Tag: George Osborne

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at Ryanair in Stansted Airport, on 16 May 2016.

Thank you Michael [O’Leary]. It’s good to be here at Ryanair today.

Ed Balls, Vince Cable and I are from different political parties.

We fought each other at the last general election with different economic arguments and we’ve clashed repeatedly in the House of Commons over the years.

But there’s one thing we all agree on.

And it’s that it would be a huge mistake for Britain to leave the EU and to leave the Single Market And we’ve come here today to Ryanair to make that point.

You are an Irish company, but you’ve got 3,000 thousand employees here in Britain, flying 41 million British passengers to over 200 destinations every year.

That would not be possible without the Single Market.

And it’s because you’re part of a growing British economy that you’re announcing today a plan to invest $1.4 billion this year – that’s almost £1 billion – and create 450 new jobs in the UK.

And you are very clear: those are jobs and investment that would be at risk if we left the EU.

It’s one, very practical example of what is at stake on June 23rd when we vote in this referendum.

In the past week we’ve seen two defining moments in the campaign.

The first was the 24 hour period when both the Monetary Policy Committee of the Bank of England, and the Managing Director of the International Monetary Fund told us that Britain’s economy would suffer if we left the EU.

Their message could not have been clearer: Britain will be poorer and the British people will be poorer.

A vote to leave could see family incomes fall, growth hit, and borrowing costs rise.

It is difficult to think of more credible observers of the British economy than the 9 members of the Monetary Policy Committee and the staff of the International Monetary Fund.

And they join a line of observers that range from the OECD, to the London School of Economics, to 8 former US Treasury secretaries, to the President of the United States of America, to the Prime Minister of Japan, to the leaders of Australia and New Zealand – indeed every member of the G20, every one of our major trading partners and every major international financial institution has been unequivocal: leaving the EU would come at an economic cost.

And what has been the response of the leave campaign?

They say it’s all a massive conspiracy.

So that’s everyone from Mark Carney to Christine Lagarde, to Barack Obama, to the entire editorial team at ITV, the staff at the IMF and the OECD, to hundreds of economists, a majority of leaders of small, medium and large firms – they think they’re all part of some global stitch up to give misinformation to the British people.

The next thing we know the Leave camp will be accusing us all of faking the moon landings, kidnapping Shergar, and covering up the existence of the Loch Ness monster.

The response to the sober economic warnings from around the world by those who want to leave the EU has not been credible or serious.

There is a reason the three of us are standing here today, putting aside our very obvious differences.

It’s not a conspiracy – it’s called a consensus.

The interventions of the last couple of weeks, from the IMF to the Bank of England make very clear that the economic argument is beyond doubt.

Britain will be worse off if we leave the EU. British families will be worse off – equivalent to £4,300 per household.

Leaving the EU is a one way ticket to a poorer country.

This emergence of this overwhelming consensus has been one of the defining moments of the last week. But there is now a second key development and it’s just as revealing.

And that is that the leading advocates for Britain leaving the EU have finally conceded – after weeks of evasive answers – that not only do they want Britain to leave the European Union, they want us to leave the Single Market too.

It’s a major admission from the leave campaign – and a major moment. For it means we can begin to quantify just what the economic costs of leaving are.

And it’s important for everyone in Britain to understand what the Single Market is.

This is the arrangement that Margaret Thatcher took us into in the 1980s.

The arrangement that the House of Commons, under Labour, Conservative and Coalition governments has endorsed.

The Single Market gives British companies and the people who work for them access to half a billion customers. It is the world’s largest trading area.

It means that when you sell something like a car, or an aeroplane engine, or a plane ticket or a food product, they can all be sold to consumers in other European countries without paying any tariffs or customs duties – in other words, there’s no extra costs to selling to our neighbours.

And it means we, as consumers, can buy those things from our European neighbours without us having to pay extra costs for doing so.

It also means we can offer services like insurance premiums and architectural designs and pensions and engineering plans direct to customers in Europe and vice versa.

The Single Market is more than just a free trade area. It’s a set of common standards.

And in an age when we’re buying and selling things on the internet, it’s more important than ever.

The Single Market means that when we buy things from companies, we know that they’re safe, that they don’t cause environmental damage, that the labelling is accurate and that you know you’re going to get what you pay for.

In the European Single Market instead of having 28 sets of rules, we have one agreed set of rules, that Britain helps shape and influence.

If we leave the EU Single Market we would lose all of that.

Ed Balls and Vince Cable are going to explain what this means in practice for British companies, British workforces and British consumers.

But I can tell you today what the overall impact on the British economy would be.

In recent weeks the leave campaign have made clear they would be prepared to see Britain leave the EU and fall back on default World Trade Organisation rules.

This is the worst case scenario and would be a disaster for the British economy.

New Treasury analysis shows that if we left the Single Market and relied on the rules of the World Trade Organisation, then after 15 years we’d be doing £200 billion less trade every year, in today’s terms.

And we’d miss out on over £200 billion of overseas investment into our country.

And let me tell you what £200 billion less trade every year and £200 billion less overseas investment means.

It means we don’t see the new jobs and facilities like we see here today at Ryanair.

It means less investment in offices, factories, car plants, shopping centres, high street shops and local industrial estates.

It means companies don’t sell as much, don’t make as much, don’t employ as much.

What does all that mean for you? It means fewer jobs, lower incomes and higher prices in the shops.

So let me end by saying this – the British people want to know the facts. In the last week we’ve learnt two key facts.

Fact: we now know the Leave campaign want to take us out of both European Union and the Single Market.

Fact: we know that the overwhelming consensus of the independent economic experts is that Britain would be poorer if we left.

And from those two facts, we can work this out:

Those who will pay the price if we leave the EU are the working people up and down this country, doing the right thing, providing for their families, worrying about their children’s future; these are the people that politicians from all parties should seek to represent.

These are the working people who will be stronger, safer and better off if we remain in the EU.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Bristol on 18 April 2016.

Good morning.

It’s great to be here at the brilliant National Composite Centre in Bristol, and good to be joined by my colleagues Liz, Stephen and Amber.

The engineers, scientists and designers who work here deliver world-leading research and innovation in composites for some of Britain’s most important industries.

One sector that particularly benefits from the work of the National Composite Centre is aerospace. The South West is a great showcase for Britain’s successful aerospace industry.

Half of everything our aerospace sector exports is sold to the European Union, and our aerospace industry relies on imports from Europe to make their finished products.

We’re here to talk about Europe today.

In a little over two months’ time the people of the United Kingdom will decide whether our country should remain in the European Union or leave it.

It’s the biggest decision for a generation – one that will have profound consequences for our economy, for living standards and for Britain’s role in the world.

But what many people are saying at the moment is that they don’t have enough facts and information to make an informed decision.

And so it’s up to all of us who fought so hard to give people this referendum, so they could take this momentous decision, to provide those facts and that information.

That’s why today the government is publishing a comprehensive Treasury analysis of the long-term economic impact of EU membership and the alternatives.

This is a sober and serious look at the costs and benefits of remaining in the EU, or leaving it.

Not just for Britain, but for the individual families of Britain.

To put it simply: are you better off or worse off if Britain leaves the EU?

Has your family got more money each year, or less?

And is there more or less money available to your government to spend on public services and lower taxes?

To find the answer to those questions, the Treasury has gone back to first principles and looked at the current costs and benefits of our membership of the European Union – essentially what we put in and what we get out.

We’ve also looked at how that would change if the EU were to reform along the lines it has committed itself to.

And we’ve looked at the costs and benefits of leaving the European Union.

Not the immediate shock – a future Treasury study will look in detail at that.

But rather the long term impact that our exit from the EU would have on family finances and the nation’s finances.

We’ve done that by examining in detail what the alternatives to EU membership look like for Britain’s economy. We know now pretty clearly what those alternatives might be, although we don’t know which one Britain would pick, or our European neighbours would accept.

There’s seeking membership of the European Economic Area, where you get access to part of the single market but you have to pay into the EU and accept free movement, without any say over either. That’s the Norway model.

There’s relying on our existing membership of the World Trade Organisation where, like Russia or Brazil, you put nothing into the EU but get nothing out in terms of preferential access. That’s the WTO model.

And then there’s the halfway house of trying to negotiate a bilateral trade deal with the EU, where you get some trade access but you’re not part of the Single Market. That’s the Canada model.

It’s a complete fantasy to claim we could negotiate some other deal, where we have access to the EU’s single market but don’t have to accept the costs and obligations of EU membership. Other member states have made it very clear in recent weeks that’s not on offer – and how could it be?

How could other European countries give us a better deal than they have given themselves? Never forget that while 44% of our exports go to the rest of the EU, less than 8% of their exports come to us.

So in today’s analysis we look at the costs and benefits of our existing membership of the EU, and test that against the three realistic alternative models – like that of Norway, the WTO and Canada.

Shortly I will ask my colleagues Liz, Stephen and Amber to go through each alternative in turn.

But first let me say something about the underlying economic assumptions that were made, and upon which the analysis rests.

We assume that the underlying objective of economic policy is to increase living standards through the creation of jobs, rising household incomes, and low and stable prices for consumers.

You may have other policy objectives that you think trump those objectives – but the purpose of economic policy is higher living standards.

It’s well established in economic literature that those higher living standards are ultimately driven by long term improvements in productivity: in other words, increasing the value of what British workers produce per hour. And it is also a well-established doctrine of British economic thinking over centuries that greater economic openness and interconnectedness helps raise productivity.

That’s because greater openness to trade and investment increases competition, enhances incentives for firms to innovate, and gives them access to finance – this enables them to invest and employ people, and it gives consumers access to more choice and lower prices.

Now I accept there are those who advocate a completely different economic approach – a closed, command economy, and no free trade or competition or private business.

But that’s never been the consensus in Britain, or the rest of the world these last few decades.

And those most prominent in advocating our withdrawal from the EU do so, in part, with the claim it will lead to freer trade and freer markets – so they share these basic assumptions about the advantages of economic openness too.

In this document the Treasury therefore assess the alternatives to EU membership, and see whether they enhance or diminish our economic openness and interconnectedness and by how much.

First, is market access increased or reduced? In other words, do British businesses and consumers face tariffs, quotas and unfair competition or other barriers?

Second, is Britain’s economic influence enhanced or curtailed? What say do we have over the rules and standards that apply to the goods and services we trade in?

Third, are the costs to Britain greater or less? What do we end up paying for a different trading relationship? We know the answer to these tests with Britain’s current membership of the EU.

When it comes to market access, there are no tariffs or quotas applied to British exports to the 500 million consumers who live in the European Union.

But a Single Market is about more than the absence of quotas and tariffs – it means common standards, so there aren’t invisible barriers and obstacles to trade.

So, for example, when a highly skilled car maker is building a car, they know it can be sold directly and without any hindrance into the continent of Europe.

It also means a British-based architect or engineer can get off the plane in Munich or Madrid and immediately start doing business.

And it means that any European airline can offer the best service at the best price to provide that journey.

That’s what the Single Market means – and the Treasury analysis shows EU membership has increased trade with EU members by around three quarters.

Greater openness leading to higher productivity and rising living standards.

We also know that our current EU membership gives us influence over the rules and standards of that Single Market – we have votes over what they are, our Commissioners can help design them, our Ministers and elected MEPs can shape them, and on key issues like common tax standards we have an absolute veto.

But we are not in the single currency and we are not in the Schengen free border area – so we have a special status in the EU.

That gives us the best of both worlds: influence over the single market without the obligations that membership of the euro and open borders would bring.

And we know what the costs and the financial rewards of being in the EU are.

We pay into the EU budget, but our citizens, businesses and universities also receive money from the EU budget.

The net direct cost is equivalent to a little over 1 pence for every £1 we raise in taxes.

But we have also received over £1 trillion of overseas investment into Britain, much of it driven by the fact we are in the EU and its Single Market.

Indeed, we have received more of this overseas investment than any other EU member state – and that drives better jobs and rising living standards too, bringing money into the exchequer to spend on public services.

So we know how our existing membership of the EU performs against these tests of openness and interconnectedness.

We also know the advantages that future reform of the EU can bring for Britain.

For the EU is not perfect. The Single Market can be expanded, the costs can be reduced, and the influence of Members States can be enhanced.

That’s what the new settlement, negotiated by the Prime Minister, supported by the Cabinet, delivers.

The Treasury analysis shows that achieving EU-wide reforms to deepen the Single Market and complete major ongoing trade deals offers a huge prize for Britain.

It could add up to 4% to our GDP over the coming 15 years – that’s thousands of pounds more for each British household.

So Britain’s membership of the European Union contributes to the openness of our economy – and that leads to higher quality jobs, rising living standards and lower prices.

And we know there will be better jobs, higher living standards and even lower prices if Europe reforms.

That’s the future on offer if Britain remains in a reformed EU – a future where we are stronger, safer and better off.

What does the Treasury’s rigorous economic analysis show about the alternatives?

Let me hand over to my colleagues Liz, Stephen and Amber. They will go through each of the alternative models – like that of Norway, the WTO and Canada – and look at what they would mean for British families.

Elizabeth Truss, Secretary of State for Environment, Food and Rural Affairs

The document published today shows how one of the big advantages of being in the European Union is the ability we have to shape the rules.

Our record shows that reforms are more likely with Britain around the EU table:

Throughout the 80s we drove trade liberalisation in Europe, with action to break down barriers to the free movement of goods, services, capital and people which meant the creation of the Single Market as we know it today.

In the early 90s it was Britain who pushed to dismantle national barriers to air travel and open Europe’s air transport up to competition, which led to the creation of low cost carriers, and helped cut the cost of air travel by 40% in just 8 years.

And in the last decade it’s been Britain pushing to deepen the Single Market in digital services – simplifying rules for cross-border online purchases, and supporting a package to end mobile roaming charges in the EU.

So we’ve proven we can influence the rules from the inside. The question is could we shape them from the outside? If we left the EU some say we could be like Norway.

Norway isn’t in the EU, but it is in another group called the European Economic Area

On paper it looks pretty similar to our relationship with the EU.

We would still be in a European club – albeit a different one.

We’d still pay contributions to support other EU member states.

We’d still implement EU legislation.

But there would be a crucial difference.

We’d have no say over the rules.

Our Prime Minister would no longer have a seat at the European Council, where EU leaders take decisions about the future direction of the continent.

No British Minister would be there when farming issues were decided – or indeed any other issue that impacts our country.

We would have no vote in the Council of Ministers – the body where the 28 EU Member States decide on legislation.

But we’d still have to implement their decisions on the internal market, and follow their rules on State Aid and competition.

The current EEA members take this on the chin.

For Norway, that means losing a vote share that inside the EU would be worth 1%.

That’s a pretty low price.

But what about Britain?

Our vote share would drop from one of the highest, alongside France and Germany, to zero.

Our strong, reforming voice would be silenced.

That’s what I call a loss of British sovereignty.

