Tag: Speeches

  • Michael Gove – 2010 Speech to Westminster Academy

    michaelgove

    Below is the text of the speech made by Michael Gove, the Education Secretary, to the Westminster Academy on 6th September 2010.

    There is no profession more noble, no calling more vital, no role more important than teaching. Far and away the best part of my job is spending time with teachers – watching and admiring, listening and learning, being uplifted and inspired.

    Whether it was the brilliant young head of History at Lampton School, Hounslow, the English lesson I observed at ULT’s fantastic Manchester Academy, the superb science teaching I was privileged to glimpse at Urmston Grammar in Trafford or the wonderful primary lesson I so much enjoyed when I visited Durand Primary in Brixton, each of these encounters with great teaching left me feeling more optimistic about the future.

    I believe we have the best generation of teachers ever in our schools, and one of the most dynamic factors behind that has been the phenomenal impact of Teach First.

    The single most enjoyable evening I’ve had in politics was spent at the Teach First annual awards, celebrating the brilliant and inspirational work of young people like Manjit More and Ed Watson, teachers whose passion for their subject and sheer enjoyment in learning are life enhancing, indeed for those they teach, life changing.

    And one of the reasons I’m here at Westminster Academy today is that Teach First teachers are playing their part, alongside so many other gifted professionals, in changing the lives of young people immeasurably for the better. This school, like many other great schools is generating impressive results for children from a challengingly diverse range of backgrounds.

    But one of the tragedies of the last thirteen years is that, despite record spending, there still aren’t enough of these good schools.

    While we have some of the best schools in the world, we also have too many which are still struggling.

    There are hundreds of primaries where the majority of children fail to get to an acceptable level in maths and English.

    The majority of children leave those schools without the knowledge and skills required properly to follow the secondary school curriculum and make a success of the rest of their time in education.

    For many of those children who have not reached an acceptable level of literacy by the end of primary, their time at secondary is marked by defiance and disruption. We have hundreds of thousands of persistent truants and thousands of pupils are excluded for disruption and assault.

    Overall – as a country – about four in ten do not meet basic standards by the age of eleven and only about half manage at least a ‘C’ in both English and maths GCSE.

    What makes this situation so much worse, indeed indefensible, is that poor performance is so powerfully concentrated in areas of disadvantage. In our education system it is still far too often the case that deprivation is destiny.

    The gap in attainment between rich and poor, which widened in recent years, is a scandal. For disadvantaged pupils, a gap opens even before primary school. Leon Feinstein’s research has shown that the highest early achievers from deprived backgrounds are overtaken by lower achieving children from advantaged backgrounds by age five.

    Schools should be engines of social mobility – the places where accidents of birth and the unfairness of life’s lottery are overcome through the democratisation of access to knowledge. But in the schools system we inherited the gap between rich and poor just widens over time.

    The poorest children in our school system are those eligible for free school meals. There are about 80,000 children in every school year who are eligible. Tracking their progress through school we can see they fall further and further behind their peers by the time they reach the end of primary. At secondary the gulf grows wider still. By sixteen, a pupil not entitled to free school meals is over 3 times more likely to achieve five good GCSEs as one who is entitled. By the time they reach university age just 45 children out of a cohort of 80,000 on free school meals make it to Oxbridge.

    On a moral level, this waste of talent, this blighting of individual lives, is an affront to decency. And in economic terms, as we face an increasingly competitive global environment, it’s a tragedy.

    Other nations have been much more successful recently in getting more and more people to be educated to a higher level. With capital so footloose, labour needs to be better educated and trained than ever before. But while we have been moving backwards with education reform over the last few years, as Tony Blair has pointed out, other nations have been forging ahead much faster and further when it comes to reforming and improving their education systems.

    The international comparisons are stark.

    Under the last Government in the most recent PISA survey – the international league tables of school performance – we fell from 4th to 14th in science, 7th to 17th in literacy, 8th to 24th in maths.

    And at the same time studies such as those undertaken by Unicef and the OECD underline that we have one of the most unequal educational systems in the world, coming near bottom out of 57 for educational equity with one of the biggest gulfs between independent and state schools of any developed nation.

    Governments often choose to compare the present with the past and say: haven’t we come far. But the entire human race is progressing at an accelerating pace – technologically, economically and educationally.

    Especially educationally. And we are falling behind. As a nation instead of comparing ourselves with the past, we should compare ourselves with the best.

    And those who want to stay the best, or be the best, are changing fast.

    There are three essential characteristics which mark out the best performing and fastest reforming education systems.

    Rigorous research, from the OECD and others, has shown that more autonomy for individual schools helps drive higher standards.

    Landmark work by Professor Michael Barber for McKinsey, backed up by the research of Fenton Whelan, has shown that teacher quality is critical: the highest performing education nations have the best qualified teachers.

    And research again from the OECD underlines that rigorous external assessment – proper testing you can trust – helps lever up standards.

    And these lessons are being applied with vigour and rigour in other nations.

    In America, President Obama is pressing ahead with radical school reform to close the gap between rich and poor. And he’s implementing all three policies to generate lasting improvement.

    He is promoting greater autonomy by providing cash and other incentives to encourage more charter schools, the equivalent of our free schools and academies.

    He has offered extra support to programmes designed to attract more great people into teaching and leadership.

    And he has encouraged states and school districts to provide greater accountability through improved testing and assessment. In other ambitious countries, the drive for greater autonomy is generating great performance.

    In Canada, and specifically in Alberta, schools have also been liberated, given the autonomy enjoyed by charter schools in the US. Headteachers control their own budgets, set their own ethos and shape their own environments.

    In Calgary and Edmonton, a diverse range of autonomous schools offer professionals freedom and parents choice.

    And the result?

    Alberta now has the best performing state schools of any English-speaking region.

    In Sweden, the old bureaucratic monopoly that saw all state schools run by local government was ended and the system opened up to allow new, non-selective, state schools to be set up by a range of providers.

    It has allowed greater diversity, increased parental choice and has seen results improve – with results improving fastest of all in the areas where schools exercised the greatest degree of autonomy and parents enjoyed the widest choice.

    In Singapore, often cited as an exemplar of centralism, dramatic leaps in attainment have been secured by schools where principals are exercising a progressively greater degree of operational autonomy. The Government has deliberately encouraged greater diversity in the schools system and as the scope for innovation has grown, so Singapore’s competitive advantage over other nations has grown too.

    The good news in England is that a new Government committed to following this path to success already has great examples here to draw on.

    Granting greater autonomy has already generated some great success stories here. In the five or so years after 1988 the last Conservative Government created fifteen city technology colleges. They are all-ability comprehensives, overwhelmingly located in poorer areas, but they enjoy much greater independence than other schools.

    They have been a huge success. Now the proportion of pupils eligible for free school meals in CTCs who achieve five or more good GCSEs A* to C is more than twice as high as for all maintained mainstream schools.

    These results are now being replicated by the small group of schools that were turned into academies under the last government – and which were modelled on the CTCs.

    As a group they improved three times faster than other schools this year and some individual academies posted incredible improvements of 15 to 25%. Those in some particularly challenging areas, such as Burlington Danes on London’s White City estate, run by the charity ARK and the Harris Academies in South London secured dramatic gains.

    It’s absolutely clear that academies and CTCs succeed because of their autonomy. Heads are given the freedom to shape their own curriculum; they are at liberty to insist on tougher discipline, pay staff more, extend school hours, and develop a personal approach to every pupil. In his memoirs published last week Tony Blair gave an excellent description of why they’re so effective:

    [An academy] belongs not to some remote bureaucracy, not to the rulers of government, local or national, but to itself, for itself. The school is in charge of its own destiny. This gives it pride and purpose. And most of all, freed from the extraordinarily debilitating and often, in the worst sense, political correct interference from state or municipality, academies have just one thing in mind, something shaped not by political prejudice but by common sense: what will make the school excellent.

    These freedoms were curtailed. But this Government trusts teachers to control the classroom and trusts parents to choose schools.

    That’s why we’re offering all schools the chance to take on academy status – starting with those rated outstanding by Ofsted. Already over 140, and counting, of the best state schools have taken up our offer of academy freedoms – in just three months. All of these schools have committed to using their new found powers and freedom to support weaker schools.

    It’s also why we’ll continue to challenge schools that are struggling; either they improve fast or they will have their management replaced by an academy sponsor, or an outstanding school, with a proven track record.

    There was an artificial ceiling of 400 such academies placed and the programme was not refused to primaries. But I am removing both of these barriers to the rapid expansion of the programme.

    And we’re helping great teachers, charities, parent groups and some existing academy sponsors, to start new Free Schools. This morning we’ve announced the very first batch of 16 projects that are ready to progress to the next stage of development and are keen to be up and running in a year’s time.

    Given that it typically takes three to five years to set up a new school I’m incredibly impressed that just ten weeks after launching the policy there are already projects at this advanced a stage. It’s a tribute to the incredible energy and commitment of these pioneering sixteen groups and the immense hard work and commitment of a superb team of civil servants who’ve been helping them.

    Following their lead are hundreds of other groups, each with innovative and exiting proposals, in active contact with the Department and the New Schools Network.

    I’m particularly excited that amongst this first batch are projects proposed by outstanding young teachers like Sajid Hussein – who’s King’s Science Academy will be located in one of the poorer areas of Bradford and Mark Lehain – another state school teacher who sees the potential for Free Schools to help students who’ve been let down by the current system.

    One of the reasons I’m so attracted to the Free Schools policy is the experience of the KIPP schools – which started with two Teach for America graduates in Houston with an incredible vision for transforming the life chances of some of their city’s poorest young people.

    Now parents queue round the block for a chance to get their child into a KIPP school and there are almost hundred across the US – their results are astonishing and almost all their pupils get to a top university. Only by allowing new providers to set up schools will this kind of innovation breath life into our education system.

    And only by allowing new providers into the system will we meet the growing demand for new primary school places in those parts of the country where the population is increasing.

    Under the old bureaucratic system of controlling education it could take five years or more to get a new school up and running. But we have real and pressing demographic pressures which demand the creation of more good school places in the next few years.

    I don’t believe that enough was done to prepare schools, especially primaries, for this pressure. The way that capital was allocated was much too bureaucratic and slow moving, primaries weren’t prioritised properly and local authorities were given the wrong sums of money. We’re taking steps now to put that right – and one of those crucial steps is helping new schools to become established in areas where there’s a growing demand for school places.

    While this drive towards a more autonomous school system is an essential part of our plans it is only part of a wider series of reforms necessary to make us truly competitive internationally and to close the gap between rich and poor.

    Our first Education White Paper, to be launched later this year, will lay out a programme of reform for this parliament that will not only lead to a more autonomous school system led by professionals but will also

    – increase the number of great teachers and leaders in our schools

    – give teachers the power to tackle poor discipline

    – create a fairer funding system so that extra funds follow the poorest pupils who need the most support *introduce a simpler, more focused National Curriculum

    – restore faith in our battered qualifications system.

    Teachers and other education professionals will be at the front and centre of the White Paper because everything else we want to achieve flows naturally from the quality of the workforce. And that is the second great principle of education reform – nothing matters more than having great teachers – and great headteachers.

    In the 1990s a series of in-depth studies conducted by American academics revealed a remarkably consistent pattern. The quality of an individual teacher is the single most important determinant in a child’s educational progress. Those students taught by the best teacher make three times as much progress as those taught by the least effective.

    And the effect of good teaching isn’t ephemeral but cumulative, with students exposed to consistently effective teaching making faster and faster progress than their contemporaries, while the effect of bad teaching isn’t just relative failure but regression in absolute terms.

    Research in the Boston school district of the US found that pupils placed with the weakest maths teachers actually fell back in absolute performance during the year – their test scores got worse.

    Indeed, wherever we look across the globe, a crucial factor which defines those countries whose schools are most successful is the quality of those in the teaching profession.

    In Finland teachers are drawn from the top ten per cent of graduates. In the two other nations which rival Finland globally for consistent educational excellence – Singapore and South Korea – a similar philosophy applies. Only those graduates in the top quarter or third of any year can go into teaching.

    In South Korea the academic bar is actually set higher for primary school teachers than those in secondaries, because the South Koreans, quite rightly, consider those early years to be crucial.

    Of course academic success at university doesn’t automatically make you a good teacher. You need emotional intelligence as well as the more traditional kind. The best teachers demonstrate that indefinable quality of leadership which springs from enjoying being with young people and wanting to bring out the best in them.

    And the reason why Teach First has been so incredibly successful in this country is that they have not only recruited some of our most gifted graduates from our top universities, they have rigorously sifted them to identify those with the leadership and personal qualities that make the best teachers.

    Thanks to Teach First, more and more of our most talented young graduates have gone on to teach in some of our toughest schools. In 2002, only four graduates from Oxford University chose a career teaching in a challenging school; in 2009/10, 8% of finalists applied to teach in a challenging school through Teach First, and the programme is now 7th in the Times’ 100 top graduate recruiters. The impact on schools has been incredible. An evaluation by the University of Manchester found that challenging schools which take Teach First teachers have seen a statistically significant improvement in their GCSE results and that the more Teach First teachers were placed in a challenging school, the bigger the improvement.

    With programmes setting up in dozens of countries from Lebanon to Australia it is now a global success story.

    And many Teach First alumni are now getting involved with Free School and Academy projects – applying the entrepreneurial spirit that won them places on the programme to the new powers and freedoms that we’re offering to professionals.

