the reception of the Treasury – they said it was trying to find signs of human life.

What you in this room have achieved – what the scientific community of Britain contributes to our country and to the world – is extraordinary. Today I honour that and I celebrate that.

Britain can be rightfully proud of its scientific prowess.

But as I have said, we must also recognise our historic weakness when it comes to translating those scientific achievements into commercial gain.

Time after time, Britain has led the way in scientific research – only to see the commercial benefits accrue overseas.

British computer scientist Tim Berners-Lee invented the World Wide Web. But it was US tech giants who did the most to turn this technology to massive commercial advantage.

We did the research that led to Liquid Crystal Displays and the flat screen computers and TVs that are now in everyone’s living room and office. But it was countries like Japan and Switzerland who exploited it.

We developed a rocket that could launch satellites into space as early as the 1960s. But we abandoned it. Only now, a generation later, are we once more investing in launch technologies.

UK researchers first spotted the huge potential strength of lightweight carbon fibre, and the Ministry of Defence patented it. It is now a $13 billion market – stretching from lightweight planes to wind turbines. But it is manufactured mainly abroad – not here.

We have some of the best research universities in the world.

But we file fewer patent each year than the US, Japan, Germany, France, China, and South Korea.

And we are getting much less income from our intellectual property than universities in the US.

This is bad for our economy.

It means a less resilient economy.

An economy not playing to its strengths.

Fewer opportunities – fewer jobs.

So a key part of our economic plan is our long term plan for science.

Our plan to break the habit of a lifetime, and get British innovation into British businesses.

So let me tell you how we can make that ambition a reality. How our long term plan for science will give you the backing you need to deliver this nation’s economic future.

There are three parts to that plan – backing scientific clusters; helping scientists make the transition from the lab to the market; and committing long term funding to science.

First, we’re backing Britain’s scientific clusters. Clusters like Cambridge.

Because you are showing just how much Britain can achieve when we turn scientific ingenuity into commercial success.

Cambridge has long been home to one of the world’s greatest universities. And you have some of the world’s greatest laboratories – including this one.

But on the back of that, over the last generation you have built a cluster of innovation that has been phenomenally productive.

Your work has resulted in some of our most important scientific and commercial successes.

Like the antibodies behind six of the world’s top ten best selling drugs – all of which you discovered here in Cambridge.

Or like gallium nitride – used in everything from LED lighting to high performance electronics. Developed here by Sir Colin Humphries, and now being manufactured at scale in Plymouth.

Or Raspberry Pi – a single board computer not much bigger than a credit card. Developed by Cambridge scientists and now selling 2.5m units, all of which have been manufactured out of an abandoned TV factory in South Wales.

Ideas developed here, commercialised here, and now at the centre of Britain’s industrial recovery.

The Cambridge cluster has now spawned 1,500 technology based firms. 60,000 jobs.

Firms created by Cambridge University Computer Lab alumni alone have created £250 million in revenue.

And fourteen tech companies here are worth a billion dollars or more – including companies like ARM, who design the chips inside a significant proportion of the world’s laptops and mobile phones.

It’s an extraordinary story – and I know that with the right support from government, you can do even more.

So I’m here to tell you: we will continue to back Cambridge.

A little over a month ago, in the Budget, I committed funding for a groundbreaking city deal here. That will mean up to £500 million of extra investment in Cambridge – including much needed investment in housing and transport.

Earlier today I also announced £6 million of new funding for the Babraham incubator here. Babraham has already had a huge impact, providing a space where start-ups can be supported to grow with public and commercial investment.

And later today you will be breaking ground on an exciting new graphene and electronics building here. That’s funded with £17 million from the Engineering and Physical Sciences Research Council. This will be a place for cutting edge research to be translated into everyday uses for this astonishing material.

I know there has also been a long debate about bringing together our world-class heart and lung centre at Papworth hospital with Addenbrooke’s hospital on the site of the Cambridge BioMedical Campus – and Papworth is working closely with the Department of Health to make sure that its plans are affordable.

But I can see myself a strong case in favour of bringing these two great institutions more closely together, creating a hub of leading-edge medicine, research and pharmaceutical development.

What you’ve achieved here has been called ‘The Cambridge phenomenon”. I want it to be the British phenomenon.

So the government is backing clusters across the UK…

– we are backing the IT and aerospace cluster around Bristol and the South West

– motor car manufacture and motor sport in the Midlands

– oil and gas and offshore engineering in the North East

– the world class life sciences in the cluster stretching from Dundee across to Glasgow and Edinburgh

– and we are investing in the exciting tech cluster linking Daresbury and Manchester

I want new clusters to grow around big data – that’s why in the Budget last month I funded investment in a new world-class Turing Institute for big data research. That centre will keep UK at the forefront of this rapidly moving, globally competitive discipline.

I want new clusters around graphene – with new research centers starting up both here and in Manchester. So backing more clusters like Cambridge – that’s the first thing we are doing to help you.

Second, we’re investing in the centres and in the programmes that help scientists take their inventions from the lab to the market.

I asked James Dyson – one of our greatest inventors, and greatest entrepreneurs – to develop a long-term vision for science and engineering.

He came up with the idea of technology centres – which bring researchers and businesses together to help commercialise technology.

Now, translated into government – we have already set up seven of these so-called Catapult Centres.

They cover everything from Cell Therapy to Transport Systems, the Digital Economy to Future Cities, Offshore Renewable Energy, Satellite technology, and High Value Manufacturing.

Two new ones will kick off next year in Energy Systems and Precision Medicine.

Each one is focused on a globally important area where we show real leadership.

Take the High Value Manufacturing Catapult, which I visited in Coventry earlier this year. I saw their cutting edge 3D printing technology – a technology which could revolutionise everything.

And I saw how they were harnessing incredibly powerful lasers to weld and cut mechanical components with a level of precision and efficiency well in advance of current manufacturing standards. I was told that there’s only one laser in the world more powerful – and that’s the one NASA have to shoot down missiles.

And our Research Partnership Investment Fund has proved that if we invest in great science – business will too. So far we have supported 22 projects with just over £300 million, and delivered a total investment of more than £1 billion.

Cambridge has been a notable beneficiary – the new Maxwell centre will be a centrepiece for industrial partnership in the physical sciences.

Our resources aren’t infinite. We’ve got to make choices.

So we have identified eight great technologies where Britain has real distinctive strengths and there is a global market – and we’re backing them with sustained investment.

Some of them are IT data- based technologies – from big data to satellites and robotics. Others are biological based – synthetic biology, regenerative medicine, agri-tech.

We’re getting behind Britain’s success stories.

Backing our successful clusters.

Backing our successful technologies, getting our innovations to the market here in Britain.

And as a result of our plan, we’re starting to get better.

When we came to government the UK was ranked 14th in the Global Innovation Index.

Now we’re third.

Business research contracts are up year on year.

We’re now producing more spin-out companies per dollar spent than the US.

But there is one more thing we have to do, if Britain is to become the best place to do science and apply it: we have to give British science the funding it needs for the long term.

We’ve had to make difficult choices to cut public spending.

The easy route would have been to cut science spending.

But it would have been painful for the economy and the wrong answer for Britain.

It would have completely undermined our long term economic prospects.

So instead I took difficult decisions elsewhere, so that I could protect science funding at £4.6 billion a year – we’ve in fact increased capital investment in science to record levels.

I can confirm today that we will deliver over the next five years the biggest sustained programme of investment in new science capital ever. We are increasing capital investment to £1.1 billion in 2015-16 and then growing this in line with prices each year to 2020-21.

Investment certainty to the end of the decade –never before has a government set such a long term commitment.

I know that certainty is absolutely vital if you want to attract investment from businesses and charities. If you want to attract world-class researchers and research projects – and global businesses – to Britain. And if you want to embark on the most ambitious, long-term projects that might previously have seemed unreachable.

Today I can announce funding for one such project – a project that exemplifies this government’s long-term commitment to British science.

I am today committing over £200 million to build a new polar flagship.

Britain has a great history of polar exploration and science – a history of Scott and Shackleton, and many other explorers, who all had a close link to this city, home of the British Antarctic Survey and the Scott Polar Institute.

In recent years our scientists have made some astounding breakthroughs at sea. We have detected the world’s most extreme deep sea volcanic vents in the Cayman Trough. And made the first ever extensive measurements under a rapidly melting Antarctic shelf.

We understand that what happens in the Arctic and Antarctic have a huge impact on us – and research we do there will have a massive impact on our understanding of changes in our climate, and in our ability to forecast the weather. That’s hugely important.

We have two aging polar exploration ships reaching the end of their life.

The easy choice would have been to not replace them. But that would have been a huge mistake for the long term.

Britain must keep a presence in these parts of the world.

So instead we’re going to replace our aging ships with the best in class.

Our new £200 million polar flagship will be the most advanced oceanographic research vessel in the world. It will be carrying the latest cutting edge technologies.

And will mean scientists can do research for more of the year, can reach areas they’ve never been able to penetrate before, and will be able to bring back huge amounts of data on the ocean and marine biology.

We have a proud history of pushing at the boundaries of scientific discovery.

Today we’re making sure we continue that tradition- at the most extreme ends of the world, where there is still so much discovery to be done.

This is just one of the many projects we can invest in because we’ve taken the difficult decisions necessary to protect the science budget.

It’s just a small part of a huge wave of new investment in science that we are now embarking on.

In total we are talking about £7 billion of capital investment in science over the next parliament. And this Autumn we will set out in detail how it will be allocated.

But rather than us deciding where all that money goes, I’ve come to ask you.

My message here today is that it is over to you.

The government is committing a historic £7 billion to science investment.

Today I’m launching the consultation – asking you, the science community, and business too – how best to invest that funding.

How to maintain excellence – and where are the new opportunities that will put Britain ahead in the global race?

There are many cutting edge projects and facilities that we could invest in.

We could invest in ramping up the power of the Large Hadron Collider.

New investment could enable scientists to search for particles that explain the dark matter that seems to make up the bulk of the material in our universe but still remains a theoretical mystery.

That research could potentially unlock nuclear fussion – with massive economic benefits to this country and the world. And we could invest in bridging the gap between genomics and phenomics.

We were at the head of the genome revolution. Phenomics is the next big challenge.

Research in this area could result in much higher crop yields and better treatments for diseases – with potentially huge benefits to our agricultural and biotech industries.

We could invest in next generation imaging technologies which would step up the speed and scale of biological research. We could see robot scientists sequencing huge numbers of samples automatically. That would be invaluable in designing new drugs and therapies for patients.

The Central Laser facility operates five state of the art lasers for UK researchers and business. But without continued investment these facilities could fall behind.

The Vulcan laser delivers a focused beam which for one tiny fraction of a second is 10,000 times more powerful than the national grid. This puts us at front of the world – but to stay there Vulcan needs to be made twenty times more powerful.

This would give us the highest intensity laser anywhere which could also develop new ways of producing nuclear power.

And we could invest in new research facilities to keep British manufacturing at the sharp edge of innovation.

This might mean new systems for producing materials without interruption 24 hours a day.

And it would complement our hugely successful High Value Manufacturing Catapult and have huge benefit to advanced manufacturing across the UK.

These are just a fraction of the opportunities we have before us.

We have some tough and exciting decisions to make over the coming months – and I’m relying on the help of you in this room and the rest of the scientific community to make sure we get it right.

In this country we really are on our way to be the best place in the world to do science. The best place to innovate.

But the rest of the world won’t just stand still.

That’s why, as part of our long term economic plan, we have to keep working through our long term science plan. That’s why we’re:

– backing successful clusters like Cambridge

– investing in the eight great technologies where Britain has distinctive strengths

– helping innovators as they make the journey from the lab to the market

– taking difficult decisions on other areas of public spending, so we can commit to unprecedented long term investments in science

And – as I’ve announced today – that’s why we are making sure all our decisions to invest will be led by the real experts, in the scientific community.

I’m proud of British science. I’m proud of you in this audience today.

That’s why we will keep taking the difficult decisions, and keep investing in our long term plan for science.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, to the American Enterprise Institute in Washington on 11th April 2014.

Both the UK and US economies are recovering from the biggest financial crisis in living memory and the deep recession that followed it.

In the UK that recession was almost twice as deep as it was in the US – and was the deepest since the Second World War.

But our growth rate has been the fastest in the G7 over the last year and we have seen record rates of job creation.

Jobs are also being created in the US.

And pessimistic predictions that fiscal consolidation was incompatible with economic recovery have been proved comprehensively wrong by events.

Cutting deficits and controlling spending has not choked off recovery but has instead laid the foundations for sustainable growth.

Many risks remain, but all this should be cause for cautious optimism.

Nevertheless, many of those same pessimists have now found new grounds to be gloomy about our future.

Today I would like to consider two new pessimistic predictions that some now make about the prospects for our economies.

The first is that we face a prolonged period of weak growth, or “secular stagnation”, which can only be escaped through large and sustained fiscal stimulus.

The second is that the historic link between economic growth and general prosperity has been broken – that even if growth is sustained, the gains will not be shared by most of our citizens but instead concentrated amongst those at the top of the income distribution.

Today I want to explain why I believe both of these predictions will be proved wrong too.

Because at heart they both stem from the same mistaken diagnosis: that free markets are the problem and more government spending is the answer.

Indeed sometimes it seems as if the prescription from some quarters is always the same: spend more when times are good because we can afford it, spend more when times are bad because we need to.

I have a different prescription.

My message today at the IMF is this.

The pessimists said our plan would not deliver economic growth.

Now they say economic growth will not deliver higher living standards.

They were wrong about the past and they are now wrong about the future.

It’s only by continuing to work through our long term economic plan that we can deliver more economic security and a brighter future for all.

If we can control our public finances, strengthen our financial systems and set free the power of human enterprise and innovation then there is no reason why our best days should not be ahead, for all of us.

Let’s consider first the outlook for economic growth.

There is a long history of pessimism in economics, beginning with Thomas Malthus.

The most famous American pessimist of the twentieth century was Alvin Hansen, who argued in the 1930s that chronically low economic demand would doom the US economy to long term secular stagnation.

His prescription was large and sustained fiscal stimulus.

Of course, the US economy is now well over ten times larger than it was when he made his prediction.

But in the last year his argument has been resuscitated and applied to our current circumstances.

My friend and regular critic Larry Summers made this argument just this week in the Financial Times.

This theory links the excesses of the last decade to current weakness through the same hypothesis: a steady fall in the equilibrium real interest rate at which demand is sufficient to deliver full employment.

In other words, the interest rate required to stimulate enough businesses investment and household spending has fallen further and further through each economic cycle until it can fall no further – we have reached the end of growth they say.

In this situation, the argument goes, the only thing that can support demand in the economy and prevent a deflationary spiral is further fiscal stimulus in the form of more government spending.

But developments over the last year make this argument increasingly difficult to sustain.

To start with, the evidence increasingly shows that monetary policy, broadly defined and effectively deployed, can work.

As unemployment falls and growth picks up, both the Federal Reserve and the Bank of England are in the process of managing the pace and timing of exit from extraordinary monetary stimulus.

These are not the actions of central banks at full stretch, maxed out on all fronts and still unable to do enough to support demand.

Two important caveats apply here.

First, monetary policy can only be fully effective when banks are well capitalised and financial systems are properly functioning.

We in the UK learnt the importance of that caveat during the acute phase of the eurozone crisis from mid 2011 to mid 2012.

Indeed, independent analysis of forecast errors by the OECD suggests that the impact of the euro crisis on financial conditions was by far the most important explanation for slower than forecast economic growth.

In the UK we have worked hard to repair our banking system with credible stress tests and additional capital when needed.

But this caveat is still extremely relevant to many countries in the eurozone, where weak banks and fragmented financial systems still weigh too much on the pace of recovery.

And as they conduct a new round of bank stress tests, I know that Mario Draghi and the ECB are very focused on this issue.

The second caveat is that you need credible fiscal policy for monetary policy to be effective.

This is where most of the controversy arises.

For the main implication of the secular stagnation hypothesis is that large and sustained fiscal stimulus is the only route to sustainable growth.

But again recent experience has in fact shown the reverse: credible fiscal consolidation plans are not only a crucial foundation for effective monetary policy, they are a necessary precondition for sustainable economic recovery.

In the US the resolution of the immediate debate about fiscal policy has lifted a cloud of uncertainty for the US economy and the whole world.

And spending cuts have not choked off the US recovery in the way that some feared they might.

In the UK not only has our growth rate been the fastest in the G7 over the last year, but it is now forecast by the IMF to be so again in 2014 – all despite warnings from some that our determined pursuit of our economic plan made that impossible.