But it’s not just the lack of influence that worries me about the Norway model.

It’s the fact that the EEA tariff-free trade doesn’t cover key areas like the vast majority of agriculture and fisheries, so Britain’s farmers would be hit.

It’s the fact that EEA members aren’t part of the EU customs union, so British firms would face new customs checks and bureaucracy if they wanted to trade with Europe.

Every time Norway exports a product to an EU country, they have to fill in a form with 50 boxes and guidance that is 78 pages long.

This must be frustrating for Norway, even though many of their exports are raw materials, making these forms easier to comply with. But it would be a nightmare for Britain as many of our exports are complex finished products like cars or machinery.

All this new bureaucracy would significantly reduce our openness and interconnectedness – reducing the competitiveness of British firms and acting as a drag on our productivity.

And being part of the EEA means still accepting EU regulations, contributing to the EU, and permitting the free movement of people,

So if we decided to be like Norway, we’d have worse access to the Single Market. We’d keep paying into Brussels but we’d be a rule-taker instead of a rule-maker.

The Treasury has run the numbers and joining the EEA would significantly reduce our openness to trade, and as a result, productivity and investment would fall.

Let’s be clear on this – because we know that increasing productivity is the key to increasing living standards. If productivity falls we will see lower wages in Britain; consumption will fall and people will be permanently poorer.

The analysis published today shows that following this path would mean a long-term reduction in GDP of around 4% every year.

And this long-term reduction in GDP will hit our tax receipts as people and businesses earn less.

The impact on tax receipts of joining the EEA would be £20 billion a year within 15 years’ time. Not a one-off hit, but an ongoing painful reduction as our country raises less money, and has less money to spend on public services.

Those are the facts on the European Economic Area.

So the analysis shows if we want to minimise the significant damage to our economy from leaving, we would, effectively, have to re-join another European club on worse terms – no vote, no power, still paying into the EU, and with much less protection against the abuse of free movement.

For a country the size of Britain, with the strong voting clout we already have in the EU, this would represent shooting ourselves in the foot.

Stephen Crabb, Secretary of State for Work and Pensions

Next I want to talk to you about global trade. There are some who imply there’s a tension between trading with Europe and trading with the rest of the world.

That is simply wrong. Both are good and we need to do both.

And that’s exactly what we will do if we remain a member of the EU.

Yes, nearly half of our exports go to Europe, but our exports to the rest of the world have gone from £150 billion to £290 billion in just 10 years – that’s a 95% increase.

And to those who say that’s proof we don’t need the EU, just look at where they’ve increased the most.

We currently benefit from trade deals the EU has negotiated with over 50 other countries.

And as today’s document explains, those deals have been great for Britain.

Our exports to South Korea have grown by over 100% in just four years since the EU Free Trade Agreement was signed. Exports to Chile have grown almost 300% in a decade.

Those other countries will have given up a lot in negotiations to gain access to a bloc with 500 million customers and a quarter of the world’s GDP.

But if we vote to leave, we’ll only have two years before all the trade deals we have via the EU would fall away. The clock would be ticking, yet renegotiating trade deals with more than 50 countries as a single country would take many, many years.

And that’s if we can even get the talks off the ground: the US Trade Representative recently said the United States is “not particularly in the market for free trade agreements with individual countries”.

Some argue there’s no need to worry – we could just fall back on the existing World Trade Organisation rules. Now let me be absolutely clear. The WTO is a brilliant organisation and one that Britain is proud to be a member of.

But their rules are a sort of ‘minimum standard’ for global trade – and they fall way short of the Single Market and Free Trade Agreements we currently access through the EU. Under WTO rules we’d face common export tariffs.

The EU would charge an average tariff of 36% on dairy products. 12% on fish. 12% on clothes. 10% on cars.

Our services exporters would be hit too – as they’d lose their automatic right not to be discriminated against through being part of the Single Market.

And we’d have to decide where to set British import tariffs.

Would we choose to set high tariffs on food, to protect British farmers?

Or would we set low tariffs on food, to protect British consumers?

Regardless of what we decided on import tariffs – there’s a catch.

WTO rules would require us to offer the same tariff to all countries.

So if we wanted to offer low tariffs to our neighbours in Ireland, we’d have to do the same for all other 160 countries in the WTO.

So for example, we’d have to offer low tariffs to countries like Brazil and Argentina while they apply high tariffs on our key exports, like Scotch Whisky at 20% in Argentina, and cars at 35% in Brazil.

Trade deals are about give and take, but we’d have turned up to the table having already played all our cards. The analysis published today shows that the WTO scenario represents the most extreme break from the EU, and it is also the alternative that is the worst for the British economy.

The sharp reduction in trade would be accompanied by a reduction in foreign direct investment into the UK as we’d no longer have the same degree of unrestricted access to the EU Single Market of 500 million consumers. Think of all the global firms that have headquarters in the UK so they can sell into Europe – if we leave the EU, they could leave Britain.

The Treasury’s rigorous analysis of the trade and investment impact of the WTO option shows that after 15 years Britain’s economy would be around 7.5% smaller.

And the fiscal cost of the WTO option is the most painful of all – in the long term our country would have to cope with annual tax receipts that are £45 billion lower. Every year.

Conclusive proof that when it comes to trade, openness and economic growth, it’s better to go for the best deal available rather than the lowest common denominator.

Amber Rudd, Secretary of State for Energy and Climate Change

As the document today explains, one of the most valuable benefits of EU membership for Britain is the Single Market. And that Single Market is not just in goods, but in services too.

So what does a Single Market in services mean, and why does it matter?

It matters because 80% of our GDP comes from the services sector, and 80% of our workforce are employed in the services sector.

Britain is the country that designs the building, arranges the finance, insures the business, draws up the contract, produces the TV series, creates the advertising campaign and audits the accounts. High skilled service industries like these are vital for our future.

The Single Market means that all of our exports can be sold to Europe tariff-free.

And crucially it isn’t just tariff barriers that the EU has eliminated for Britain.

The Single Market seeks to eradicate non-tariff barriers too. So a British architect or a British lawyer can go and work in any other European country and have their professional qualifications recognised.

And the creation of passporting rights in the 90s means that financial services firms like banks, insurers and investment managers can establish themselves anywhere in the EU, and trade across the whole Single Market, with lower cost and lower complexity.

The figures speak for themselves.

Our service industries are growing at a rate of nearly 3% a year on average.

Our services exports have increased from £130 billion to £220 billion in the past decade alone – with Europe being by far our biggest market.

I accept the European Single Market for services is not yet complete – that’s why commitments to complete it formed such a key part of the Prime Minister’s recent negotiation.

But the results clearly show that the Single Market has benefitted our services sector.

Now I want to look at the final alternative scenario the Treasury has modelled: a negotiated bilateral agreement.

They’ve looked closely at countries like Switzerland and Canada who’ve negotiated bilateral trade deals with the EU.

The Canada free trade agreement seems to be the most popular with those who want to leave, so let’s look at its benefits and costs, and contrast it to EU membership.

It’s been held up as the most comprehensive Free Trade Agreement the EU has ever made.

It’s a vast, detailed agreement that runs to over 1500 pages – although 800 of those pages are exemptions and barriers to free trade.

And remember it’s not in place just yet.

Canada spent 7 years negotiating the deal, waiting outside the door as those on the inside decided whether to agree.

But when it comes into force it may work well for Canada and for the EU.

However, I’m not so sure it would work well for us.

Their deal does offer some liberalisation in services it’s true. But the Canadians export about a tenth of the value of services to Europe than we do.

And the Treasury analysis finds that around 50% of our service exporters would face materially less access to the EU market than they currently enjoy if we were to replicate the Canadian deal.

In addition, Canada doesn’t have access to the financial services passport.

This would be a real problem for Britain. If we left the EU and lost access to passporting rights the evidence suggests that financial services jobs would move out of Britain.

But it’s not just services where the Canadian deal wouldn’t work for us.

On agriculture, key sectors are excluded from the Canadian deal.

Take beef for example. We currently export over 90,000 tonnes of beef a year to Europe tariff-free, and if we wanted to sell more then we could.

The Canadian agreement allows them a quota of 50,000 tonnes, above which they would be subject to some tariffs equivalent to around 70%.

If we voted to leave then a reciprocal deal would badly hurt British beef farmers.

And how about another example – cars. Our car manufacturing sector is thriving, but as you’ve already heard from Stephen, the EU places a 10% tariff on cars from outside the EU.

This would cost our industry more than £1 billion a year, and the Canadian deal only eliminates them after 7 years.

So even though the Canadian Free Trade model is put forward as the best and most comprehensive option by those who want to leave, it’s clear there are some crucial gaps for a country like Britain.

The Treasury analysis published today shows that a Free Trade Arrangement like Canada’s would have a significantly negative impact on our trade, investment and productivity.

After 15 years Britain’s economy would be around 6% smaller, compared to 3.8% smaller were we to join the EEA.

So even the best bilateral trade deal the EU has agreed with an outside country is significantly worse than the access you’d get to the Single Market through the EEA.

George Osborne, Chancellor of the Exchequer

So you’ve heard today the serious and sober Treasury analysis, which sets out the costs and benefits of Britain’s membership of the European Union.

The costs of accepting common European standards; and the benefit that gives us of unique access to a Single Market of 500 million people.

The costs of being one voice among many when it comes to setting those standards; and the benefits of the influence that gives us to shape those rules to our advantage, and extend our trade access around the world, so that when it comes to our economic environment, Britain is a rule-maker not a rule-taker.

The costs of directly contributing a little over 1 penny in every 1 pound of taxes; and the direct benefits of the billions of pounds of foreign investment which flow more to Britain than any other European country and boosts our public finances.

Deliver the economic reform we’ve agreed in the European Union, and the benefits are even clearer.

The analysis shows that our economy could be 4% greater if we extend that Single Market and do more free trade.

These economic costs and benefits of EU membership, with or without this brighter, positive future need to be weighed against the economic costs and benefits of all the plausible alternatives for Britain.

The Norway model – where we gain partial access to the Single Market, but face customs barriers and have no influence over the rules we’re forced to abide by.

Where we lose trade and investment, but still have to pay into the EU and accept free movement of people. The WTO model, where barriers are erected by our nearest and most important markets, everything we make from food to cars to clothing and all the services we provide – with severe consequences for our industry and the size of our economy.

The Canadian model, where our services that make up 80% of our economy cannot do business freely with Europe, and the integrated supply chains that are a feature of our advanced manufacturing face customs barriers for the first time in half a century.

Under any of these alternative models of the kind of relationship Britain might have with its principal export markets our influence is diminished; we trade less; we receive less investment; our openness and interconnectedness to Europe is reduced.

And you’d have to believe that we could more than compensate for that loss of trade and investment with Europe, by increasing trade and investment with the rest of the world.

But the evidence shows that our trade deals with more than 50 other non-EU countries would be jeopardised, and our ability to influence global trade rules would be hugely reduced.

We’d do less trade with the rest of the world outside the EU, not more.

The Treasury has modelled the economic impact of alternatives to EU membership.

As you’ve heard from my colleagues, the biggest impact comes if we just rely on being a member of the WTO.

The least impact comes if we try to form a relationship like Norway, but then we have to pay into European budgets and accept free movement – the very things those who want to leave claim they want to be rid of.

That’s why those most prominent in advocating British exit from the EU say we’d try to form an arrangement like Canada.

But we’re not Canada – our comparative advantage is in services and advanced manufacturing. 50% of all our services exports go to the continent of Europe.

So the economic analysis shows that this Canada-style arrangement comes at a real economic cost for Britain.

The central estimate is that in the long run GDP would be over 6% smaller and Britain would be worse off by £4,300 per household.

The people of Britain want to know the facts before they vote on 23 June.

The Treasury’s analysis steps away from the rhetoric and sets out the facts.

Britain would be permanently poorer if it left the European Union. Under any alternative, we’d trade less, do less business and receive less investment.

And the price would be paid by British families. Wages would be lower and prices would be higher.

And that means that Britain would be poorer by £4,300 per household.

That is £4,300 worse off every year, a bill paid year after year by the working people of Britain.

And that is the long term cost – in the short term we’d face a profound economic shock and real instability. This Treasury analysis is serious and sober – and it’s conclusive.

British families will pay a heavy economic price if we leave the EU.

And don’t believe the flimsy claim that at least we would get some money back by not paying our 1 penny in every £1 we raise in taxes to the European budget.

If we left the EU, we’d lose tens of billions of pounds in money for our public services, because our economy would be smaller and our families poorer.

The most likely bill our public services would pay if we left the EU is £36 billion.

That’s the equivalent of 8 pence on the basic rate of income tax.

Higher taxes and a smaller economy is not a price worth paying.

Of course, I know there will be many attempts by those who advocate exit to dismiss this Treasury analysis.

But it’s rigorous, it’s rooted in the facts and its conclusions are similar to every other credible independent analysis done around the world – from the recent global outlook of the IMF to the academic research of the London School of Economics.

And I would conclude by saying this:

It is a perfectly honest position to say that Britain would be worse off but that is a price worth paying.

But don’t pretend to the British people that leaving the EU comes at no economic cost.

There is a price to be paid if we leave – a £4,300 price that families will pay year after year.

Don’t let’s leave the EU on a false prospectus.

Let’s have the facts and the figures in front of us as we all make this huge decision on 23 June.

For me, in the end, it’s not just about the economics. It’s about who we are as a country.

The Britain I love is open, confident in its values and ready to shape the future of our world.

I don’t want Britain to be like Norway or like Canada or anyone else.

I want us to be like the Great Britain we are.

Strong. Proud. Prosperous.

Stronger, safer and better off in the European Union.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, on 23 April 2013.

In seventeen months Scotland will decide whether or not to end over three hundred years of partnership with the other nations within the United Kingdom.

As decisions go, they don’t come much bigger.

This isn’t a decision for the UK Government or me to take.

It’s a choice for people living in Scotland.

The UK Government is today publishing an in depth economic paper; the first of a series about the economic implications of Scottish independence.

With this, and future Scotland analysis publications, the UK Government wants to inform the debate and help people to make up their own mind.

The paper deals with one of the most important decisions that would face a separate Scotland – how to arrange its currency and wider monetary and fiscal affairs.

This analysis has been prepared by Treasury civil servants, which is why I’m speaking to you today.

Their analysis shows that the current arrangements of a full, monetary, fiscal and political union bring economic benefits to all parts of the UK.

Breaking up that union would represent a fundamental change, and confront an independent Scottish state with difficult choices about what to put in its place.

The paper provides evidence of how the United Kingdom benefits from being a deeply integrated single domestic market.

We trade together – Scotland exports to the rest of the UK nearly a third of everything it produces.

We do business together – nearly one in five private sector jobs in Scotland is for business based elsewhere in the UK.

We work together – each year over forty thousand people move across the border in each direction to live and work.