    All of this explains why one of the first decisions I took in office was to increase Teach First’s grant by £4 million to enable them to double their number of recruits each year; expand across the whole country and for the first time into primary schools.

    In the White Paper we will unveil a whole range of proposals alongside the growth in Teach First to ensure we attract the best possible people into education to help in our mission.

    And alongside that we will, perhaps even more critically, ensure that we help those teaching now to do their jobs even better by providing them with the support, additional professional development and security they need to fulfil their full potential and help their pupils do the same.

    We’ll be announcing new policies which will make it easier and more rewarding for teachers to acquire new skills and additional qualifications. We will make it easier for teachers to deepen and enhance their subject knowledge, ensuring teachers are seen, alongside university academics, as the guardians of the intellectual life of the nation.

    We need to act because not enough good people are coming to teaching, or staying in teaching.

    Teachers who have left the profession tell me that the grinding load of bureaucracy which has been piled on them has been a major factor in walking away from a job so many entered with such high hopes and idealism. One of the best headteachers I’ve ever met told me during the election that he yearned to be free from a Government which had baseball-batted him over the head with bureaucracy. So we will be tackling bureaucracy at source, stripping out unnecessary obligations placed on hard-pressed teachers and overworked governors, simplifying the Ofsted inspection regime and tackling health and safety rules which inhibit out-of-classroom learning and have undermined competitive team sports.

    But, crucial as reducing bureaucracy will be, nothing is a bigger barrier to getting more talented people to become teachers, and stay teachers, than discipline and behaviour. Among undergraduates tempted to go into teaching the reason most commonly cited for pursuing another profession, well ahead of concerns about salary, is the fear of not being safe in our schools.

    There are massive problems with violence and disruption in our most challenging schools. There are over 300,000 suspensions per year and about a quarter of a million persistent truants. Thousands of teachers every year are physically attacked and about one in three teachers have been subject to false accusations.

    We will never get more talented people into the classroom; we will never give disadvantaged children the inspiration they need to succeed, unless we solve this problem.

    In our first months we’ve already taken action to give teachers more power to deal with discipline problems. First, we’ve removed the ban on same-day detentions, giving heads and teachers a stronger deterrent against poor behaviour. Previously, teachers had the power to put pupils in detention, but only if the school gave their parents 24 hours’ notice in writing. In future each school will be able to decide what notice to give and how to inform parents.

    We’ve also increased teachers’ powers to search troublemakers.

    Previously teachers could only search, without consent, anyone who was suspected of carrying a knife or other weapon.

    We’ve significantly extended this list to include: Alcohol, controlled drugs, stolen property, personal electronic devices such as mobile phones, MP3 players and cameras, legal highs, pornography, cigarettes and fireworks.

    In the White Paper we will outline further changes including the clarification and simplification of use of force guidance and crucially how we’ll protect teachers against false and malicious allegations from pupils and parents. This growing problem acts as a huge deterrent to teachers – especially male teachers in primary schools.

    Newly released figures show that 28% of primary schools now have no male teachers at all – which can make it even hard to provide a supportive and safe environment for disruptive boys.

    So the message is clear.

    We’re on the side of teachers, we’re determined to restore order and we’re not going to be deflected from laying down lines which the badly behaved must not cross.

    But just as we need to be clear about the need for order we also need to be clear about the pressing, urgent, need to improve provision for those disruptive, difficult and damaged children who need special help.

    In the White Paper we’ll lay out plans to radically improve the environment in which disruptive and excluded pupils are educated and we will ensure that those organisations with a proven track record in turning young lives round are given the opportunity to do more.

    And, of course, we need to tackle the deep-rooted causes of educational disaffection that leads so many young people to be disruptive in the first place. At the heart of our White Paper plans for a simpler, fairer funding system is the Pupil Premium.

    This will see extra money attached to young people from deprived backgrounds – which will be clearly identified to their parents.

    Schools that benefit from this additional cash will not be told exactly how to use it – but we will expect them to ensure that children struggling with the basics get the extra support they need so they don’t fall irretrievably behind their peers.

    And to help ensure money is spent wisely right at the beginning of schooling we will take radical action to get reading right.

    Children cannot read to learn before they have learned to read. Without that secure foundation even the most gifted and innovative teacher will struggle to inspire and inform.

    We know that, whatever else may work, teaching children to read using the tried and tested method of systematic synthetic phonics can dramatically reduce illiteracy.

    So we will make sure that teacher training is improved so every new primary teacher – and every teacher in place – is secure in their grasp of phonics teaching. We will ensure teachers have the best reading materials to help embed great phonics teaching.

    I am clear that we need that solid foundation, but we also need to create room for greater flexibility once the basics are secure. That is why we will develop a new National Curriculum that excites and challenges young people while giving teachers the space to develop their own pedagogy. I will be saying more over the coming weeks about our plans for a curriculum review but it’s crucial that the expectations we set of what children should know will be more ambitious and based upon global evidence concerning what knowledge can be introduced to children at different ages.

    In particular we have to move beyond the sterile debate that sees academic knowledge as mutually exclusive to the skills required for employment; and rigour as incompatible with the enjoyment of learning.

    The most exciting curriculum innovations in development at the moment are those which find ways to trigger the curiosity inherent to young minds towards intellectual tough material.

    To take one example, the computer games developed by the brilliant mathematician Marcus du Sautoy show children’s imaginations can be harnessed to a deep understanding of the most complex ideas.

    Hand in hand with curriculum reform is the need to restore faith in our exam system. Qualifications are the currency of education – and just like with the money markets – confidence is everything.

    Over the past few years there has been a growing and justified concern, from parents and from teachers.

    Last month the exams regulator Ofqual acknowledged that the GCSE science exams were not set at a high enough standard. I’ve been saying this for years – backed by learned institutions like the Royal Society for Chemistry.

    But my warnings were ignored and the status quo retained despite the fact that it was actively damaging the education of hundreds of thousands of children a year.

    Critical to restoring confidence in our exams system is a much more assertive and powerful regulator. We will legislate to strengthen Ofqual and give a new regulator the powers they need to enforce rigorous standards.

    We will ask Ofqual to report on how our exams compare with those in other countries so we can measure the questions our 11, 16 and 18 year olds sit against those sat by their contemporaries in India, China, Singapore, South Korea, Australia, New Zealand and Canada.

    Our young people will increasingly be competing for jobs and university places on a global level and we can’t afford to have our young people sitting exams which aren’t competitive with the world’s best.

    And for A Levels we’ll give those institutions with the greatest interest in maintaining standards – universities – more power to shape exams and determine their content.

    As well as reforming exams to make them more rigorous we need to change league tables to make them more effective.

    One thing I’m determined to do is publish all the exam data held by the Government so that parents, schools and third parties can use web-based applications to create many new and bespoke sorts of tables.

    This will mean they’re not dependent on the measures that Government decides to use; and also that there is complete transparency about the qualifications our young people are taking.

    But Government still needs key measures of secondary school performance to ensure that the reforms we’re putting in place are having a real impact on performance in our schools and are closing the gap between rich and poor.

    Over the next few months – before the publication of the White Paper – there’s the opportunity for a real debate about what we, as a nation, should expect of young people at the age of 16. And so what these key measures should be.

    I think most people would agree that English and maths GCSE are an irreducible core that nearly all young people should be expected to achieve at 16.

    But I believe there is an argument that the vast majority of young people should take a wider range of core academic GCSEs: an English Baccalaureate that would ensure that all children – especially those from less privileged backgrounds – have a chance to gain a base of knowledge and a set of life chances too often restricted to the wealthy.

    So I’m proposing that the Government look at how many young people in each secondary school secure five good GCSEs including English, maths, a science, a modern or ancient language and a humanity like history or geography, art or music.

    Such a broad yet rigorous suite of qualifications would allow students here the chance to secure a school-leaving certificate which shares many of the virtues of the European baccalaureate approach. I am a great admirer of the already existing International Baccalaureate and am determined to support a wider take-up of that qualification. But the GCSE is a popular and resilient qualification, well understood by employers, teachers and students.

    It seems to me that one of the best ways of capturing the breadth and rigour of the IB while making the most of the strengths of the GCSE is to create special recognition for those students who secure good passes in a balanced range of rigorous qualifications.

    An English Bac could incentivise schools and students to follow the courses which best equip them, and us as a nation, to succeed.

    I am deeply concerned that fewer and fewer students are studying languages, it not only breeds insularity, it means an integral part of the brain’s learning capacity rusts unused.

    I am determined that we step up the number of students studying proper science subjects. Asian countries massively outstrip us in the growth of scientific learning and they are already reaping the cultural and economic benefits.

    And I am passionately concerned that we introduce more and more young people to the best that has been thought and written, which is why I lament the retreat from history teaching in some of our schools and believe also that we should incentivise deeper knowledge of our shared cultural heritage.

    I believe that a change in how we measure and grade schools, to reward those who have pupils who succeed in all these areas, and a special recognition of student achievement with the award of a Baccalaureate certificate to those pupils who secure these passes, could reinvigorate the culture of learning in this country.

    I’m not suggesting this would or should be the only measure used but I do believe that this is a valid expectation of most young people in the 21st century.

    It also would not preclude the study of other GCSEs outside of this core or any vocational qualifications that would be of genuine benefit for student’s progression to post-16 education and employment.

    But it would dramatically strengthen the position of core academic subjects in our schools and stop the shift to less challenging courses driven by the current perverse accountability system.

    And it would align us with the expectations other advanced countries have of their children.

    In nearly every other developed country in the world children are assessed in a range of core academic subjects at 15 or 16 even if they are on a “vocational” route.

    This is true in Europe, where for example in France all children take the Brevet des Colleges which assesses French, maths, history/geography/civics and a modern foreign language.

    In places like Holland that have separate vocational routes from the beginning of secondary school all children are still typically assessed on the core academic subjects (in Holland this is languages, arts, science, maths and history).

    In Finland – the best-performing country in Europe according to international league tables – all children are assessed in maths, Finnish, history, science and art/music at GCSE age.

    In Asia there is typically assessment of the whole core curriculum at GCSE level. In Singapore, for example, all pupils must take English, another language, maths, science, humanities, plus one other subject (of course they also still use O Levels in Singapore).

    And in the States nearly all schools have mandatory assessment during high school in maths, English, science and social studies (including history and politics).

    We are extremely unusual in having no requirement to study anything academic apart from English, maths and science after 14 (and only English and maths have to be assessed using GCSE).

    Taken altogether, the changes we want to make represent a formidable reform programme. A more autonomous school system led by professionals; a new generation of brilliant teachers; a new era of discipline in our schools; a fairer funding system; a simpler and more challenging curriculum and a qualifications system that restores standards rather than diminishing them.

    I’m under no illusions about how tough it will be to drive this programme through but the scale of the challenge is such that we have no choice but to be this radical and this ambitious. There is no option but to push ahead on all fronts as quickly as possible.

    Children only have one chance – and I am impatient to ensure that my children – that all children – get the best possible chance to succeed in our state schools.

  • Paul Goggins – 2003 Speech on Restorative Justice

    Below is the text of the speech made by the then Home Office Minister, Paul Goggins, to the Restorative Justice Conference on 28th November 2003.

    I am delighted to be able to make a contribution to today’s conference which provides us with an important opportunity to highlight the benefits of Restorative Justice and to feed back some of the responses we have received from the consultation that has been taking place over the last few months.

    I hope that today will also be an opportunity to exchange ideas and good practice. As Sir Charles has already said, it is an exciting time for restorative justice.

    Of course this approach isn’t new, and many of you have been working in this area for a long time – spreading the word and developing good practice. But I do sense that Restorative Justice is beginning to capture people’s imagination and to gather some real momentum.

    So I want, first of all, to thank you all for the contribution you are making to the development of Government thinking on Restorative Justice; in particular for your thoughtful and thought-provoking responses to the strategy document; and indeed for the ways in which you continue to take restorative justice forward in practice.

    I especially want to thank Sir Charles and the Restorative Justice Consortium who have done so much to press and pioneer this work. The Government is determined to put the victim at the heart of the criminal justice system. It was no co-incidence that we published our National Strategy for Victims and Witnesses on the same day as the Restorative Justice strategy, indeed the two are designed to support each other.

    The Domestic Violence, Crime and Victims bill announced in this week’s Queen’s Speech will, for the first time, give victims of crime guaranteed rights to information and advice from all the criminal justice agencies and ensure that the interests of victims are championed right across government.

    And Restorative justice is, of course, centred on the needs of victims: their need to spell out the harm an offender has inflicted on them; their need to draw a line under events and put the crime behind them; their need to see an offender put something back into the community to make restitution for the damage they have caused.

    Some people argue that this is a soft option – but I don’t agree.

    Facing up to the consequences of what he has done and making amends can be a real turning point for an offender. It certainly was for the 17 year old I came across who had met face to face with the person whose house she had burgled and had resolved to make changes to her life – change that now includes a full-time college course.

    It also transformed the attitude of the young boy I was told about on a visit to a local Youth Offending Team after he met the leader of the disabled persons’ group who were regular users of a building he had recently damaged.

    And in reality it is this kind of change that victims want. Of course they are deeply angry and hurt by crime and their sense of justice will mean they want to have punishment meted out. But they also want to see attitudes challenged, to see people given the chance to change and to make amends for the harm they have caused.

    Without doubt one of the biggest obstacle we face in the criminal justice system at the present time is the perception that it lacks public confidence. Crime is down 25% in the last 6 years and you are less likely to be a victim of crime now than at any time in the last 20 years. But people simply don’t believe it – they feel afraid and sceptical.