I know the path of fiscal policy in the UK has been the focus of some interest in the US debate, so let me briefly set out our approach and the thinking behind it.

Following our general election in May 2010 we were faced with a record 11% budget deficit, a hung parliament, a banking system five times as large as our GDP, and none of the advantages that the role of the dollar as the world’s reserve currency provides for the US.

What’s more, across the English Channel and the Irish Sea some of our nearest neighbours were teetering on the brink of a sovereign debt crisis.

In these circumstances fiscal credibility was vital for economic stability, let alone economic recovery. The alternative did not bear thinking about.

So we moved quickly to set out a multi-year deficit reduction plan and legislated for it.

The pace of our fiscal consolidation over the last four years has been steady, with an average annual reduction in the cyclically adjusted primary balance of around 1.6% of GDP according to the IMF – the largest and most sustained of any major advanced economy.

And the composition of the consolidation has been based on careful analysis of the economic evidence: 80% will be achieved through spending cuts and entitlement reform; tax rises have been mainly limited to indirect taxes; and we have protected the most economically valuable spending – on science and education.

In response to the acute crisis in the eurozone we made no net changes to tax policy or spending plans, so the underlying stance of fiscal policy remained unchanged.

But the fiscal credibility we had earned meant we could safely allow the so called automatic stabilisers to operate through lower than forecast tax receipts.

And growth has picked up strongly following the abatement of the euro crisis, the success of the Funding for Lending Scheme in reducing bank funding costs, and the subsequent improvement in UK financial conditions.

Our macroeconomic approach has been consistent – responsible fiscal policy, activist monetary policy – and the results for job creation over the last four years have been far better than anyone expected, to an extent not fully appreciated by many in the US.

Employment is now above its previous peak; jobs have been created three times faster than any previous UK recovery; and our employment rate has risen by almost two percentage points since the first quarter of 2010 – the second fastest rise in the G7.

As our recovery has strengthened in the last year, so the composition of that recovery has improved.

Investment spending has grown by 8.8% over the past year compared to 2.2% in the US.

That bodes well for UK productivity, though I am the first to say that we still invest too little and export too little.

And unlike in the past, growth has not been fuelled by credit: our household debt to income ratio continues to fall to 140%, down from a peak of around 170%.

Indeed the UK’s combined public and private debt ratio fell more in the last year than in any other year since data began in 1987.

Many risks remain for the UK economy, not least the slow growth of our biggest export market the Eurozone and the situation in Ukraine, and I remain resolutely focused on building a resilient economy that can withstand future shocks.

But all of this demonstrates that fiscal consolidation and economic recovery go together, and it undermines the pessimistic prognosis that only further fiscal stimulus can drive sustainable growth.

Indeed that is precisely the wrong prescription for our economies.

Before the crisis the UK and the US economies were built on a fundamentally flawed economic model: we ran up ever larger debts owed to China and the developing world to buy the things that they made for us.

2008 was a wake-up call for that whole approach.

Instead of more debt or more government spending we need to get our public finances in order, make structural reforms and compete in the world again.

In the UK that means continuing to work through our long term economic plan – a plan that is working.

As the deficit comes down we cannot afford to let up in our efforts to control spending.

We need to get debt falling because the evidence shows that high levels of debt leave a country more exposed to future shocks and crowd out more useful spending due to high debt interest payments.

And for the UK I’ve made clear that in order to reduce our debt levels in a reliable way we need to deliver an absolute budget surplus in normal times.

But that in itself is not sufficient. We need competitive tax rates and long term structural reforms to make our economies more productive.

That’s why, at the same time as cutting our budget deficit, we are cutting business taxes to the lowest rate in the G20 – last week the headline rate fell again to 21 per cent.

That’s why we are supporting large infrastructure investment in rail, roads and energy: the largest programme of rail investment since the days of Queen Victoria; the biggest investment in our road network for more than thirty years; and fundamental reform of our energy market to encourage large scale private investment.

We understand that there is a positive role for government in the economy.

It was a Republican president who built the interstate network here in the US, , and I am a strong supporter of a new North-South high speed rail line in the UK.

The challenge of competing in the world economy is why I am determined to bring the US shale revolution to the UK to support jobs and help bring down energy costs.

It’s why in my Budget last month I announced fundamental reform of the support we provide for British exporters.

And it’s why we have protected science spending even while other budgets have been cut.

Some, like Professor Robert Gordon of Northwestern University, argue that science and innovation may be running into diminishing returns.

Such predictions have always been proved wrong in the past and I believe they will be again.

The statement “everything that could have been invented has been invented” is often misattributed to the nineteenth century US patent commissioner Charles Holland Duell, but it was a view widely shared at the time.

In fact he believed that the discoveries of the time would appear insignificant compared with what was to come, and he was right.

Today the scientific breakthroughs of the past century have created an explosion of technological applications, which are in turn stimulating new advances in fundamental science.

Just as improvements in lens technology and better microscopes led to huge leaps in germ theory and medicine, today we cannot even imagine the advances in all areas of science – from genetics to materials – that high powered computing will make possible in the years ahead.

Now the challenge for this generation of politicians, business leaders and policymakers is to embrace innovation and make the case for the economic reforms that can harness its potential.

So we should encourage the potential of new genetic technologies not fear them; in Europe we must make the case for GM crops instead of giving in to hostility and protectionism; and all of us need to invest in the application of new discoveries such as graphene – discovered in the UK – instead of allowing our competitors to overtake us.

To believe in secular stagnation is to ignore all of this potential and, as a result, end up at the wrong prescription – more government spending.

Instead my outlook is fundamentally optimistic and I have set out a very different prescription: fiscal responsibility; effective monetary policy; far-reaching and ambitious supply side reforms.

In simple terms, I believe that if we reward hard work and support people’s aspirations to provide a better life for their family then there is no limit to what human enterprise can achieve.

I bring this same optimism to the second of today’s pessimistic predictions – that even if growth is sustained the benefits will accrue to the few not the many.

This prediction – that the link between living standards and economic growth has broken – also leads its proponents to the same prescription: more government spending on welfare and the costs of economic dependency.

But it too can be proved wrong if we follow a different approach.

To begin with it is not well supported by the facts.

As Greg Mankiw has pointed out for the US, on a superficial reading the data appears to show that real median incomes grew by only 3% over the entire period from 1979 to 2007. That sounds like there is a big problem.

But in fact once you take account of changes in household composition, lower taxes, healthcare benefits and other forms of remuneration then that number turns into a 37% real terms increase.

Of course that’s not to say that inequality doesn’t matter – it does.

The Great Recession made our countries poorer and times have been difficult for British and American families.

But in the UK the evidence shows that growth supports rising living standards.

Recent work by academics at the London School of Economics and our own analysis at the Treasury has found no evidence that employee compensation has become detached from GDP growth in recent decades.

Previous results that appear to show a break disappear once you take account of rising pension contributions and payroll taxes.

That is one reason why the labour share of national income in the UK has stayed constant over the last decade.

Nor does the evidence support the so-called “hollowing out” hypothesis in the UK – the idea that middle-skill and middle-income jobs are disappearing with most of the growth in employment either at the top or the bottom of the distribution.

While some traditional mid-level occupations have shrunk or moved down the income scale, new ones have been created to take their place.

So we have fewer middle-paid production line and secretarial jobs, but a lot more middle-paid jobs in IT and professional services.

Overall there has been little change in the proportion of people in middle-income jobs in recent years.

And after rising during the industrial restructuring of the 1980s, as it did in many countries, the level of inequality in the UK has been fairly constant for two decades, and according to the latest data is at its lowest level since 1986.

So the long term link between economic growth and living standards has not been broken.

When the economy shrinks people get poorer, and the only way to ensure people are better off is for the economy to grow.

But we nevertheless face a tremendous challenge.

The very legitimacy of our free market system depends on the promise that effort is rewarded and prosperity is shared.

In recent decades the premium earned by highly skilled, highly qualified people has increased, even as the number of highly skilled people has increased.

That tells us something important about the insatiable demand for higher skills in the modern global economy. The flip side of that is that the downside of having low skills has increased too.

Harvard economists Claudia Goldin and Larry Katz famously posited a “race between education and technology.”

More recently Erik Brynjolfsson and Andrew McAfee have been among those writing about the “race against the machine” – the risk that increasing deployment of artificial intelligence, driverless cars and other digital technologies will lead to unemployment.

Some say that if there are people lacking work, the government should create jobs itself through more spending.

If we want a more equal society, they say the answer is a bigger welfare budget.

But it is simply not sustainable to attempt to swim against the tide with ever more government spending.

We have seen how that approach sows the seeds of its own destruction – not only because the spending becomes unaffordable but also because it creates dependency and ends up harming the very people it is designed to help.

Instead we need to equip our citizens to succeed in the world as we find it; in economic terms we need to increase both their human capital and the returns on that capital.

We need to ensure that work always pays by cutting income taxes and reforming welfare.

We need to reduce the business taxes and regulatory barriers that hold back the creation of new good jobs.

And – most critically of all – we need to make sure we have the best schools and skills in the world.

In other words, we must build a ladder of opportunity for people to climb.

In the UK we are putting this approach into practice – trying to build that ladder.

We have radically cut the tax burden on the low paid; we have introduced new conditionality for those who claim benefits; and we are replacing our complex web of working age benefits with a single Universal Credit so that it always pays to work.

I also support a restoration of the real value of our minimum wage while cutting costs for businesses at the same time.

All of this is about creating enough good jobs.

That is why I have recently set the UK the ambition of “full employment” with the highest employment rate of any G7 economy.

At the same time as making work pay, we must ensure that those at the top of our society contribute their fair share, but the way to do that is not punitive and self-defeating taxation.

Uncompetitive tax rates are as counterproductive at the top end of the income scale as they are at the bottom end, so we have cut our top rate of tax while doing more than any previous British Government to close loopholes and ensure that everyone pays the tax that is due.

We have also introduced a permanent levy on bank liabilities in order to discourage excessive leverage and reflect the costs that the banking crisis imposed on our economy – and I note that recent tax reform proposals in the US have proposed something similar.

All these reforms – to the tax system, welfare, the minimum wage, employment support – have been delivered by this government – solutions to deep problems of social justice and social mobility.

But there is one area of reform that I believe is more important for our long term prosperity than all the rest – that can deliver growth rather than stagnation and simultaneously ensure that the gains from growth are shared.

And that is education.

The education policies we’ve been implementing, led by our Education Secretary Michael Gove, have been influenced by, and reflect, the work of education reformers in the US and elsewhere around the world.

The pioneering work of Mike Bloomberg and Joel Klein in New York, Bobby Jindal in Louisiana, Bill Haslam in Tennessee, Mitch Daniels in Indiana and Jeb Bush in Florida has inspired our approach.

You have – quite rightly – identified schools reform as the civil rights issue of our time.

The emphasis the AEI has placed on policies to advance greater social justice is nowhere clearer than in your work on education.

In both our countries poor children are disproportionately likely to go to poor schools.

In both our countries inequality is perpetuated by a lack of educational opportunity for disadvantaged children.

And in the United Kingdom we are creating the British equivalent of charters – academies and free schools – to provide disadvantaged children with greater opportunities than ever before.

A majority of our secondary schools – broadly equivalent to US high schools – are now academies.

And even though our nation is a sixth the size of the US, we have more students in total in academies and free schools in the UK than there are children in charters in the US.

This is a revolutionary breakthrough in extending school autonomy – and parental choice.

We are also following in the footsteps of the great work being done in the US – from Tennessee to D.C – to ensure that teachers are properly evaluated on the impact they make in the classroom and rewarded for good performance.

What unites all of these reforms is a belief that our nation will only make progress if we make use of every child’s talents and liberate every student’s potential.

In all these ways we can ensure that the link between growth and prosperity remains unbroken.

I have long argued that this truly progressive end can only sustainably be delivered through these means.

Today I have tried to set out a confident, optimistic agenda that can do just that.

Every generation needs to make the case for free markets, enterprise and opportunity afresh.

Every generation needs to overcome the forces of stagnation and choose growth instead.

Every generation needs to find a way to fulfil the promise of shared prosperity.

These are the challenges of our age and the answers to match them are within our reach.

The pessimists are on the march again with their predictions of stagnation and falling living standards.

We, the optimists, can prove them wrong again.

Our two nations’ best days lie ahead.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at Tilbury on 31st March 2014.

Thank you for coming here to Tilbury Port, this morning.

We’re all here at the start of the most important week of changes to our tax system for a generation.

These are the biggest cuts to personal and business taxes for two decades, and we’re making our benefit system more affordable and fairer too.

Changes which will affect the lives of millions of people.

Whether you are working or looking for work; whether you’re starting your own business or hiring someone new – these changes will help.

They are part of our long term plan to build a more resilient economy and create jobs.

Jobs are at the heart of what I want to talk to you about today:

Helping businesses to create jobs; helping people to get jobs; supporting people with jobs.

And it’s jobs that bring you all together here today.

That’s because each and every one of you has found a new job or an apprenticeship in the past few years. Or you have given someone else a job – some of you taking on your first employee, some because your firm is growing, some because you have made that huge leap and started a business of your own.

You come from different firms and different types of work; different ages, different stages of your life.

You’ve come together today because each and every one of you knows what that new job means. The pay cheque at the end of the month and the security that comes with that. The ability to support your own family, to feel financially independent and to plan for the future.

This week’s tax and benefit changes directly affect you – and they directly help you.

This week you will keep more of the money you earn.

This week your business can keep more of the money it makes, so you can invest, expand and create new jobs.

This week we give more support to those looking for a job, but, from this week, we also ask more of those signing on to benefits – so they find work as quickly as possible.

It’s our approach to the economy: fix the fundamentals; back hardworking people; support business; and sort out welfare so it always pays to work.

This approach has already led to 1.3 million more jobs here in Britain.

Here at Tilbury Port, over 100 new jobs.

In Thurrock, in just the last year: 7,200 new jobs; unemployment down by 40%.

It’s an amazing, heartening story.

Britain is creating jobs faster than at any point in our recent history and faster than almost any other country in the world.

But it’s not enough. Too many people, especially young people, are still without a job. Many people want better careers.

And so our work is not done.

We need more jobs to be created in Britain. And we have an ambitious new goal. We want Britain to be the best place in the world for you to find a job.

The best place in the world to hold a job. Working to build an economy that supports full employment.

Four years ago, Britain couldn’t begin to imagine such a thing.

Our economy had collapsed. Our public finances were in a mess. Our country was on the brink.

We had to take difficult decisions, make unpopular choices to put things right.

But with your help and hard work, we’ve been turning things around.

The deficit is coming down, so the debt is under control.

Stability is returning; and with it, confidence.

Companies are moving here; investment is happening here.

Britain is starting to walk tall in the world again.

Even now there are those who want to give up, spend more, borrow more, attack business and put up taxes, and go back to square one.

Back to economic chaos. Back to no new jobs.

Back to a Britain that has weak government and no plan.

We reject that approach.

We say: let’s go on working through the plan that has got us this far.

This week we do that.

This week we turn those words into more action.

Here’s the diary for a week that will help put Britain to work.

On Tuesday, tomorrow – the rate of tax many businesses pay goes from 23% down to 21%.

And on Tuesday too the amount those businesses can invest with no upfront tax doubles to half a million pounds.

Some say: why help business?

We say: because without business there are no jobs.

21% corporation tax is one of the lowest rates in the world.

And that means companies coming here to Britain, work coming here to Britain; trade and investment coming here to Britain.

You can actually see that happening here at Tilbury Port with your own eyes.

Just look at the new Distribution Park that is being developed here – it’ll bring over a thousand new jobs in the next 3 years.

This port is a big business. But there are many smaller companies here today who are thriving as well.

Just look at HW Wilson, who took on 5 apprentices in the last few years – and have now decided to keep them all on in full employment.

Smaller firms like this are the lifeblood of our economy. And we support them.

Tomorrow’s increase to the annual investment allowance helps small business especially.

It helps businesses to expand and install new machines, buy more vans, build a new factory plant – and when that happens, they take on more staff.

There are people here in this audience who have done that – people who are growing their firm or starting out for themselves.

On Tuesday we’re getting behind you. Backing what you do.

And what about all those shops on our high streets, and the pubs and cafes too?

They’ve had a tough time in recent years because of the economy; and the growth of the internet has made it even more difficult for some.

But they are part of our community and they are an important source of jobs.

So tomorrow we’ve got another tax cut. A billion pound package to help ease the burden of the business rates.