It’s not surprising then that Scotland’s economy is so closely aligned with the rest of the UK and its interests so inextricably linked.

So the analysis makes clear the value of being able to fully co-ordinate our monetary, fiscal, and financial stability policies.

Such co-ordination allows us to:

our central bank, the Bank of England, to set interest rates to suit conditions throughout the UK and to have the ability to step in rapidly to stabilize our financial system when the need arises;
take advantage of the UK’s ability to borrow in its own currency and credibility and track record with the international financial markets – built up over many, many years – to access cheaper financing;
leverage the UK’s large and diverse tax base of thirty million individual taxpayers and nearly two million registered businesses to ensure when times are tough there is the fiscal firepower to ensure resources go to wherever in the UK they are needed most.
As the Scottish Government’s own Fiscal Commission puts it:

Retaining a common currency would promote the single market and help facilitate trade and investment to and from the rest of the UK and elsewhere.

And the Commission is right on this point.

Who would conclude the answer to today’s economic and financial challenges is to:

– erect barriers between you and your most important trading partner;

– accept a premium on the cost of borrowing when money is tight;

– and conduct your business in two different currencies, across fluctuating exchange rates, when currently you don’t have to – with all the additional costs involved?

The Treasury paper identifies four potential alternative models from which a separate Scottish state could pick its currency and monetary arrangements.

All are a profound change from the pound we have today.

An independent Scotland could:

– adopt the pound unilaterally, just as Panama uses the US dollar;

– seek a formal agreement, like the Eurozone have with each other, to form a sterling currency zone with England, Wales and Northern Ireland in the continuing UK;

– agree to adopt the euro itself;

– or introduce a new Scottish currency.

And the analysis is clear: all of these alternative currency arrangements are less suitable economically than what we have now – for both Scotland and for the rest of the UK.

Scottish Government Ministers have made it clear they want an independent Scotland to keep the pound, the Bank of England and to enter a formal currency union with the rest of the UK.

The Treasury paper cautions that a formal currency union between two completely separate countries is not the same thing as keeping the pound we have now.

First, financial markets would need to be convinced such a union was built to last.

A durable currency union between two separate countries requires very strong and credible political commitment. The very opposite of what the SNP is proposing with its determination to break the political ties with the rest of the UK.

But the lesson from the Euro is stark – they want to weaken the political ties in a dramatic way.

Monetary union without close fiscal and political integration is extremely hard to sustain.

That’s why the Euro area is having to reform its institutions, as the original measures to maintain budgetary discipline of its member states proved inadequate.

Countries with the euro now have to:

– submit their budget plans to Brussels alongside their own national parliaments;

– commit by the Fiscal Compact to keep budgets balanced or in surplus;

– and face the prospect of sanctions if they run excessive deficits and fail to take effective action to cope with them.

And that’s not all.

You only have to look at the problems facing smaller members of the euro area such as Portugal, Ireland and Greece. The most recent reminder of how difficult things can become are the events in Cyprus.

Cypriot authorities have had to put in place temporary capital controls.

This wouldn’t happen within the US or within the UK.

And the Treasury paper cites the example of the last two nations to try 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 as investors and savers sought what they saw as a safer haven for their funds.

So the challenges for establishing a formal currency union between Scotland and the remaining UK are not hard to imagine.

The political commitment to maintaining the currency union would be tested daily in the financial markets; particularly if there was any hint of that currency union being a temporary arrangement – a real possibility if an independent Scotland was committed as a condition of EU membership to join the Euro at some point.

Indeed the Scottish Government’s own Fiscal Commission talks only of retaining sterling “immediately post-independence” and of how its proposed framework was “designed to be flexible” should Scotland’s economic conditions change post-independence.

Instead of talking up the strength and permanence of currency union, they are talking up the flexibility and short-lived nature of it.

Second, the Treasury analysis suggests that an independent Scottish state would have to accept significant policy constraints, even if the financial markets could be convinced of both countries’ commitment to maintain for the long-term a formal currency union.

Monetary policy set by the Bank of England in such a union would over time become less and less suitable for both countries, as tax and spending policies diverge.

Tax and spending would therefore need to take more of the strain to stabilize the Scottish economy in the face of economic shocks.

And the paper suggests that an independent Scotland would be more exposed than the UK to volatile revenues from oil and gas, and a large banking sector relative to the size of the Scottish economy.

Today in the UK we pool our tax resources – a common insurance policy where all pay their share of the premium.

We are able to transfer funds to help areas of the country adjust to economic shocks.

A co-ordinated UK response is automatic.

Such arrangements couldn’t simply be translated into a currency union of two separate countries.

An independent Scotland would have to agree its tax and spending plans with what would become a foreign government.

So the big contradiction is that those proposing separation are campaigning to “bring powers home” with one hand, while planning to give them away with the other.

Third, there is no guarantee that the terms of a formal currency union could be agreed between an independent Scotland and the rest of the UK.

There are no modern examples of a successful formal currency union between two countries of such unequal size.

There are currently seventeen members of the euro area.

The largest member – Germany – represents just less than thirty per cent of the GDP of the euro area as a whole, a sterling currency union would be much more imbalanced.

The continuing UK would comprise around ninety per cent of the total GDP in a sterling currency union with an independent Scotland.

Some have quoted the example of the Belgium-Luxembourg economic union, two countries with a similar difference in size.

But both countries kept separate currencies.

Luxembourg effectively ceded all control of monetary policy to the Belgian central bank.

And the monetary association nearly failed in the early 1980s when Luxembourg made plans to make the Luxembourg franc independent.

So let’s be clear: abandoning current arrangements would represent a very deep dive indeed into uncharted waters.

Would a newly independent Scottish state be prepared to accept significant limits to its economic sovereignty?

To submitting its budgetary plans to Westminster before Holyrood.

To constrain the degree of tax competition between Scotland and the rest of the UK.

To accept some continuing oversight by UK authorities of its public finances.

And what is the economic case for the remaining UK?

The Treasury analysis suggests that the answers are not clear.

Of course there could be some benefits for the rest of the UK in keeping the same currency as an independent Scotland using the pound, but it would also create significant economic risks.

However, the imperative to agree to a formal currency union would not be as strong for the rest of the UK as for Scotland.

While around 30 per cent of total Scottish output is exported to the rest of the UK, the rest of the UK relies on exports to Scotland for less than 5 per cent of its total output.

The benefits of this trade would need to be judged against the imbalance within the sterling currency union of exposure to economic and financial risk.

The rest of the UK – as the larger economy – would be much more exposed to the risk of an independent Scotland running into fiscal and financial difficulties.

As Professor John Kay – formerly a member of the Scottish Government’s Council of Economic Advisers – has put it:

It is easy to see why the rest of the UK, representing 91.5% of a monetary union, might seek oversight of the economic affairs of Scotland, representing 8.5% of the same union. It is more difficult to see why the rest of the UK representing 91.5% of a monetary union should concede oversight of its policies to Scotland, representing 8.5% of the union.

The fundamental political question this analysis provokes is this.

Why would fifty-eight million citizens give away some of their sovereignty over monetary and potentially other economic policies to five million people in another state?

Before the rest of the UK could ever agree to enter a formal currency union, any future UK Chancellor of the Exchequer at the time of independence would have to provide the British people with a clear and compelling answer to this question of sovereignty.

The SNP asserts that it would be in everyone’s interests for an independent Scotland to keep the pound as part of a Eurozone-style sterling zone.

But the Treasury analysis we are publishing today shows that this is not the case.

Let’s stop speculating – and look at the evidence: would the rest of the UK family agree to take that risk?

Could a situation where an independent Scotland and the rest of the UK share the pound and the Bank of England be made to work?

Frankly, it’s unlikely, because there is real doubt around the answers to these questions.

In other words, the only way to be sure of keeping the pound as Scotland’s currency is to stay in the UK.

The Treasury paper also discusses other alternatives open to an independent Scottish state if it proves impossible to agree a formal currency union with the rest of the UK.

It could continue to use the pound without the rest of the UK’s agreement.

However, to do so would leave an independent Scotland with no control over its own monetary policy.

The Bank of England would continue to set interest rates – but without any regard for conditions in Scotland.

And with no ability to print money, a Scottish monetary authority could only play a very limited role as a ‘lender of last resort’ to Scottish commercial banks.

In this scenario an independent Scotland would be faced with severe monetary and fiscal constraints.

Some small countries have adopted this approach.

Montenegro uses the euro.

Panama the US dollar.

But, both the Scottish Government’s Fiscal Commission and the Treasury’s analysis conclude that this option would not be appropriate for a country of Scotland’s economic size and complexity.

Another option is that Scotland could apply to join the euro area.

Indeed, it may well have to as part of conditions for EU membership.

But this would mean losing the pound, imposing new transaction costs on Scottish businesses’ trade with their largest market – the rest of the UK.

And the Scottish economy differs significantly from the euro area.

It is certainly less well integrated with the EU than with the UK as a whole.

The policies of the European Central Bank would therefore be less well suited to conditions in Scotland than those currently pursued by the Bank of England.

And an independent Scotland would face the same constraints designed to ensure the eurozone’s stability as its other smaller members.

Finally it could introduce a new independent Scottish currency.

An attractive option for many as it’s the only one where an independent Scotland would not have to give up control over some or all of the economic levers at its disposal.

However, the Treasury analysis shows that this freedom would come at a cost.

The transition costs of establishing a new central bank and to replace the pound coins and notes currently in circulation;

The risk that capital could flow out of Scotland if Scottish residents preferred to hold their assets in an established currency, with the need as a result for capital controls in the transition period;

The higher transaction costs of doing business with all of Scotland’s trading partners – particularly the UK;

And the risks of a volatile exchange rate deterring long-term transactions and investment.

So the analysis concludes that in comparison to current arrangements the benefits of an independent monetary policy are unlikely to outweigh these costs.

The conclusion is clear.

The pound we share works well.

The saying goes,

If it ain’t broke why fix it?

But I say –

if it ain’t broke don’t break it.

The alternatives to the way Scotland now uses the pound are second best.

Is second best really good enough for Scotland?

I want the best for Scotland and for all our United Kingdom.

We’re better together.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Aberdeen on 3 September 2013.

Good morning.

I’m delighted to be here in Aberdeen at such an illustrious gathering of the oil and gas industry – an industry that is of vital importance to Britain’s economy.

But let us first remember Duncan Munro, Sarah Darnley, Gary McCrossan and George Allison.

Four brave professionals who ten days ago, tragically lost their lives in a helicopter crash off Shetland.

Our thoughts are with their families, friends and colleagues at this difficult time – and the book of condolences here today shows the depth of feeling for those four brave professionals.

And we should also remember that 25 years ago, 167 people lost their lives in the Piper Alpha disaster.

A tragedy that leaves an indelible mark here in Aberdeen on the industry, and the whole community.

Let us pay our respects.

To the brave professionals who lost their lives last month, and on that terrible night 25 years ago.

To their families and friends in whose memories they live on.

To those who survived and the rescue teams who helped them do so.

The whole of the UK owes a massive debt to the thousands of men and women who work in what is an inherently dangerous environment – delivering enormous benefits to every family in the country.

I know that as an industry you sometimes feel taken for granted.

Well, I want you to know this: you are not taken for granted.

You are very much appreciated.

And my personal message to you is this.

First, I recognize the vital role the oil and gas industry plays in the UK economy – and will continue to play for many many years to come.

Second, I also recognize that the oil and gas remaining in the UK Continental Shelf will be increasingly difficult and more expensive to extract – but that this Government commits to play our part in delivering the investment that’s needed.

And third, I believe that the best way to support this industry and maximize the returns from this great national asset is:

– by working together across the UK;

– through mobilizing all the UK’s resources; and
by pooling our risks to provide stability across the whole UK.

On Sunday, I was on the Andrew Marr TV show.

In his book, the History of Modern Britain, he says that the oil and gas industry’s story is one of the most remarkable and under-discussed in the entire history of our country.

It’s a tale of pioneering geologists, seismologists, roustabouts and rough-necks.

He said that: “The discovery and exploitation of huge oil and gas fields far out under cold, stormy and turbulent waters … is a modern epic of technical skill, bold finance, endurance and individual courage”.

And he is right to compare the feats of North Sea civil engineering with the building of the railways by the Victorians.

I’ll never forget my first visit to a North Sea platform, the Elgin Franklin platform, six years ago.

The long helicopter flight across the bleak, open sea – and then, the pinprick in the distance of the platform looming ever larger – until you land on the enormous construction.

I remember that first, powerful emotion you get when you step out onto a North Sea platform: what an extraordinary achievement of the human spirit and ingenuity.

Later today I will travel out to Talisman Sinopec’s Montrose platform and I know I will feel the same pride in what our country can achieve when we work together.

For from the day 38 years ago, when the first oil was piped ashore in Cruden Bay, the oil and gas industry has brought huge benefits to the whole of the UK.

And it continues to do so today.

Oil and gas still meets around 70 per cent of the UK’s primary energy needs – with more than half of UK demand for oil and gas met by UK production.

The heat and light for our homes;

power for our businesses;

and fuel for the transport for our people and goods.

Directly and indirectly, the industry employs nearly half a million people – almost half of them here in Scotland.

It’s the largest industrial investor in the UK – and it’s investing more than ever before.

And while the expertise for the initial development of the North Sea was largely imported, a world class home-grown industry has sprung up on the back of it.

Over 1,000 companies in and around Aberdeen alone.

Businesses which are now leading an export charge from Azerbaijan and Russia, to Brazil and the Middle East – with international sales of nearly £8 billion from Scotland alone.

As all of you know, subsea technology is a sector where the UK is a global leader – and it’s one of our fastest growing industries.

And I’ve spoken to the subsea’s industry conference here before in Aberdeen to celebrate its success.

Today we capture more than a third of a global market – a market that’s set to double over the next five years.

Growth at home and abroad.

Growth that I want to help you deliver.

Of course, I understand that your industry has changed hugely since the early days of North Sea extraction.

Then, the North Sea was dominated by a handful of ‘majors’ – the BPs and Shells, the Occidentals and Exxons.

Now, there are over 50 oil companies operating in the North Sea – with smaller independents and national state-owned oil companies rubbing shoulders with the original ‘majors’.

New names to conjure with: Apache, KNOC, Petrofac, Talisman, Sinopec, JX Nippon.

While the pattern of ownership today has changed from 30 years ago, the nature of the development opportunities is different too.

Companies are operating in a mature basin.

And that brings me to my second point.

The fact is that the oil and gas remaining in the UK Continental Shelf will be increasingly difficult and more expensive to extract.

You know well that the ‘big’ strikes are fewer and farther between.

The opportunities are often smaller, technically challenging or both – with the oil either in deeper waters or just harder to reach and extract.

In the central North Sea, companies are drilling at water depths of 100 metres.

In the planned Rosebank field West of Shetland, Chevron will be operating at 1,100 metres in waters more than ten times deeper.