    Part of the answer at least lies in greater public participation – and restorative justice can help achieve that – whether by direct contact between the victim and offender or through the kind of community improvements delivered through sentences like the Enhanced Community Punishment. One of the things I particularly like about the Enhanced Community Punishment is the distinctive logo that will enable local people to recognise that someone has been putting something back into the community as payment for the damage they have done.

    Justice shouldn’t be something far removed from the individuals and communities harmed by crime. And a more open and engaged process will give people the grounds for greater confidence in the Criminal Justice System.

    But I don’t want Restorative Justice to simply be reserved for serious offenders. I also want to see this approach become firmly embedded in the everyday life of local communities. It can guide the way that schools develop effective discipline and anti-bullying strategies. It can help deal with low level anti-social behaviour as well as provide a way of mediating between neighbours who can’t get on – and don’t have a clue about how to start putting things right.

    Restorative justice should be a way of restoring balance to relationships and situations where conflict and fear may otherwise reign.

    The consultation process on Restorative Justice has been crucial to the development of our thinking. We received just over 100 responses to the strategy document and I want to warmly thank every one of you who sent in your views. Your thoughts, ideas, criticisms and comments will form the basis of future policy and practice.

    Christine Stewart is going to go into this in more detail, but I want to outline some of the key themes that have emerged.

    One of the key issues to emerge from the consultation is the pace of implementation. It was striking that so many people who passionately believe in Restorative Justice want to see it introduced in a careful, gradual way. They want to be sure that as it grows it keeps its integrity. They want to be sure that that too much enthusiasm does not lead to this approach being used when it isn’t actually appropriate.

    I take heart from this caution, because it reflects the approach we are in fact taking: careful development, continuing innovation, safeguarding standards, and ongoing research into its impact and effectiveness.

    As we promised in the document, work has started with a group of practitioners to develop accreditation standards for restorative justice. We have also invited bids from those who are interested in carrying out research into the trial of the new diversionary Restorative Justice. It is important that we put in place a strong evidence base for the work we are doing.

    A second key issue, that many of the responses raise, was that restorative justice should be more than just an add on to the Criminal Justice System, more than just another tool in the toolbox.

    There are, of course, a number of other very important goals for the criminal justice system in addition to restoration. Punishment, public protection, the reform and rehabilitation of offenders and crime reduction are all clearly stated purposes of sentencing in the new Criminal Justice Act. But Restorative Justice does have a legitimate place alongside them: helping to meet the needs of victims, repairing harm, rebuilding relationships.

    Restorative justice is a way of doing things that we need to get into the thinking and working of every agency and every sector.

    A third key issue raised is about the respective roles and contribution of voluntary and statutory agencies in the delivery of restorative justice. A few people questioned whether the police should have a role – I certainly think they should.

    Others argued for a distinct restorative justice service – independent of any existing CJS agency. Many respondents highlighted examples of existing successful practice of Restorative Justice within the Criminal Justice System.

    The truth is, of course, that we don’t yet have all the answers – we’ll learn more as we go along, from the research commissioned by the Home Office as well as from projects on the ground. But what we do know for certain is that voluntary sector practitioners have been and will continue to be crucial to the development of Restorative Justice.

    Along with the great majority of the responses, I welcome and celebrate the current diversity of provision. Restorative justice has grown up from the grass roots. It is innovatory – people are continuing to discover new ways of applying it, in care homes, in schools and prisons, to resolve disputes in the community, and to tackle anti-social behaviour.

    This innovation should not be constrained or held back by making Restorative Justice the preserve of any one sector or organisation.

    A further key issue emerging from the responses was the need for a broader understanding of Restorative Justice. Many identified this as fundamental to public confidence and success.

    So we need to work together, in a co-ordinated way, to raise understanding of Restorative Justice – within all the Criminal Justice agencies and across the public as a whole. That doesn’t necessarily mean a big public information campaign. It’s probably too early for that and we need, as always to make sure that we have sufficient capacity in place to meet demand and expectation.

    What will raise people’s awareness and appreciation of restorative justice – and gain their trust – is their own direct involvement in and experience of restorative processes. Hearing about it from people they know and trust and seeing it in action.

    I know this from my own personal experience. Having read and heard about Restorative Justice I was already a supporter, but seeing at first hand, in Pentonville prison, a meeting between an offender and a victim really brought home to me what a powerful process it can be, and the kind of transformation it can bring about for all those involved.

    So these are some of the issues that have come out of the consultation, together with a few of my own observations. As I said at the start, whilst it is still relatively young there is a momentum behind Restorative Justice now.

    That momentum has come largely from local agencies, and from the dedication of practitioners applying RJ in their work – and in their everyday lives.

    And perhaps this is the most important feature of Restorative Justice. It is not merely a process or a system – it represents a set of values that acknowledge harm but emphasise the need for reconciliation and the possibility of reform.

    So thank you for your work, your commitment to and passionate belief in Restorative Justice and your contribution to the development of our overall strategy and policy.

    I feel confident that we are really on to something and hope that you will continue to work with us – building a criminal justice system that meets the needs of victims, and has the trust of the community.

  • William Ewart Gladstone – 1893 Speech on Unemployment

    Below is the text of an answer given in the House of Commons on 1st September 1893 by the Prime Minister and First Lord of the Treasury, William Ewart Gladstone, on unemployment.

    COLONEL HOWARD VINCENT : I beg to ask the First Lord of the Treasury whether, in negatively replying to the representations recently made to him on behalf of the large number of persons in London and elsewhere now without employment, he has considered the state of affairs disclosed by the last number of The Labour Gazette, officially published by the Board of Trade, as to the decline in trade, the increase in pauperism, the 20,000 highly skilled artizans unemployed, and the widespread reduction in wages; and if the Government propose to take any steps to mitigate the consequences to the masses of the people?

    MR. W. E. GLADSTONE : I cannot help regretting that the hon. and gallant Gentleman has felt it his duty to put the question. It is put under circumstances that naturally belong to one of those fluctuations in the condition of trade which, however unfortunate and lamentable they may be, recur from time to time. Undoubtedly I think that questions of this kind, whatever be the intention of the questioner, have a tendency to produce in the minds of people, or to suggest to the people, that these fluctuations can be corrected by the action of the Executive Government. Anything that contributes to such an impression inflicts an injury upon the labouring population. Every and any suggestion with reference to the improvement of the position of the people, whether in respect to fluctuations in trade or any other matter, is always entitled to and will have our best and most careful consideration; but I believe the facts are not quite correctly apprehended. The decline in trade is not greater now than at previous periods of depression from which there has invariably been a recovery. Although there is a slight increase of pauperism as compared with last year, pauperism is much less in proportion to the population than at any previous period of our history. The Return of the Local Government Board for the year 1892 shows a percentage of 2.5 of the population, as compared with 3 per cent. in 1882, and 4 per cent. or 5 per cent. 20 or 30 years ago. The unemployed among the artizan population are at present about 6 per cent. for the Unions making Returns, but this rate is not specially high at this moment, and it has fallen pretty steadily since the beginning of the year, when it was 10 per cent., and higher percentages have been known in previous periods of depression.

    COLONEL HOWARD VINCENT : Is it not proposed to take any steps at all in the matter?

    MR. W. E. GLADSTONE : I have stated that I am not aware of anything in the present depression of trade which indicates any duty incumbent upon the Government except the duty of considering any proposal or suggestion which may be made, and which has about it the smallest promise of utility.

    MR. J. BURNS : Will the right hon. Gentleman consider, with the President of the Local Government Board, the desirability of again sending a Circular Letter to all the Local Authorities asking them to give employment to the unemployed on reproductive and useful works, as was done in 1886, 1888, 1890, and 1892 by the late President of the Local Government Board?

    MR. W. E. GLADSTONE : Yes; I shall be happy to consider that question.

  • Nick Gibb – 2010 Speech to Catholic Education Service

    nickgibb

    Below is the text of the speech made by Nick Gibb to the Catholic Education Service on 13th October 2010.

    Thank you, Father [Michael] O’Dowd, for that introduction.

    With the Spending Review imminent, members of the Cabinet are locked in rooms across Westminster this week. But Michael asked me to pass on his best wishes to you for your conference and I’m delighted to be here to share our vision for education with you.

    The last time that I saw many of you was at St Mary’s University College in Twickenham for the Big Assembly with His Holiness Pope Benedict [XVI].

    First and foremost, it was an extremely successful event and I’d like to congratulate Oona [Stannard] and the Catholic Education Service on the leading role that it played in organising it.

    There were some of the very best choirs that I’ve ever heard, which is testament to the importance that Catholic schools place on the wider development of pupils through extra-curricular activities.

    But above all, it was a fantastic celebration of the role that the Catholic Church plays in our education system and the perfect way to mark the start of the Year of Catholic Education.

    In his speech, His Holiness said:

    As the relative roles of church and state in the field of education continue to evolve, never forget that religions have a unique contribution to offer.

    Faith schools have been part of the English education system since it began.

    The historian Nicholas Orme traced this back as early as the 7th century when he described churches and cathedrals as ‘centres of literacy’.

    By the 15th and 16th centuries, the Church had become one of the most important providers of education in local communities.

    And when Catholicism re-established itself in the mid-19th century, the establishment of Catholic schools was prioritised so that children had places to learn.

    Faith organisations have just as important a role to play in education in the 21st century.

    Today, around a third of maintained schools in England are faith schools and, despite operating in some of the poorest areas of the country, they are consistently outperforming other schools.

    At a pupil level, 6 per cent more pupils in secondary faith schools achieved 5 A* to C GCSEs including English and mathematics than the national average, while 6 per cent more pupils in primary faith schools reached the expected level in English and mathematics. When you look just at Catholic schools, both of these figures increase further still to 7 per cent.

    At a school level, almost half of the 200 best-performing secondary schools in the country are faith schools, while 64 per cent of the 200 best-performing primaries are faith schools – of which nearly a quarter are Catholic.

    And as well as having more diverse intakes than other schools, Ofsted recognises that faith schools are more successful than non-faith schools at promoting community cohesion.

    A few weeks ago, I visited St Gregory’s Catholic Science College in Harrow.

    It was the first school I visited when I became a minister and I was delighted to be asked back because I was blown away by my first visit there.

    Last summer, 66 per cent of pupils achieved five A*-C GCSEs including English and mathematics. But I was struck most by the strong ethos that the headteacher has instilled, the emphasis on aspiration and, as tends to be the case with the happiest and most industrious schools, how I could tell just walking through the gates that there was a culture of respect and good behaviour.

    If we could replicate schools like St Gregory’s, there would be no need to have a schools minister or a Department for Education. But while we do have some of the best schools in the world in our country, we also have too many which are still struggling.

    Still a long way to go

    As we saw from the Key Stage 2 progression statistics published last week, there are hundreds of primary schools where the majority of children fail to get to an acceptable level in mathematics and English.

    The majority of children leave those schools without the knowledge and skills required properly to follow the secondary school curriculum and make a success of the rest of their time in education.

    Overall, four in ten pupils don’t meet basic standards by the age of eleven, and only about half manage at least a ‘C’ in both English and mathematics GCSE.

    What makes this so much worse is that poor performance is so powerfully concentrated in the areas of the greatest disadvantage.

    It is enormously demoralising to track the progress of the poorest pupils.

    The stark report published by the Equality and Human Rights Commission earlier this week showed that only a third of children eligible for free school meals reach a good level of development by the age of five, compared to more than half who are not.

    This gap then continues through primary and secondary school until, aged 16, pupils entitled to free school meals are over half as likely to achieve five good GCSEs and more than twice as likely to be permanently excluded.

    By the time they reach university, just 45 children out of a cohort of 80,000 on free school meals make it to Oxbridge.

    It is because deprivation still far too often dictates destiny that we are introducing a pupil premium. It will provide extra funding for schools with the poorest pupils to pay for smaller classes, extra tuition and the best teachers.

    But we are also determined to learn from the other nations that have been much more successful recently in getting more and more people to be educated to a higher level.

    The most recent PIRLs study of 10-year-olds saw England fall from 3rd out of 15 countries in 2001 to 15th out of 40 countries in 2006.

    While the PISA study showed that only 2 out of 57 countries have a wider gap in attainment between the highest and lowest achievers.

    Three pillars of reform

    There are three essential characteristics which mark out the best performing and fastest reforming education systems.

    First, they are guided by the principle that more autonomy for individual schools helps drive up standards.

    Second, the highest performing education nations invariably also have the best teachers.

    Third, there is rigorous external assessment based on a curriculum that provides a deep and rich learning experience.

    The coalition government is determined to implement all of these lessons in our country and I will reflect on how we intend to do so today.

    Greater autonomy

    One of the first things we did was to offer all schools – including primary schools for the first time – the chance to take on academy status – starting with those rated outstanding by Ofsted.

    In recent years, academies have consistently outperformed other schools. Last year, their rate of improvement was twice that of other schools, with some individual academies posting incredible improvements of between 15 and 25 per cent. Those in some particularly challenging areas, such as Burlington Danes on London’s White City estate, run by the charity ARK, and the Harris Academies in South London, have all secured dramatic gains.

    In his memoirs, Tony Blair gave an excellent description of why they’re so effective:

    [An academy] belongs not to some remote bureaucracy, not to the rulers of government, local or national, but to itself, for itself. The school is in charge of its own destiny. This gives it pride and purpose. And most of all, freed from the extraordinarily debilitating and often, in the worst sense, political correct interference from state or municipality, academies have just one thing in mind, something shaped not by political prejudice but by common sense: what will make the school excellent.