We’re giving our small high street shops and cafes and pubs £1,000 off their rate bills.

Capping the rates of every business.

And taking a third of a million of the smallest firms out of rates altogether.

To those who ask why let me tell you: if our businesses can keep of the more money they’ve earned because the rates are lower and the taxes are lower, then they can hire more people and invest in the future.

It’s all about jobs.

Tuesday is also supposed to be the day when fuel duty goes up again.

It won’t – it’s frozen again.

In fact petrol will be 20p per litre less than it would have been because we’ve kept freezing it to help working people, to help families and to help businesses.

But in the diary of the week ahead, the biggest boost for jobs comes not on Tuesday but next Sunday.

Sunday is the day of the new Employment Allowance. The day every business gets a £2,000 cash-back on jobs.

A lot of people don’t realise this. But when a company employs someone, they don’t just have to pay their salary – they pay a tax to the government.

It’s called employer national insurance but it’s really a jobs tax – and it can discourage a company, especially a small one, from hiring someone.

With this new Employment Allowance there’s no jobs tax for many firms and so no obstacle to creating jobs.

This week we’re making sure our businesses keep more of what they earn so they invest and hire.

But we’re also going to make sure that people keep more of what they earn – so their work pays more.

That’s going to happen this Sunday.

From this Sunday people can keep the first £10,000 of what they earn before they pay any income tax.

It’s a big moment in the history of our country’s tax system.

Four years ago, it was just £6,500 tax free.

That’s a big difference and when you calculate what it means for your salary and pay packet – it means you’re keeping £700 more of what you earn.

And for one in ten, those earning the lowest wages, they’ll pay no tax at all.

No government has ever lifted so many people out of tax altogether.

– So £10,000 of income tax free.

– A new Employment Allowance for every business.

– Happening next Sunday.

– A big day for working Britain.

The culmination of this week that sees the biggest reduction of business and personal tax in two decades.

It’s only possible because your hard work is helping us fix the economy – and it is only part of our plan to create jobs.

For it’s no good creating jobs – if we’re also paying people to stay on welfare.

We inherited a welfare system that didn’t work

There was not enough help for those looking for a job – people were just parked on benefits.

Frankly, there was not enough pressure to get a job – some people could just sign on and get almost as much money staying at home as going out to work.

That’s not fair to them – because they get trapped in poverty and their aspirations are squashed.

It’s certainly not fair to taxpayers like you, who get up, go out to work, pay your taxes and pay for those benefits.

So if Tuesday is when we help businesses creating jobs; and Sunday is when we help hardworking people with jobs; next Monday is when we do more to encourage people without jobs to find them.

Benefits will only go up by 1% – so they don’t go up faster than most people’s pay rises, as used to be the case.

When I took this job, some people were getting huge payouts – receiving £50,000, £60,000 even up to £100,000 in benefits. More than most people could get by working.

That was outrageous.

So we’ve capped benefits, so that a family out of work can’t get more in benefits than the average working family.

We’re now capping the overall welfare bill, so we control that. That came into force last week.

And we are bringing in a new Universal Credit to make sure work always pays.

From this month we’re also making big changes to how people go about claiming benefits.

We all understand that some people need more help than others to find work.

So starting this month we’ll make half of all people on unemployment benefits sign on every week – and people who stay on benefits for a long time will have to go to the job centre every day so they can get constant help and encouragement.

To claim benefits people will also have to show they can speak English, or go on a course to learn how.

It is ridiculous that people who didn’t speak English, and weren’t trying to learn it, could sit on out of work benefits in this country.

If people can’t speak English it is hard to get a job. Starting this week it will be even harder to get benefits if they’re not even attempting to learn it.

We’re going to require people to look for work for a week first before they get their unemployment benefit.

When people turn up at the job centre they’ll be expected to have a CV ready and to have started looking on our new jobs website.

From now on the deal is this: look for work first; then claim the dole. Not the other way around.

We will ask many of the long term unemployed to do community work in return for their benefits -whether it is making meals for the elderly, clearing up litter, or working for a local charity.

They will be gaining useful work experience and there’s an important principle here: if you want something out, you’ve got to put something in.

All of this is bringing back the principles that our welfare state was originally based on – something for something, not something for nothing.

That’s fair to the people claiming benefits – and fair to taxpayers who are paying for them.

The old way has failed. More public spending leading to more welfare bills and more government jobs the country couldn’t afford.

Instead, this week, we follow the new way, our way: backing businesses by cutting their taxes so they can create jobs; cutting the tax on hard working people so their job pays; and holding back welfare rises and imposing more conditions on those claiming the dole, so that getting a job pays more.

The biggest business and personal tax cuts for a generation.

Welfare changes that get people back to work.

That’s our jobs plan and it’s the only plan in town.

And it’s working.

Record numbers in work.

Employment growing three times faster than any recovery on record.

For the first time in 35 years, a greater proportion of people in work than in the US.

But the problems we’re dealing with run deep. They cannot be solved overnight.

Under the last government there were places where the benefits culture had become deeply entrenched.

And while unemployment has come down, there are still over 2 million looking for a job

It will take time to fix that. But we will not rest while we still have so much wasted potential in some parts of our country.

That’s why today I’m making a new commitment.

A commitment to fight for Full Employment in Britain.

Making jobs a central goal of our economic plan.

70 years ago this year; during the second world war, when Winston Churchill was Prime Minister of a Coalition Government; they set the first commitment to full employment.

In those days they thought government could micro-manage the economy and guarantee a job for everyone.

But – as we learnt again recently – you can’t abolish boom and bust.

So attempts past and present by governments “guarantee” a job to every person are doomed to fail.

There are always going to be ups and downs to the economic cycle.

And spending billions of pounds creating jobs in the public sector doesn’t work either.

Government spending gets out of control; businesses fail as their taxes get too high, work pays less as personal taxes rise, and jobs in the private sector are lost.

You end up with more people unemployed instead of less.

Then the politicians who make these guarantees get into a panic.

So unemployed people are pushed onto sickness benefits to hide the real numbers.

That’s what happened before we came to office.

The politicians talked of guaranteeing full employment and ended up with a Great Recession and soaring unemployment.

We are taking a different approach.

And let me be clear.

There is no reason why Britain shouldn’t aim to have the highest employment rate of any of the world’s leading economies.

To have more people working than any of the other countries in the G7 group.

That’s my ambition.

The best place in the world to create a job; to get a job; to keep a job; to be helped to look for another job if you lose one.

A modern approach to full employment means backing business.

It means cutting the tax on jobs and reforming welfare.

It means improving our schools.

It means spending less on benefits, so we can invest more in creating new jobs: by having more apprenticeships, new roads and railways, and making Britain a world leader in science.

That is what I mean when I say that we are going for Full Employment.

These are things within the power of the government.

We’ve already done a lot, and made a lot of progress. But we will need to go further.

So in the next parliament we will need to keep going – keep reforming those benefits to help more people into work. So the system is fairer for people who are paying for it.

Keep reducing tax and costs on businesses – so they create jobs.

Keep rewarding and supporting hardworking people who have jobs.

That’s the approach that leads to the fullest employment.

Jobs matter – mass unemployment is never a price worth paying.

But artificial jobs paid for on borrowed money doesn’t work either.

We need our new approach.

At the heart it is a deal.

We’ll do everything we can to back business, help create jobs and make work pay.

But in return we say that those who can work must take the jobs that are available.

That’s the fair deal our society should always have stuck to.

That’s the fair deal that will underpin our commitment to full employment in the future.

Of course, there will always be people in between jobs; people unable to work.

And there are those with important caring responsibilities to their families and others not seeking work. They will never be included in a drive for full employment.

But we all know that there is nothing kind or fair about leaving people who could work out of work and living on the dole. With all the stress and the bad effects that has on relationships, on families, children – even whole communities in some places.

Everyone here knows what a difference a new job can make to people’s lives.

It’s not just the money. It’s the feeling of security, of making a contribution.

We’re making historic changes this week to cut tax and reform benefits; and we won’t stop until we make sure that everyone has the opportunity to enjoy the peace of mind that comes from having a job.

And everyone can have the opportunity to join this audience in the world of work.

Below is the text of the 2014 Budget speech made by George Osborne, the Chancellor of the Exchequer, in the House of Commons on 19th March 2014.

Mr Deputy Speaker,

I can report today that the economy is continuing to recover – and recovering faster than forecast.

We set out our plan.

And together with the British people, we held our nerve.

We’re putting Britain right.

But the job is far from done.

Our country still borrows too much.

We still don’t invest enough, export enough or save enough.

So today we do more to put that right.

This is a Budget for building a resilient economy.

If you’re a maker, a doer or a saver: this Budget is for you.

It is all part of a long term economic plan – a plan that is delivering security for the people of this country.

I have never shied away from telling the British people about the difficult decisions we face.

And just because things are getting better, I don’t intend to do so today.

Yes, the deficit is down by a third.

Now in the coming year it will be down by a half.

But it is still one of the highest in the world – so today we take further action to bring it down.

Yes, investment and exports are up.

But Britain’s got twenty years of catching up to do – so today we back businesses who invest and export.

Yes, manufacturing is growing again, and jobs are being created across the country.

So today we support manufacturers and back all regions of our country.

And while as a nation we’re getting on top of our debts, for many decades Britain has borrowed too much and saved too little.

So in this Budget we make sure hardworking people keep more of what they earn – and more of what they save.

Yesterday we set out our support for parents with tax free childcare.

Today support for savers is at the centre of this Budget, as we take another step towards our central mission: economic security for the people of Britain.

OBR and economic forecasts

Mr Deputy Speaker, let me turn to today’s forecasts from the Office for Budget Responsibility.

I am grateful to Robert Chote, Steve Nickell and their team – and thank Graham Parker for agreeing to serve with them for another term.

It is a credit to the OBR that we now take for granted that figures presented at this Despatch Box are not fiddled but fair and independent.

A year ago at the Budget the OBR forecast the economy to grow by just 0.6% in 2013.

They now confirm that it grew by three times as much.

At the Autumn Statement, they significantly revised up their expectations for future growth.

Today I can tell the House they are revising up their forecast again.

A year ago, they predicted growth in 2014 would be 1.8%. At the Autumn Statement, 2.4%. Today the OBR forecast growth in 2014 of 2.7%.

That’s the biggest upward revision to growth between Budgets for at least 30 years.

Growth next year is also revised up to 2.3%.

Then it’s 2.6% in 2016 and 2017.

And with the output gap closed around a year earlier than previously predicted, growth returns to around its long term trend, at 2.5% in 2018.

Taken together, these growth figures mean our economy will be £16 billion larger than was forecast just four months ago.

Mr Deputy Speaker, there is another prediction the OBR make today the House will want to know about.

Six years ago Britain suffered a Great Recession.

We had the biggest bank bail out in the world.

We had the biggest deficit since the war.

We suffered the deepest recession in modern times.

But later this year the OBR expects Britain to reach the point when our economy is finally larger than before it collapsed six years ago.

That’s because we’re now growing faster than Germany, faster than Japan, faster than the US – in fact there is no major advanced economy in the world growing faster than Britain today.

But we should be alert to the risks.

The euro area is slowly recovering but as the OBR caution “further damaging instability remains possible”.

There is volatility in emerging markets.

And while for now the OBR do not expect the situation in Ukraine to have a “large impact” on us, they warn that an escalation risks higher commodity prices, higher inflation and lower growth.

It’s a reminder of why we need to build our economy’s resilience.

Employment forecasts

At home the biggest risk is clear: abandoning the economic plan that is working.

And nowhere is the success of that plan more evident than in job creation.

Today again we are reminded that the most important consequence of our plan is more people in work – with each job meaning a family more secure.

The pace of net job creation under this government has been three times faster than in any other recovery on record.

1.3 million more people in work.

The latest figures today show a staggering 24% fall in the claimant count in just one year, and the fastest fall in the youth claimant count since 1997.

The OBR today forecast one and a half million more jobs over the next five years.

Unemployment down from the 8% we inherited to just over 5%.

And the OBR predict earnings to grow faster than inflation this year and in every year of the forecast. That’s why the country can afford a real terms increase in the National Minimum Wage.

Mr Deputy Speaker, this is a government whose plan is delivering jobs.

We now have:

– a record number in work

– a record number of women in work

– and for the first time in 35 years, a higher employment rate than the United States of America

That’s what we mean when we say we’re getting Britain working.

Fiscal

Mr Deputy Speaker, there can be no economic security if there is no control of the public finances.

Before I presented my first Budget to this House, the government was borrowing one pound in every four it spent – and we were faced with the threat of a sovereign debt crisis.

We have taken difficult decisions.

But thanks to those decisions, the IMF now say that we are achieving the largest reduction in both the headline and the structural deficits of any major advanced economy in the world.

There were those who said repeatedly that the deficit was going to go up.

Instead I can tell the House that the Office for Budget Responsibility have revised down the underlying deficit in every year of their forecast.

Before we came to office the deficit was 11%.

This year they say it will be 6.6% – lower than forecast and down a third.

Next year, 5.5% – down a half.

Then it will fall to 4.2%, 2.4% and reach 0.8% in 2017-18.

In 2018-19, they are forecasting no deficit at all – instead, at plus 0.2%, a small surplus.

But only if we work through the plan.

The government’s fiscal mandate is met – and continues to be met a year early.

And yet while the underlying structural deficit falls, it falls no faster than was previously forecast – despite higher growth.

This goes to the heart of the argument this government has made:

Faster growth alone will not balance the books.

Securing Britain’s economic future means there will have to be more hard decisions; more cuts.

The question for the British people is: who has the credibility to deliver them?

Let me turn to the underlying cash borrowing numbers.

Britain was borrowing £157 billion a year before we came to office.

This year we expect to borrow £108 billion.

That’s £12 billion less than forecast a year ago.

Indeed even since the Autumn Statement the OBR have revised down borrowing in every single year.

In 2014-15 they say it will fall to £95 billion.

Then it falls again to £75 billion in 2015-16, then £44 billion, then down to £17 billion.

In 2018-19 we won’t be borrowing at all. We will have a small surplus of almost £5 billion.

Taken together, these new figures mean Britain will be borrowing £24 billion less than was forecast. That’s more than we spend in an entire year on the Police and Criminal Justice system.

Lower borrowing and a smaller deficit mean less debt.

While we meet the debt target one year late as before, the OBR have revised down national debt in every single year of the forecast.

They expect it to be 74.5% of GDP this year; 77.3% next year; peaking at 78.7% in 2015-16 – lower than the 80% previously forecast – before falling to 78.3% in 2016-17, then falling to 76.5% and then 74.2% in 2018-19.

So Mr Deputy Speaker,

Growth up.

The deficit set to halve.

Debt is lower.

And the biggest single saving of all is a £42 billion reduction in the interest payments we will have to make on that debt.

Saving every family in the nation the equivalent of almost £2,000.

Money that was going to creditors around the world, now going to pay for the NHS and other public services.

Monetary policy

Mr Deputy Speaker it is because we have a credible fiscal plan that the Bank of England can provide the support needed to businesses and families.

Yesterday, I confirmed the appointments of Anthony Habgood to Chair the Court and Ben Broadbent and Minouche Shafik to be the new Deputy Governors for Monetary Policy and Markets and Banking respectively.

All three make a strong team at the Bank stronger still.

I today re-confirm my remit for the Monetary Policy Committee, including the target of 2 per cent CPI inflation – which the OBR expect will be met this year, next year and in the years ahead.

I also set out the remit for the Financial Policy Committee, the body created by us to avoid the mistakes of the past.

Although the OBR forecast that house prices will remain below their real terms peak until at least 2018, I have asked the Committee to be particularly vigilant against the emergence of potential risks in the housing market.

And to enhance our resilience, and protect us from economic shocks, we will also continue rebuilding our foreign exchange reserves.

Those reserves are now 50% higher than when we came to office.

£1 coin

Of course, the prerequisite of sound money is a sound currency.

And, Mr Deputy Speaker, the £1 coin has become increasingly vulnerable to forgery.

Now among the oldest of coins in circulation; one in thirty pound coins are counterfeit – and that costs businesses and the taxpayer millions each year.

So I can announce that we will move to a new, highly secure, £1 coin.

It will take three years. We will consult with industry.

Our new pound coin will blend the security features of the future with inspiration from our past.

In honour of our Queen, the coin will take the shape of one of the first coins she appeared on – the threepenny bit.

A more resilient pound for a more resilient economy.

Fiscal policy

Mr Deputy Speaker, sound money depends too on sound public finances.