New entrants are bringing fresh thinking and impetus, making viable even the most marginal fields.

Normally when politicians visit platforms, they visit the newest field.

But the Montrose field I’ll be visiting is one of the oldest in the North Sea.

I’ve deliberately chosen to go there because I want to see how Talisman Sinopec and Marubeni Oil and Gas’s £1.6 billion investment is extending the life of five fields by 14 years – which means that these fields will be producing the equivalent of an additional 100 million barrels of oil until 2030.

This project alone will be creating and securing 2,000 jobs throughout the UK supply chain. But there are also challenges.

We need to develop a North Sea regime that keeps pace with the changing structure of the basin.

The Montrose project is a case in point.

Its economic viability depends on a complex mix of factors: targeted tax breaks, and bundling a number of older fields with two undeveloped ones.

So, as we think about the future of the North Sea, what can we be certain about?

We can be certain that:

– our reserves aren’t infinite;

– the costs of extraction are rising;

– and North Sea tax revenues are in long-term decline.

But we can also be certain that the ingenuity of the industry will secure its long-term future and that we’ll still be recovering oil from the North Sea and West of Shetland in the 2050s.

We can’t know the precise level of recoverable reserves.

The future is about volume and value.

So nothing can – or should – be taken for granted – and we know that.

The British government’s objective is simple: we want to work with you to maximise the North Sea’s recoverable reserves.

So we’ve put in the place the first ever national Oil and Gas strategy.

The PILOT programme is identifying ways to remove barriers to development.

And, working through the Fiscal Forum, we’re putting in place tax reliefs to support the industry as extraction becomes more difficult.

In my Budgets, I’ve doubled the value and extended the scope of the small field allowance.

I’ve put in place a £3 billion allowance to support investment in and exploration of large and deep fields like those West of Shetland.

And I’ve introduced a £500 million allowance for large shallow-water gas fields and a brownfield allowance to encourage incremental investment in older fields.

Perhaps most important of all, I’ve provided the industry with long-term stability, by providing certainty on tax reliefs – worth upwards of £20 billion over a 30-year period – on future decommissioning costs.

Funded by the whole of the UK, that’s equivalent to £3000 pounds for every man woman and child in Scotland – being used to support investment in the North Sea.

The UK government will enter into contracts with industry setting out what relief companies can expect to receive in future when decommissioning assets.

And if the actual amount turns out to be less, the government will make up the short-fall.

This means assets will be easier to transfer and the climate for investment improved.

I can tell this Conference today I’m unveiling the final decommissioning deed.

A concrete example of the tax certainty this government is providing.

Never before has any government entered into legally binding contracts with individual companies to guarantee the tax relief they can expect decades into the future.

No other place in the world provides such a guarantee.

And your industry – not the Treasury – estimates that this decommissioning certainty will drive at least £17 billion of increased investment, extending the life of the North Sea basin with an additional 1.7 billion barrels extracted.

It’s the culmination of 18 months of hard work and close collaboration between you and government.

Thank you for that.

Now let’s get the deeds signed and get the investment.

And we’re already seeing results from this new tax regime.

Oil & Gas UK are forecasting record levels of investment of £13.5 billion for 2013, helping to stem the decline in production of recent years.

And look at the projects already announced.

Statoil are investing £4.3 billion in the Mariner heavy oil project, creating 700 jobs.

EnQuest, the UK’s largest independent oil producer are investing £170 million in the Thistle field, safeguarding 500 jobs and creating nearly 1,000 more in the supply chain.

CNR International are investing £300 million to extend the life of Ninian field and produce 5 million additional barrels.

And following the introduction of the large shallow water gas field allowance, GDF Suez, Centrica and BayernGas UK are investing £1.4bn in the Cygnus gas field, creating 1,200 jobs.

We want to build on this success.

Sir Ian Wood is currently reviewing how we can improve future economic recovery of oil and gas from the UK Continental Shelf.

He is looking at what further powers the government should have to ensure the North Sea remains a prime location for new investment and that government ensures companies are operating their licences effectively.

Government and industry have a shared interest in maximizing the economic production of the UK’s oil and gas reserves.

I want to see far greater collaboration from industry on production and exploration.

Because the fact is, production efficiency is down.

When ownership of North Sea assets is more widely spread than ever before, collaboration is often the only way to improve the economic viability through economies of scale.

Like:

Access to critical infrastructure.

Keeping in play older infrastructure hubs, so that recoverable reserves aren’t lost forever.

Sharing the benefits of new technologies and extraction methods.

Above all, deploying the best talent to the North Sea so the basin can flourish.

Government and industry pulling together to maximise both of our returns from the North Sea – volume and value.

Let me turn to the bigger picture on energy.

Your message, which we’ve heard and listened to, is the need for predictability so you can plan for the long-term.

That’s what our decommissioning tax certainty is all about.

But this is just one part of our support to the energy market.

We are seeking, from companies like yours and others, tens of billions of pounds of investment to secure Britain’s energy in the decades to come.

And we want a mix – oil and gas are vital, but so too are renewables and nuclear.

My ambition is that when you look across the western world, you see the UK as the best and most stable place to invest – and we’re creating the tax and regulatory regime to achieve it.

Last year, we published our Gas Strategy which set out our expectation that gas generation will be an essential part of our energy supply.

In June, we published draft strike prices for renewable energy generation – providing the certainty needed to make investing in new technologies less risky and more attractive.

We’re introducing ambitious and radical reforms to the electricity market – a new way of paying for generation will bring forward up to £110 billion of private sector energy investment.

We’ve set up a Green Investment Bank to invest in green energy projects and leverage further investment from the private sector.

We’ve already committed to invest up to £3.8 billion through the Bank.

On Shale, let me say this, because I know it’s an issue that has been in the news a lot recently.

Of course, we want exploration of our shale resources to be safe, to avoid environmental damage, and be done in a way where communities get the benefit of what’s happening in their backyard.

That’s why we got the industry to commit to generous community benefits.

But let me also say this.

Britain led the way in finding new sources of energy – coal in the 18th and 19th centuries, oil in the 20th century, and renewables at the turn of the 21st century.

If we turn our back on new sources of energy which countries like China and the US are exploiting, then:

– we’re saying to British families: you pay energy bills that are higher than those paid by families elsewhere;

– we’re saying to British companies: you’ll face costs higher than companies face elsewhere;

– and we’re saying to our country: we’ll have fewer jobs, less investment and higher costs of living – and I’m not prepared to say that to the British people.

Britain is not going to turn its back on the energy sources of the future.

So we’ve set out a generous new tax regime for shale gas and removed the bureaucratic obstacles to its use onshore and offshore.

And when I talk about Britain I mean a United Kingdom.

I’ve talked about predictability in this speech, but I know that one issue that has created uncertainty is the possibility of Scottish independence.

We determined to end that uncertainty by holding a referendum that will reach a decisive outcome next year.

The question of whether Scotland’s future lies within the UK or without needs to be answered.

As an Englishman, I passionately hope people in Scotland vote to stay within the UK in just over a year’s time.

This hope is, I know, shared by the great majority of people living in England, Wales and Northern Ireland.

The reason is simple: we’re better together.

For those tempted to think that the rest of the UK would be better off without Scotland, let me be clear.

Separation would bring consequences for not just Scotland.

We would all suffer.

The rest of the UK is by far the most important market for Scottish goods and services.

Scotland’s trade with the rest of the UK is almost double its entire trade with the rest of the world – and it’s a share that’s growing.

This trade benefits companies and employees the length and breadth of Scotland.

And it’s a two-way street: Scotland benefits from being a strong part of the UK, and the UK also benefits from Scotland’s place within it.

As our economy recovers, I want Scotland to lead the way.

All achieved within the UK, not outside.

So let’s lay to rest some myths once and for all.

Independent European countries of similar size don’t out-perform Scotland.

In fact, Scotland performs well against comparable European States.

Introducing an international border between Scotland and the rest of the UK would reduce business and trade across the border.

You don’t need passport controls and customs officers for there to be a negative effect.

It’s the gradual growing apart of institutions, policies and regulations;

It’s the slow unpicking of the unified labour market, an integrated infrastructure and a single tax system – the possibility of different currencies.

Today, we’re publishing clear analysis that shows the value of Scotland being part of the UK, in terms of extra trade and economic activity over the coming generation.

As the paper says: Scottish GDP could be 4 per cent higher in 30 years if it is part of the UK. £2000 for every family in Scotland.

Put it another way: separate from the UK, create an international border, and the loss to every Scottish household will be £2000.

So, we should think very hard before Scotland exchanges a UK domestic market that works well for a new foreign export market that won’t work as well.

If it ain’t broke, don’t break it.

Your industry is a great example of how we’re better together when we work together, when we are together.

Oil & Gas UK talk about the “need for fiscal predictability and long-term planning to optimize recovery of the country’s offshore oil and gas resource”.

Today all of the major tax revenues, whether it’s from oil, or retail, or consumption, or income or duties are pooled across the UK.

This provides Scotland with secure and stable funding; the Scottish government with budgetary predictability and Scotland’s public services with the stability to plan for the long-term.

As part of the UK, Scotland doesn’t have to cope with the challenge of managing volatile oil revenues.

This is no small challenge – Scottish tax revenues from oil can fluctuate from year to year from £2 billion to £12 billion.

They are the most volatile tax revenues that exist.

Finance ministries are always at risk of being over optimistic about how much revenue they’re going to get in.

That’s why we created the Office for Budget Responsibility.

It is totally independent.

And it now provides for us independent estimates of tax revenues – including from oil and gas.

So when you hear big numbers bandied about that aren’t impartial, and it sounds too good to be true – it probably is.

The UK government can provide the oil and gas industry with a long-term commitment to decommissioning relief.

This commitment represents around 1 per cent of UK GDP.

It would represent around 12 per cent of Scottish GDP.

It’s for the Scottish government to explain how they would pay for that.

The UK’s approach looks at the wider economic contribution of oil and gas, not just at tax revenues.

We’ve been prepared to take the long-term decisions needed to unlock investment.

We accept that’s cost us in lower tax receipts in the short term – but its worth it for the benefits over the long haul.

We’ve been able to pursue this course because the UK has broad shoulders – a big domestic market, a diverse economy, a wide tax base and a broad energy mix.

Look at the facts.

Oil and gas is an important national asset, but revenues from oil and gas are just 2 per cent of our total tax receipts.

Renewable energy is an increasingly important part of the energy mix.

Many of the companies represented here today are also leaders in renewable energy.

Last year over £1.5 billion was invested to develop Scotland’s abundant sources of renewable energy, which now supports over 11,000 jobs and generates nearly 40 per cent of Scotland’s electricity.

This is made possible by over £500 million a year of UK support, with the costs spread amongst 26 million households across the UK, keeping average electricity bills in Scotland lower than they would be if funded by Scottish consumers alone.

How likely is it that this kind of subsidy would be provided to the energy market of a foreign country?

As I’ve said many times before, Scotland could go it alone.

But to suggest that spending can be increased; tax bills cut; an oil fund established; household energy bills kept down and investment in renewables increased simply doesn’t add up.

Texans played an important part in the early exploration of the North Sea.

So you’ll recognise the well-known Texan phrase – “all hat and no cattle”.

I hope those who advocate Scottish independence will offer a little less hat and a bit more cattle.

Let me end by saying this.

How we manage our country’s natural resources goes to the heart of the solidarity between the peoples and nations of these islands.

Whether we are realising the assets from the dark waters of the North Sea or West of Shetland, or shale gas reserves in Lancashire, or coal in Yorkshire or renewable energy in the Thames Estuary and the Firth of Forth.

You have my total commitment to your remarkable industry.

I will work with you to get the tax regime right, to support more investment, to create the climate for more production and more jobs.

My door is always open to hear what you have to say and to help you.

Volume and value.

Valuable and valued.

We know that when we:

– pool our resources

– share our advantages

– and join forces to tackle future challenges

– we achieve far more by working together

Industry and government.

Scotland and Britain.

The whole is so much greater than the sum of the parts.

Thank you.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, on 9 September 2013.

Good morning, ladies and gentlemen.

Today I want to talk to you about this government’s plan for economic recovery.

Now, you’re probably thinking that a construction site is a strange place to make a speech.

But I’ve invited you here for a reason.

This development – 1 Commercial Street – began in 2007.

The plan was to turn this building into 21 floors of office space, private apartments and affordable housing.

Construction began; and continued at a pace.

Until in 2008 the work simply stopped.

Investors pulled out.

Jobs were lost.

And the site lay silent for three years.

But last year, something exciting happened.

Construction began again.

Today, 230 people are working here at 1 Commercial Street to complete the development – and it will open its doors next year.

I’ve brought you here because this building is a physical reminder of what our economy has been through in the last six years.

The message from here to the British people is this.

The economic collapse was even worse than we thought.

Repairing it will take even longer than we hoped.

But we held our nerve when many told us to abandon our plan.

And as a result, thanks to the efforts and sacrifices of the British people, Britain is turning a corner.

Many risks remain. These are still the early stages of recovery.

But we mustn’t go back to square one.

We mustn’t lose what the British people have achieved.

This is a hard, difficult road we have been following.

But it is the only way to deliver a sustained, lasting improvement in the living standards of the families of this country.

For I’m going to make another argument today: you don’t solve the pressure on cost of living with simply a shopping list of interventions and government regulation.

Of course, there are important improvements we can make to the scale of energy and water bills, the cost of housing, the fees paid for everyday financial services, the expense of rail and road travel.

These are a burden on families – and we are doing everything we can do to reduce their cost – with more to come this autumn.

We know every penny counts for hardworking people.

But by themselves these changes don’t amount to an economic policy.

And to focus exclusively on these things alone, important as they are, is to miss the wood for the trees.

I know that times are tough and that family budgets are squeezed.

But fundamentally, Britain is poorer than it was not because government didn’t intervene enough, or rail regulation wasn’t tough enough, or rental policies weren’t fair enough.

Britain is poorer because of a massive failure of economic policy in the last decade.

Jobs were lost. Unaffordable public spending had to be reined back. A flawed model of growth had to be reformed. Unregulated banks had to be rescued. That is why living standards fell.

The best way to improve living standards is to tackle these deep economic problems head on and build an economy where those who aspire to work hard and do the right thing are rewarded.

More good jobs. Tax free childcare. Low mortgage rates. More of your income tax free.

Our plan for the economy is a plan for living standards.

The alternative plan still being presented is a return to higher borrowing, more debt, more instability, lost jobs, rising interest rates and higher taxes.

These will all add hugely to the cost of living.

And that we know from bitter experience will make our nation poorer not richer.

Today I want to look at the economic evidence behind all these arguments.

First, let’s look at what the latest data tells us about the scale of what happened to the British economy in 2008, and the macro-economic imbalances and underlying structural weaknesses that left Britain so vulnerable.