    Whether it’s new approaches to the curriculum, to assessment, to discipline and behaviour, to pastoral care, to careers guidance, to sport, the arts and music, new ways of gathering data on pupil performance, new ways of supporting teachers to improve their practice, new ways of tackling entrenched illiteracy and new ways of ending the culture of low expectations, it is that single-minded focus on what will work for them that we want all schools to have.

    Over 140 outstanding schools have already taken up our offer and will lead the way – and I hope that many more will follow, including faith schools.

    I am grateful to Oona and to the CES for the constructive dialogue that we’ve had over the past few months about the involvement of faith schools in the Academies programme.

    In that spirit of partnership, let me also say that you have been right to raise concerns about the potential impact that conversion would have on land, on governance, on the curriculum, amongst other things.

    I want us to work through all of these issues and that is why we were pleased to provide a small amount of funding to help develop a model funding agreement for Catholic schools.

    And I do want to be 100 per cent clear that it would be wrong for us to expect faith schools converting to academies to do anything differently. That is why faith designation will continue into academies and, while they must of course comply with the School Admissions Code so that they are inclusive, academies will be able to continue to give priority to children of their faith.

    I believe that, in time, faith schools can play the same kind of leading role in the Academies programme as they do in the wider schools system, not least because they have so much to offer in working with other schools that need more support to improve.

    As well as expanding the Academies programme, we’re helping teachers, charities, churches and parent groups to start new free schools.

    Bishop McMahon pointed out earlier this year that free schools are about local communities getting together, pooling their resources and supporting the needs of the local community, and how this resonates with the way that so many Catholic primary schools were founded.

    Despite the robust approach that we’re taking to assessing proposals, we’ve already announced the first sixteen projects that are progressing to the next stage of development and want to be up and running next September.

    Given that it typically takes between three and five years to set up a new school, it is a tribute to the incredible energy and commitment of these pioneering groups that they have already reached such an advanced stage.

    Encouragingly, there are already a number of proposals from faith groups and, while the door of course remains open for faith groups to establish new schools through the existing voluntary-aided route, I hope you will look at this route as a means of increasing the number of faith places available.

    While I’m on the subject of new schools, let me also say that I understand why some communities were disappointed by the announcement to end the Building Schools for the Future (BSF) programme.

    Sadly, we inherited a scheme that was characterised by massive overspends, tragic delays, botched construction projects and needless bureaucracy so we had to take action.

    The end of the BSF programme does not mean the end of school rebuilding. I believe we can build more schools more efficiently and more quickly in the areas that need it the most in the future and that is what we’ve asked our review team to deliver.

    Similarly, Oona has been lobbying on your behalf recently about the removal of home to school transport, which I understand is an important consideration for you and for parents.

    Parents have the right to bring up their children in the way that they see fit and, if they adhere to a faith, to bring up their children with respect to the tenets of that faith.

    Our education system must reflect that choice and LAs must respect a parent’s wishes.

    Every council’s budget is under pressure but their primary responsibility is to spend taxpayers’ money in a way that meets local needs and, if you or parents don’t believe that’s happening, I have no doubt that you will let them know.

    While the drive towards greater autonomy is an essential part of our plans, it is only part of a comprehensive programme of reforms to make us truly competitive internationally and to close the gap between rich and poor.

    Comprehensive programme of reform

    Our first Education White Paper, to be launched later this year, will set out the whole-system improvement needed to improve standards and close the gap between rich and poor.

    Teachers and other education professionals will be at the fore because everything we want to achieve starts with, and flows from, the quality of the workforce.

    In the White Paper, we will unveil a whole range of further proposals to ensure we attract the best possible people into education and, perhaps even more critically, provide those teaching now with the support, professional development and security they need.

    We’ve already doubled the size of the Teach First programme so that more highly skilled graduates come in to help us with our mission, and we will also make it easier for experienced, talented people to change career and move into teaching.

    To ensure they get off to the best possible start, we will look at how we can improve the quality of initial teacher training and, in particular, strengthen phonics and mathematics training for primary teachers.

    And because the best teachers apply their passion for learning to their own careers as well as to their pupils, we will make it easier and more rewarding for teachers to acquire deeper knowledge and new qualifications, including postgraduate and management qualifications.

    As crucial as recruitment and training will be, there is nothing more dispiriting for teachers than dealing with a grinding load of bureaucracy and nothing more likely to put them off completely than dealing with bad behaviour,

    We are determined to lift burdens on teachers so that they can get on with their jobs, and to build on the action that we’ve already on ill discipline by simplifying the use of force guidance and protecting teachers against false and malicious allegations from pupils and parents.

    Once teachers are secure and able to develop their professional skills, we then have to create more room for them to use them.

    So we will develop a new National Curriculum that excites and challenges young people. It will be informed by teachers and experts, but based on the best global evidence of what knowledge and concepts can be introduced to children at different ages.

    We will set out more details in the White Paper but I can assure you that I believe that RE is an important part of the curriculum.

    RE is thought provoking, allows pupils to develop a greater understanding of the communities they live in and, importantly, it is valued by parents.

    Finally, hand in hand with curriculum reform comes the need to restore confidence in our battered qualifications system.

    So we will legislate to strengthen Ofqual and we will also ask it to evaluate how our exams compare with those in other countries so that we know how well our children stand against those from the countries with whom we are increasingly competing.

    Conclusion

    I’m proud to call myself a supporter of faith schools – and Catholic schools in particular – because they have such a strong track record of building strong communities that work together to help one another and of supporting the most disadvantaged.

    We want to learn from you and are committed to working with you as we take forward the far-reaching reform programme that I’ve set out.

    Because, just like the Catholic Church, we want to ensure that all children get the best possible chance to succeed.

  • Eddie George – 1998 Speech to TUC Conference

    Below is the text of the speech made by Eddie George to the 1998 TUC Conference.

    If the newspapers are to be believed – and I make no comment on that – then you have just welcomed Daniel to the lion’s den. Although this is my first experience of this particular lion’s den, I must admit I have been in a few others. In fact, the last time that I faced such a formidable audience, the Chairman tried to reassure me by explaining that it wasn’t me they were angry with, it was the person who had invited me to speak. So to avoid any possible misunderstanding, I would like to begin by thanking John Monks for inviting me along this afternoon. It is perhaps no coincidence that today is Respect for the Aged Day in Japan!

    Actually, I am very pleased to be here and to have this opportunity to respond directly to some of the serious concerns that have been expressed recently by trade union leaders, among others, about monetary policy. Let me start with perhaps what is your biggest concern. You think that the Monetary Policy Committee, which I chair and which sets interest rates, is only interested in controlling inflation and takes little or no account of the effects of its decisions on real economic activity and jobs. Some of you evidently think that that is because we are a crowd of ‘pointy-heads’, or ‘inflation nutters’, or even ‘manufacturing hooligans’, and I am not sure that these descriptions are intended as terms of endearment.

    More seriously, and perhaps more generously, some of you think that the problem lies with our remit from the Government, which is first to maintain price stability, defined as an underlying inflation rate of 2 – 2.5% and, subject to that, to support the economic policy of the Government including its objectives for growth and employment.

    Whatever the reason, your concern is that we place too much emphasis on holding prices down and not enough on keeping growth and employment up. The implication is that you see a trade-off between inflation and the rate of economic growth, so that if only we would let up a bit on controlling inflation then this country could enjoy higher activity and lower unemployment which are the really good things of life, or at the very least we could avoid some of the worst damage that is currently afflicting the whole of agriculture, large parts of manufacturing industry and even some services sectors. That might even be true – for a time. The trouble is that in anything other than the short-term it will be likely to mean more, rather than less, economic damage and lower, rather than higher, growth and employment.

    Often in the past in this country we behaved as if we thought that promoting higher growth and employment, which of course is what we all want to see, was largely a matter of pumping up demand. We paid too little attention to the structural supply-side constraints. All too often we tried to buy faster growth and higher employment even at the expense of a bit more inflation. In effect, we tried to squeeze a quart out of a pint pot, and you all know the result – rising inflation and a worsening balance of payments which eventually could only be brought back under control by pushing up interest rates dramatically, far higher than they are today, and forcing the economy into recession.

    I do not need to remind you of the really miserable social as well as economic consequences, as right across the economy people lost their jobs, their businesses and their homes; or insidiously repeated experience of boom and bust produced a pervasive short-termism in business behaviour which infected both industry and finance and, dare I say, both employers and employees however much we all like to blame everyone else. Everyone was tempted to grab what they could while the going was good.

    But we have learned from that experience. We have learned that in anything other than the short-term there really is no trade-off between growth and inflation. What we are trying to do now through monetary policy is to keep overall demand in the economy growing continuously, broadly in line with the capacity of the economy as a whole to meet that demand. Both the previous Government and the present one set a low inflation target as the immediate objective of monetary policy, not as an end in itself but in effect as a measure of our success in keeping demand in line with supply. So the real aim is to achieve stability across the economy as a whole in this much wider sense.

    Now there is not a lot, quite frankly, that we can do directly through monetary policy to affect the supply side, the underlying rate of growth that can be sustained without causing inflation to rise. That can be influenced by the whole raft of Government policies ranging from education and health to taxation and social security, and it depends ultimately on the ingenuity, the productivity and the flexibility of the economy. Employers and employees working together clearly have a crucial role to play in this context and I recognise the constructive and forward-looking role that many of you are now playing to improve the supply-side capacity of the economy.

    But monetary policy operates on the demand side and the best help that we can give is to keep overall demand consistently in line with that supply-side capacity, not letting it run above capacity but not letting it fall below capacity either, as reflected in consistently low inflation. That way we can moderate, rather than aggravate, the unavoidable ups and downs of the business cycle, enabling steadier growth, high levels of employment and rising living standards to be sustained into the medium and longer term, and if we can do that then it will contribute indirectly to the supply side by creating an environment which encourages more rational, longer-term decision-making throughout the economy.

    I would hope, President, that on this basis we could all agree at least on what it is we are trying to do. The debate is not about the ends, it is about the means. We are every bit as concerned with growth and employment as you are, as anyone in their right mind must be. But we are interested in growth and employment that is sustained into the medium and long term, and permanently low inflation is a necessary condition for achieving that. If I thought that low inflation were simply an end in itself, then I have to tell you I would get very little satisfaction from my job.

    But even if we agree on the objective, that still of course leaves plenty of room for us to disagree about what that means for the actual policy stance, the level of interest rates, at any particular time. In fact, as you may have noticed, because we are wholly open about it, even the individual members of the Monetary Policy Committee have actually been known to disagree about that – at the margin.

    Outside the MPC a lot of people say to me, “Okay, I agree we don’t want to return to boom and bust” – I have heard that this afternoon – “but”, they say, “you are still overdoing it. From where I sit, or from what I’m told”, they say, “we’re headed for recession, it’s just hours away”. Sometimes they imply that we are also going to undershoot the inflation target and sometimes they don’t much seem to care about what happens to inflation.

    Now there are always plenty of people who claim to know what’s going to happen to the economy, to know that interest rates are “clearly far too high”, or “clearly far too low”, and the present time is no exception. It has been difficult recently to hear yourself think about the deafening noise of opinions on the state of the economy which, understandably, often reflect the situation in their particular neck of the whole economy wood.

    The truth is that neither we, nor they, nor anyone else, can know with any great certainty precisely where demand is in relation to capacity in the economy as a whole. Still less do we know where it is likely to be over the next couple of years, and that is the more relevant consideration, given the time that it takes before changes in interest rates have their full effects.

    Monetary policy isn’t a precise science, we have never pretended that it is, but it cannot be just a matter of sweeping, broad-brush impressions based upon partial information either. What we have to do is to make the best professionally-informed analysis we can of all the sources of information available to us, relating to every sector of the economy and every part of the country and then constantly review and, as necessary, modify our judgments month by month and quarter by quarter, in the light of the flood of new information as it becomes available.

    That, of course, is exactly what we do in fact do, using the vast array of official economic statistics and financial market data, all the publicly available, and some private, surveys and commentaries, as well as a wealth of anecdotal and structured survey evidence that we collect ourselves through our 16 non-executive directors, through the frequent visits which MPC members make around the country, through meetings in London and through our network of 12 regional information-gathering and disseminating agencies with their 7,000 industrial contacts throughout the United Kingdom, and we openly display the facts as they are available to us as well as our analysis and our conclusions regularly through the publication of the minutes of our monthly meetings and in the quarterly Inflation Report.

    So when people say to me that the economy is headed for recession, I am interested in comparing the evidence on which they base their views with our own evidence, and I want to know whether or not they are also saying that they expect us to undershoot the Government’s inflation target.

    Let us just for a moment turn down the noise and look at some of the relevant facts as they relate to the economy as a whole.

    Since the economy started to recover from recession in the spring of 1992, some six‑and‑a‑half years ago, overall output has grown at an average annual rate of about 3%. That is well above the trend rate for the past 20 years of just 2%. Employment has increased by 1.2 million over this period, while unemployment has fallen almost month by month, on the familiar claimant count measure, from a peak of over 10% in 1993, to some 4.7% now. That is the lowest rate for 18 years. Meanwhile retail price inflation (on the Government’s target measure) has averaged around 2.75% ‑‑ that is the lowest for a generation. There is not much evidence here that low inflation inevitably means low growth and employment.