We are entering a critical phase and we must learn from the past.

Every time a post-war government has embarked on public spending cuts, real spending has risen back to its previous heights within three years.

And sure enough there are those today who say: ease up, spend more, borrow more.

That would mean debt rising towards 100% GDP – undermining growth.

It would be a huge mistake and we are not going to let that happen.

Many Chancellors, faced with a recovering economy and improved borrowing forecasts before an election, would be tempted to squander the gains.

I will not do that today.

These gains were hard won by the British people – and we’re not going to jeopardise their economic security.

Britain is not going back to square one.

So in this Budget all decisions are paid for. Taxes are lower but so too is spending.

For we must bring our national debt substantially down.

Analysis published today shows just running a balanced current budget does not secure that.

Instead, Britain needs to run an absolute surplus in good years.

We will fix the roof when the sun is shining – to protect Britain from future storms.

So I can confirm that in addition to the cuts this year and next, there will be cuts in the next Parliament too.

To lock in our country’s commitment to this path of deficit reduction we will seek the support of Parliament in a vote.

And I will bring forward a new Charter for Budget Responsibility this autumn.

We are taking further difficult decisions now so we can reduce the deficit and protect our NHS and schools and meet our obligations to the world’s poorest by contributing 0.7% of our national income to help them.

On public service pensions, we implement the reforms proposed by John Hutton.

We will ensure schemes are properly valued, saving the taxpayer over £1 billion a year.

We are continuing with pay restraint in the public sector – an essential part of maintaining sound finances and economic stability.

We will also insist on the prudent management of departmental finances.

Thanks to the efforts of my colleagues in Cabinet, these now regularly come in under budget.

In order to lock-in these underspends, I said in December that we would reduce spending by £1 billion in 2015-16. Today, I am making that overall billion pound reduction permanent.

And I look forward to the work my excellent colleague the Chief Secretary is now doing, with the Cabinet Office, to find further efficiencies.

Difficult decisions on public service pay and pensions.

Further savings in departments.

A cap on welfare bills.

None of these decisions are easy, but they are the right thing to ensure Britain lives within her means.

Welfare

We set out today the details of that welfare cap – and we will seek the support of Parliament for it next week.

From housing benefit to tax credits, the full list of benefits included in the cap is published in the Budget document today.

Only the State Pension and the cyclical unemployment benefits are excluded.

I am setting it at £119 billion in 2015-16. It will rise, but only in line with forecast inflation, to £127 billion in 2018-19.

Britain should always be proud of having a welfare system that helps those most in need.

But never again should we allow its costs to spiral out of control and its incentives to become so distorted that it pays not to work.

In future, any government that wants to spend more on benefits will: have to be honest with the public about the costs, need the approval of Parliament, and will be held to account by this permanent cap on welfare.

Tax avoidance

Mr Deputy Speaker,

The distributional analysis published today shows that the Budget decisions, and the decisions across this parliament, mean the rich are making the biggest contribution to the reduction of the deficit – because we are all in this together.

The independent statistics show that under this government income inequality is at its lowest level for 28 years.

Thanks to my Right Honourable Friend the Prime Minister’s leadership we have driven the international efforts to develop tough, new global tax rules that stop rich individuals hiding their tax and companies shifting their profits offshore.

Here at home we’re collecting twice as much as before through compliance – collecting the taxes that are due.

And the number of registered tax avoidance schemes has fallen by half.

And while the vast majority of wealthy people pay their taxes, there is still a small minority who do not.

We will now require those who have signed up to disclosed tax avoidance schemes to pay their taxes, like everyone else, up front.

This will apply in future to schemes covered by our General Anti-Abuse Rule too.

If people feel they’ve been wronged, they can of course go to court. If they win, they get their money back with interest.

We have already consulted on this idea – now we will implement it. The OBR confirm that this will bring forward £4 billion of tax receipts. And it will fundamentally reduce the incentive to engage in tax avoidance in the future.

The public tolerance for those who do not pay their fair share evaporated long ago – but we’ve had to wait for this government before there was proper action.

So today we go further still:

I am increasing HMRC’s budget to tackle non-compliance.

We will block transfers of profits between companies within groups to avoid tax.

We will increase tax credit debt recovery rates for those with sufficient earnings.

We will give HMRC modern powers to collect debts from bank accounts of people who can afford to pay but have repeatedly refused to, like most other Western countries.

We will increase compliance checks to catch migrants who claim benefits they aren’t entitled to, saving the taxpayer almost £100 million.

We will take action to curb potential misuse of the EIS and VCT schemes.

And we are expanding the new tax we introduced to stop people avoiding stamp duty by owning homes through a company.

We will expand the tax on residential properties worth over £2 million to those worth more than £500,000.

And from midnight tonight anyone purchasing residential property worth over half a million pounds through a corporate envelope will be required to pay 15% stamp duty.

None of this applies to homes that are rented out.

Many of these are empty properties held in corporate envelopes to avoid stamp duty.

This abuse will end.

Mr Deputy Speaker,

Another abuse has been the manipulation of the LIBOR rate.

Our regulators are broadening their investigation to the foreign exchange markets – and I will keep the House informed.

Financial services are a hugely important industry to this country which I want to promote around the world.

But I also want the fines paid by those who have demonstrated the worst of values to support those who demonstrate the best of British values.

I’m talking about the men and women in our armed forces who risk their lives to keep us free.

So I will continue to direct the use of the LIBOR fines to our military charities and our emergency service charities too.

Because the sums continue to grow, I can today extend that support to our search and rescue and lifeboat services – and provide £10 million of support to our scouts, guides, cadets and St John’s Ambulance.

I am also today waiving inheritance tax for those in our emergency services who give their lives protecting us.

I will also relieve the VAT on fuel for our Air Ambulances and Inshore Rescue boat services across Britain, and provide a new air ambulance for London – all in response to huge and heartfelt public demand and the campaigning of my Hon. Friends for Hexham, Brentford & Isleworth, and Argyll & Bute.

Tomorrow is the 21st anniversary of the IRA bomb that killed young Tim Parry and Johnathan Ball.

Survivors for Peace was set up by Tim’s parents, Colin and Wendy, and it no longer receives lottery funding. My Honourable Friend for Warrington South and the RHM for Dulwich have both raised this issue, and I know myself what incredible work they do.

To honour the memory of all victims of terrorism we will provide the funding the programme needs.

Last month with my Right Honourable Friend for Dumfriesshire I visited Lockerbie to pay my respects on the twenty fifth anniversary of the tragedy. And we will support the scholarships created for local people there to study in the United States.

Further, this summer, many services of remembrance will be held in our cathedrals to mark the Great War, so we are providing £20 million to support the repairs needed to these historic buildings.

We will also support the celebration of the 800th anniversary of the signing of the Magna Carta next year.

King John’s humbling centuries ago seems unimaginably distant.

A weak leader, who had risen to the top – after betraying his brother, compelled by a gang of unruly barons to sign on the dotted line.

So I will provide a grant to the Magna Carta Trust to ensure that today’s generation learn the lessons of the past.

Exports

Mr Deputy Speaker,

We’re not going to have a secure economic future if Britain doesn’t earn its way in the world.

We need our businesses to export more, build more, invest more and manufacture more.

First, exports.

Our exports have grown each year and the OBR today forecast rising export growth in the future.

Our combined goods exports to Brazil, India and China have risen faster than those of our competitors.

But we’re starting from a low base and we’ve got many lost years to catch up.

Britain has to up its game – and today we do.

With Stephen Green, and now Ian Livingston, we’re expanding the reach and support UKTI offers British businesses.

But for many firms the truth is you can only win the contract if you are backed by competitive export finance.

For decades the British government has been the last port of call, when we should be backing British businesses wanting to sell abroad.

Today we fundamentally change that.

And we’re going to start with the finance we provide our exporters.

We will double the amount of lending available to £3 billion.

And I can announce that from today the interest rates we charge on that lending will be cut by a third.

Instead of having the least competitive export finance in Europe.

We will have the most competitive.

We will also reform Air Passenger Duty to end the crazy system where you pay less tax travelling to Hawaii than you do travelling to China or India.

It hits exports, puts off tourists and creates a great sense of injustice among our Caribbean and South Asian communities here in Britain.

From next year, all long haul flights will carry the same, lower, band B tax rate that you now pay to fly to the United States.

Private jets were not taxed at all under the previous government. Today they are, and I’m increasing the charge so they pay more.

And because we want all parts of our country to see better links with the markets of the future we’re going to provide start-up support for new routes from regional airports, like Liverpool, Leeds or indeed Inverness.

More support for businesses; competitive finance; cheaper global flights…

I want the message to go out that we are backing our exporters – so that wherever you are around the world you can’t fail to see: Made in Britain.

One key British export is the North Sea’s oil and gas.

We will take forward all recommendations of the Wood report. And we will review the whole tax regime to make sure it is fit for the purpose of extracting every drop of oil we can.

We will introduce now a new allowance for ultra high pressure, high temperature fields to support billions of pounds of investment, thousands of jobs and a significant proportion of our energy needs.

Even with these measures, the North Sea is a mature basin – and the OBR have today revised down the forecast tax receipts by a further £3 billion over the period.

The Scottish economy is doing well and jobs are being created.

But this is a reminder of how precarious the budget of an independent Scotland would be. These further downgrades in the tax receipts would leave independent Scots with a shortfall of £1,000 per person.

Britain is better together.

Housing

Mr Deputy Speaker, our country needs to export more – and it also needs to build more.

House building is up 23%. But that’s not enough.

That’s why we’re making further reforms to our planning system and offering half a billion pounds of finance to small house building firms.

It’s why we’re signing city deals across the country to get more built – with a new funding deal this week for Cambridge.

And it’s why we’re giving people a new Right to Build their own homes and providing £150 million of finance today to support that.

It’s why we’re funding regeneration of some of the urban housing estates that are in the worst condition, and we’re extending the current Support for Mortgage Interest Scheme to 2016.

And it’s why we’ve got Help to Buy.

We’re extending the Help to Buy equity loan scheme for the rest of the decade, so we get 120,000 new homes built.

In the South East where the pressure is greatest we’re going to build new homes in Barking Riverside, regenerate Brent Cross, and build the first new Garden City in almost a hundred years at Ebbsfleet.

We’re going to build 15,000 homes there, put in the infrastructure, set up the development corporation and make it happen.

I thank my Honourable Friends for Dartford and Gravesham for their tremendous support.

And we will be publishing a prospectus on the future of Garden Cities.

Taken all together, the housing policies I announce today will support over 200,000 new homes for families.

We’re getting Britain building.

Investment

Mr Deputy Speaker, we’re also going to get Britain investing.

Britain has under-invested for decades.

We’re the first government to have committed to long term and rising capital budgets – and this autumn I will set out the detailed plans for the projects that will be supported for the rest of the decade. We’ve been reminded again this week of the benefits high speed rail will bring to the north of our country and I’m determined it goes further north faster.

Today I have approved a £270 million guarantee for the Mersey Gateway Bridge thanks to the hard work of my Honourable Friend for Weaver Vale.

Tomorrow we introduce legislation to give new tax and borrowing powers to the Welsh Government to fund their infrastructure needs, and they can start now on work to improve the M4 in South Wales.

Because of the exceptionally poor weather this winter, I am making an additional £140 million available, on top of that already provided, for immediate repairs and maintenance to damaged flood defences across Britain.

Our roads too have taken a battering.

My Honourable Friend for Northampton North has been a persistent campaigner for resources to repair the pot-holes in his constituency and across the country.

His persistence has paid off and I’m making £200 million available which local authorities can bid for. I trust Northampton will be making an application.

Modern infrastructure is part of a successful economy.

So too is a modern industrial strategy.

If Britain isn’t leading the world in science and technology and engineering, then we are condemning our country to fall behind.

So we will establish new centres for doctoral training, for Cell Therapy and for Graphene – a great British discovery that we should break the habit of a lifetime with and commercially develop in Britain.

To make sure we give young people the skills they need to get good jobs in this modern world, we’ve doubled the number of apprenticeships and I will extend the grants for smaller businesses to support over 100,000 more.

And we’ll now develop new degree level apprenticeships too.

Mr Deputy Speaker, in my maiden speech here in this House I spoke of Alan Turing, the codebreaker who lived in my constituency, who did more than almost any other single person to win the war, and who was persecuted for his sexuality by the country he helped save.

I am delighted that he has finally received a posthumous Royal Pardon.

Now, in his honour, we will found the Alan Turing Institute to ensure Britain leads the way again in the use of big data and algorithm research.

I am determined that our country is going to out-compete, out-smart and out-do the rest of the world.

Business tax

Government investment is part of the story – but we need business investment too.

When we came to office, Britain had one of the least competitive business tax regimes in Europe.

Now we have the most competitive.

Thanks to the Office of Tax Simplification we have already cut burdens on administration – and I am grateful to Michael Jack, John Whiting and their team for their hard work.

Today we accept their recommendation to move the collection of Class 2 NICs into self-assessment, abolishing for 5 million people this wholly unnecessary bureaucracy.

And we’ve cut business tax rates.

Corporation tax was 28% when we came to office.

In just two weeks corporation tax will be down to 21%, high street stores will get £1,000 off their rates, and every business in the country will get the Employment Allowance – a £2,000 cash-back on jobs.

Next year, corporation tax will reach 20% and we take under 21s out of the jobs tax altogether.

Businesses keeping more of their money to create jobs and invest in the future.

Today I want to go further.

Many of the enterprise zones we created are now flourishing – so the business rates discounts and enhanced capital allowances will be extended for another three years.

And I can confirm that with the Northern Ireland Executive we’ll establish the first enterprise zone there near Coleraine.

I’m raising the rate of the R&D tax credit for loss-making small businesses from 11% to 14.5%.

Two years ago, I launched the Seed Enterprise Investment Scheme to help finance start-ups.

It’s been a great success and I’m making it permanent.

We’re backing investment into social enterprises with a Social Investment Tax Relief at a rate of 30%.

And we’re supporting our creative industries too. The European Commission has today approved the extension of our film tax credit – and I will apply the same successful approach to theatre, especially regional theatre.

From this September there will be a 20% tax relief for qualifying productions, and 25% for regional touring.

And we’re expanding by a third the size of the cultural gift scheme.

But I want to do something today that helps all businesses invest.

In 2012 I increased the Annual Investment Allowance ten-fold to £250,000.

This generous allowance was due to expire at the end of this year – and all the business groups have urged me to extend it.

So we will. But we’ll do more.

We’re going to double the Investment Allowance to £500,000, extend it to the end of 2015, and start it next month.

99.8% of businesses will get a 100% investment allowance.

Almost every business across Britain will pay no upfront tax when they invest in the future.

It costs £2 billion in the short term – so when we say: we’re going to get Britain investing; when we say we’re going to back growth around the country – we mean it.

Manufacturing

A resilient economy is a more balanced economy with more exports, more building, more investment – and more manufacturing too.

We’ve got to support our manufacturers if we want to see more growth in our regions.

To those who say manufacturing is finished in the West, I say: look at America, which will see up to five million new manufacturing jobs by the end of this decade.

I’ll tell you why.

US industrial energy prices are half those in Britain.

We need to cut our energy costs.

We’re going to do this by investing in new sources of energy: new nuclear power, renewables, and a shale gas revolution.

We’re going to do this by promoting energy efficiency.

Today, by tilting the playing field – extending the 2% increase in company car tax in 2017-18 and 2018-19 while increasing the discount for ultra low emission vehicles – and reducing the rate of fuel duty on methanol.

But above all we are going to have a £7 billion package to cut energy bills for British manufacturers – with benefits for families and other businesses too.

First, I am capping the Carbon Price Support rate at £18 per ton of CO2 from 2016-17 for the rest of the decade.

This will save a mid-sized manufacturer almost £50,000 on their annual energy bill.

And it will save families £15 a year on their bills too – over and above the £50 we’ve already taken off.

Second, I’m extending the existing compensation scheme for energy intensive industries for a further four years to 2019-20.

Our steel makers, chemical plants, paper mills and other heavy energy users make up 35% of our manufacturing exports and employ half a million people. This scheme helps the companies most at risk of leaving to remain in the UK.

Third, I’m introducing new compensation worth almost a billion pounds to protect these energy intensive manufacturers from the rising costs of the Renewable Obligation and the Feed-In Tariffs.

Otherwise green levies and taxes will make up over a third of their energy bills by the end of the decade.

Fourth, I am exempting from the carbon price floor the electricity from Combined Heat and Power plants which hundreds of manufacturers use.