Second, the plan we have robustly pursued since 2010 is designed to address those imbalances and deeper problems in order to move from rescue to recovery. So let’s assess the growing body of evidence that shows it is working.

Third, I will show you how our economic plan will help avoid the mistakes of the past in this new recovery phase.

We must reject the old quick fixes that lie behind so many of our problems and hold to the course we have set.

That is the only sustainable path to prosperity, rising living standards and a recovery that works for all.

First, the past.

It is not for nothing that the new Governor of the Bank of England and many other economists now describe the period of economic contraction in 2008-9 as the Great Recession.

The same recent revisions to GDP data that showed there was in fact no ‘double dip’ also revealed that the impact of that Great Recession was greater even than we thought three years ago.

GDP fell by 7.2% from peak to trough.

That is almost twice as deep as the recession experienced by the United States; three times as deep as that experienced by Britain in the early 1990s.

The immediate impact of the crisis is now a familiar story: the banking system almost collapsed, unemployment rose; and the budget deficit soared.

The currency depreciated dramatically, leading to a sharp rise in the cost of imports and putting downwards pressure on household incomes that is still being felt today.

What happened in Britain was the product of a pattern of economic development that had been fundamentally unbalanced and unsustainable for many years.

The bailout of RBS was the biggest in the world because British banks had been allowed to become among the most leveraged and unstable in the world.

The banks reflected an economy that had become, on some estimates, the most indebted in the world – with total private sector debt reaching 470% of GDP by the beginning of 2010.

And the soaring budget deficit had its roots in an unsustainable increase in public spending in the eight years before the crisis – the second most rapid increase in spending as a share of GDP of all OECD countries.

As a result the government ran rising deficits even at the peak of the boom and entered the crisis with a structural deficit that the IMF estimates was more than 5% of GDP, the highest in the G7.

At the time most economists took a narrow view of sustainable growth: if inflation was low, and unemployment was close to its so-called ‘natural’ rate, then that was deemed to be enough.

Clearly that was a huge mistake.

We now know that truly sustainable growth also depends on sound public finances, well capitalized banks, healthy balance sheets, and a system of financial regulation that is alert to broader risks to the economy like asset bubbles and excessive debt.

The pre-crisis British economy was also unbalanced in other important ways.

Deep-rooted and long standing structural problems in our economy that had been masked by the great tide of debt were harshly exposed when the tide receded.

Growth had been too concentrated in one corner of the country while many other parts of Britain fell behind and became increasingly dependent on unsustainable levels of public spending.

Too many people remained trapped in dependency by an unreformed welfare and education system.

There is a focus today on the issue of household income growth.

What is less recognized is that household income growth had started to slow sharply from the early 2000s.

Annual growth in household disposable income more than halved from 3.6% on average over the five years before 2003, to an average of 1.7% in the five years after that.

The proceeds of unprecedented global prosperity and rising trade were not finding their ways into the pockets of British families.

Government borrowing to fund ever rising welfare transfers like tax credits – accompanied by the increase in household indebtedness – obscured this simple fact: Britain was not earning its way in the world.

As Raghuram Rajan – now the new Governor of the Reserve Bank of India – has compellingly written, stagnant incomes and declining productivity growth helped to fuel the bubble, as both households and the government used ever increasing levels of debt to maintain even more unsustainable levels of spending.

So these underlying structural weaknesses and our huge macroeconomic imbalances were intimately linked.

That is why the solution to the economic crisis the new British government faced in 2010 needed to confront both.

That brings me to my second argument: our economic plan is the right response to Britain’s macroeconomic imbalances and the evidence shows that it is working.

As I have argued for more than five years now, the correct macroeconomic response to the perilous economic situation in which the UK found itself in 2010 is a combination of fiscal responsibility and monetary activism.

Fiscal responsibility to deal with a record budget deficit over a period of several years; monetary activism to manage the process of deleveraging and support demand.

Some still question whether the government’s macroeconomic response was correct – whether we were right to hold to our economic plan.

The headline facts are not in dispute.

We know that recoveries after a financial crisis have historically been slower than other recoveries. But growth has been weaker than originally forecast.

Since the end of the recession the UK has grown by 4.3%, less than the US but more than the eurozone.

At the same time the labour market has performed much better than expected.

Employment has grown extremely strongly – more so than even the most optimistic forecasts, with over 1.3 million net new jobs created in the last three years.

Indeed, employment is now above its pre-recession peak in the UK.

That is not the case in the United States.

The difference is not simply down to growth in the labour force: our employment rate is above the US and has grown more quickly.

Particularly striking in comparing the UK and US experience is the different trends in working age inactivity – historically an Achilles Heel for the UK after previous recessions.

Since the crisis the working age inactivity rate in the UK has actually fallen by almost a percentage point to 23.5%, while in the US it has risen by over two percentage points to 27%.

Our unemployment rate would now be almost half what it is today if participation in the labour force had shrunk to the same degree as in America.

These are the facts.

The controversy has been why GDP growth has been weaker than originally forecast.

Broadly there have been two competing analyses.

The first is a simple – some would say simplistic – story that lays the blame mainly or sometimes entirely on fiscal consolidation.

Let’s call this the ‘fiscalist’ story of the last three years – and it was advanced by advocates of a so-called Plan B.

This argument claims that with interest rates at their lower bound, the fiscal multipliers – the impact of spending cuts and tax rises on output – have been much higher than anticipated, and the resulting impact of the consolidation on GDP growth far greater than forecast.

The second analysis is put forward by many independent economists, including those who support our economic plan, the so-called Plan A.

This analysis is that fiscal consolidation has not had any greater impact than originally allowed for in the Office for Budget Responsibility’s June 2010 forecasts.

Instead, the composition and timing of the slowdown in GDP growth relative to forecast is better explained by external inflation shocks, the eurozone crisis and the ongoing impact of the financial crisis on financial conditions.

This analysis – let’s call it the ‘financial conditions’ story of the last three years – has been set out in its most detailed form by the independent Office for Budget Responsibility in their Forecast Evaluation Reports.

As they put it, they are “still not persuaded” that the multipliers in the UK have been bigger than their original estimates.

In my view the last few months have decisively ended this controversy in favour of this ‘financial conditions/ story of the last three years.

Those in favour of a Plan B have lost the argument.

The reason is simple: proponents of the ‘fiscalist’ story cannot explain why the UK recovery has strengthened rapidly over the last six months.

The pace of fiscal consolidation has not changed, government spending cuts have continued as planned, and yet growth has accelerated and many of the leading economic indicators show activity rising faster than at any time since the 1990s.

If the fiscal multipliers were much higher than the OBR estimates, as the fiscalist story requires, this should not be possible.

Indeed, proponents of the fiscalist analysis predicted that stronger growth would only return if the government changed course and reduced the structural pace of consolidation.

In contrast, an analysis of the last three years that attributes weaker growth to the inflation shocks, the eurozone crisis and the resulting impact on financial conditions finds the latest better economic data straightforward to explain.

The initial impact of the commodity price shock at the end of 2010 has worked its way through the economy.

The eurozone crisis that began in 2010 and intensified in the summer of 2011 has finally abated following the ECB’s decisive intervention last summer.

That has removed the enormous tail risks that have been holding back investment and dampening consumption.

And the government’s continued fiscal credibility has allowed the UK authorities to pursue a strategy of monetary activism with schemes such as Funding for Lending that have supported a dramatic improvement in financial conditions.

Should we be surprised that the evidence does not support a story of the last few years based on higher fiscal multipliers in the UK?

No – economic theory and academic evidence both suggest that multipliers are likely to be relatively low in an open economy with a floating exchange rate and independent monetary policy like the UK.

Recent empirical studies – including several by IMF economists – that allow for multipliers to vary across countries have overwhelming found exactly this result.

The truth is that the UK’s pace of fiscal consolidation, at around 1% of GDP per annum, is line with the G7 and G20 average and the IMF’s guidance for developed economies.

What does set the UK apart from many countries is that we set out a clear plan early on.

It was a detailed, multi-year plan. We legislated for it and we’ve stuck to it.

The bulk of the consolidation has come from permanent reductions in spending on items like welfare entitlements.

And the whole credibility of the plan has been buttressed by the creation of an independent Office for Budget Responsibility.

The resolution of this debate is not simply an intellectual battle over recent history – it matters hugely for the future of the UK economy.

At times over the last three years the political pressure to change course has been intense – despite solid support from the business world and many in the economics profession.

Plan B would have risked higher interest rates as the UK became sucked into the eurozone sovereign debt crisis on our doorstep – and would have left us much more vulnerable had the euro crisis got even worse.

It would have undermined our ability to pursue an activist monetary policy.

Our recovery from the Great Recession would have been undermined, not strengthened.

The impact on living standards would have been much harsher.

So the evidence increasingly suggests that our macroeconomic plan was the right one and is working.

Amazingly, even with the evidence we now have, there are still those calling for the government to abandon its economic plan in order to spend and borrow more.

But to do so would be disastrous.

The risks from unsustainable debt in our world may have abated, but they have not disappeared.

For the UK now to set out to deliberately increase it’s budget deficit would be a signal to investors that we had abandoned discipline, at the very moment when we are turning a corner.

We would be back to square one.

I say this again because it is the biggest threat today to the British economy.

Those still calling for more borrowing and more debt in spite of all the evidence want to put low mortgage rates and jobs at risk.

The impact on living standards would be severe.

Just as our economy recovers and the British people’s efforts start to pay off – now is not the time to put all that at risk.

And I will not do that to this country.

This building illustrates the story of our economy.

The structure is built. The walls have gone up.

So too with our economic plan. We have laid the foundations. We have built on top of them. But we cannot stop now.

We have got to finish the job.

And we will.

For my third argument today is this: our economic plan will help avoid the mistakes of the past in this new recovery phase, and it will build a stronger economy for the future.

The only sustainable path to prosperity is to reject the old quick fixes and stick to the course we have set.

The main external risks we face today are these: the slowdown in emerging markets; the possibility of further turbulence in the Eurozone; and the risk that instability in the Middle East will push up oil prices.

We remain vigilant on all fronts, and our economic plan gives us the resilience and stability we would need if any of these risks were to materialise.

But we must be just as vigilant for any home-grown risks that could undermine a sustainable recovery.

For macroeconomic policy this means three things: avoiding an unintentional and premature tightening of financial conditions; using the Financial Policy Committee and our new system of financial regulation to avoid the mistakes of the past; and staying the course with our deficit reduction plan.

For microeconomic policy, not repeating the mistakes of the past means following through with our far-reaching economic reforms in order to raise living standards in a sustainable way.

Let me briefly cover each in turn.

I said at the Mansion House speech in June that “a steady rise in bond yields across the largest developed countries will be a sign of confidence returning” and so it has been.

But I also warned of the dangers of market instability and said that forward guidance under our new MPC remit could be a useful tool to manage expectations as the economy recovered.

Some have interpreted more recent increases in gilt yields as a sign that forward guidance has somehow failed, but that is, I believe, a misunderstanding.

I’d argue that market movements since the August Inflation Report vindicate the need for forward guidance: the counterfactual would have been even bigger increases in yields in response to positive economic data.

And the evidence suggests that forward guidance is succeeding in changing expectations in the real economy: the Bank of England’s Inflation Attitudes Survey shows a marked fall in the proportion of people expecting interest rates to rise over the next year.

Of course, just as an inadvertent and early tightening of monetary policy would be a mistake, so would leaving it too late to take away the punchbowl further down the track.

Our new regulatory system is designed to avoid precisely that age old error.

We’ve put the Bank of England back in charge of bank supervision, and created a new Financial Policy Committee to spot economy-wide risks to financial stability and act before they crystallise. Much current debate is focused on whether the UK is returning to the bad old ways of debt fuelled, consumption-led growth.

Many of those who previously claimed growth would not return have switched their argument in the face of the inconvenient economic data.

They now argue that we are seeing the “wrong sort of growth.”

But a close look at the data doesn’t support this argument.

Consider the facts.

Business surveys suggest growth is balanced across all sectors of the economy, including manufacturing as well as services and construction.

Consumer spending accounted for less than half the rise in GDP over the first half of this year.

Net exports contributed more than twice as much as that. And investment is picking up.

The government’s economic plan supports this through a combination of aggressive export promotion and a highly competitive business tax regime.

We will go on supporting both through this next phase.

Nor are we seeing a return to unsustainable levels of indebtedness and household borrowing, as some claim.

Total private sector debt has fallen by almost 40% of GDP since its peak in the first quarter of 2010.

The ratio of household debt to incomes has fallen too, unwinding all of the increase seen during the credit boom of 2004 to 2008.

And as Mark Carney said at the August Inflation Report, forecast consumption growth is “broadly in line with income growth”, not driven by rising debt.

Some have questioned whether new risks are emerging in the housing market.

This debate would benefit from a little less assertion and a little more examination of the evidence.

House prices are down a quarter from their peak in real terms, and relative to earnings they are back at 2003 levels.

Mortgage approvals are running at only a little more than half, and transactions a little more than two-thirds, of pre-crisis levels.

That is why the government’s Help to Buy scheme is a sensible, time-limited and necessary financial intervention to fix a specific financial problem: the dramatic reduction in the availability of high loan-to-value mortgages.

The median LTV for first time buyers has fallen from a long term average of 90% to just 80% now.

This change is not something we should welcome, it is both a market failure and a social problem – imagine if you’d had to find twice as big a deposit for your first home.

90% and 95% LTV mortgages are not exotic weapons of financial mass destruction – they are a regular part of a healthy mortgage market and an aspirational society.

And, importantly, Help to Buy mortgages will all be repayment mortgages, not interest only mortgages, so borrowers will rapidly build up a larger equity buffer within just a few years even in the absence of any house price growth.

Some claim that Help to Buy will boost demand but not supply, but again the evidence suggests otherwise.

Not only are the government’s planning reforms already increasing the flow of new planning permissions, but the lack of mortgage availability at higher loan to value ratios has itself been one of the biggest factors holding back the supply of new housing.

That’s why a report last week by former MPC member Charles Goodhart, now at Morgan Stanley, estimated that Help to Buy could increase housing starts by more than 30% between 2012 and 2015.

So the evidence suggests tentative signs of a balanced, broad based and sustainable recovery, but we cannot take this for granted.

The Financial Policy Committee and the Bank of England have made clear that they have the will and the means to act if necessary, with new macro-prudential tools that can target specific areas of the economy where imbalances are emerging.

If that happens they will need resolve and determination to take the right decisions, and it is only when those tools are required that will we see quite what an important innovation this new framework is.

For the government’s part, the same resolve and determination will apply to our deficit reduction plan.

With the successful conclusion of the Spending Round we have now set out detailed plans that started in 2010 and extend to April 2016.

Even if the improving economic news eventually leads to an improvement in the fiscal outlook, the job will not be done.