    But, of course, we started this period with demand blow capacity ‑‑ with a fair amount of slack in the economy which we were gradually taking up. By last year, it had become clear, in the evidence of rising capacity utilisation and of growing tightness in the labour market, that unless we acted to moderate the growth of demand we were at risk of overheating. That is why we tightened policy over last summer, to slow things down before inflation took off and to head off a subsequent recession. Although, as I say, you can never be sure ‑‑ economic forecasting is a very uncertain business ‑‑ a necessary slow-down, rather than a more serious recession is what we think we are seeing; and, as I understand it, that is what your own General Council thinks too.

    Our problem in slowing the economy down has been enormously complicated by the increasing imbalance between the domestic and the internationally‑exposed sectors of the economy. Domestic demand for goods and particularly for services has been unsustainably strong and large parts of the economy have been doing very well on the back of that. But the sectors which are most exposed to international competition have been suffering enormous pressure as a result, initially, of the exaggerated strength of sterling ‑‑ especially against the major European currencies in the run‑up to decisions on the Euro ‑‑ and as a result subsequently of the successive waves of turmoil spreading through large parts of the global economy. Overall demand growth, at least until fairly recently, remained excessive, and the labour market has continued to tighten.

    The question was what should we do? It was not that we did not know that large parts of the economy were under the hammer; we had been as conscious of that as anyone. Still less was it that we did not care; we care, just as you must, about activity and jobs in all sectors of the economy. But the stark choice confronting us was either to tighten policy, knowing that it would inevitably increase the pain which the internationally exposed sectors were already suffering, or to disregard the developing excess overall demand in order to protect the internationally‑exposed sectors from further damage. That was the choice that confronted us.

    This second course might have meant less pain for the internationally‑exposed sectors in the short run, but it would have meant putting the whole of the economy, including the exposed sectors, at risk of accelerating inflation; and it would, in all probability, have meant a much sharper downturn in the economy as a whole a little further ahead. We have been round that buoy all too often before. And so we tightened policy, trying as best we could through our tactics to minimise the unwanted upward pressure on the exchange rate.

    I know, President, only too well that this will be cold comfort to many of you in the exposed sectors, but there is no point in pretending that things are other than they are. The present imbalance means we are trying to maintain stability in the economy as a whole in extraordinarily difficult circumstances.

    But I will make one final point. The inflation target we have been set is symmetrical. A significant, sustained fall below 2.5% inflation must be regarded just as seriously as a significant sustained rise above it. I give you my assurance that we will be just as rigorous in cutting interest rates if the overall evidence begins to point to our undershooting the target as we have been in raising them when the balance of risks was on the upside. There is now evidence that domestic demand growth is moderating, as it must do, and that the labour market is tightening more slowly than before. On top of that, as we said in our press notice last Thursday (announcing that we had not changed interest rates) we recognise “that deterioration in the international economy could increase the risks of inflation falling below the target”. That is still not the most likely outcome in the eyes of most of us; and, given the real world uncertainties, we cannot anyway sensibly tie our hands. But there is no doubt in my mind that recent international developments have at least reduced the likelihood that we will need to tighten policy further.

    I am grateful for your attention. Thank you.

  • David Gauke – 2015 Speech to the ABI biennial conference

    davidgauke

    Below is the text of the speech made by David Gauke, the Financial Secretary to the Treasury, at the ABI Biennial Conference held in London on 3 November 2015.

    Good morning – I’m very pleased to be here with you today.

    UK insurance has a long and proud history, stretching back to the London coffee houses of the 17th century. But there is nothing old-fashioned about today’s industry. It is a great UK strength and an industry we are proud of.

    It is good news for everybody – your shareholders, your customers, and the wider economy – that British insurance is the best in Europe. Our ambition, as a government, is to do our utmost to keep it that way.

    The insurance industry has a dual social role.

    First of all, it is vital in helping businesses and individuals manage risks and plan for the future.

    But it is also a key contributor to national prosperity. You employ 300,000 people. You sell £20 billion a year in exports. In 2014, the industry held £1.9 trillion in invested assets and contributed £29bn to the country’s GDP.

    The past few years have had important developments on both fronts.

    We all remember the floods of 2012 and the winter of 2013-14.

    Flooding is a stark example of the importance of insurance, and I would like to thank the insurance industry and the ABI in particular, for their hard work and commitment to successfully progress Flood Re.

    It is a great example of government and the private sector working closely together. It will ensure available and affordable insurance for those at high flood risk and will make a real difference to people’s lives.

    I am delighted that the regulations introducing Flood Re have now been approved by both Houses in Parliament and that Flood Re will soon be designated. This means that Flood Re will shortly receive its powers and duties. Subject to Prudential Regulation Authority (PRA) approval, it will then have the legal authority to start operating.

    We’ve also had the most fundamental change to how people can access their pension savings in nearly a century. Adapting to these changes has required a great deal of work from the industry, and I have been impressed by the many providers that have stepped up to make these reforms a success.

    Over 200,000 people have taken advantage of the new flexibilities and I’m pleased that already over 90% of customers are being offered flexible options, and that a quarter of the largest providers are planning product launches in the next six months.

    The ABI has found that £5 billion was accessed by savers in the first six months of the freedoms. That represents a major step forward in creating a climate where individuals can take control of their own hard-earned savings, and enhance their retirements as they see fit.

    These are truly historic reforms, and the government will work closely with industry to ensure that they deliver real freedom and choice for consumers.

    We’ve also had major steps forward on the prosperity agenda.

    The Insurance Growth Action Plan tasked UK Trade and Investment to develop target market strategies for China, India, Brazil, Turkey, Indonesia – that is, some of the most rapidly growing markets in the world.

    These strategies were designed to sell the UK insurance markets’ comparative advantage in these emerging markets, and are already helping UK insurers to access those markets.

    Which means more revenue, more jobs, more growth.

    So there’s been no shortage of good news stories. But there are also important challenges ahead.

    Our changing society and our rapidly developing technological landscape means that there is a lot for the industry to adapt to.

    With challenges, of course, come opportunities. UK financial services are nothing if not adaptable – so I know that the industry will adapt to the changing environment, spot new opportunities – and continue growing, and serving their customers.

    So what are the key areas of change – and of opportunity – for the future?

    I would suggest three:

    The first, keeping up with a changing society;

    The second, making the market even more effective;

    And the third, staying competitive in the global race.

    Pensions are a vital part of the insurance industry. And it’s no secret that, as our society enjoys ever-greater longevity, the pensions system will require a new approach.

    We have two principles here:

    First, that people who have spent their working lives saving money into their pension pots should have the freedom to decide how to spend that money.

    And second, that pension products should meet the needs of different types of pensioners;

    The government’s policies are transforming retirement savings for the long-term, from top to bottom. The pension freedoms we have introduced mark an unprecedented shift of power, away from government and industry, and towards the consumer.

    Good progress has been made to date. But it is important that industry continues to innovate, and introduce new products that are tailored to consumers’ changing needs.

    In light of the recent reforms, this is a great time for the industry to reflect and consider what it can do to provide a better service and encourage more people to think about saving for retirement.

    Now that customers have more choices, they will also want more advice. And it is clear that new and emerging technologies have an important role to play here.

    New digital models to provide high-tech, low-cost, user-friendly advice are emerging in the industry all the time. These new technologies could have a significant role to play in meeting customers’ needs around financial advice.

    The Financial Advice Market Review, launched in August, is considering the opportunities and challenges presented by such technologies to provide cost-effective advice services. In particular, the review seeks to understand how the regulatory environment can support technology-based advice models. The review will report back at Budget 2016 and I would encourage all of you to engage with it.

    Looking to the future, the pensions tax consultation was an opportunity for insurers to take stock and consider how the industry can adapt and provide a better service

    It’s been really positive to see the ABI, who have been a key stakeholder, working closely with government to ensure pension provisions are improved.

    The consultation closed at the end of September, and we’ve already picked up on some of the key themes:

    1. the need for more effective communication around the importance of saving for a pension;
    2. the significance of having a stable system;
    3. the need for consistency in the system to tackle perceptions of unfairness.

    The ABI will be a great support to us in developing our policy over the coming months, and we look forward to working with them.

    But, of course, it’s not all about pensions. And the second area I’d like to touch on today – making the market even more effective – touches on all aspects of the insurance industry.

    Effectiveness comes from security.

    Insurance fraud is a significant problem, which comes at a great cost to consumers and industry. It’s a particular issue with motor insurance – and the government has taken a number of steps to tackle this problem.

    Earlier this year, the government set up the Insurance Fraud Taskforce. The group, made up of consumer and industry representatives, has been asked to investigate the causes of fraudulent behaviour and recommend solutions to reduce the level of insurance fraud. We hope to achieve a set of robust and ambitious proposals by the end of the year, ultimately aimed at reducing the cost of insurance fraud for consumers.

    We have also set up MedCo, which became operational in April 2015. It will facilitate the independent sourcing of medical reports in soft tissue injury claims, helping tackle fraudulent and unnecessary whiplash claims. And we’re reviewing the MedCo Portal, to make sure it’s meeting its objectives and tackle teething problems.

    Effectiveness also comes from making the most of new technology.

    I’ve already touched on how automated advice systems can help provide low-cost but high-quality advice on pensions.

    But there’s much more it can do. Financial technology helps the customer and – as a driver of innovation – it helps the industry’s competitiveness.

    That’s why we’re pulling out all the stops to foster the best investment environment, the right tax system, the appropriate regulatory framework and the best infrastructure for Fintech companies to flourish across the UK.

    We now have a “Special Envoy for Fintech” in the shape of Eileen Burbidge, whose role will be to promote the UK as a global Fintech hub and help develop our strategy.

    We’re launching an international benchmarking exercise to look at how we perform compared to other countries.

    And we’re working closely with the regulators to explore how we allow innovators to experiment with novel ideas early on, without having to worry about getting regulatory authorisation.

    It’s an exciting, rapidly growing area – so I look forward to your ideas on how we can make the most of it.

    To make the market work more efficiently, we also need to take action on tax measures where appropriate.

    I know, for instance, that concerns have been raised by several UK insurers that misuse of the EU status of Gibraltar by other UK insurers to avoid VAT was impacting on their ability to compete fairly.

    So at the Summer Budget we took action, and changed the VAT rules so that the supply of these insurance repairs services is deemed to be where the service is used and enjoyed – i.e. in the UK. The measure will level the playing field and deter possible expansion of this avoidance.

    And while we’re on the subject of tax, I would like to say a few words about the insurance premium tax – IPT for short.

    As you know, the UK standard rate of IPT remains lower than many other EU states, including Germany where the standard rate is 19%.

    As part of the Summer Budget, it was announced that the standard rate would be increased from 6% to 9.5% as of 1st November.

    We recognise the challenges insurance businesses have faced in implementing the IPT rate change this summer. I can assure you that HMT officials are in close communication with industry representatives, to see whether the HMG/ABI agreement on amending the rate needs to be reviewed.

    In addition, as part of a major exercise in digitalising the UK tax system, we are making operational changes to make it easier for insurers to submit their IPT returns.

    We would like to thank you for the cooperation we’ve had so far and hope that you will agree that the government’s work on e.g. tackling insurance fraud and VAT tax avoidance will help keep premiums down in the long run.

    The third area which I would like to talk about today is global competitiveness.

    We have made real progress in showcasing what we have to offer internationally. Already, we’re reaping the rewards.

    But we also have to be constantly on the lookout for opportunities to keep us one step ahead. And where we risk falling behind, we need to act.

    One such area is alternative risk transfer.

    Through Insurance Linked Securities (ILS), new ways have been found to share insurance risk with capital markets. ILS has helped to increase the capacity of the reinsurance sector, particularly for specialist or extreme types of risk, and investors have benefited from high performing assets which diversify portfolios.

    This is now a $60 billion market and growing fast. ILS looks here to stay.

    But crucially, the UK does not currently have the right framework to support the growth of ILS in the London market. So there is the risk that the expertise which ILS business requires could be drawn elsewhere.

    That is why the Chancellor announced in the March Budget that Treasury and the UK regulators, working closely with the London market, would design a regulatory and tax framework to support the domicile of ILS business in the UK.

    And as well as constantly refocusing ourselves, we also have to ensure we remain competitive within Europe.

    Europe, at its best, can bring good benefits. Put simply, our insurance firms tend to do very well in Europe.

    Our industry’s use of technology and experience of online sales gives us an edge in European markets where a large number of UK insurers already operate. And our continued role in the EU has helped us influence regulation to protect UK interests, such as the long-term guarantees package in Solvency 2.

    A few weeks ago, the commission launched its action plan for Capital Markets Union (CMU), a flagship project for the new commission. Its primary objective is to create deeper and more integrated capital markets in the EU, by breaking down the barriers to the free movement of capital.

    The action plan recognises that Europe requires significant long-term investment in assets such as infrastructure. Insurers, who often have long term liabilities, are the largest institutional investors in Europe and natural investors in such assets.

    So the CMU is good news for insurers, good news for the City, and good news for the UK.

    Having said that, there is a balance to be struck between regulation and competitiveness.

    We have been supportive of Solvency 2, for example, as it represents a major improvement on the patchwork of European insurance legislation under the previous Solvency 1.

    Solvency 2 is the global gold standard in insurance regulation and will bring opportunities for UK firms to expand to new markets, to innovate and to provide new products.

    We firmly believe Solvency 2 will help support financial stability across the financial system, while securing insurers’ central role as a stable, long term provider of finance through the “matching adjustment”.