And this entire package delivered without any reduction in the investment in renewable energy.

Today I have cut the cost of manufacturing in Britain.

Half of the firms that will benefit most are in the north of England. A third are in Scotland and Wales.

Thousands of good jobs protected.

A more resilient economy.

A government on the side of manufacturers.

A Britain that makes things again.

Duties

So we’re backing exports, backing manufacturing, backing a Britain that builds.

And Mr Deputy Speaker, we also want to help hardworking people keep more of what they earn and of what they save.

That’s what we’ve done by freezing council tax, freezing fuel duty and raising the personal allowance to £10,000.

And from next year tax free childcare – 20% off, for up to £10,000 of childcare costs for parents.

And an early years pupil premium to help the most disadvantaged.

Today we can do more to help.

Let me start with duties.

I can confirm that the fuel duty rise planned for September will not take place.

Petrol will be 20 pence lower per litre than it would have been.

Turning to gambling duties.

Fixed odds betting terminals have proliferated since gambling laws were liberalised almost a decade ago.

These machines are highly lucrative, and therefore it’s right we now raise the duty on them to 25%.

We will also extend the horserace betting levy to bookmakers who are based offshore.

And we’ll look at wider levy reform and at introducing a ‘racing right’ to support the sport.

While betting machines have grown, the number of bingo halls has plummetted by three quarters over the last thirty years.

Yet bingo duty has been set at the high rate of 20%.

Now fuel duty is frozen, my Honourable Friend for Harlow has turned his energy and talent into a vigorous campaign to cut bingo duty – ably assisted by my Honourable Friend for Waveney.

They want the rate cut to 15%.

I can go further.

Bingo duty will be halved to 10% to protect jobs and protect communities.

Let me turn now to tobacco and alcohol duties.

Tobacco duty has been rising by 2% above inflation and will do so again today.

This escalator was due to end next year – but there are no sound health reasons to end it, so it will be extended for the rest of the next Parliament.

We’ve introduced new laws to prevent alcohol being sold below minimum tax rates, and this helps prevent supermarkets undercutting pubs, and helps stop problem drinking.

It’s a far more targeted approach than the alcohol duty escalator hated by many responsible drinkers.

Today, I am scrapping that escalator for all alcohol duties.

They will rise with inflation, with these exceptions:

Scottish Whisky is a huge British success story.

To support that industry, instead of raising duties on whisky and other spirits, I am today going to freeze them.

And with some cider makers in the West Country hit hard by the recent weather, I am going to help them by freezing the duty on ordinary cider too.

And then there’s beer. I know the industry, led so ably by my Honourable Friend for Burton, have been campaigning for a freeze.

But beer duty next week will not be frozen.

It will be cut again by 1 pence.

Pubs saved. Jobs created. A penny off a pint for the second year running.

Personal allowance

Mr Deputy Speaker, it is a central part of our long term economic plan that people keep more of the money they have earned.

When we came to office, the personal tax allowance was just £6,500.

In less than three weeks time, it will reach £10,000.

That’s an income tax cut for 25 million people.

Today, because we are working through our plan, we can afford to go further.

Next year there will be no income tax at all on the first £10,500 of your salary.

Ten and a half thousand pounds tax free.

£800 less in tax every year for the typical taxpayer.

Our increases in the personal allowance will have lifted over 3 million of the lowest paid out of income tax altogether.

And I am incredibly proud we have achieved that.

I can also confirm today that the higher rate threshold will rise for the first time this Parliament, from £41,450 to £41,865 next month, and then by a further 1% to £42,285 next year.

And because I am also passing the full benefit of today’s personal allowance increase on to higher rate taxpayers – people earning 42,000, 43, 50, 60, all the way up to £100,000 will be paying less income tax because of this Budget.

Tax cuts for those on low incomes – and those on middle incomes too.

Help for hardworking people as part of a long term economic plan.

And I am linking the rate of the transferable tax allowance for married couples to the personal allowance, so it will also rise to £1,050.

Help for 4 million families that they would take away and we are proud to provide.

Savings

Our tax changes will help people who work. But there is a large group who have had a particularly hard time in recent years: and that is savers.

And this matters not just because these are people who have made sacrifices to provide for their own economic security in retirement.

It matters too because one of the biggest weaknesses of the British economy is that it borrows too much and saves too little.

This has been a problem for decades and we can’t fix it overnight.

It’s no surprise that the OBR forecast the saving ratio falling.

So today we put in place policies for savers that stand alongside deficit reduction as a centrepiece of our long term economic plan.

The reforms I am about to announce are only possible because, thanks to this government:

– we have a triple lock on the state pension

– more people are saving through auto enrolment

– and we’re introducing a single tier pension that will lift most people above the means test

That secure basic income for pensioners means we can make far reaching changes to the tax regime to reward those who save.

Here’s how.

First, I want to help savers by dramatically increasing the simplicity, flexibility and generosity of ISAs.

Twenty four million people in this country have an ISA.

And yet millions of them would like to save more than the annual limits of around five and a half thousand pounds on cash ISAs, and eleven and a half thousand pounds on stocks and shares ISAs. Three quarters of those who hit the cash ISA limit are basic rate taxpayers.

So we will make ISAs simpler by merging the cash and stocks ISAs to create a single New ISA.

We will make them more flexible by allowing savers to transfer all of the ISAs they already have from stocks and shares into cash, or the other way around.

And we are going to make the New ISA more generous by increasing the annual limit to £15,000.

£15,000 of savings a year tax free – available from the first of July.

And I’m raising the limits for Junior ISAs to £4,000 a year too.

But the £15,000 New ISA is just the first thing we are doing for savers.

Second, many pensioners have seen their incomes fall as a consequence of the low interest rates that Britain has deliberately pursued to support the economy.

It’s time Britain helped them out in return.

So we will launch the new Pensioner Bond paying market leading rates.

It will be issued by National Savings and Investments, open to everyone aged 65 or over, and available from January next year.

The exact rates will be set in the autumn, to ensure the best possible offer – but our assumption is 2.8% for a one year bond and 4% on a three year bond.

That’s much better than anything equivalent in the market today.

Up to £10 billion of these bonds will be issued. A maximum of £10,000 can be saved in each bond.

That’s at least a million pensioner bonds.

And because 21 million people also invest in Premium Bonds I am lifting the cap for the first time in a decade from £30,000 to £40,000 this June, and to £50,000 next year – and I will double the number of million pound winners.

But I still want to do more to support saving.

And so, third, we will completely change the tax treatment of defined contribution pensions to bring it into line with the modern world.

There will be consequential implications for defined benefit pensions upon which we will consult and proceed cautiously.

So the changes we announce will not today apply to them.

But 13 million people have defined contribution schemes, and the number continues to grow.

We’ve introduced flexibilities.

But most people still have little option but to take out an annuity, even though annuity rates have fallen by a half over the last 15 years.

The tax rules around these pensions are a manifestation of a patronising view that pensioners can’t be trusted with their own pension pots.

I reject that.

People who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances.

And that’s precisely what we will now do. Trust the people.

Some changes will take effect from next week.

We will:

– cut the income requirement for flexible drawdown from £20,000 to £12,000

– raise the capped drawdown limit from 120% to 150%

– increase the size of the lump sum small pot five-fold to £10,000

– and almost double the total pension savings you can take as a lump sum to £30,000

All of these changes will come into effect on 27 March.

These measures alone would amount to a radical change.

But they are only a step in the fundamental reform of the taxation of defined contribution pensions I want to see.

I am announcing today that we will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots.

Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want.

No caps. No drawdown limits.

Let me be clear. No one will have to buy an annuity.

And we’re going to introduce a new guarantee, enforced by law, that everyone who retires on these defined contribution pensions will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have.

Those who still want the certainty of an annuity, as many will, will be able to shop around for the best deal.

I am providing £20 million over the next two years to work with consumer groups and industry to develop this new right to advice.

When it comes to tax charges, it will still be possible to take a quarter of your pension pot tax free on retirement, as today.

But instead of the punitive 55% tax that exists now if you try to take the rest, anything else you take out of your pension will simply be taxed at normal marginal tax rates – as with any other income. So not a 55% tax but a 20% tax for most pensioners.

The OBR confirm that in the next fifteen years, as some people use these new freedoms to draw down their pensions, this tax cut will lead to an increase in tax receipts.

These major changes to the tax regime require a separate Act of Parliament – and we will have them in place for April next year.

Mr Deputy Speaker, what I am proposing is the most far-reaching reform to the taxation of pensions since the regime was introduced in 1921.

But there is one final reform to support savings I would like to make.

Mr Deputy Speaker,

There is a 10 pence starting rate for income from savings.

It is complex to levy and it penalises low income savers.

Today I am abolishing the 10 pence rate for savers altogether.

No tax on those savings whatsoever.

And we will almost double this zero-pence band to cover £5,000 of saving income.

One and a half million low income savers of all ages will benefit.

Two thirds of a million pensioners will be helped.

Mr Deputy Speaker,

The £15,000 New ISA.

The Pensioner Bond.

People given access to their own pension pots.

A right to impartial advice.

The 10p rate for savers abolished to zero.

The message from this Budget is:

– you have earned it;

– you have saved it;

– and this government is on your side.

Whether you’re on a low or middle income,

Whether you’re saving for your home, for your family or for your retirement.

We’re backing a Britain that saves.

Mr Deputy Speaker,

The central mission of this government is to deliver economic security.

We’re not promising quick fixes.

Instead we’re taking the next steps in our long term plan.

The forecasts I’ve presented show:

– growth up

– jobs up

– the deficit down

Now we are securing Britain’s economic future with:

– manufacturing promoted

– working rewarded

– saving supported

With the help of the British people we’re turning our country around.

We’re building a resilient economy.

This is a Budget for the makers, the doers, and the savers.

And I commend it to the House.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, to the British Chambers of Commerce in Hong Kong on 20th February 2014.

Ladies and gentlemen, thank you for coming – and thank you for asking me to speak again to the British Chambers of Commerce.

I spoke to this Chamber three years ago. I said then that relations between Britain and Hong Kong had always been deep and strong – but I said that the economic relationship could be even deeper and stronger.

That has proved to be the case. Thanks to the work of the British Chambers of Commerce and its members, Hong Kong and the UK are now doing more business together than ever before.

I want to talk to you today about the opportunities that this deeper integration brings for both our countries.

But as two of the most open, free-trading, financially connected places on earth, we also understand more than most that deeper global integration brings new risks as well.

And so I also want to talk about what we can to do tackle those global risks head-on, both internationally through organisations like the G20, and in countries like the UK.

Of course Hong Kong and Britain have always had a special bilateral relationship.

That’s about much more than our historic and legal ties.

It’s about our shared values.

It’s about the influence that your culture has had on British life – and that our culture has had here.

It’s based on the thousands of Hong Kongers who study and work in Britain and the quarter of a million British citizens who choose to work here in Hong Kong.

And of course it is also about our inextricably intertwined economies.

So whereas others could make the mistake of seeing Hong Kong as nothing more than a jumping point for trade with mainland China, we in Britain know just how important Hong Kong is as a destination its own right.

You are the UK’s second largest market for goods in the Asia-Pacific.

You are the source of just under 30% of the profits of two of the UK’s largest banks, HSBC and Standard Chartered

More investment comes to the UK from Hong Kong than from the USA, Canada and Singapore combined.

This relationship brings jobs and prosperity for both our economies.

Just look at companies like Hutchinson Whampoa, who I’m seeing after this. It is the single largest foreign investor in the UK. It is responsible for around 35,000 jobs in everything from ports to telecoms to the water supply.

Look at companies like MTR, who I am also visiting later today. They run two of the main commuter rail lines in London and the South East of the UK.

Over here in Hong Kong they are working with British firms like Kier and Laing O’Rourke to deliver new infrastructure projects including the extension of Admiralty Station and the new high speed rail link to the mainland, which I am looking forward to seeing later.

And it is not just about large global players.

This year, while the Shangri-La hotel opens in London’s biggest skyscraper, the Shard…

…On the other side of the river a small Hong Kong tech company called Advanced Merchant Payment will be opening in London’s Tech City.

They will be providing innovative financial services to SMEs and their banks.

And when they wanted to expand outside Asia, they choose to come to our country first – because we have the best environment for start-ups, a world class financial services industry, and one of the most open and competitive economies in the world.

It’s only been three months since I was last here. But even in those three months I detect growing optimism about the economy here – and across Asia.

And every time I come here I sense the energy and the ambition of a continent assuming its place at the heart of the global economy.

Of course Hong Kong is also hugely important to us as the prime gateway to and from one of the biggest parts of that global economy – mainland China.

Almost a tenth of all our exports into China flow via Hong Kong. That’s a huge proportion.

And almost two thirds of all Chinese outward investment comes through here in one form or another.

But Hong Kong has this special position because of its own inherent strengths.

Three hundred British firms base their regional headquarters here, not just because of Hong Kong’s prosperity.

But also because of Hong Kong’s stable government and strong legal system.

As my colleague, the Foreign Secretary, said this month: Hong Kong’s success is underpinned by its autonomy, rights and freedoms – guaranteed by the Joint Declaration- and the best way to preserve Hong Kong’s strengths is through a transition to universal suffrage which meets the aspirations of the people of Hong Kong.

How that is achieved is for the people of Hong Kong, and the governments of Hong Kong and China to decide.

What I want Britain to do is to build on this special relationship with Hong Kong, so that together we can be a bridge – and not a barrier – to trade between mainland China and the world.

For strengthening the relations between China and the UK has been a very important personal priority of mine as Chancellor of the Exchequer.

When I was last here in Hong Kong, before Christmas, I arrived off a ferry from Zhuhai, at the end of a long visit to China and after the conclusion of a very successful Economic and Financial Dialogue between our two nations in Beijing.

Those talks represented the next big step forward in the UK-China relationship.

For the first time ever, the door was opened to Chinese investment in civil nuclear power.

Millions of pounds of Chinese investment in other British infrastructure projects were secured.

And new opportunities for British exports to China – already up 80% in 3 years – were secured as well.

And when the Prime Minister led a trade mission to China last December, the delegation struck £5.6 billion pounds worth of business deals between our two countries.

For this is a two-way relationship of equals. Gone are the days when the British finance minister was only interested in securing greater market access to China.

That’s still important, but just as important now is Chinese investment and access to the UK.

Nowhere is that more apparent than in the development of the use of China’s currency, the Renminbi.

Hong Kong knows that well – you are the largest offshore centre for RMB in the world.

London’s position as the Western centre of RMB trading has been greatly strengthened as a result of this collaboration with Hong Kong.

Now almost two thirds of all RMB payments outside of China and Hong Kong take place in London.

Now London firms are able to invest directly in Chinese stocks and shares in RMB – something that’s just not currently possible anywhere else in the West – thanks to our agreement with the Chinese Government last year.

Now Chinese banks are going to be able to apply to set up wholesale branches in the UK, for the first time.

And we are now the first country in the G7 to agree an RMB swap line with the People’s Bank of China, giving London investors the confidence to expand their RMB activities.

Ultimately what we all want to see is RMB being used more and more as a currency of choice in the world.

And that’s why today I want to go further.

So I can tell you today that the UK and Chinese Governments are in active discussions about the appointment of a Renminbi clearing bank in London.

Recognising London’s role as the Western centre of offshore RMB trading, I am also announcing today that we will be hosting the first International RMB Conference in London this summer – and it will be sponsored by an array of British, Chinese and International Banks from HSBC to ICBC, from Standard Chartered, RBS and Barclays to Bank of China and the China Construction Bank, from Citi, JP Morgan and ANZ to the Agricultural Bank of China and the Bank of Communications and others.

In the Economic and Financial Dialogue last October we said we wanted to see greater collaboration between financial services firms in the UK and China.

Well, today I am very pleased to see exactly that, with the announcement that the Chinese firm, E Fund Management – who I believe are here with us today – will be partnering with a London firm, ETF Securities, to launch a new investment product on the London Stock Exchange. That product will allow people in the West to invest directly in Renminbi in Chinese companies. It’s just one example of the growing links between our financial sectors.

These steps will bring the UK and China closer together, and promote trade and commerce.

But I also want to promote the exchange of ideas and better understanding between both our countries.

That’s why I want to make the UK the prime destination for tourists from this part of the world. Almost three hundred thousand Chinese tourists come to the UK each year, and that number is growing by 40% a year.

I want to make it easier for tourists from the mainland to visit. So I am pleased to announce today that even more British retailers, such as John Lewis, are going to start accepting payments in Renminbi.