More tough choices will be required after the next election to find many billions of further savings and anyone who thinks those decisions can be ducked is not fit for government.

So whether it’s avoiding an inadvertent tightening of monetary policy, not repeating the debt-fuelled mistakes of the past, or sticking to the necessary fiscal consolidation, our macroeconomic plan will support the emerging recovery.

For microeconomic policy, the priority must be following through with our far-reaching economic reforms in order to raise living standards in a sustainable way.

As the evidence builds in favour of the government’s economic plan, many of our opponents are now shifting the focus of their criticism to the ongoing pressure on the cost of living.

Families have had a difficult time making ends meet thanks to what happened to our economy.

But this is not some separate issue – it is inextricably linked to the core arguments about the economy and the governments economic plan.

Our economic plan is the only sustainable way to raise living standards.

For a start, the most powerful tools that we have to protect living standards as our economy recovers are low mortgage rates and low taxes, and we’re delivering both.

The falls in mortgage rates that our plan has delivered are worth £2,000 a year to a family taking out a standard fixed-rate mortgage of £100,000.

Our record increases in the personal allowance have already saved a basic rate taxpayer £600 a year, rising to £700 a year by next year.

We’ve used billions of pounds to help with fuel costs by freezing fuel duty for over two years.

Low mortgage rates. A £10,000 Personal Allowance. Fuel duty frozen. And soon tax free childcare.

These make huge, positive impacts on the cost of living.

And none of this would be possible if we had abandoned our tough spending plans.

But as I said right at the start, in the long term, the only sustainable way to raise living standards is to raise productivity by tackling the underlying structural weaknesses in our economy that were exposed by the crisis.

Our economic plan constitutes the most ambitious programme of structural reform for a generation.

Our school reforms are raising standards and introducing more choice and diversity into our school system.

Our welfare reforms are helping more people into work, with the lowest number of workless households since 1996 and the lowest level of inequality since 1986.

Our universities are flourishing as their finances have been secured through tuition fees, while choice and flexibility drive up standards.

Our skills system is being transformed with a record number of apprenticeships, new University Technical Colleges and a greater role for employers.

The re-launch of TSB onto our high street today is another sign of progress in the biggest ever overhaul of our banking system.

We are delivering the biggest programme of investment in our railways since Victorian times, the biggest programme of road building since the 1970s, and -according to a recent global survey – our regulatory reforms have made the UK the best place in the world to invest in infrastructure.

And HS2 will transform the economic geography of our country and help spread rising prosperity to the Midlands and the North of England, which is why I am passionately in favour of it.

Our corporate tax system is now amongst the most competitive in the world, with companies that left the UK now bringing investment back home.

A new industrial strategy is finally providing the long term stability and leadership that is needed in so many sectors such as aerospace, automotive, agri-tech and bio-science.

And British science is scaling new heights with its budget protected for the future and rising capital investment in new facilities.

We have already achieved a lot, but there is still more than we can do in all these areas.

One thing is very clear.

Tinkering around the edges while ignoring the tough decisions required will not rise to the scale of the challenge.

We will not make that mistake.

We will learn the lessons of the last decade so that we are not tempted by the quick fixes that lie behind so many of our problems.

We will constantly examine what is happening in the present so that we can avoid repeating the mistakes of the past.

And we will keep our sights firmly fixed on the future so that we do not shrink from the changes required to build lasting prosperity.

Our economic plan does all these things.

Just like this building, with office space, private flats and affordable housing, the job is not finished, but everyone will benefit.

This is how we will build an economy that works for everyone.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Hong Kong on 16 January 2012.

I am delighted to have the opportunity to address this Forum, to speak with such a distinguished audience and to do so here in Hong Kong.

I had a very useful discussion earlier today with Chief Executive Donald Tsang. He deserves our thanks for the excellent job he has done in his years as Chief Executive.

Later today I will fly to Beijing and then Tokyo.

It is no surprise or coincidence that my first trip abroad in 2012 should be to Asia.

It reflects instead the deliberate, conscious effort that the British Government places on deepening Britain’s partnership with Asia.

This Asian partnership is not a substitute for our close working relationship with our neighbours in the European Union, our strong links with North America. It is an essential complement to those friendships.

For Asia will be the engine of world growth in this year and the years ahead.

I have spent much of my time in Office in talks about the eurozone.

The eurozone has made progress in recent months, in particular the provision of liquidity to banks by the ECB.

But of course there remains more to do, as the euro area itself acknowledges.

No one likes to see credit ratings downgraded, but what matters much more are the actions western countries take to restore their own fiscal sustainability and take the structural reforms necessary to ensure productive, competitive economies.

All European economies need to tackle the structural obstacles to growth that we’ve simply not had the political will to address in recent years.

It is good news that these issues of growth and competitiveness will be the focus of European leaders’ discussions later this month.

Britain is taking all these problems head on.

Yes, we’re reducing our deficit with a strong, credible and comprehensive deficit-reduction plan.

But we’re also reforming welfare entitlements, removing regulation, making it easier to employ people and create businesses, overhauling education, reducing our corporate taxes to some of the lowest in the world, and championing within the EU a deepening of the single market and leading across the world the cause of greater free trade.

That’s why, as we look to this difficult year ahead, I want to focus today on three reasons to be optimistic for the future.

Three reasons for Britain to be bold.

The first reason is this:

A richer, stronger Asia is an opportunity for the world, not a threat – we should be bold enough to say it and to explain it to our own populations.

Second, we in Britain can build on our position as the home of Asian investment and Asian finance in Europe – provided we’re bold enough to do what it takes to make that happen, and we will.

And third, with a new alliance between Britain and our friends in Asia, we can be bold in defeating the forces of protectionism and make global finance a force for good, not instability.

First, a richer, stronger Asia.

There is no doubt that this is one of the most remarkable achievements in our modern history, and you’ll know the story far better than I do. The Chinese economy is 15 times larger than it was when I first visited China as a student two decades ago. In 1960, South Korea had the same income per head as those in Sub-Saharan Africa. Today, South Koreans enjoy an average income of $23,000.

What is the human story behind all these statistics? The desire of people to have a better life and to leave to their children more than they were born with.

It is the most powerful force for progress we have ever known – and here in Asia it has driven an economic transformation.

That hasn’t always been easy for those in the west.

I do not believe, as some argue, that the rise of the east is a threat to the west.

It is the strength of Asian economies which mean world growth in this decade and the next will be higher than the past 30 years.

Of course there are challenges as we adjust to sharp shifts in economic growth and power.

These adjustments can be painful when unemployment is a challenge in many countries across the world, and where competition for scarce resources affects the prices of key commodities.

In the past, when developed economies were weak, oil prices were self-correcting forces.

In the current crisis, demand from Emerging Economies has kept prices high.

But these problems are the problems of success – the problems of a stronger world economy.

Globalisation is a force for good.

Not only has it been a force for poverty reduction far greater than all the aid programmes across the world put together.

Not only has it allowed people here to have aspirations and ambitions beyond the dreams of their parents and grandparents.

But it also provides huge opportunities to trade and invest for countries who seize them, and I believe that we can make Britain the home of Asian investment and Asian finance in Europe.

This is my second reason for optimism.

If we take the right steps, if we’re bold, then growth in Asia means growth in Britain.

It is precisely as Asian economies become richer and become nations of consumers that hundreds of millions of people will want to buy the things that British companies can sell them.

They will want to buy modern medicines for the first time – and when they do so, I want to make sure it is from pharmaceutical firms like Glaxo SmithKline and Astra Zeneca, the largest employer in the constituency I represent.

They will need modern insurance, banking, and accountancy services, and when they seek those services I want them to do so from companies like HSBC, Prudential, Barclays and Standard Chartered.

The wealthiest will become consumers of Rolls-Royces made in Sussex, and Bentleys made in Crewe, dressed in Burberry clothes manufactured in Yorkshire.

And – like a generation of Japanese tourists before them – they will want to travel.

And when they do, I want them to go on holiday to Britain. I want them to go this year, the year of the spectacular London Olympics and the Queen’s Diamond Jubilee celebrations.

And when they go I want them to fly here on the wings of Airbus planes made in North Wales, powered by Rolls Royce engines assembled in Derby. For Britain is one of the top ten manufacturers in the world as well as a global financial centre.

If we are going to make the most of what the growing economies of Asia have to offer Britain, then we need make sure we have dealt with the problems in Britain’s economy.

And we are.

For one of the illusions of globalisation has been that the countries of the west could live indefinitely on the cheap credit and low inflation that the emerging economies of the East provided for us – that we could go on forever borrowing money from hard-working Chinese savers to buy the things those Chinese workers were making for us.

The financial crisis and the deep recessions has been the toughest of reminders of the simple truth that you have to earn your living in this world.

And the lesson of the past year has been that global confidence in a country depends on its determination to deal decisively with the challenges it faces – and by getting to grip with our debts, Britain has shown it is determined to do that.

As I’ve said, we are undertaking major reforms to increase Britain’s competitiveness.

Cutting business tax rates to among the lowest in the developed world, scrapping regulation on small firms, reforming welfare and education, and creating the most flexible workforce in Europe.

The UK is already one of the most open economies in the world – with a stable political system, a commitment to the rule of law and free trade.

Even more than it already is, we want Britain to become one of the easiest places to invest, to raise capital, to start a business, to expand and to export from.

And our links with Asia grow stronger and stronger.

The UK is now the largest source of foreign direct investment to China from within the whole EU and UK goods exports to China rose by 20% last year, and 40% the year before that.

UK goods exports to Hong Kong rose by 19%.

This is largely driven by the ingenuity and innovation of the Asian and British private sectors.

But we have got to do more if we are to be the home of Asian investment in Europe.

The British Government needs to roll up its sleeves and make it happen.

Let me tell you how.

Last year, my colleague William Hague, the British Foreign Secretary, spoke at this very Forum and said he wanted to refocus Britain’s diplomatic efforts on the East.

He has been good to his promises. Our embassy in China has expanded significantly and the work of our trade promotion agency, UKTI, has increased its presence across China.

As well promoting British investment in Asia, we are actively seeking Asian investment in Britain and its infrastructure.

We are investing in a new generation of transport, energy and communication networks for our country. Last week alone, we committed to a new high speed rail link to connect our largest cities. The Olympic Park is the largest urban regeneration scheme in Western Europe.

Here and in Beijing I will be promoting infrastructure as just one of the opportunities the UK brings for Chinese investors, following the lead taken by Hong Kong’s own Cheung Kong Group, the largest overseas owner of UK infrastructure.

And there is the potential for a new and fruitful partnership that would bring benefits to the people of China, Hong Kong and Britain.

Last September, at the UK-China Economic and Financial Dialogue, I agreed with Vice Premier Wang that “both sides welcomed the private sector interest in developing the offshore RMB market in London” and we agreed to “engaging in bilateral dialogue and dialogue with other authorities, as necessary, to support the market’s future development”.

My visit furthers that dialogue with the Chinese authorities, together with Chinese and British banks, on establishing London as a new hub for the RMB market, as a complement to Hong Kong and other financial centres.

The recent history of the growth of the RMB market is well known to all of you.

It is clear that there is scope for substantial expansion of the RMB market in the coming years.

In June last year, RMB had a world foreign exchange market share of 0.9 per cent.

This compares to China’s share in world trade in 2010 at 11 per cent.

London is perfectly placed to act as a gateway for Asian banking and investment in Europe, and a bridge to the US.

This is not just an accident of time-zone, or our language, although both are important.

It reflects London’s strength in product development, its regulatory structure and the depth, breadth and international reach of its financial markets. We are by some distance the world’s largest foreign exchange market; and the growing use of RMB in those global markets will bring substantial benefit to Chinese economic development and the wider world economy.

It is a reflection of China’s increase in influence and share of global GDP, and is a step towards greater capital convertibility.

I welcome the Donald Tsang’s comments on the importance of the joint private sector forum announced today, facilitated by the Treasury and the Hong Kong Monetary Authority, to promote closer cooperation between the London and Hong Kong on the development of global RMB business.

I also welcome Hong Kong’s decision to extend the operating hours of its RMB settlement system, which London is the key beneficiary of.

Our objective is simple: we want to expand the amount of business and trade we do with each other, so that the citizens of China, Hong Kong and Britain all benefit from the prosperity and jobs that will bring.

And it leads me to my third and final point today.

I believe we can be bold in forging a new alliance between Britain and our Asia partners to defeat the forces of protectionism and make global finance a force for good.

I have been doing this job for just short of two years now.

One of the things that have struck me in the thirteen IMF and G20 meetings I’ve attended is how often the British and Chinese agendas are very similar.

You might not expect it, given our different history, cultures and traditions.

But very often, around the table, China and the UK are some of the most forthright advocates of free global and open markets.

China is the world’s second largest manufacturing exporter in the world, while the UK is the world’s second largest services exporter.

I would like to set out what I think should be our shared agenda in 2012.

First, we need to resist a return to protectionism.

The December World Trade Organisation ministerial meeting highlighted that Doha is at a significant impasse.

We need to look at new and innovative alternative approaches to taking forward trade liberalisation, consistent with WTO rules.

That means continuing to push ahead with ambitious free trade agreements with key partners.

Britain is pushing hard to complete EU free trade deals with India and Singapore this year, as well as maintaining momentum towards an ambitious agreement with Japan.

Second, we need must ensure a reformed and more representative IMF has the tools and resources to do its job.

The reforms agreed at the Seoul G20 summit in 2010, which the UK was one of the first countries to ratify, will ensure the IMF is more representative of its whole membership.

The IMF does not belong to any one region of the world.

Its role is to support countries which get into difficulty, not currencies.

Its resources should be drawn from its members and available on an equal basis to all.

But its members also have a responsibility to ensure the IMF has the resources it needs to promote the global economic stability from which we all benefit.

The risks faced by the global economy have increased significantly over the past year.

The capacity of the IMF may also need to rise to ensure those risks can be addressed, but this cannot be a substitute for action by the eurozone.

Britain stands ready to play its part.

Third, we must also ensure global capital markets are underpinned by global rules for financial regulation enforced by strong global institutions.

As home to two of the world’s major financial centres, Hong Kong and Britain share an interest in a truly global approach to financial regulation that maximises the benefits, while reducing the risks, of open financial markets.

It is because we favour a global approach that we oppose an EU-only FTT.

At the heart of these new global rules are the Basel III prudential requirements for banks, which must now be rigorously implemented around the globe.

We must also push ahead with the agreed G20 reforms of derivatives, remuneration and systemic financial institutions and I would like to take this opportunity to acknowledge what Michel Barnier – who will speak at this Forum after me – is doing to help advance issues in Europe.

These new global rules – high standards, globally applied – must be overseen and enforced by a stronger Financial Stability Board as the global financial watchdog, building on the reforms made at the Cannes G20 summit.

These are all long-lasting reforms that will make global finance a force for good rather than a source of instability, intermediating to put to work the savings of millions to create new jobs and new investments for millions more.