    We recognise Solvency 2 will need time to bed in, and we will be monitoring its impact closely. In particular, we have pressed for consistent and proportionate implementation to ensure a level playing field across Europe. We will also be keeping a close eye on how Solvency 2 affects the competitiveness of UK firms outside the EU.

    So as can be seen, it’s been a busy time for the industry!

    But, I hope, also an exciting time.

    As the UK economy continues to go from strength to strength – and just last week, we had the news that we are now the top G7 country in terms of the ease of doing business – that will create fresh opportunities for UK businesses.

    We look forward to working with you to make the most of those opportunities.

    No doubt, there are challenges ahead; but I firmly believe that with a savvy approach and a flexible outlook, the UK insurance industry can continue to be a world leader for many years to come.

    Thank you.

  • David Gauke – 2013 Speech on Social Investment Tax Relief

    davidgauke

    Below is the text of the speech made by the Exchequer Secretary to the Treasury, David Gauke, on 22nd October 2013 and was held at the Livery Hall at the Guildhall in London.

    I’m very pleased to be here this morning, in such a historic venue.

    In fact, as something of an amateur historian, when I was given the rather grand job title of Exchequer Secretary to Her Majesty’s Treasury three and a half years ago, I thought it would be a good idea to investigate its history.

    And – after an extensive trawl through the internet archives – I discovered that the title of Exchequer Secretary to the Treasury dates all the way back to the mid-1990s!

    In that context – when I was looking at the history of the term social enterprise – I was not surprised that it predated the title, Exchequer Secretary to the Treasury, but not by as much as I might have thought. It was first coined as recently as 35 years ago, at Beechwood College in Leeds.

    Of course the concept of a social enterprise dates back much further. Whether that be the John Lewis Group in the early 20th century… The Co-operative Group in the 19th century…

    Or going back even further, The Bridge House Estates; which was founded a stone’s throw from here in 1282, to maintain bridges over the River Thames.

    The government recognises the crucial role that such groups have played, and will always play in our economy.

    And we recognise the important role it currently plays. The social enterprise sector – in fact – employs more than 2 million people, and the total annual incomes from the sector are estimated at over £160 billion per year.

    So not only are these organisations good for thousands of communities up and down the country. They also play a key role in driving the UK economy.

    As such, we want to give social enterprise groups the support they need.

    Social Investment Market

    One of the recurring issues that we know these organisations face is access to finance. And without access to capital it can be a real struggle to scale-up, to grow or even to become self-sustaining.

    For this reason the government – led by the work of Nick Hurd – is committed to growing the social investment market.

    And as part of this work, we’ve launched a number of initiatives focusing on all parts of growing this market, including:

    – the supply of finance

    – the demand for finance

    – creating an ‘enabling environment’ for social investment

    So we’ve worked hard to ensure that we’ve got the right regulation in place to support the sector.

    And we’ve also established a number of publically-backed funds to directly support social enterprises in the UK.

    But we know that there remains one massively under-represented type of investor in this market – and that’s the type of investor I want to spend the rest of my time focussing on today. The private, individual investor.

    Individual investor

    Some services to cater for this type of investor are emerging. But we know that there is a further appetite out there, and we need to find a way to tap into it.

    A Cabinet Office paper published in the summer stated that fewer than 16% of High Net Worth Individuals currently have investments with ethical, social or community benefits. Yet 77% of potential pension contributors said they would prefer to contribute to a social investment fund than to a conventional fund for their pension. And 36% said they would choose social investment even when it involves a significant trade-off with financial return.

    So we needed to find a way to tap into this enthusiasm. And I know from my day to day role – my more readily understood, but somewhat less glamorous job title is Minister for Tax – that tax levels and reliefs can be a key lever for encouraging certain behaviour.

    It was with this in mind, and this type of investor in mind, that at this March’s budget, we committed to introducing a tax relief for social investment.

    Social investment tax relief

    That tax relief, the matter-of-factly titled ‘social investment tax relief’ is currently being designed by my officials at the Treasury.

    We consulted on it over the summer and I’d like to thank everyone here that contributed.

    We now plan to introduce the relief by early next summer, through the 2014 Finance Bill.

    In the consultation document we outlined that the relief would:

    Firstly, offer individuals income tax relief – as a proportion of the amount invested – for investment into qualifying social enterprises.

    Secondly, allow social enterprises to receive up to £150,000 in investment through the scheme in any 3 year period.

    Thirdly, offer relief on investment instruments other than equity.

    Fourth, focus on allowing established forms of social enterprise – Community Interest companies, community benefit societies and charities – to benefit from the relief.

    And fifth: allow for investments via a ‘nominee’ – to cater for those individuals who do not want to make investment decisions personally and would prefer to make use of professional expertise.

    I appreciate that there are a lot more details to be ironed out, but we will be publishing our draft legislation on this in December, and I strongly urge you to explore some of the detail then.

    Enterprise Investment Scheme

    Now, some of you may have noticed something familiar in the form of this relief. And this is neither coincidence nor plagiarism.

    The model of the scheme takes inspiration from the successful and long-standing Enterprise Investment Scheme, or EIS.

    A scheme which will not only be well understood by many investors, and thus easy for them to figure out and operate in.

    It is also a scheme which is very successful at achieving its aims. In fact, since its establishment in 1994, it has brought over £8.7 billion of equity investment into nearly 20 000 small, UK companies.

    This shows the impact that a well-targeted tax intervention can have on motivating private investment into specific areas of the economy, and it is a success that we want our relief to emulate.

    Wealth advice community

    So that is how we plan for the social investment tax relief to look.

    But – as many of you will know – announcing a tax relief is only half the story. We need people to know about it. And we need people to know how to use it. And that is why the wealth management sector –many representatives of which are in this room today – will have such an important role to play in all this.

    You are at the forefront of delivering financial advice to the public. You’re the ones they turn to when they want to know where they can invest most safely, or most profitably, or most ethically. So you can play a crucial role in enabling investors to understand and to make use of this scheme.

    And networks such as this one – the Social Investment Academy – have a crucial role to play too, in bringing together people from across the advisory community. And in spreading news of the scheme.

    I understand that this is only your second meeting as a group? So I’m very grateful to have had the opportunity to speak to you so early in your existence.

    And I’m sure that either myself, or a member of my Treasury team will be very happy to attend another of these events closer to the implementation of the tax – when we have greater detail on its exact workings – to explain things in more detail.

    We want to see – as I’m sure do many people in the room – a strong social investment market here in the UK.

    And – as government – we’re doing the best we can to support it – through our actions on both regulation and on taxation.

    We hope that you – as wealth advisors – will be able to help us spread the word, and to build the strength of the market here.

    And I’ll look forward to working with you as you do so.

    Thanks for listening.

  • David Gauke – 2013 Speech on Tax Competitiveness

    davidgauke

    Below is the text of the speech made by the Exchequer Secretary, David Gauke, on 28th February 2013.

    I was very pleased to be invited to speak at this event, which I know forms part of Politeia’s Recovery and Growth economic series.

    ‘Recovery and growth’ are, of course, two of the biggest challenges facing the UK. And as a Government, as a country, we cannot afford to be complacent about our economic position in the world.

    We are in a global race. This race pits us against a number of existing and new competitors and, like any competition, there will be winners and there will be losers. There will be countries that continue to move towards ever greater prosperity, and there will be countries that see their economic outlook, and in turn their standard of living, decline.

    As Government, it’s our role to do what we can to ensure that the UK falls into the former category. That our economy is stable once again, and that our businesses have the right environment to compete in the 21st century. Some factors in achieving this are beyond our control. The economic circumstances we inherited. Commodity prices. The Eurozone crisis.

    But other factors are within our control and, within the strict fiscal constraints in which we have to operate, we have to make sure that we pull all the levers available to us to achieve growth. This is why we are reducing burdensome regulation – reforming planning and employment law, modernising our infrastructure, improving our education system, increasing apprenticeships and reforming welfare.

    But one of the biggest levers we have access to, and the lever that I would like to talk about today, is tax.

    I know that this Government’s tax policy has been at the centre of some very lively debate, and this is a debate that we welcome. Allister has played a very large role in this debate, and it is absolutely right that organisations like Politeia and the Taxpayers Alliance have joined the discussion too, and made calls for radical reforms. I welcome a debate not only on how much we tax but what we tax.

    But what I want to do this evening is take head-on the critique that this Government has failed to make significant supply-side reforms to our tax system and, in particular, our corporation tax system. I will make the case that this Government, when compared to both its international competitors, and its historic predecessors, has embarked on some radical tax reform in challenging circumstances.

    We inherited the largest deficit since the Second World War, but the Government is taking decisive action to return the public finances to a sustainable path. Spending cuts will constitute 79 per cent of the total fiscal consolidation by 2015/16. Total spending, as a proportion of GDP, is forecast to fall from 47.4 per cent in 2009-10 to 40.9 per cent in 2016-17. Nonetheless, we operate in an environment where a competitive and efficient tax system is essential, but with limited flexibility in the public finances.

    So how have we responded? Put simply, this Government wants to establish the most competitive tax system in the G20. Not only to attract businesses here, but also to help the enterprise that already exists on these shores.

    We set out our plans in the Corporate Tax Roadmap, and have worked hard, together with business, to introduce a substantial package of corporate tax reforms to make the UK more attractive as a place to invest.

    We have cut corporation tax from an inherited rate of 28%, to 23% from this April, and then 21% from April 2014. We have reformed the Controlled Foreign Companies tax regime, which is seeing organisations move their head offices to, rather than away from, the UK. We are introducing the patent box and making our R&D tax credit regime more generous; ensuring that the UK is an attractive place to invest for innovation. And we have increased the rate of VAT, as taxing consumption is much less damaging to businesses than taxing employment or profit.

    We’ve managed to deliver all these changes in a time of austerity, and I know that other countries have been envious of what we’ve managed to achieve.

    My focus this evening is on business tax, but we cannot ignore personal tax. The top rate of 50 per cent, as inherited from Labour, was one of the highest in the developed world. It was supposedly implemented to raise greater revenue and address the country’s deficit, but ended up having the opposite effect.

    It only served to discourage talented individuals from working in the UK, it raised little (if anything) in revenue and – most worryingly – it sent a signal to businesses and entrepreneurs (the exact people that could bring jobs and growth and revenue to our country) that Britain was not open for business.  And that is why this April we will be reducing that rate to 45p – a level which is lower than Japan, Germany, Canada and Australia.

    This was a politically brave move, it isn’t one that will make us popular with some people, but I am certain it sends the right message to high earning individuals and strengthens our prospects for growth.

    A better tax environment for business leaders and for businesses though, isn’t just about the policies we introduce. It’s about making sure that we engage with the sector when making these policies, and that we give them advanced warning of any major changes.

    This is why, for example, we published the majority of Finance Bill clauses in draft, for greater scrutiny, at least 3 months before introduction of the Bill. Businesses welcomed this opportunity to engage as early as possible, and this has resulted in better quality tax law. We will continue that engagement. In fact, this greater level of engagement has proven beneficial with regards to collecting taxes too.

    The complexity of many large companies’ tax cases, and the large amounts involved, make engagement the most cost-effective way to improve tax compliance and support businesses at the same time. So for the largest two thousand corporations in the UK, we now have dedicated HMRC customer relationship managers.

    This strategy has been very successful. By supporting the organisations and ensuring rigorous compliance they garnered positive feedback from business, while also helping HMRC to maximise revenues by recovering the right amount of tax.

    But HMRC can only collect the tax that is due under the law. And the law in this area is not simply a domestic matter. As with most major economies, the tax system in the UK is consistent with internationally agreed OECD guidelines.

    There are international concerns over whether the current corporate tax rules manage to properly capture the profits generated by multinational companies in the jurisdictions where their economic activity is located. And it’s understandable that not only citizens, but the vast majority of businesses will feel aggrieved if some companies aren’t seen to be paying their fair share of tax.

    This is a complex area, but any reform will require concerted international action. It is an issue that all countries are facing, and politicians will continue to work with each other to develop the appropriate international solutions.

    We are also working hard to simplify the tax system on our shores. We established the Office of Tax Simplification – or OTS – in 2010 to provide independent advice on simplifying the UK tax system, and we have implemented a number of their recommendations.

    But let me address one argument that is sometimes made – that ‘if only we simplified the tax system, we wouldn’t see the avoidance that has featured so prominently in recent months’. There is an element of truth in this. Complexity can provide the opportunity for avoidance.

    But it is also the case that complex behaviour can take advantage of simplicity in the tax system. Many of the high profile cases that have attracted media attention have had little to do with complexity within our tax system.

    I believe we have to look at the complex interaction between the tax systems of different countries and an international tax architecture that has not kept pace with the complex modern global business environment. In other cases, relatively simple tax rules have been exploited by complex and contrived behaviour. To paraphrase Einstein, a tax system has to be as simple as possible. But no simpler.

    This has been something of a whistle stop tour through this Government’s actions on tax, but hopefully it provides some kind of overview of the large number of actions we’ve taken, and changes we’ve implemented, to reduce the tax burden on businesses. I believe that these have been radical reforms. And I’d like to spend the last few moments explaining why, by comparing the actions that this Government has taken against those of both our international competitors, and our political predecessors.

    With regards to international comparisons, I believe that our approach has been vindicated, and that the UK is increasingly becoming known as a competitive nation for investment. We have a considerably more competitive CT rate than the US at 40%, France at 33.33% and Germany at 29%.