I also want to strengthen our relationship by encouraging more students from China and Hong Kong to come to our world-class universities. We already have over 100,000 Chinese students studying in the UK each year.

Today I can announce a new collaborative programme between leading universities in China and the Russell Group of UK universities on the key challenges we all face. We’re going to work together, with leading businesses to find answers to the problems of urban development, public health, energy and transport, the digital economy and financial reform.

And I want students in Britain to understand Asia better as well. Which is why today I am also announcing a new grant for Chinese language teacher training in 50 London schools. My ten year old daughter is already learning Mandarin – I want thousands more children in Britain to learn this language of the future world economy.

These are just a few small steps forward in a relationship between Britain, Hong Kong and China that gets deeper and richer every year.

For me the relationship is about more than economics and the bottom line. It’s about how we view our world and the extraordinary change it is going through.

For some see the rise of China, the success of Hong Kong, the growth of Asia as a threat to the West. They call it a ‘race to the bottom’ and they want Western countries like mine to pull up the drawbridge and close the shutters.

I think that would be a tragedy for us all – and leave us all impoverished.

This is not a race to the bottom.

We should not see growth in China and Hong Kong as a threat to us or something to be afraid of.

We should see it as a huge opportunity. Get it right and it means jobs and investment in London and the whole of Britain. Economic success in Asia can bring economic security at home. An opportunity for us as well as for you.

But only if we work through our long term economic plan.

Of course, as we’ve seen over these recent years, closer global integration also brings global risks. And if we get it wrong – if we don’t tackle those risks head on – then those risks will threaten our economic security.

Today I am on my way to the first G20 Finance Ministers and Central Bank Governors meeting of the year, in Sydney.

We might have hoped that this would be the first time in five years that the G20 has met outside of a global crisis.

The risk of a eurozone collapse has greatly receded, and the prospect of a destabilising standoff over the US fiscal position now looks much less likely.

But as well as reasons to be cheerful, there are also reasons to be careful.

Many economies in Europe remain very weak.

Problems in the Middle East abound.

And in recent months we have seen volatility in several emerging markets, with currencies weakening by up to 19%, bond yields spiking by up to 11%, and sudden falls in equities markets across Latin America and Asia.

Most emerging markets are more robust than they were in the late 1990s, and in many cases flexible exchange rates are functioning correctly as shock absorbers.

But if we have learnt anything from the recent Great Recession, it is that in this interconnected global economy one country’s problem can very quickly become everyone else’s problem.

And acting early when risks emerge can head off much greater damage later on.

My message here in Hong Kong is this:

The risks to economic recovery have not gone away.

Together we need to act now to ensure that emerging market problems don’t contribute to a new crisis.

How do we do that?

By each one of us putting our own houses in order.

And by using the G20 to make sure we all confront our problems instead of running away from them.

As we meet in Australia, the G20 is more than capable of doing that; provided we focus on the important issues.

But there is a danger that in Sydney and other such meetings we find ourselves distracted by a pointless debate about US and UK monetary policy…

…that the G20 descends into a blame-game…

…and we miss the opportunity to drive through, together, the reforms that are necessary to safe-guard the global recovery.

To avoid that happening we need to understand better what the last six years have taught us about how global coordination works.

In particular we need to understand that international coordination can work and has worked when it holds governments to account for domestic reforms, but not when it tries to impose global macroeconomic policies that are against countries’ own self interests.

Fostering domestic resilience from the bottom up is the best way to build global resilience at the top.

For example, many people have identified global macroeconomic imbalances between surplus and deficit countries as a major contributing factor to the Great Recession a few years ago.

With some exceptions, those macro imbalances have now dramatically reduced – China’s current surplus came down from over 10% in 2007 to 2.3% in 2012, and the US current account deficit fell from 4.7% in 2007 to 2.7% in 2013.

Has this therefore been a triumph of external pressure against US and Chinese self-interest?

That would obviously be a misunderstanding of the real forces at work.

China has not reduced its current account surplus because of external pressure by international bodies like the IMF or G20– they’ve done it because the Chinese understand it is in their self interest to move away from an investment and export led model of growth towards something more sustainable.

In fact it is hard to find examples in history of a surplus economy taking action to rebalance demand in response to external pressure.

Equally the US has not reduced its current account deficit because of international pressure – it has been a product in large part of the shale revolution and improved US competitiveness. Indeed we can go further – the initial macro imbalances were not in themselves the major cause of the crisis.

Capital flows from East to West and from surplus countries to deficit countries did indeed reduce global interest rates.

But those low interest rates did not induce financial crises in countries with robust domestic frameworks. Canada did not have a banking crisis or a fiscal crisis. Nor did Sweden. It was not the overall net flows from East to West that turned out to be the problem.

It was poor domestic regulation in the US and much of Europe of some specific capital flows – particularly into housing and commercial real estate assets – and poor domestic regulation of the banks who held many of those assets.

Equally it was poor economic and fiscal management in many of those same countries which left their economies so vulnerable to the ensuing banking crisis.

None more so than the UK. We went into the crisis with the biggest structural deficit in the G7 and with the most leveraged households and banks of any major economy and we paid a heavy price for that failure of policy.

And of course it was the underlying flaws in the institutions of European monetary union that made the impact so catastrophic and long lasting in the eurozone.

So in fact it was a lack of resilience at a national level in several important economies that created a lack of resilience at a global level.

Exactly the same is true now when we look at the risks in emerging markets.

I can see that it is tempting for some to blame Western monetary policy for economic problems in some emerging markets, but this is neither accurate nor useful.

Not accurate because, while tapering of US monetary policy in response to a strengthening domestic recovery may have been the trigger for instability it is not the real cause.

The underlying causes are domestic fragility in those countries, often built up over a long period of time – and that is why some emerging markets have been much more affected than others.

And blaming Western monetary policy is not useful because it doesn’t lead us to any sensible solutions.

The Fed does not and indeed should not set monetary policy to be appropriate for emerging markets – the Fed has a legal and democratic requirement to set monetary policy to be appropriate for the US economy.

The fact that it is currently tapering its programme of quantitative easing is a sign of success.

Equally I know that UK citizens would be rightly outraged if Mark Carney and the Bank of England set UK monetary policy decisions on the basis of what was best for other economies. So at this G20 we should avoid finger pointing and distractions.

There is an alternative.

The alternative is to focus on building domestic resilience – not just in emerging markets, but also in developed economies.

The alternative is to use the G20 to hold governments accountable for these domestic reforms, rather than allowing them to escape accountability by blaming their problems on others.

And that alternative is exactly the plan put forward by my colleague Finance Minister Joe Hockey and the Australian presidency.

Under that plan, the G20 members will sign up to comprehensive and ambitious national reform agendas – and then hold each other to account for delivering them.

That is exactly the right approach because it tackles the underlying problems head-on. I’m ready for the UK to play its part and I hope this approach is adopted by the G20 later this year. We all need to get our houses in order.

We all have to put in place the four fundamentals necessary for economic security: responsible fiscal policy; credible institutions; effective financial regulation; and crucially, the long term structural reforms that will deliver lasting prosperity.

It is a lack of these foundations that caused the financial crisis in developed economies, and the recent troubles in some emerging markets.

Just look at those developed economies who had these foundations for economic security in place, and how much better they performed in the financial crisis.

Look at Australia, where I’m heading tomorrow. Thanks to robust financial regulation and the reforms of the John Howard government many years ago they grew through the crisis when many others were shrinking.

Or look at Canada, who were also in control of the risks in their financial system. They bounced back from the 2009 crisis extremely quickly – by 2010 they were growing by 3.4%!

The same is true of Sweden, who grew by an astonishing 6.6% in 2010 and then 2.9% the year after that.

Unsurprisingly we see the same pattern with emerging markets now – those who had the fundamentals in place, who have taken the difficult decisions to reform, have avoided the worst of the volatility.

Compare the relative calm we’ve seen in countries like Mexico and Peru with the experience of some of their neighbours.

Look at Malaysia, now growing at 5.4%.

And we have also seen other economies taking up these reforms, to head off future threats.

Last October, for example, I was speaking to the Vice Premier of China, Ma Kai, about China’s comprehensive economic reform plan.

The plan that the Chinese leadership went on to set out at the Third Plenum tackles exactly the fundamentals I’ve talked about – by allowing markets to play a greater role; strengthening financial sector regulation, including around shadow banking; and establishing the next generation of free trade pilot zones to boost trade and investment.

And as a result, I am confident that when these reforms are implemented they will not just make China more resilient, but make the whole global economy more resilient.

This is where global coordination can be really effective.

We’ve already seen that the G20 works when it focuses on the painstaking process of coordinating reforms, and holding governments to account for delivering them.

The G20 has played a crucial role in reforming financial regulation – setting deadlines for agreement and tasking the Financial Stability Board and Basel committees to meet those deadlines.

Now Basel three is being implemented; so too, new global rules on derivatives; and as Mark Carney has said, this year we must secure an international solution to the too big to fail problem in banking. The G20 can resist moves to global protectionism – as it has done remarkably well in these recent years – and promote new trade agreements.

The G20 and the IMF have important roles in coordinating balanced and responsible fiscal consolidation plans, though there is still more to do.

And because the British Prime Minister, David Cameron, put international tax evasion and tax avoidance at the centre of our G8 Presidency, the Australian Presidency of the G20 has been able to pick up the baton and for the first time we have the real prospect of new, tough and fair global tax rules.

This kind of international cooperation works.

And so the Australians are completely right to take this to the next level, and ensure we have comprehensive plans to make our countries more resilient. Not just emerging markets, but countries like the UK as well.

And so I want to end by talking about what the UK has to do.

The UK went into the crisis with the largest structural deficit in the G7, the highest household debt and the most leveraged banks of any major economy.

By the time I came into Government, we had experienced one of the greatest falls in GDP of any major economy, and our deficit was forecast to be larger than any other in the G20.

So we set out in 2010 a long term economic plan to restore economic security and prosperity. And we have worked through that plan ever since.

Stuck to it when critics told us to abandon it and come forward with a Plan B – we held our nerve.

Now, four years on…

– We have brought the deficit down by a third, and set out credible fiscal plans that will eliminate the deficit within four years.

– We’ve overhauled our regulatory system, and we’ve given the Bank of England cutting-edge macroprudential powers.

– We’re ending too big to fail in our banking system – we’ve gone further and faster than anyone else, and the rest of the world is following our lead.

– And we have sought to make Britain aggressively competitive.

I have cut corporation tax again and again – from next year it will be the lowest in the G20 and one of the lowest in the world.

We’ve made the UK the location of choice for multinational company head quarters. The City of London has become stronger and bigger.

We have reformed university funding and spent on science, so that British universities can remain world-leading.

We’ve invested in infrastructure – the largest infrastructure project in Europe is being tunnelled under London as we speak.

Far from shying away from difficult issues like Nuclear energy and fracking – my government is leading the way in Europe.

And we are attracting more investment from China than any other European economy.

Indeed, more investment from the rest of the world than any other country in the European Union.

As a result of this long term economic plan, we are growing.

In fact, the UK is now growing faster than any other major European economy.

We’ve had the strongest growth in employment in our history.

Unemployment has come down sharply.

And it’s encouraging to see growth that’s not fuelled by debt, and not just concentrated in services but in manufacturing and construction too.

Some in Britain might be tempted to say: job done, let’s avoid more hard decisions.

That would be a huge mistake.

Abandon the plan and we abandon the progress we’ve made and go back to square one.

I have never been a Chancellor who has run away from confronting our problems.

I’ve never been afraid to level with people about the hard truths.

I said that we have to go on dealing with our debt and our deficit – and we have no choice but to do so.

I said recovery was not enough, we needed to avoid the mistakes of the past.

So I’m now the first to say that the recovery is not yet secure and our economy is still too unbalanced.

We cannot rely on consumers alone for our economic growth, as we did in previous decades.

And we cannot put all our chips on the success of the City of London, as my predecessors did.

Britain is not investing enough.

Britain is not exporting enough.

There are encouraging signs. Both business investment and exports are forecast to grow.

But we can’t be passive observers of the forecasts.

We need to roll up our sleeves, get to work and make it happen.

I am delivering my Budget in four weeks time.

This is not a budget where we can rest on our laurels and say “job done”.

It is a budget where we must confront our problems and deal with some hard truths.

A Budget that safeguards our recovery in the face of ever present global threats.

But more than that:

I want to deliver a Budget that supports a Britain that invests and that exports.

A Budget that lays the foundations for our long term economic security.

And a Budget which ensures that around the world, wherever you are, you can’t help but see “Made in Britain”. That’s the budget I’m going to deliver.

For ultimately what is the goal of all this?

Of global coordination, of domestic reforms, of sticking to our plans?

It is a future where the global economy is resilient in the face of economic storms.

It is a future of jobs, and prosperity, and peace of mind.

It is economic security, for all our citizens.

Here in Hong Kong, and in Britain and around the World.

Thank you.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Edinburgh on 13th February 2014.

In just over 7 months people in Scotland will decide whether or not to walk away from the United Kingdom.

The stakes couldn’t be higher or the choice clearer.

The certainty and security of being part of the UK or the uncertainty and risk of going it alone.

At the very heart of this choice is the pound in your pocket.

Why?

Because the currency we use is about so much more than notes and coins.

It’s about the value of our savings our power to purchase the everyday things we need and how we make the wheels of trade and commerce turn.

A stable currency is the bedrock of our economy

It underpins our jobs, our mortgages, our pensions our public services and our taxes,

And the opportunities for our children and our grandchildren

I don’t have a vote on 18th September.

But I know where I stand.

The pound is one of the oldest and most successful currencies in the world.

I want Scotland to keep the pound and the economic security that it brings.

And I hope passionately that the people of Scotland – who make such an important contribution to life on these islands – choose to stay within our family of nations here in the United Kingdom.

And why wouldn’t we keep the UK together?

The UK works. In good times, and also in bad.

Together we have faced the worst economic and financial crisis since the Great Depression.

Government debt sky-rocketed, hundreds of thousands of people lost their jobs, banks were bailed out, and as a nation we were made poorer.

But we avoided the economic collapse other nations around us in Europe faced. Because together, we had the strength to confront our problems and overcome them.

Reducing our deficit, cleaning up our financial system, and working through a long term economic plan for the country.

A long term plan that will allow people to feel secure again.

We’re seeing signs now that we have turned the corner.

The UK economy is growing faster than any other advanced economy in Europe.

And within the UK, Scotland is growing faster than the rest.

We’ve had 6 consecutive quarters of Scottish growth.

Growth not just in services but in manufacturing and construction too.

Over a hundred thousand new jobs have been created in Scotland in the last four years.

Sixty five thousand fewer people unemployed compared to 2010

But the job is not yet done.

These hard-fought gains could be easily lost.

And nothing could be more damaging to economic security here in Scotland than dividing our United Kingdom.

That’s not the outcome I want.

I ask you to look ahead to the longer-term challenges we face as a country competing for jobs and business in the global race…

– providing good careers for our children

– supporting an ageing population

– managing with lower North Sea oil revenues

And consider: to which of these great challenges is dividing up the United Kingdom the right solution?

Today Scotland is one of the most economically successful parts of the UK.

– with growth per head the same as the smaller independent European states the Scottish government would like Scotland to join…

– but with far more stability and less volatility than them, thanks to being part of the wider UK.

So for me the positive answer is to work as one and to tackle these challenges together.

Nowhere are the risks to Scotland’s economic security more apparent than in the debate about currency.

Last year the Chief Secretary and I came to Glasgow to share the rigorous and objective analysis the Treasury had done on the question of Scotland’s future currency.

I said it was unlikely that an independent Scotland would be able to share the pound and share the Bank of England.

Today I am here in Edinburgh to consider with you further rigorous and objective analysis by the Treasury which builds on that work – and draws on what we have learnt in the last year.

Alongside this analysis I am also taking the exceptional step of publishing the internal advice I have received from the Permanent Secretary to the Treasury, Sir Nicholas Macpherson.

Since I spoke last April, the Scottish government’s proposal for sharing the UK pound has been questioned by one independent economist after another

Including by DeAnne Julius, a distinguished former member of the Monetary Policy Committee, and John Kay, one of Alex Salmond’s former economic advisers

Many prominent supporters of the Yes campaign have raised doubts about the nationalist’s plan,

From Jim Sillars, the former deputy-leader of the Scottish National Party, to Dennis Canavan, chairman of Yes Scotland, and Patrick Harvie, the leader of the Scottish Green Party.

Businesses and the financial services sector have started to speak out.