And working with partners in Asia we can do just that.

Ladies and Gentlemen, these are challenging times for the world.

But there are also opportunities to build a more balanced, sustainable global economy if we take them.

A strong Asia.

A strong British-Asian relationship.

And strong multi-lateral organizations that support open markets and global stability.

In a challenging and difficult year, these are three reasons to be positive about our future.

Together, let’s build a more prosperous economy for everyone.

Thank you.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at the CBI Leaders Meeting at Davos on 27 January 2012.

It’s good to see such a strong British presence in Davos.

Someone said to me yesterday that they’d never seen such a sombre mood here.

That reflects the very difficult economic outlook, as shown in the UK by the negative fourth quarter GDP data earlier this week.

But my argument today is that policy makers are not powerless in the face of these economic forces.

Let me explain that with three propositions.

First, it is possible to resolve the eurozone crisis, and that would provide the biggest possible boost to the British economy.

Second, we in Britain can deal with our own problems – including the colossal debts and imbalances that built up during the long boom.

And third, we can win the argument for open markets and free enterprise as not the source of the problem but the solution.

Let me begin with the eurozone, the main topic of debate here in Davos.

And let me start by saying something that is not acknowledged enough in our national debate.

Eurozone countries have achieved a lot over the last eighteen months.

Pooling their resources into a central fund, giving up sovereignty in a fiscal compact, fiscal consolidation and structural reforms in many countries.

These are all difficult and courageous decisions, and they are having an impact.

But while we should acknowledge these achievements, it would be a disservice to our own citizens to pretend that they are enough.

As David Cameron argued yesterday, more still needs to be done to reach a convincing and lasting solution.

The evidence for this can be seen in the continuing scepticism of investors around the world, in volatile financial flows, in continued stress in bank funding markets and in the still elevated interest rates on periphery sovereign debt.

The problem is simple: how will some countries in Southern Europe be able to make the adjustments required of them and retain the competitiveness they have lost in a way that is politically sustainable in a democracy?

The argument is not that fiscal consolidation and structural reform are the wrong prescription when budget deficits are unsustainable and economies are uncompetitive – they are absolutely crucial.

But in the absence of the flexible exchange rate and independent monetary policy that are helping to smooth the process of adjustment and rebalancing in the UK, the resulting cost may be simply too high to be credible.

That’s why I agree with Christine Lagarde, the Managing Director of the IMF, when she said earlier this week that the eurozone “needs some form of fiscal risk-sharing” to complement the fiscal compact and provide more support for countries making painful adjustments.

That risk sharing could take many forms.

One solution suggested by the IMF is the creation of Eurobonds to finance at least some proportion of national budgets – something that I first argued last summer was part of the inexorable logic of monetary union.

Political agreement to the principle of Eurobonds would go a long way to convince financial markets of the euro’s long term future.

We in the UK should not be anxious about eurozone countries embarking upon deeper fiscal integration without us – we should welcome it as a way of resolving the current crisis on our doorstep.

Nor should we be paranoid about our influence as a member of the EU.

In the last week Britain has supported EU action to take sanctions against Iran, and we are very close to agreeing a complex directive on the regulation of derivatives.

We will remain active members of the EU, pushing for an expansion and deepening of the single market on which so many British jobs depend.

A large number of EU countries see us as vital allies in than task, which should be the main focus of the EU Council meeting on Monday.

If fiscal risk sharing is the way to make the euro work in the future, the most urgent requirement to address the current crisis is an increase in the resources of the eurozone’s financial firewall.

Eurozone countries need to convince financial markets that they can respond to any eventuality.

The eurozone economy as a whole has sufficient resources to put the credibility of the firewall beyond doubt.

All that is required is the political agreement to make those resources available on a credible timescale.

At the same time the global community – through the IMF – should always be ready to support individual countries that get into trouble and need temporary financing while they adjust.

As I have said many times, the UK is a longstanding supporter of the IMF – indeed we were instrumental in its creation – and we stand ready to play our part in that global effort if certain conditions are met.

No new vehicles or funds specific to the eurozone.

Full IMF conditionality.

The participation of other G20 countries.

And crucially, IMF resources to support individual countries cannot be a substitute for further credible steps by the eurozone to support their currency.

In other words, the world needs to see the colour of their money before it contributes any more.

A resolution of the eurozone crisis would provide the biggest single boost to the British economy in the short term.

But we will not put our economy back on the path to prosperity unless we confront our domestic problems.

And the biggest of those is captured by a single word: debt.

Over the last decade Britain experienced the biggest increase in debt of any major economy.

The total of household, corporate, financial and public sector debt in the UK reached 500% of GDP.

As a country we went on a debt-fuelled binge.

We are now experiencing the reality of deleveraging.

History tells us that this process is painful, and as Carmen Reinhart and Ken Rogoff have shown recoveries after debt-fuelled financial crises tend to be slower than other recoveries.

We cannot change what happened in the past, but we can ensure that we manage the process of deleveraging as best we can.

And that means that we must never lose sight of this crucial point – when the underlying problem is debt, deliberately adding to the stock of debt is exactly the wrong thing to do.

The initial crisis of banking and private sector debt has now evolved into a sovereign debt crisis.

When this Coalition Government came to power, the UK was forecast to have the largest budget deficit in the G20.

Since then, the argument we have made, supported by the CBI, about the absolute necessity of a credible deficit reduction plan has been vindicated by events.

Growth has been weaker than originally expected due largely to a commodity price shock and the eurozone crisis.

But the arguments for deficit reduction have become stronger, not weaker, over the last year.

You only have to look around us to see how a loss of fiscal credibility can lead to higher interest rates.

In an economy as indebted as the UK, that would make recovery all but impossible.

And once credibility has been lost, it is a long, hard road to get it back.

We have taken difficult decisions that others have ducked.

By confronting our country’s problems we have secured the same low interest rates as Germany and the US, and we have won credibility where once it was being lost.

None of this is easy for elected politicians to achieve.

So I welcome the continuing support of British business in making this argument.

We are winning it for now, but we can never afford to let our guard down against the vested interests that will defend every line item of government spending.

The other aspect of deleveraging that must be carefully managed is the deleveraging of the financial sector.

More capital and lower leverage is a crucial part of making our financial system safe for the future.

Again the process can be painful, and pace of change must not be excessive, but the destination cannot be in doubt.

The Basel III agreement and the Vickers reforms in the UK provide the right framework, and the transition timetable will give banks enough time to make the necessary changes.

In the meantime, the Government is doing what it can to ensure small businesses aren’t the innocent victims of a squeeze on credit – so we will be passing on the hard-won low interest rates that the Government can borrow at through our £20bn National Loan Guarantee Scheme.

I am today publishing the Financial Services Bill that will overhaul the failed system of financial regulation which allowed such dangerous levels of leverage to emerge.

The failings of that system are now well understood.

The tripartite structure was incoherent, without clear lines of accountability.

The tripartite committee didn’t meet for almost a decade.

Everyone was so focused on ticking off a regulatory check-list that nobody felt it was their responsibility to use their judgement.

The astonishing result was that RBS was allowed to take over ABN Amro when the credit markets had already frozen up.

And crucially it was unclear who was in charge in a crisis when taxpayers’ money was at stake.

We are putting in place clear lines of accountability, and restoring that crucial element of judgment.

One body will be put back in charge of prudential regulation and systemic stability – the Bank of England.

A new Financial Policy Committee with independent external members will monitor the evolution of leverage and risk in the economy as a whole.

And when taxpayers’ money is at risk in a crisis this legislation gives the Chancellor the power to direct the Bank of England to act.

This power will be a more credible tool than the 1946 power of direction, which has always been regarded as a nuclear option and therefore never used.

For the first time it will allow the Chancellor to direct specific liquidity interventions to assist individual entities, the Special Resolution Regime for banks, and general interventions to preserve stability as long as the Government is willing to take responsibility for the action and take the resulting risk on its balance sheet.

Independent central banks should not be put under pressure to do what governments do not have the courage to do on their own account.

There will be no ambiguity about who is in charge.

During normal times the independent Bank of England will be responsible for prudential regulation and systemic stability, accountable to Parliament.

But in a crisis, when taxpayers’ money is at risk, both the responsibility and crucially the power to act will rest with the Chancellor of the day.

I hope that we will never again see the paralysis and confusion that did so much damage when the latest crisis hit.

Resolving the eurozone crisis.

Tackling our problems at home.

These are necessary requirements to get our economy back on its feet.

But I believe that we need to do much more if the British economy is to fulfill its potential.

We need to redouble our commitment to open markets and free enterprise.

Last year at this lunch I said I needed the support of British business against the forces of stagnation.

I would argue that we are an unabashedly pro-enterprise Government that is doing almost all of what you have asked of us.

We are reforming employment law, doubling the period before employees can claim unfair dismissal and introducing fees to deter vexatious tribunal claims.

We are changing the planning system to include a presumption in favour of sustainable development.

We are cutting corporation tax from 28% to 23% and reforming the controlled foreign companies rules so that multinationals are coming back to Britain instead of leaving it.

We have introduced one of the most generous tax regimes for investors in new businesses with improvements to the Enterprise Investment Scheme.

We are unblocking the barriers to infrastructure investment and taking a more activist approach to coordinating the necessary finance.

We will continue to push forward on all these fronts and many more.

In each case we will continue to need your support to confront the vested interests that oppose reform.

But there is one more thing that we need to fight for.

The unique British advantage – more I would argue than any country in the world – of open markets and free enterprise.

We still understand the British insight of 150 years ago that when you open your markets you benefit even if others don’t do the same.

We welcome foreign investment for the jobs and prosperity it brings.

This is a source of huge strength for the British economy.

When I was in Asia earlier this month I was hugely encouraged by the enthusiasm I found for Britain.

We are in the EU single market without being in the euro.

We are a liberal Anglo-Saxon economy and even more open to trade and investment than the US.

The recent investment by the China Investment Corporation in Thames Water and the progress we are making in establishing London as an offshore RMB centre are hugely positive signals.

With your help we must continue to preserve this openness against those who seek to undermine open markets and free enterprise.

We must ensure that Britain remains connected to future source of growth.

And continue to send the signal around the world that Britain is open for business.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at the Global Investment Conference on 26 July 2012.

Welcome to this session – and a particularly warm welcome to my distinguished colleagues, Christine Lagarde, Managing Director of the IMF, and Angel Gurria, Secretary General of the OCED.

I thank you both for taking the time to join us on the eve of the London Olympic Games.

The Olympic Games celebrate human endeavour and peaceful competition between the nations of the earth.

This Global Investment Conference celebrates human innovation and industry, and show-cases Britain as a home for investment in a fiercely competitive world economy.

You’ve heard from the Prime Minister and many colleagues of mine in Government already.

I hope the message you are receiving is loud and clear:

Britain is open for business.

Indeed, we assert that there is no major western economy that is more open, more welcoming of foreign investment, less protectionist and more pro-free trade than the United Kingdom.

Across all political parties, in all parts of the country, we welcome overseas companies with open arms.

In the last few months, we’ve encouraged Chinese investment in our capital’s water system, Hong Kong investment in our telecoms and gas network, Indian investment in our car-making and steel, and today, Malaysian investment in a prime property site here in London.

In the very difficult global economic environment – and with our own disappointing GDP numbers – we as a Government have to work even harder to attract more of this investment.

We have a relentless focus on the economy.

And our message, our sales pitch, if you like, to investors has three components:

– We’re dealing with our debts

– We’re creating the most pro-business tax regime in the developed world

– And we’re making the long-term structural reforms to secure a more productive future.

Let me take each briefly in turn.

First, in our continent reeling from a sovereign debt crisis, the UK is a country which demonstrated to the world that is has a credible plan to deal with its debts.

In the last 2 years, we have cut our deficit by 25 per cent.

When this Government entered office, the UK’s cost of borrowing was the same as Spain’s and Italy’s.

Today, their cost of borrowing is more than six per cent and ours is one and a half per cent.

That market confidence and those ultra-low interest rates are precious assets – hard won and easily squandered.

And it is precisely that market confidence and fiscal credibility that allows our independent monetary authority, the Bank of England, to operate a more active monetary policy.

– Expanding the Quantitative Easing programme.

– Launching with the Treasury the new Funding for Lending Scheme operational next week that will reduce bank funding costs to reduce loan rates and mortgage costs.

– And it is the same fiscal credibility that means we can use our balance sheet to offer billions of pounds worth of guarantees to new infrastructure projects and export opportunities.

You will hear those arguing that we should abandon our plan and spend and borrow our way out of debt.

You hear that argument again today.

These are the siren voices luring Britain onto the rock.

We won’t go there.

A credible plan to deal with our debts is an anchor of stability and a prerequisite of recovery.

We have that credible plan – and we’re sticking to it.

That gives confidence to investors looking at the UK.

So too should our pro-business reforms to the tax system.

I challenge anyone in the audience to name another major western economy that is:

– Reducing its corporation tax as aggressively as we are: from 28% to 22%.

– Or cutting its top rate of income tax to attract wealth creators.

– Or introducing new generous tax regimes for patents, and research, and creative industry.

– Or creating a new regime for the headquarters of global firms, so that companies are now moving to Britain instead of moving away.

– This is the most pro-business tax reform in any developed economy today.

And the final sales pitch is this.

We are also tackling the deep-rooted problems that undermine the competitiveness of many western economies, including ours.

In the last 2 years, we’ve undertaken major reforms of planning, higher education, schools and welfare that will equip Britain for the future.

It’s involved tough decisions, raising pension ages, reducing public sector costs, taking on vested groups.

But we’ve done it.

And despite disappointing GDP numbers, we are determined to continue to tackle the deep rooted problems our economy faces.

The deficit is down by a quarter.

Inflation has halved.

Employment is up.

Exports are rising – and Britain’s businesses are now exporting more to the rest of the world than to Europe.

A sign of openness to the opportunities from emerging as well as established economies across the world.

And we know we have more to do.

Our motivation is simple.

It was spelt out by the Prime Minister this morning.

We’re in Government at a time of great change in the world economy.

Great change, and of course, great uncertainty.

And we think that some western countries will adapt well to that change, cope with that uncertainty well.

And others not adapt so well.

We have a relentless focus to ensure that Britain adapts to the changing world and thrives in it.

These Olympic Games are a showcase of Britain at its best.

This Conference is a sign of our nation’s commitment to welcome the world’s investors.

Britain is open for business.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at Davos on 22 January 2016.

It’s great to be here again speaking to British business leaders.

I’m glad to see so many familiar faces.

It takes me back to the last time I spoke at this lunch, four years ago.

I spoke then of the sombre mood at Davos, and of the great challenges facing both the British and European economy.

Back then we were still struggling to recover from the financial crash that brought us to the brink, and the great recession that did so much damage.

As a new Chancellor, I had set out a clear economic plan for us to follow. We would tackle the crisis in our public finances.