    But perhaps most striking was the recent survey by KPMG, asking tax professionals to rate the three countries they rated as most attractive from a tax perspective. In 2009, the UK featured in only 16% of responses. By 2012, this number had increased to 72%. In three years, we had moved from being an also-ran to the number 1 spot as the most competitive tax regime in the world, ahead of the Netherlands in second and Ireland in third.

    The report stated that a low effective tax rate remains the number one tax factor when assessing the competitiveness of a country’s tax system, but that stability, simplicity and advanced warning of major changes are also of high importance. These are all factors this Government has worked hard to enhance, and the report is a reflection of the way this Government has rebalanced our tax regime from being a business hindrance to a business facilitator.

    So when some complain that we have not taken the radical steps necessary to make our tax system competitive, I would say – ask the people who deal with the tax system for a living, who deal with different tax jurisdictions on a day to day basis. KPMG did just that.  And the answer is clear – and positive.

    Closer to home though, let us compare the radicalism of the current Government, in terms of cutting business taxes, with the Governments of Mrs Thatcher. Like many in this room, I look back with admiration to a Government that came to power at a time when the country faced severe economic difficulties. Our borrowing high, our competitiveness in decline, the Thatcher Government pursued a number of radical reforms which transformed our country for the better.

    But in terms of tax reform, how do we compare?

    A comparison with the first Thatcher Government – with Sir Geoffrey Howe as Chancellor – draws up some interesting parallels. Both Governments have to be described as tax reformers, as opposed to tax cutters. The deficit in 1979 was 4.1% of GDP, lower than the 11.2% we inherited but, like the current Government, Sir Geoffrey’s focus was on reducing borrowing. For example, the overall tax burden was sharply increased in the 1981 Budget, in the teeth of a recession. However, within the constraints in place, both Governments have engaged in tax reform. Both Governments increased VAT and cut income tax, predominantly by raising the personal allowance.

    Turning to business tax, in the early ‘80s, further revenue was found from the Petroleum Revenue Tax and a windfall tax on bank deposits. A comparison can be made with higher taxes on North Sea Oil and the Bank Levy. But if we ignore all those taxes, we see that only minor changes were made in business taxes. In current prices, the value of the net change in the corporation tax burden was less than £1bn per year.

    In contrast, the total fiscal impact of changes to the corporation tax regime introduced by George Osborne, excluding the North Sea, amount to a reduction of around £7 billion per year by 2015/16.

    The current Government’s record also stands comparison to the second Thatcher Government from 1983 to 1987. With the advantages of benign economic conditions (a just reward for the courage shown in the first term), a huge Parliamentary majority and a Chancellor – Nigel Lawson – with a close interest in tax reform, this Government has a deserved reputation for radicalism in this area.

    The 1984 Budget saw the announcement of substantial reductions in the corporation tax rate, from 52% to 35%. However, it should be remembered that this was funded by making capital allowances and other reliefs less generous. That is not to say that the reforms were wrong – they were not, they have stood the test of time and future Governments followed in this direction. But this meant that the net corporation tax burden was reduced by less than £1bn per year in today’s prices for the 1983 to 1987 Parliament, as with the preceding Parliament.

    This once again shows the radicalism of this Government’s equivalent reduction by £7billion a year by the end of this Parliament.

    It is true, of course, that different times require different responses. Capital is more mobile now than it was in the 1980s. Consequently, competition is greater and Governments have to work harder to attract investment than was once the case. Nonetheless, it is clear that not just in international terms but also in historical terms, this Government has delivered substantial tax reforms, making our tax system much more competitive.

    But this is not to suggest that we will become complacent, nor that we think our work is done. The nature of a global race is that one cannot be static. But with regards to tax reform, I believe that we have made strong progress towards our goal of the most competitive tax system in the G20.

    That we are creating a simpler, competitive, well-enforced tax structure, which will help businesses to help the country back into economic prosperity. That we are putting in place the conditions for recovery and growth.

    Thank you.

  • David Gauke – 2012 Speech on Taxation

    davidgauke

    Below is the text of the speech made by David Gauke, the then Exchequer to the Treasury, on 5th October 2012.

    Introduction

    I was delighted to receive an invitation to make the keynote speech here today, at this – CIPP’s Annual Payroll and Pensions Conference and Exhibition.  Celtic Manor played host to one of the great European Ryder Cup triumphs in 2010. And given Sunday evening’s extraordinary efforts over the USA in Medinah, it seems apt to be here. Excitement, drama, triumph and despair – and unlikely comebacks. We all knew dealing with the tax system can be like that – but now we know that those words can apply to golf too.

    It is also apt that I give this speech at CIPP’s annual conference.  I have enjoyed very constructive engagement with CIPP, both during my time in opposition and in government, across both policy and operational matters.

    And I am pleased to be able to draw attention to an excellent new CIPP initiative here today. Next week CIPP will announce their new national apprenticeship initiative, in conjunction with the Department for Business, Innovation and Skills. The scheme will create up to 600 skilled jobs helping to address the lack of trained resource in financial administration in small and medium sized enterprises.  I see this as an excellent example of how short-term Government seed-corn investment, alongside business, can lever a sustained increase in employer investment in skills, to ultimately support growth.

    Before turning to the key matters I want to address, forgive me if I take you back to when I first started work for a major City law firm, as a trainee solicitor in 1995.  Fee earners did not have their own computers.  Communication was through letter, fax or occasionally telex. If you needed to be contacted when out of the office, you could book out the firm’s mobile telephone.

    I raise these points not as a nostalgic look back at a more peaceful age, but to highlight how much the world has changed in the last 18 years. Despite the Treasury’s well documented tight-fistedness, I not only have access to the internet, but I don’t need to dial in for it.

    But until fairly recently, the world of tax was behind the times. In 2005, most of us were already paying our utilities online, but three quarters of those filling in self assessment forms did so by post.

    While my search engine seems to know to offer me discounted tickets to see Ipswich Town FC play at home – we have until recently failed to make use of the technology available to make life as easy as possible for taxpayers.

    Of course paying tax is rarely going to be as popular an exercise as buying football tickets – even for an Ipswich match. But in many ways, that makes it even more important to make the process as painless as possible.

    Regardless of our opinion on tax, it affects us all and is intensely personal. But much of our experience is framed by the method and manner in which it is collected.

    And I believe the extent to which technology can improve that process is limited only by our imagination and initiative.

    So I want to talk to you today about how we are using technology to improve the taxpayer experience.

    To reduce burdens on households and businesses; to improve transparency; to allow taxpayers to take responsibility for their tax affairs; to help HMRC exercise a fair and efficient approach to tax administration, and to help the public hold government to account for the way it raises and spends their money.

    Modernising PAYE

    To modernise the tax system has been our goal since my party was in opposition. In my role as a Shadow Treasury minister, I was struck by how cumbersome the Pay as You Earn system was.  David Freud, advising us on welfare reform, was concerned that in order to move to a universal credit system, we needed earnings information in real time.  So for some time, we worked together to find a way to reform radically how PAYE worked.

    Since coming into office, we have already made substantial progress to improve the personal tax system, and in particular PAYE, which for too long had been neglected.

    HMRC’s new computer system holds all a customer’s PAYE records in one place, for all their employments and pensions. That new system is now delivering much better accuracy and efficiency.

    It allows HMRC, for the first time, to see the full tax position of callers to their contact centres as soon as they get in touch – helping HMRC provide a better service.

    Through using the new technology, great progress has been made clearing old backlogs – HMRC are over 97 per cent through the legacy cases (those prior to 2007-08) and will clear these by December this year.  They are aiming to be completely up to date on later tax years (2008-09 to 2011-12) by April – ready to start 2013/14 with PAYE in the best shape for many years.

    RTI

    And we are making further investment in Real Time Information – a system that will bring PAYE into the 21st century by allowing HMRC to receive information on employees’ earnings, tax, and National Insurance Contributions as they are paid, rather than at the end of the year.

    RTI is the single biggest innovation in the administration of the tax system since PAYE was brought in after the Second World War.

    It will make it easier for employers to administer PAYE and will make tax more accurate.

    RTI integrates PAYE reporting with normal business practices; enables employers to provide information more frequently; in time it will let more issues be resolved in-year; and makes it is easier to adjust when employees leave or join within the tax year. The majority of the pilot employers questioned expect a reduced burden when end of year is taken into account. And they have told HMRC they see clear advantages in increased accuracy and simplicity – especially around starters and leavers.

    And I’m pleased to say CIPP have also been hard at work making the lives of employers easier.  Their new Payroll Assurance Scheme should help employers ensure their payroll returns are accurate and complete. I wholeheartedly welcome initiatives of this kind in supporting employers, and by extension HMRC, in the payroll process.

    In steady state, we expect our new RTI system to save employers around £300 million net per year in admin costs alone. And we also expect reductions in tax credit error and fraud of £300m.

    As a consequence the system is expected to pay for itself within a year.

    RTI will also provide a key building block for our reform of the welfare system – which will make sure that work always pays, and is seen to pay.

    It will ensure DWP have up-to-date information about employment and pension income, so that Universal Credit awards can be assessed dynamically, without people needing to send information about their pension or employment income.

    DWP and HMRC have been working closely to make sure the two projects are appropriately joined up. And that the necessary technology to support RTI for Universal Credit will be in place this month – ready for DWP to use from October 2013.

    As you will know, we’ve been piloting the RTI scheme since April, and a couple of months ago I travelled to Solihull to make CIPP’s first RTI submission as they joined.

    That provided an excellent photo opportunity of the back of my head as I clicked a mouse button – not quite awarding medals at the Paralympics, but at least I got a small cheer….

    From next month, large employers will be able to join the RTI pilot or expand existing involvement, and I would encourage all who have not signed up to investigate the requirements and consider joining as soon as possible – the benefit of doing so cannot be overstated.

    From the start of our pilot in April, with just 10 employers, we now have over 1600 PAYE schemes in the pilot – exceeding the target for September by over 15 per cent, and with over 1.9 million individual records sent through the system.

    And I am pleased I can say that we have received strikingly positive feedback from the pilot employers. It’s not always the case that the words ‘very easy’ are used to describe an HMRC initiative. And it’s even less often that a tax administration reform is described as ‘pretty cool’ – to quote one Twitter user…

    But this reflects the work they have been doing with stakeholders and customers – to ensure that RTI works for them.

    The achievement is all the more encouraging given the additional impressive work on data quality taking place, which will ensure HMRC sustains the success as the pilot scales up.

    Most employers will begin reporting PAYE in real time in April 2013. All employers will be routinely reporting PAYE in real time by October 2013, in time for the introduction of Universal Credit.

    Modernising the personal tax system

    But this is only a start of our reforms to bring the Personal Tax system into the 21st Century.

    In November last year, HMRC published two discussion documents that took our vision further. They presented our plans for the future, and gave a taste of our ambition.

    They spelled out our ambition – to deliver a personal tax system that is more transparent and easier to use for the individual taxpayer.

    We want to increase awareness and accountability, making it easier for individuals to know what they have paid, what their overall tax rate is, how it has been calculated and when and why they should interact with HMRC.

    While this will not happen overnight, we have started the debate. And we want to engage with individual tax payers to understand whether, what, and how they want to see information on their tax affairs.

    Tax transparency

    For many, the details of tax are difficult to understand, detached from everyday life, a black box of rates, thresholds and reliefs.

    They trust their employers and PAYE to get it right for them, and do not understand the system’s limitations and what can go wrong.

    It is little wonder that taxpayers find it difficult to work out exactly how much of every pound they earn they get to keep.

    The fact that tax is necessary – to support critical public services – should not give Governments carte blanche to take as much as they can get away with.

    Governments need to be accountable for what they raise, how they raise it, and how it is spent. And for that to happen, people need to be in a position to understand what they pay and why.

    If I were to summarise Government’s vision for tax it would be transparency, simplicity and efficiency.

    And in order to deliver that, I have been clear that I want nothing less than to transform the UK Personal Tax system fundamentally to deliver a better experience, and a more transparent approach for the taxpaying public.

    Examples of recent achievements

    Other countries are already taking decisive steps to help their citizens engage in their tax affairs. And the evidence shows that allowing customers to view and transact with their own tax leads to greater awareness and understanding.

    One idea would be for full online personal tax accounts.

    Accounts that would allow those who pay tax via PAYE to access their records online, as is already the case for those who declare liabilities through the self assessment process;

    That would allow people easily to check and alter their address details at the click of a button;

    That would allow HMRC to correspond with millions of taxpayers at minimal cost through a mailbox system;

    That would allow people to manage their tax themselves; see their tax rates; and see how those compare to previous years;

    And that would allow employers to do the same.

    Ultimately, you could access your online account through your phone – “Putting tax back into your pocket” so to speak…

    My gas company has been doing this for years –  and perhaps it’s time for HMRC to be in the same position.

    Personal tax accounts could be something for the future.  A lot of thinking would be needed on how they might best work for the taxpayer.  But in the meantime, we have already taken steps to improve transparency.

    At Budget this last year we announced that HMRC would introduce a personal tax calculator by April 2012 so that individuals can work out how much tax and NI they may expect to pay, and what their effective tax rate is.

    That has been delivered and the mobile app version was downloaded 34,668 times in the first 24 hours, and now has around 220,000 downloads – the Guardian made it ‘app of the week’ and it was the second most downloaded free app in Apple’s online iTunes store.

    At the last Budget, we announced we would take this further – with tax statements for 20 million customers every year from 2014/15.