Last week the President of the UK Chamber of Shipping and the Chief Executives of Scottish Financial Enterprise, of Simmons&Co, and of Sainsburys all expressed their concerns.

The American Chief Executive of one of the biggest investors in Scotland, BP, said that the huge unanswered questions over the currency and economic policies of an independent Scotland could put big investments in this country at risk.

And now my two predecessors as Chancellor, the current Chief Secretary, Shadow Chancellor, Scottish Secretary and First Minister of Wales – all from different political parties to me – have raised the same questions I raised almost a year ago.

But perhaps no contribution has been more decisive and unquestionably independent than that offered by the Governor of the Bank of England when he spoke about the currency union, here in this city, two weeks ago.

Dr Mark Carney is a Canadian citizen who speaks for no side in this debate, but instead offered the people of Scotland, and the people of the whole UK, his technical and independent advice.

Today I want to pick up where the Governor’s speech left off.

So it’s worth recalling exactly what he said.

He said that the existing UK has proved “durable and efficient”.

He said that we “would need to consider carefully what the economics of currency unions suggest are the necessary foundations for a durable union, particularly given the clear risks if these foundations are not in place.”

And he warned us of the risks that could arise if an independent Scotland tried to stay in a currency union with the UK, without both nations ceding significant sovereignty not only over banking but also over spending and tax decisions.

And in the face of these questions posed by the Bank Governor, what have the Scottish government said?

They have just simply asserted it’s a common sense proposition.

Wrong.

Common-sense is when you’ve got something that works really well already

– you don’t throw it away

– you don’t replace it with something that certainly won’t work as well

– and you certainly don’t embark on a high-risk experiment that may not work at all.

And have the Scottish government engaged in the technical arguments the Governor made? No.

Have they attempted to offer answers to the questions he posed? No.

We’ve had nothing more than confusion, wild assertion and empty threats.

Let me deal with this so-called response, before we go into the real economic issues.

First of all, the Scottish government say “it’s as much Scotland’s pound as the rest of the UK’s”.

They are like an angry party to a messy divorce.

But the pound isn’t an asset to be divided up between the two countries after break-up as if it were a CD collection.

The value of the pound doesn’t lie in the paper and ink that’s used to print it.

The value of the pound lies in the entire monetary system underpinning it.

A system that includes the Bank of England and the tens of millions of UK taxpayers who stand behind that financial system

It is a system that is supported by political union, banking union and automatic transfers of public spending across the United Kingdom.

A vote to leave the UK is also a vote to leave these unions and those transfers and those monetary arrangements.

That’s part of the choice that people in Scotland are being asked to make.

There’s no legal reason why the rest of the UK would need to share its currency with Scotland, as the Treasury’s publication today clearly shows.

So when the nationalists say “the pound is as much ours as the rest of the UKs” are they really saying that an independent Scotland could insist that taxpayers in a nation it has just voted to leave…

– had to continue to back the currency of this new foreign country

– had to consider the circumstances of this foreign country when setting their interest rates

– stand behind the banks of this foreign country as a lender of last resort

– or stand behind its foreign government when it needed public spending support.

That is patently absurd.

If Scotland walks away from the UK, it walks away from the UK pound.

The Scottish government also asserted after Dr Carney’s speech that sharing the pound would make sense to the rest of the UK because of the huge volume of trade the rest of the UK does with Scotland.

I’m the first to say that our deeply integrated businesses and their suppliers are compelling reasons for keeping the UK together.

70 per cent of Scottish trade is with the rest of the UK. That is a massive proportion.

And trade with Scotland is important to the rest of the UK – but at only 10 per cent of the total trade, it is a much smaller proportion.

These trade figures don’t make the unanswerable case for a shared currency that the Scottish government assume.

After all, 40 per cent of the UK’s exports go to the euro area, but we chose not to join the euro.

And almost 20 per cent of our exports go to the United States – are the Scottish government suggesting that we should adopt the dollar?

When his economic arguments fall apart, the First Minister resorts to reckless threats.

He says “an independent Scotland will refuse to accept its fair share of national debt if the UK refuses to share the pound”.

That’s like saying: because my neighbour won’t agree to my unreasonable demands, I’m going to burn my own house down in protest.

Currently Scotland benefits from the whole UK’s credibility in the gilt markets.

– credibility that is hard won by tough policy decisions and responsible actions – like our recent statement from the Treasury that we would honour all UK gilts in the event of independence.

The fact our commitment was immediately accepted by investors here and around the world was a sign of that credibility and strength.

And it’s that strength and credibility that delivers every day low mortgages for Scottish families and low rates for Scottish businesses borrowing to expand.

Independent experts already estimate that even a new Scottish state which had accepted its fair share of UK debt would have to pay an ‘independence premium’ to borrow from the markets.

The premium has been put at between 72 and 165 basis points above UK rates.

For the average mortgage-payer in Scotland, that could be an extra £1,700 a year in mortgage payments.

But the premium would be as nothing compared to the millstone the Scottish people would have to carry if an independent Scotland failed to honour its fair share of national debt.

In that scenario international lenders would look at Scotland and see a fledgling country whose only credit history was one gigantic default.

And they would demand a punitively high interest rate as a result.

That would be crippling for every Scottish household with a mortgage or personal loan, for every Scottish business with credit, for the public finances and therefore for public services and for taxpayers, and for the whole economy.

If an independent Scotland reneged on its debts it would become an outcast among the family of responsible economic nations.

So it is a reckless threat.

And Alex Salmond knows it.

And the fact that he issues this reckless threat shows how all his other arguments have been exposed by the serious analytical work of the Treasury, the wider economic community, and now the independent Governor of our central bank.

So let me return to the real economic issues that the Governor raised.

Mark Carney ended his speech last month by saying this.

He said “a durable, successful currency union requires some ceding of national sovereignty.”

He concluded that “Decisions that cede sovereignty and limit autonomy are rightly choices for elected governments and involve considerations beyond mere economics. For those considerations, others are better placed to comment.”

And that’s where I want to pick up today.

I want to give you my assessment of the merits of a currency union, as the elected politician currently responsible for the overall health and stewardship of the UK economy.

That assessment is based on the new Treasury analysis which I publish today. Prepared by civil servants, it sets out in detail the problems that we would face if we attempted to create a currency union between an independent Scotland and continuing UK.

The Treasury analysis highlights four major requirements for a currency union between an independent Scotland and the rest of the UK.

The first is the requirement for a banking union.

As the Governor said, without a banking union “the viability of the [currency] union itself [is] undermined.”

If we have learnt one thing from the euro crisis, it is that a currency union is unstable without a shared financial supervisor, common resolution mechanisms, a lender of last resort, and credible deposit guarantee schemes.

It would be important for Scotland, where financial sector assets are worth more than twelve times Scottish GDP, to be able to call on the deeper pockets of the neighbouring UK government in a crisis.

Otherwise it is extremely difficult to see how Scotland could remain a home to large financial institutions like RBS.

RBS would have undergone a disorderly collapse without the support of the whole UK in 2008 – and even for a country of our size, it was a huge endeavour.

An independent Scotland would have been unable to bail it out.

Without a shared banking union, the Scottish Government would also struggle to create a depositor guarantee scheme which was as credible as the one we have now in the UK.

That in turn would make an independent Scottish state a less attractive place to be based as a deposit taker like a bank.

The consequence would be a loss of business and a loss of jobs.

So a banking union is important for an independent Scotland. But it would also be an essential demand for the rest of the UK if we were to contemplate a currency union.

After all, the rest of the UK would be tying its currency to a country with a big financial sector, capable of inflicting huge damage on it – and it would demand supervisory control as a result.

Just as Germany has now done, through the ECB, in the aftermath of the Spanish and Irish banking problems.

But how could I propose such a banking union to the UK public after an independence vote?

We have fought hard to keep Britain out of a banking union in Europe – a union that includes Ireland, whose banking system is also integrated with ours.

So why would the rest of the UK now join a banking union with Scotland?

For at heart this banking union would involve putting UK taxpayers on the line for banks in a foreign country.

Asking them to underwrite a Scottish Government guarantee on deposits held in Scottish Banks.

Asking to put their money at risk whenever Scottish authorities extend emergency support to Scottish banks.

And with little prospect of any benefit flowing in the other direction – for Scotland could only make a limited contribution to supporting a big English bank.

It is very difficult to see how after a ‘Yes’ vote, any UK politician could propose such an asymmetrical arrangement.

What would be in it for the rest of the United Kingdom? Nothing but exposure, again, to the risk of a failing bank – this time not even in our own country, but in a foreign one.

The second requirement for a successful currency union is for much greater fiscal risk sharing.

As the Governor said, that fiscal risk sharing is needed not just to underpin a banking union – in other words, to pay out in the last resort when banks fail – but also to smooth over economic shocks.

In our case, the continuing UK would be almost ten times the size of the Scottish economy. So this would be a totally one-sided deal where UK taxpayers would have to transfer money to an independent Scotland in times of economic stress, with limited prospect of any transfers the other way.

We got Britain out of the eurozone bailouts. Now we’d be getting into an arrangement that was just the same.

The citizens of the rest of the UK could not sign up to such a deal. And frankly, even if we could, I do not think Scotland would want to either.

For the logic of a currency union would mean that Scotland would have to give up sovereignty over spending and tax decisions.

Look at the direction the euro is heading in – supervision and consent to member budgets, deficit controls, debt reduction rules.

In a crucial sense, Scotland would have less independence than it has now – because spending and tax decisions would still have to be agreed by the Parliament in Westminster, but now there would be no longer any Scottish MPs in that Parliament or Scottish members of the Cabinet.

And the citizens of the rest of the UK would have to concede at least some sovereignty and supervision of our own Budget to a foreign country – something we’ve fiercely resisted up to now and would in the future.

The Scottish government claims to accept this in principle.

They talk about being prepared to agree a fiscal pact.

But at the same time, Mr Salmond said to the Financial Times only a few days ago that the pact: “doesn’t need to cover rates of taxation, I don’t think there’s any need for that”.

And John Swinney has said that “A shared currency will mean an independent Scotland having control of tax policy, employment policy, social security policy, oil and gas revenues, immigration policy and a range of other levers to suit our own circumstances”

That is a million miles away from the fiscal risk-sharing the Governor has said is the foundation of an effective currency union and the Eurozone is working to.

It shows that a greater fiscal union is not acceptable to the Scottish government – and would not be acceptable to the rest of the UK.

The third requirement for a currency union is, of course, the same monetary and exchange rate policy.

Within a currency union, an independent Scotland would not have exchange rate flexibility or the ability to set interest rates specifically to suit conditions in Scotland.

Scotland’s economic conditions are taken into account today by the Monetary Policy Committee. On top of that we have full fiscal risk sharing across the UK.

Without that fiscal risk sharing, the full force of any adjustment to an economic shock would have to be borne in full by Scottish taxpayers.

Consider for example the impact of a substantial fall in the oil price – something we’ve seen several times over the last thirty years.

As part of the UK, Scotland is insulated from the impacts that this would have on tax revenues.

In the last Autumn Statement for example the Office for Budget Responsibility cut its forecast for North Sea revenues by almost £4bn over the next three years.

But instead of needing to cut spending, the Scottish Government saw its budget rise by more than £300m.

Under independence, if the Scottish Government did not have the flexibility to cut interest rates – and lacked the fiscal risk sharing it currently has – it would have to respond to a fall in oil revenues by cutting public spending dramatically or raising taxes hugely in response.

The Treasury analysis published today shows that for each 20 dollar fall in the oil price, an independent Scotland would lose 11,000 jobs, whereas if it remained part of the UK it wouldn’t lose any.

To put this in context, between 2008 and 2009 the global oil price fell by over 60 dollars.

So Scotland would be forced to take more drastic fiscal measures in times of crisis, and the pressure would quickly grow to leave the pound so that Scotland could regain control of its interest rates and its exchange rates.

And it would be in the UK’s interests to have separate interest rates as well.

Just consider a scenario where the value of oil increased.

The Scottish government have asserted that the rest of the UK would want to make a currency union work, because Scottish exports – especially oil – make a substantial contribution to the UK’s balance of payments.

As it happens independent experts think the effect would be broadly neutral, but let’s put that aside for now.

According to the Scottish government’s logic, if the value of oil exports went up, contributing more to the UK balance of payments, then we would have an even greater interest in making a currency union work.

But the opposite is the case.

Because if Scottish oil did make such a substantial contribution to the UK’s balance of payments, then it would be artificially increasing the value of the pound – and that would be to the detriment of exporters in other parts of the UK.

That’s exactly what many members of the euro have discovered over recent years.

That’s an argument against currency union, not for it.

This leads me to the fourth and final requirement, which is about the permanence of any currency union.

If currency unions are to succeed then the markets must believe they are built to last.

Look at the massive damage to confidence and stability in 2012 when there was doubt about whether Greece would remain in the euro – despite the protestations of everlasting currency union by all involved.

My commitment as UK Chancellor of the Exchequer – and the commitment of the UK government – to Scotland and to Scotland’s place within the UK is absolute.

In the event of independence the Scottish government’s commitment to the continuing UK would be the opposite of absolute.

As both its own Fiscal Commission and White Paper make plain, the Scottish government’s vision is of a currency union of convenience, not conviction.

Their White Paper said, “It would of course, be open to the people of Scotland to choose a different arrangement in the future.”

The Fiscal Commission said that the currency could evolve “should the people of Scotland wish for further reform or should economic conditions change.”

They go out of their way to tell us that a currency union would be a temporary arrangement that can be ditched as Scotland’s circumstances change.

This makes it unsustainable.

Imagine what would have happened to Greece two years ago if they had said they would consider going back to the Drachma.

It would have happened the next day.

The markets would try to break a Sterling currency union – knowing that, unlike with Greece, the Scottish Government were actively stressing how temporary the arrangements were.

Just look at what happened to the last two nations who tried to form a currency union following separation – Slovakia and the Czech Republic.

Their union fell apart after only thirty three days as capital flowed from one to the other in pursuit of the safe haven.

We would face the same risk if Scotland tried to keep the pound.

Signing-up for arrangements that are inherently unstable would risk over time breeding huge resentment on both sides of the border.

We want to bring people closer together, not drive them further apart.

So to what conclusion does this analysis of the requirements of a workable, successful currency union lead us?

We have seen how it would be impossible to construct an acceptable banking union, or fiscal union…

We have seen that we would be ill-served by the monetary policy arrangements, and that the permanence of the currency union would be in serious question from the outset.

On this basis, the official advice I have received from civil servants in the Treasury is that they would not recommend a currency union to the Government of the continuing UK.

Listening to that advice, looking at the analysis myself

It is clear to me:

I could not as Chancellor recommend that we could share the pound with an independent Scotland.

The evidence shows it wouldn’t work. It would cost jobs and cost money. It wouldn’t provide economic security for Scotland or for the rest of the UK.

I don’t think any other Chancellor of the Exchequer would come to a different view.

The Scottish government says that if Scotland becomes independent there will be a currency union and Scotland will share the pound.

People need to know – that is not going to happen.

Because sharing the pound is not in the interests of either the people of Scotland or the rest of the UK.

The people of the rest of the UK wouldn’t accept it and Parliament wouldn’t pass it.

This issue more than any other exposes the gaping chasm at the core of the plans to separate Scotland from the rest of the UK.

People in Scotland are being asked to accept two diametrically opposite things at the same time.

That with independence everything in Scotland will change and at the same time nothing will change.

It simply doesn’t add up for the Scottish government.

If Scotland walks away from the UK, it walks away from the Pound.

There is an alternative, confident, future for Scotland.

A future in which the nations of the UK work together to provide economic security for our citizens.

A future where strengthened devolved government empowers people from every corner of our land to play their part.

A future of jobs and prosperity and peace of mind.

It’s a strong Scotland within a United Kingdom.

That is a future worth fighting for.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, on 15th January 2014.

Thank you for inviting me here today and congratulations to the Fresh Start Group and Open Europe for pulling together this excellent conference of European reformers.

Andrea and the Fresh Start team are providing just the kind of practical and challenging thinking we need as we work towards a reformed Europe.

Likewise, Mats and the Open Europe team are influencing the debate not just in the UK but right across Europe.

I know that your new partner office in Berlin is already having an important impact on the debate there.

And I would like to particularly pay tribute today to Rodney Leach.

Rodney’s tireless campaigning helped keep Britain out of the euro.

I’m proud to have been on the board of that ‘no’ campaign.

It is hard to imagine now, but at the time joining the euro seemed a real possibility.  I shudder to think what would have happened during the last decade if we had joined the euro.