We would cut business taxes and boost enterprise.

We would take the difficult long term steps to ensure a lasting private sector recovery rather than pump up the public sector balance sheet still further and risk catastrophe.

I described it as “a hard road to a better future.”

But by the time I spoke here to you, the enemies of that plan and our long term solution were circling.

There was talk of a double dip recession.

Our unemployment rate had just hit its peak of 8.5%. Real wages were falling.

The clamour for plan B – and a return to spending and borrowing – was growing.

But you – the British business community – never wavered. You kept faith with our plan – plan A.

You understood there was no easy shortcut to the work Britain had to do. You kept your nerve and so did we.

And I want to thank you all for the role you have played over these years – for your support and commitment to the difficult choices we’ve taken to turn Britain around.

And the results have been there for all to see.

Britain has been one of the fastest growing advanced economies in the world these past few years.

This week we saw our unemployment fall again to almost 5%.

And now we’ve got the highest employment rate in our history.

Real wages are growing.

The deficit as a share of GDP is down to nearly a third of what it was with solid public finance data this morning.

On the back of this, business investment is forecast to grow at 7.4% this year – the fastest growth since before the crisis.

That shows your confidence in the UK economy.

I’m proud of these economic achievements.

And I think you should all be proud too.

Because much of the success of our economy is down to you – you’re the job creators, the innovators, the providers of opportunity.

And thanks to you, the UK has been a bright spot in the world economy.

We have been a chink of light cutting through the global gloom.

But that gloomy backdrop means we cannot rest or become complacent.

Some seem to think the job is done and we can afford to let up.

The new year is only three weeks old, and already I’m facing calls to abandon our public spending controls and borrow freely.

That would be precisely the wrong response.

We need to continue to implement our long term economic plan. We need to keep cool heads as the market heats up.

Now, as much as ever, we need to go on putting our own house in order.

For as I’ve said, we face a dangerous cocktail of risks from the global economy. Everyone here in Davos is discussing China’s slowdown, and plunging oil prices.

And here’s a sobering fact:

2016 has been the worst start to a year for the financial markets in my lifetime.

And I’m not so young anymore.

Oil is now around $30 a barrel.

Let’s be clear: cheaper energy is helpful to many of you here – and to British families.

But the speed of the drop has hit oil-producing emerging economies hard.

And Iran – OPEC’s second biggest member – is now bringing on more supply.

Long term that is good news, but we could all do with a little less of this volatility in our lives.

Meanwhile, as corporate earnings seasons kicks off in the US, there are reports it could be a weak one.

With some people already querying the US rate rise.

It adds up to a hazardous mix.

But my message today is one of confidence: we can meet these risks and overcome them, if we stick to our plan.

We are all here to talk about the future – for your businesses, for our countries. So I wanted explain what the best antidote for the dangerous cocktail is.

To offer concrete proposals on how the global economy needs to change.

And explain how we plan to reform Britain’s economy too.

The Chinese are fond of their proverbs and they have a good saying.

They say that “talk does not cook rice.”

It is simple, it is true, and it is particularly relevant now.

There’s a lot of transition taking place – transition that is difficult and turbulent, yes; but transition that is fundamentally positive too.

We know that China is transitioning from investment to consumption.

We know that global oil markets are in transition, with new suppliers like Iran and new technologies like shale.

We know that interest rates in the US are in transition.

And we know there are big forces at work as the demographics of many Western nations change, altering the balance between investment and savings.

These are the shifting tectonic plates of the global economy.

So since we all know they are shifting, we should also know that those shifts create tremors.

The question is: how large will those tremors be?

And the question for all of us here is: do we just talk about this transition – or do we take the action, and show the political will, to adjust to this transition and make it as smooth as possible?

You will hear, here at Davos, any number of political leaders promise reform.

What we need to see are the results.

We need to see every shoulder at the wheel.

Every country acting as one in search of growth.

We need China to keep reforming. To deliver on the commitments in the Fifth Plenum to allow markets to play a greater role as it consistently says it wants.

We need Japan to stick to all three arrows of its bold plan. To deliver not just stimulus but the structural change to deliver the sustainably higher growth rates it so badly needs.

In countries like Russia and Brazil we need greater efforts to diversify, away from state owned companies and to increase investment, particularly in infrastructure.

And in our continent of Europe I’m tired of seeing yet more action plans for completing the single market and yet more calls for free trade deals. I want to see those plans put into effect.

That is part of the reform we are now seeking in the EU.

Our global institutions can play their part too – and up their ambition.

The theme of Davos this year is the digital economy.

And we should give our global institutions a reboot.

Take trade.

Opening up markets with trade deals can help all your businesses grow, helping every economy you operate in.

I welcome the recent trade agreements in Nairobi, but it is simply unacceptable that the Doha Round of trade talks that were kicked off in 2001 have still not been concluded.

It is no easy task but the World Trade Organisation has a strong leader. Let’s get behind him.

Or take the IMF.

The IMF tells us reforming the supply side of economies by backing competition can boost growth.

So I want the Fund to hold countries feet to the fire – tell us when we are not doing enough to reform.

Christine Lagarde has shown real leadership and guided the IMF through a very difficult period with integrity and intelligence.

I was the Finance Minister who proposed her for the job 5 years ago.

Yesterday I nominated her again, for a second term, so she can complete the job.

And we will need more from the G20 too.

China will lead this year and the focus – on trade, and on competitive reforms – dovetail with what we need from the WTO and the IMF.

Working together across these institutions we should make it a year of action.

For as that Chinese saying goes, talk does not cook rice.

And in turbulent times we need action to deliver economic security at home. At its heart are sound public finances.

When we came to office in 2010 the deficit was over 10% of GDP. £1 in every £4 the country spent had to be borrowed.

We’ve dramatically reduced that deficit – but it remains too high. So does our debt.

The Budget last summer and the Spending Review that followed took further difficult decisions so that we turn that deficit into a surplus.

I said at the time that we needed that surplus as the precaution against tough times ahead. People said it wasn’t necessary, we should run a deficit forever.

I think events at the start of this new year have borne out our judgement. They serve as a salutary reminder that we need to do everything we can to fix our public finances and build our resistance for whatever lies ahead.

Reducing government spending is easy to talk about; but hard to deliver.

Every government budget has its pressure groups who will go on our TV and radio to defend every pound we spend. But we have persevered in the patient work of saving money and reducing borrowing.

In the UK we are seeing what independent observers like the OBR describe as the most sustained reduction in government consumption in over 100 years.

Indeed, it’s the biggest fiscal consolidation any G7 economy has achieved in modern history.

You, the business community, have consistently backed us as we’ve taken these difficult decisions – because you know that there`s no security unless a country lives within its means.

Just as we’ve put the public purse on a stable footing we’ve radically reformed financial stability too.

People ask me about whether we’re keeping an eye on levels of private debt. Yes we are.

Indeed, I created the new Financial Policy Committee in the Bank of England precisely to spot those kind of risks.

The Committee has already taken action to limit bubbles in the housing market, and require our banks to hold more capital.

It’s looking at Buy-to-Let mortgages and it’s made it very clear it will take further action if needed.

For economic security is a foundation that every working person and every company operating in our country gains from.

Sound public finances, a sound financial system.

These don’t happen by accident.

They’re not a consequence of speeches… They require hard decisions, persistence and action. And we are delivering it.

Of course, stability is essential, but it is not by itself enough.

After all, graveyards are pretty stable places.

We need a dynamic economy.

We need major reforms to improve our productivity, which is the key to sustained rises in living standards.

We start with education and skills.

It’s been a perennial British weakness. Lots of governments have talked about it as a priority.

But changing schools, demanding excellence and driving up standards is easier said than done.

The vested interests gather. The unions circle the wagon around the status quo.

But we’ve challenged that status quo – and I think people will look back on the far-reaching reforms we’ve made to schools under Michael Gove and Nicky Morgan as one of the most important economic and social reforms any post-war government has undertaken.

Five years ago 200 schools were academies; today over 5000 are.

Our reforms mean 1.4 million more pupils are being taught in good or outstanding schools.

Our reforms mean millions of new apprenticeships, giving young people the chance to learn a trade.

And despite all the protests, we raised student loans and now our universities are flourishing, many rank among the best in the world, and more kids from low income backgrounds are going to college than ever before.

Now under the leadership of my friend and colleague Sajid Javid we’re pushing forward with more apprenticeships funded by a levy, more improvements in schools and university reforms – again bitterly opposed – but absolutely right.

Not just talking about excellence, but delivering it.

As well as investing in people we must invest in hard infrastructure

In Victorian times we led the world in rail.

The first inter-city railway in the world was British, the fastest steam locomotive in history was British.

But then we fell back.

Now I want us to get back the cutting edge, building new high speed lines.

Again, we faced opposition. Everyone is in favour of infrastructure in general until you propose something specific. But now the budgets for HS2 are set, the legislation is going through Parliament and construction will soon begin.

We’re also backing the largest road investment programme since the 1970s, building new nuclear power and investing in renewable energy too.

And we’re now trying to instil long term thinking in all our infrastructure planning – taking it out of the day-to-day political fight.

Crossrail took 20 years to get off the ground because a political consensus couldn’t be found.

It was the first project I was asked to cancel, and the first project I gave the green light to – and now this awe-inspiring underground railway is taking shape.

I’m not going to stand by and let British people travel for longer to work, or pay more for their utilities just because we struggle to get political consensus for the big decisions.

That’s precisely why I wanted to set up the National Infrastructure Commission – it’s why I reached out for the very best person to help me set it up in Andrew Adonis.

And now I’m looking forward to reading their first report before the Budget on how we can improve transport in the north and in London and every region across the country.

We are also committed to creating a competitive economy. Now again, we know, competition doesn’t always happen if you leave it to the market alone.

That’s why in November we published a new plan to break up monopolies and back new entrants.

Why shouldn’t customers choose their water provider? Why can’t more pharmacies deliver drugs online? Why can’t supermarkets offer legal services? Of course, there will be protests from those whose businesses are shielded by existing regulation.

We need action to let competition flourish, back the new company that doesn’t always have a seat at events like this, and put the customers first.

And we need to improve connectivity.

We start from a decent base: British households are pretty savvy when it comes to the internet.

The average Briton spends £1500 online each year with the internet contributing more than 10% of our GDP – higher than anywhere else in the G20.

We are the top destination in Europe for Foreign Direct Investment and the leading FinTech hub in Europe.

These are encouraging signs. Because a digital economy is a productive one

But here’s another statistic for you: just a 10% increase in the UK’s digital density could add £40 billion to GDP by 2020.

Those are the sort of gains we must grab

That’s why we will be publishing our far-reaching Digital Strategy this year, setting out what we will do to ensure that the benefits of digital are felt throughout the economy.

And we must go on building stronger and deeper links with the rest of the world.

That’s why events like this are important Because yes, it is true that growth in emerging markets has slowed recently, down from 7.5% a year in 2010 to 4% a year in 2015.

But even with this slower pace of growth, the emerging economies are still expected to have accounted for 70% of all the growth in the world in 2015.

We don’t deliver sustained growth by becoming insular and isolated.

We’ll protect ourselves by reaching out to the world and broadening our links.

By looking to each and every trading opportunity.

So that we are doing business with many countries, and many sectors. That`s why we are determined to pursue reform of the EU and achieve a better relationship for Britain with our European partners, as David Cameron explained yesterday.

That’s why, earlier this week I welcomed Indian Finance Minister Arun Jaitley in Downing Street and we reaffirmed the strength of our economic relationship, jointly announcing the upcoming issuance of the first-ever Indian offshore Rupee bond in London – cementing our future as the world’s centre of finance.

And it’s why I hosted the first ever UK – Brazil Economic and Financial Dialogue in London at the end of last year.

These relationships help to boost trade for British businesses – exports from the UK to the emerging economies have increased by 16.5% since 2010. And let me just say a few more words about China.

We want China to rebalance.

All of the troubling statistics – slowing energy use, low metals demand—are signs of the same thing, a shift to a consumption based economy.

So my main message on China is that we won’t rubberneck and fret about each new bump on the road.

We’re in it for the long haul.

We are going to support China on the difficult route of economic reform that it is following.

We want to be China’s best partner in the West.

Some say the stock market volatility in China means we’re wrong to strengthen our economic ties.

But those critics can’t look beyond the next days’ headlines.

China is an economic colossus, it is the second biggest economy on the planet. It’s a huge part of our world’s future.

Any economy that size you want to trade with, whether it is growing at 7%, 6% or 5%.

Even at this growth rate, China will add an economy equivalent to the size of Germany’s to world output by the end of this decade. So we strengthen our links across the world.

But we will only thrive as an outward looking nation that wants to trade with the world if we have a pro-business government.

So my aim, and what I’m working to achieve, is making Britain the best place to be a global firm.

For five years we’ve unashamedly backed business, large and small.

You asked us to set a permanent level for the Annual Investment Allowance; we did that and made it bigger too. At £200,000: it’s at its highest ever permanent level.

You asked us to reform R&D tax relief, so we made it more generous.

You asked us to deal with the punitive 50% income tax rate because it was destroying enterprise – and though it was not popular, I cut it.

But the business tax reform I am most proud of is the reform we’ve made to corporation tax.

When I became Chancellor it stood at 28% – and as a result, Britain did not stand out as a low tax destination for business. Today it does.

In Budget after Budget I’ve cut the rate – from 28% to 20%. The lowest in the G20.

I could stop there. Let other countries catch up. Or we could press on and press home our advantage.

The future favours the bold. So I’m cutting corporation tax again, to 19% and then to 18% by the end of the decade.

Let us forge ahead and let others follow our dust tracks.

Overall the business tax cuts we’ve announced since 2010 will be worth nearly £100 billion to business this decade.

To repeat, that is £100 billion of support.

At times when we’ve had to make many other difficult decisions on the public finances I hope those facts make my priorities clear.

And I want to assure you of another thing.

That these choices are born from deeply held views I hold about enterprise and free markets.

I`ll be frank with you: There aren’t many votes in cutting taxes for business.

And so we don’t pander to business to win your votes.

We support firms like yours because we honestly believe that the business community shows some of the best British values.

Of self-reliance, of building for the future.

Of innovating to solve problems, and of open and fair competition.

That is what the UK is about.

That`s what this government is about.

That is what your businesses do. And without your success there are no jobs, no resources for public services, no future.

We’ve all come a long way together since I spoke to you at this lunch four years ago.

There were bumps on the way, but we stuck to the course. Now, as markets around the world heat up, we in Britain will keep a cool head.

Because we have further to go to achieve our aim – and become the most prosperous major economy in the world by 2030s.

My door is always open to you.

I will need your ideas to achieve that goal.

And I’m looking forward to working with you all in the years to come to make it happen.

For, as the team who’ve provided this meal today know: talk, my friends, does not cook rice.