    But as well as informing individuals on their tax affairs, it will also make it easier to provide up to date information to HMRC.

    Helping increase accuracy, reduce burdens on business, prevent fraud and error, and reduce costs to the Exchequer.

    We’re also doing work to help out business.  Our new online ‘Business Tax Dashboard’ for example allows businesses to see how much tax they have already paid and how much they still owe.  Just one of a number of measures that has led to reduced admin burdens for business up and down the UK.

    And these are just some of the ideas we’ve had.  I want businesses, individuals, and representative bodies like CIPP to come forward with how we can improve tax transparency further.

    Tax/NICs integration

    Part of that process involves removing misleading elements of the tax system. While the headline standard rate of tax declined between 1980 and 2010, the level of direct personal tax has remained roughly the same. That is because National Insurance – a tax on income, if not strictly speaking income tax – increased.

    Jean Baptiste Colbert, the Minister of Finance under King Louis XIV famously said that ‘The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”

    That certainly seems to have been the approach taken in the recent past, with a persistent policy of keeping tax and National Insurance separate, even though for most intents and purposes, they fall on the same base and go to the same place – the Exchequer. That allowed the previous government to keep headline income tax rates low, despite raising taxes on income.

    But I believe people should know how many feathers have been plucked. That is my motivation for tax transparency, and underpins our approach to Income Tax and NICs integration.

    As many of you are aware, at Budget 2011 we said we would look at  how best to bring together the operation of income tax and National Insurance contributions.

    In doing so, our aim is make the tax system more transparent, and also less burdensome.  Over the past 18 months we have had excellent engagement with organisations such as CIPP to work through the detail. Operational integration is not straightforward, we knew that when we started.  But by working in partnership with organisations such as CIPP we can work through those issues to identify what more we can do to simplify the system for employers and employees. This collaborative approach is essential in such a highly complex area where the potential impacts on employers are significant. It is crucial that major reforms are well thought through rather than rushed.

    We also need to consider the impact on the individual as well as business. As set out in the Government’s 2011 publication, “integrating the operation of income tax and National Insurance: next steps” any reforms that make NICs match income tax structure could mean that a significant number of individuals would end up with a different NICs liability.  Some could pay more and others less. Therefore before proceeding with any reform, it is our responsibility to ensure we have a clear understanding of the number of individuals likely to be affected and how they will be affected.

    I encourage businesses and representative bodies like yours to continue to engage with us on this and other reforms – as I am grateful to you for doing thus far. I hope to be in a position to provide an update on this detailed programme of work shortly.

    Conclusion

    The ideas of this Government – and the ideas that we are taking on board from taxpayers and their representatives – offer to use technology to transform the way that tax operates.

    Ideas that will make it easier for HMRC to keep information up to date and for taxpayers to provide it.

    Ideas that will lead to greater individual understanding of and engagement in their tax affairs.

    Ideas that could make the administration of the personal tax system easier for employers and fairer for individuals.

    Ideas that will increase accuracy, reduce burdens, and cut costs.

    Ideas that will benefit the administration of the tax system, but also taxpayers, and – perhaps most importantly – the debate surrounding what we pay and how we pay it.

    Thank you.

  • David Gauke – 2011 Speech to the Tax Journal Group

    davidgauke

    Below is the text of the speech made by the then Exchequer Secretary to the Treasury, David Gauke, to the Tax Journal Group on 9th November 2011.

    Good afternoon, and thank you for inviting me to speak here today. It’s a pleasure to speak to so many of the leading legal and business executives from the tax industry.

    The businesses that are represented today from the backbone of our economy, and are the driving force for our recovery.

    Your companies and your success are critical to meeting the growth challenge, creating the jobs, driving the investment, and stimulating the innovation that we need.

    But the businesses here today, and the businesses represented on the panels throughout this conference haven’t assumed the position of domestic and global leadership through mere luck. They have done so through enterprise and ambition.

    And it’s the same endeavour that this Government supports to lead us through tough economic times.

    It’s no small challenge. We are still in the midst of an economic crisis that stretches back three years. What was once the worst financial crisis in almost a century, a crisis of private and banking sector debt, has transformed into a crisis of sovereign debt.

    The focus today is on Greece and Italy, but it’s easy to forget that when we came into Government there was much concern about the UK’s fiscal credibility.

    Because we inherited a dire economic situation. The largest peace time deficit the country had ever seen, borrowing one pound for every four that we spent, with Standard & Poor’s putting our AAA rating on negative watch.

    But through the toughest Spending Review in decades, we set out plans to eliminate the structural current budget deficit by 2015.

    It was a plan that meant S&P took us off negative watch. It’s the reason the market continues to back our debt, with gilt yields falling record lows in recent months. When we came to Government our rates were tracking the likes of Spain and Italy. But we managed to break rank, and now we’re tracking the likes of Germany.

    And those low interest rates make a real difference to businesses refinancing debts, and households paying mortgages. An interest rate increase of just one per cent, would take as much as £10bn out of families’ pockets, and would bring unbearable pressure on businesses across the country.

    Fiscal consolidation is not an ideological commitment it is an economic necessity. And as we face continued instability, now is not a time to change tack. We have to stick to the plan and we will.

    But fiscal consolidation begs the fundamental question…where should the burden lie? Spending or taxation?

    In our Spending Review we were clear…the burden would fall on spending. Restoring spending as a share of the economy to a level closer to its historical average.

    All the international evidence and experience suggest that consolidation through spending restraint would be more likely to promote growth.

    Hand in hand with that, we have to ensure that we have a tax system that supports our businesses.

    In today’s globalised economy, tax competitiveness is arguably more important than ever.

    After years of tariff reform, technological advance, and information revolution we are operating in a much more fluid world economy.

    Globalisation and the free movement of capital and labour have created vast new opportunities, and indeed the UK has capitalised on these. And in difficult economic times like these, free and open markets are the most powerful tool that we have for a global recovery.

    But globalisation also brings challenges…where our competitiveness slips, we can very quickly be left behind. And more often than not, business success in the UK has come in spite of rather than because of our tax system.

    In 1997, the UK had the tenth lowest main rate of corporation tax in the EU. But by the time we came to office, we’d slipped to 20th

    According to the World Economic Forum, on an overall measure of competitiveness, in the last decade we slipped from 4th to 12th in the global league table.

    We are committed to reversing the decline that has marred the last decade or so.

    First and foremost that means making our tax system an asset. Making sure that we have a tax system that supports growth and doesn’t stand in its way.

    Our ambition is to create the most competitive tax system in the G20.

    This is a big challenge. But it’s one that we can meet even as other countries rise to the task.

    In fact I was struck by comments by the former Labour Cabinet Minister, James Purnell in an article in the Financial Times only last week. In it he argues that the British state has is ‘good at fixing problems’… Thatcher after the Winter of Discontent, Tony Blair on the health service, and he also lists, the Chancellor George Osborne through the deficit reduction plan.

    Compare our resolve in tackling our deficit with the fiscal deadlock in the US this summer, or the monetary hesitancy in the Eurozone. In James Purnell’s words, not mine, “Britain’s state governs. It’s one of Britain’s real competitive advantages.”

    We are committed to creating a tax system which is competitive and stable will provide business with the confidence to invest and expand over the long term.

    Higher taxes on profits simply make the UK business environment internationally uncompetitive…reducing the returns on, and the incentive to invest…undermining productivity to the detriment of our private sector and our wider society, rich and poor alike.

    That’s why we are reducing the main rate of Corporation Tax by 2014 it will reach 23% – the lowest rate in the G7 and one of the lowest rates in the G20.

    We are resisting the European Commission’s proposals for an EU financial transaction tax. Whilst we support the idea in principle, it can only work if implemented globally. Even the Commission itself estimates that the current proposal could reduce EU GDP by as much as 3.4% of EU GDP, that’s €422 bn. And, as the Chancellor said in Brussels yesterday, the tax will be paid by pensioners not by banks and bankers.

    Furthermore, as a home to many of the world’s biggest Multi-national companies, our approach to tax needs to reflect the realities of dealing with companies stretching around the world and over different jurisdictions.

    A competitive tax system should recognise that fact.

    Central to doing that is a move towards a more territorial system of taxation.

    That is why we have taken steps to reform the taxation of foreign branches, introducing an opt-in exemption from corporate tax for the profits of foreign branches of UK companies.

    And it’s why we are also taking action to improve the Controlled Foreign Company (CFC) rules… rules that have been in place since 1984 and have become outdated.

    The consultation on new CFC regime closed at the end of September and I would like to thank all those who have contributed to the debate that has taken place over the summer. You have given us much to think about and I am grateful for the level of engagement from the industry, including from many of you here today.

    There will be an update on the CFC proposals in the next few weeks, ahead of the publication of draft legislation, and we remain determined to embed a competitive CFC regime.

    However any reform to the tax system has to consider the issue of fairness alongside that of competitiveness.

    Facing the deficit that we do, we have had to make difficult decisions on tax….decisions that at times necessarily involve a trade off with competitiveness. But decisions that nonetheless ensure that we embed a tax system that is fair.

    Firstly, we inherited the 50p rate of tax from the previous Government.

    And we have kept the rate as a demonstration of our commitment to share the burden for reducing the deficit. But we nonetheless understand that higher marginal tax rates are not good for the UK.

    We believe that making this permanent would do lasting damage to the UK’s economy which is why we have repeated that this is only a temporary measure.

    Secondly, the bank levy.

    We believe that it’s right that banks make a full and fair contribution to cutting the deficit, and a fair contribution in respect of the risks they pose to the UK economy.

    It is also intended to encourage banks to move to less risky funding profiles. Encouraging them to look to more stable sources of funding rather than flighty short term funding. Because as we saw in the crisis, a liquidity shock can all too easily turn into a system wide seizure.

    Banks need to be more resilient to those shocks. Look to secure stability for the long term, working with the grain of our wider reform programme, to underpin a sustainable and stable economy.

    But the levy balances that imperative, with our commitment to maintaining the UK’s presence as a leading, global financial services centre.

    In delivering tax policies, there are times where it is necessary to make trade-offs.  There are times when different objectives take us in different directions.

    But I think it was helpful for the Chancellor, in his March Budget, to set out his principles of good taxation for a modern age.  They are that:

    Our taxes should be efficient and support growth.

    They should be certain and predictable.

    They should be simple to understand and easy to comply with.

    And our tax system should be fair, reward work, support aspiration and ask the most from those who can most afford it.

    I have said something about how we have made our tax system more efficient and growth supporting.  And about the need for fairness.

    But let me say a little about certainty and predictability and simplicity.

    Because there are always pressures to add to the complexity of the tax system.  Usually, this is as a consequence of the belief that the tax system should be used not just to raise revenue but also to achieve other policy objectives.

    And, of course, there are times when tax can do just that.  For example, it is legitimate for the tax system to encourage expenditure in research and development.

    We know that there is a market failure that needs to be corrected because firms reinvesting in R&D cannot capture all the benefits that accrue from investment in this area.

    And there is a place for using the tax system so that externalities are incorporated into the cost of a good, for example.

    But there are those that argue that we can go further, that we distinguish between ‘good’ and ‘bad’ business practices and tax them accordingly.

    On examination, this raises many issues.  Some would say that we should favour ‘long term investment’ versus ‘short term speculation’.

    But should the tax system encourage people to hold onto an investment for longer than they want to solely to benefit from a tax break?  That would damage economic efficiency.

    We could see whole business models facing a changed tax regime because of the activities of one or two businesses that attract negative headlines – thus damaging predictability.

    And the history of providing tax breaks to encourage particular types of behaviour has often resulted in avoidance opportunities that have proved to be very expensive.  Which was then followed by complex anti-avoidance provisions.

    There is always a risk that attempts to use the tax system to influence behaviour can result in additional complexity and uncertainty for businesses.

    So, for the avoidance of doubt, it is not the Government’s attention to assess all businesses and divide them into producers and predators.  And then apply different tax rates to them, perhaps with a ‘predator surcharge’.

    Of course, such an approach would place considerable extra demands on HMRC.

    HMRC already faces a substantial and difficult task to effectively protect the tax base, ensuring that businesses and people pay what they owe.

    We want a tax system that supports business, that demonstrates that the UK is open for business, but doesn’t leave the tax base open to exploitation.

    It’s impossible to protect low and competitive rates, if we’re not prepared to protect the tax base.

    This isn’t something that can be achieved through sabre rattling however.

    How companies experience the UK tax system is as important to tax competitiveness as the headline rates that we set.

    It means that our approach to tax collection has to be as intelligent as it is vigilant.

    That’s why I support the work of HMRC’s Large Business Service. And it is why I think it is right than an approach of constructive engagement between HMRC and taxpayers is in the best interest of maximising revenue collection, and expanding business activity in the UK.

    It’s an approach based on cooperation and trust. Trust from Government in business not to engage in aggressive avoidance. And trust from business in Government and HMRC to treat them fairly and work in complete confidence.

    With ever increasing complexity of business affairs, increased cooperation is the only route to efficient and competitive tax systems. It goes hand in hand with the headline reduction in tax rates.

    We’ve come a long way in the last year alone to restore UK competitiveness.

    Indeed, according to the World Economic Forum, for the first time in a decade the UK has moved back into the top 10 in the global competitiveness index.

    But we still have a long way to go, and in difficult economic times it is vital that we work together to understand what more, or indeed what less, our Government can do to boost competitiveness and promote growth.

    I look forward to working with you all in the years to come.