We’d have had an even more extreme boom-bust cycle and a downturn even deeper than the Great Recession we experienced under the last government.

And in the aftermath, as we tried to pick up the pieces, we would have been hobbled, without a floating exchange rate or an independent monetary policy.

That wouldn’t have been in the interests of this country – and I don’t think it would have been in the interests of the rest of Europe either.

The issues that were raised during the debate about joining the euro endure now: arguments about the necessity of economic reform, concern that currency union would lead to further fiscal union, and doubts about the yawning democratic deficit.

At the time William Hague, who I was working for, predicted the euro could become a “burning building with no exits”.

More than a decade later, these issues have not gone away. Far from it. They have been thrown into sharp focus by the economic crisis in Europe and in the eurozone.

That’s why a year ago the Prime Minister gave his landmark speech on the need for a reformed Europe, fit for the global race – and a reformed relationship between Britain and the European Union.

It’s why he committed our country to a referendum on that renegotiation.

In Britain it has always felt like there have been two debates about the EU.  One debate is about sovereignty, democracy and accountability.

A second debate has been about the economics.

But there aren’t two debates. This is one debate.

Getting the economics right is not sufficient to persuade people of the merits of the EU.  Other constitutional change is needed. But getting the economics right is absolutely necessary.

It was after all sold to our country as a European Economic Community.

Without economic success the EU will not be regarded as democratically legitimate.  You can see that in the way that support for the EU has fallen sharply right across the continent during the economic crisis.

So today I want to develop the conversation about some of the economic reforms that we want to secure as part of the forthcoming negotiations. We need two things.

First we need economic reform that enables the EU to create jobs and economic security, and compete in the global race – something it is not doing well at the moment.

And second as the Eurozone undertakes the integration required to make the euro work, we need constitutional reforms to make sure that those countries which are not in the euro can remain in the EU, confident that their interests and rights will be protected.

Let me begin with jobs and economic security.

We knew there was a competitiveness problem in Europe before the crisis. But the crisis has dramatically accelerated the shifts in the tectonic economic plates that see power moving eastwards and southwards on our planet.

Over the last six years, the European economy has stalled.

In the same period, the Indian economy has grown by more than a third.

The Chinese economy by nearly 70 per cent.

Over the next 15 years Europe’s share of global output is forecast to halve.

Make no mistake, our continent is falling behind.

Look at innovation, where Europe’s share of world patent applications nearly halved in the last decade.

Look at unemployment, where a quarter of young people looking for work can’t find it.

Look at welfare.

As Angela Merkel has pointed out, Europe accounts for just over 7 per cent of the world’s population, 25 per cent of its economy, and 50 per cent of global social welfare spending.

We can’t go on like this.

This is the continent that for centuries led the world in innovation and scientific discovery, enterprise and work ethic. Are we to say that the Europe that gave us Galileo, Darwin and Marie Curie, the industrial revolution, democracy and the free economy, has given up on the future because it is all too difficult?

As a father of two young children, I don’t want to turn to them as we see the latest Chinese scientific breakthrough or Indian innovation and say: “that used to be us. That used to be Europe.”

The hard truth is that if we want to maintain our way of life in Europe we’ve got to get more competitive. And that’s going to require some tough steps: living within our means, making our labour markets competitive, expanding free trade.

Most of the action needed will have to be taken at a domestic level.

I’m not here to lecture other member states about that.

Not least because the UK has had to take more action than most.

When I entered office three and a half years ago, we had just suffered one of the sharpest falls in national output, and faced the highest budget deficit of any major western economy – higher than Spain or Portugal, and much higher than Italy or France.

Indeed, our budget deficit has fallen a lot but is still one of the highest in Europe.

That’s why we’re working through a long term economic plan that makes the tough choices necessary for our long term prosperity.

Reducing borrowing.

Cutting taxes.

Creating jobs by supporting business and investing in infrastructure.

Capping welfare and controlling immigration.

Delivering better skills and schools.

And I know we’re not alone.

Many of our neighbours have also taken tough decisions in recent years. We in Britain should praise them for it, not dismiss them.

Germany led the way a decade ago with its employment and welfare reforms.

Unemployment has halved since, and remains half the European average.

Spain is undertaking radical labour market reforms that are now yielding real results.

Sweden has reformed its education and welfare systems.

It’s right that most of these reforms have to be taken at the national level.

We all have to put our own house in order. And there’s still a huge amount more we all have to do, including here in Britain.

But Europe’s competitiveness also requires action at the European level.

Now there are those who throw their hands up and say “we can’t reform Europe, it can’t be done, it’s all too hard”, I say “we’ve already proved you wrong”.

Take the EU Budget.

Last year, the Prime Minister negotiated the first ever real terms cut to the EU budget.

For the first time, EU spending is not going up but coming down.

And far from being a lone voice, we were working alongside like-minded countries including Germany, Sweden, the Netherlands and Denmark.

Take bureaucracy.

The UK, drawing on the findings of our business taskforce, has proposed a programme for cutting red tape in Europe that has secured the support of 13 other Member States and the European Parliament.

Take free trade.

Britain was one of the strongest promoters of the recent trade deals with Canada, Singapore and Korea. The Canada deal alone will be worth £1.3 billion pounds to Britain.

Reducing the budget, tackling red tape, some free trade agreements – this is a good beginning, but it’s not nearly enough.

We need to be much, much bolder.

We should set ourselves the urgent task of completing the transatlantic trade and investment partnership – the EU-US Free Trade agreement.

This would be the world’s biggest ever trade deal – together our economies would account for half of global output.

The Commission estimate it would boost the European economy by 120 billion euros a year – that’s over 500 euros for every family in the EU. It would bring £10 billion pounds a year to the UK alone.

Some in the European Parliament talk about stalling this Trans-Atlantic Partnership to pursue other agendas.

But when a quarter of young people looking for work in Europe are unemployed, this would be a complete betrayal.

We need to create jobs, increase trade, support business growth – we’ve got the European tools to help with the job, let’s get on and use them.

The same applies with the Single Market.

We need to stop talking about completing the Single Market in services, energy and digital, and get on with it.

I remember sitting around the ECOFIN table nearly four years ago and listening to Mario Monti present his “Report on the Future of the Single Market”

It offered a detailed plan for boosting the Single Market. On the services sector alone, it estimated we could boost GDP by up to 1½ per cent.

And it was agreed by the EU.

But four years on, what has come of it? Precious little.

We need to come up with innovative ideas to overcome the vested interests that are holding back progress in this area.

Personally I’m attracted to Open Europe’s thoughts on using enhanced cooperation to allow a smaller group of Member States to move forward toward trade liberalisation in areas like services among themselves if not all EU member states can agree.

If enhanced cooperation can be used by others to create expensive job destroying ideas like a Financial Transaction Tax, why don’t we think about using it for job creating measures that others oppose?

If we in the EU are going to solve our competitiveness problem we need to think big.

If we are going to create jobs and provide economic security, we need major reform

So the crisis has accelerated and sharpened the economic challenges that already faced the whole of Europe.

But the crisis has also brutally exposed the problems that were always apparent to many of us in this room in trying to run a currency union without a proper fiscal, financial and political union to back it up.

The European Council President, Herman Van Rompuy acknowledged this a few years ago. He said: “this tension has been there since the single currency was created.

However, the general public was not really made aware of it”.

Well, it wasn’t for lack of trying in those debates about the euro 15 years ago.

And everyone’s aware of the tension now.

Three years ago I predicted that that the economic crisis in the eurozone would force the “remorseless logic” of monetary union towards greater fiscal and economic integration, including a banking union.

Even as late as 2011 that was regarded as a controversial prediction.

I also said that this loss of national control, and the loss of economic flexibility, was precisely why I didn’t want to see the UK in the euro.

But since then the Eurozone has started to work through that remorseless logic. Creating the Banking Union, the European Stability Mechanism to bail out Eurozone countries and now the proposed Single Resolution Mechanism to bail out Eurozone banks.

And the UK has not blocked them.

We could have blocked crucial parts of the Banking Union, but we didn’t.

That’s because we want the euro to work. Work for those in Europe who use it, and work for us, because an unstable euro on our doorstep has already done great damage to jobs and growth in Britain.

But we have been clear from the outset that in return for this integration, non euro members like the UK would need safeguards to protect their rights and interests.

Some on the continent like to assume this is just the UK pursuing its own self-interest, at the expense of the collective good.

But it’s the opposite.

If we cannot protect the collective interests of non-eurozone member states then they will have to choose between joining the euro, which the UK will not do, or leaving the EU.

So we have fought to safeguard the rights of non-euro members. But it has not been easy.

Let me spell out just some of the issues I’ve seen first-hand sitting at the ECOFIN table in financial services, where it has been most difficult.

Deeper integration in the Eurozone has thrown up four sorts of challenges, and we have had to argue our case and work hard to build alliances to deal with all four of them.  But again, for those who say reform isn’t possible – we’ve been more successful in starting to deal with them than some people expected.

First there is a danger that the euro members could start to use their collective voting weight in the EU to effectively write the rules for the whole EU by Qualified Majority Vote.

Under the Lisbon Treaty, from 2016, the Eurogroup on its own will have sufficient votes to pass any financial services legislation for the whole of the EU.

That’s a problem because it could leave us in a position where euro members – including ones with little or no financial services industry – can caucus together to impose financial services legislation on the UK –the world’s leading financial centre.

And we’ve already started to see the Eurogroup discussing EU directives privately before involving other member states – like they did over the Bank Recovery and Resolution Directive last June.

It means there’s a very real risk that badly thought through legislation will be imposed on the UK.

And as the Chancellor of a country where financial services represent a tenth of the economy, and employ more than a million people, I could not let that happen.

Damaging Europe’s great global financial centre would also, incidentally, be very bad for the whole of Europe too.

The City of London is not, as some of our continental friends kid themselves, in competition with Paris and Frankfurt. It is in competition with places like Hong Kong, Singapore, and New York.

That’s why it was important that we secured some important institutional changes to protect the UK and ensure we have safe, competitive financial services.

It was a long hard fight, but we negotiated in the ECOFIN and European Council a whole new voting system – the so called “double majority” system – which will apply in the European Banking Authority.

Double majority voting means that legal proposals now require a majority of both eurozone and non-eurozone countries to pass.

People said we would not be able to secure a new voting system, that it was impossible.

But we did.

That leads me to the second challenge. We’ve had problems with discriminatory treatment of non-eurozone Member States.

A clear example is the European Central Bank’s policy of forcing clearing houses with large euro-based transactions to move to the eurozone.

How can we say there is an EU wide single market if we say that certain businesses can only locate in certain member states?

That’s why we’re taking the European Central Bank to the European Court of Justice.

And that’s why alongside double majority voting, we fought hard for and secured a new binding legal provision in the Single Supervision Mechanism regulations to prevent discrimination against financial services providers based on their location within the EU.

Third, we’ve had problems with accountability and transparency and basic policy discipline in some European institutions.

The Commission’s legislative proposal on the financial transaction tax, for example, was contradicted by its own original impact assessment which showed that the policy would reduce EU GDP.

And then there’s the European rules on bonuses, with their damaging consequences and perverse incentives for the big salary rises we’re starting to see.

To establish the right principles, we have been taking an increasing number of cases to the ECJ – which is not something that we do lightly.

We’re going to court over the financial transaction tax, the bonus cap and short selling as well as the action I mentioned against the ECB on clearing houses.

Far from being unthinkingly anti-European, we are using the European court to enforce European principles of non-discrimination and adherence to European law.

We have a good argument in all these cases. The ECJ’s advocate general, and the Council Legal Services have on separate occasions both agreed with key UK arguments. We await final judgement.

And lastly, on the whole issue of ‘ins’ versus ‘outs’, we inherited a situation where the previous government accepted that the UK and other non-euro Member States would be liable for contributing to the costs of Eurozone bailouts.

That was completely unacceptable.

So another principle this government has established, thanks to the very hard negotiating of the Prime Minister, is that the UK and other non-euro members will not pay for European bailouts alongside the new European Stability Mechanism.

We’ve also established that those member states outside the Banking Union will not pay for bailing out banks in that Banking Union – as part of the new Single Resolution Mechanism.

After all, one of the reasons we didn’t join the euro is because we didn’t want to take on this kind of fiscal responsibility for other member states.

I have been clear since the start of the process that Eurozone integration was necessary to make the euro work better, but that it would throw up these issues and that in return we would expect to see the rights of non-euro members protected.

That has been the consistent position the Prime Minister and I have maintained for three years now.

But it is not the case that the UK is always the member state arguing for less activity or blocking things.   We’ve led the way on financial services regulation and ringfencing our banks – and we have the most stringent capital and liquidity rules in Europe.

Nor are we “sitting on the sidelines.”

We have been active in fighting our corner, building alliances and winning arguments in Brussels.

For example we ensured that the so-called “Hedge Fund Directive” protected the single market with passporting rights for EU players that meet the rules.  This was against opposition from others to keep markets closed.

We’re now fighting for the opening up of the derivatives market, to bring competition and better value to European customers.

We have achieved a lot.

We are achieving more.

But this isn’t enough.

What is becoming clearer, as Eurozone integration increases, is that we are now at a point where we are stretching the EU institutional architecture to its limits. We risk going beyond what is legally possible or politically sustainable.

The European Treaties are not fit for purpose. They didn’t anticipate a European Union where some countries would pursue dramatically deeper integration than others.

Rather than face up to the truth, those in Brussels are being forced into legal gymnastics as they try to stretch the existing Treaties to fit a situation they were not designed for.

A classic example before us at the moment is the Banking Union Single Resolution Mechanism.

Because the rules weren’t designed to support a banking bailout fund for just some EU members, those Member States taking part have had to create a hastily put together intergovernmental treaty outside the EU.

We don’t want this to be a source of legal disputes later on.

The euro has to be put on firmer foundations, for the crisis in the Eurozone may have abated, but the contradictions it revealed are not yet resolved.  We should use this moment of relative tranquillity in markets to build those foundations for the future.

And that’s why the questions thrown up by Eurozone integration are inevitably linked to the wider reform negotiations that I touched on at the start.

Ultimately I don’t think we will be able to maintain this approach of patching things up as we go along with contorted legal innovations and short term fixes.

We are taking a great risk with the future economic security of Europe if we do so.

Instead of make-do-and-mend, we should make the Treaties fit for purpose.

We are not the first to recognise this. The new German coalition agreement states “we will adapt the Treaty bases of the Economic and Monetary Union”.  Enrico Letta has also talked about Treaty change.

There is potential common ground here.

Let me recap:

Europe urgently needs economic reform.

Eurozone integration is necessary if the euro is to survive

But proper legal protection for the rights of non-euro members is also absolutely necessary – to preserve the single market and make it possible for Britain to remain in the EU.

I believe it is in no-one’s interest for Britain to come to face a choice between joining the euro or leaving the EU.

We do not want to join the euro.  But also our withdrawal from a Europe we’d succeeded in reforming would be bad for Britain.

And a country of the size and global reach of the UK leaving would be very bad for the whole of the EU.

Let us not shy away from robust democratic argument on a subject that goes to the heart of our own national interest.

Feelings run high on both sides of the argument – that is understandable.

But strong feeling must never be allowed to cloud clear judgement about where this country’s real long term economic interests lie.

It is clear what the British people want.

They refuse to accept that we just have to take the EU as it is – that one size must fit all, that change is impossible, that reform is doomed.

Nor do they accept that the only course open to us is to pack up and leave, to abandon the single market and the common rules from which we benefit, and to walk away.

They are rightly suspicious that the one thing that unites those who urge Britain to join the Euro and those who advocate leaving is their shared conviction that any change is impossible, and that there is no other way.

There is another way.

It is to change the EU and to change Britain’s relationship with it, and then to place the decision in the hands of the British people: do you want to stay in a reformed Europe, or would you prefer to leave?

That is our policy, and that is our commitment to the British people.

Thirteen years ago, William Hague warned of the dangers of the Euro – for Europe and for Britain.

He was right.

And I believe he was right too when he said that our country wanted to be in Europe but not run by Europe.

In Europe but not run by Europe. That phrase sums it all up for me.

Now we have the chance to give the British people a real choice.

The biggest economic risk facing Europe doesn’t come from those who want reform and renegotiation – it comes from a failure to reform and renegotiate.

It is the status quo which condemns the people of Europe to an ongoing economic crisis and continuing decline.

And so there is a simple choice for Europe: reform or decline.

Our determination is clear: to deliver the reform, and then to let the people decide.

And that’s exactly what we will do.