Good afternoon and a very warm welcome to London. I am delighted that Siemens has chosen to host its latest board meeting here in the UK.
I would like to say, very clearly, to all of you here today that Britain is, once again, open for business.
I would also like to emphasise that this Government values the commitment that Siemens has shown to the UK. The company already offers learning and career opportunities to around 17,000 UK employees. It’s a relationship we value enormously, and we want to have a dialogue with you in the months ahead to explore how we can collaborate more closely in the future.
The Coalition has an unwavering commitment to rebuilding and rebalancing Britain’s economy, so we can recover and grow once more.
Business is the dynamo that will power our future prosperity, and fuel the innovation that will underpin our future competitiveness. And that includes innovation in engineering and manufacturing, so we can once again sell our knowledge to the world.
As the events of the past two years have made painfully clear, we must leave behind the over reliance on financial services and support a renewal in modern manufacturing, so we are able to grasp the huge opportunities of the low carbon age. The ideas, skills and innovations of manufacturers will be just as important to our economic future, as the mills and mines were in our past.
But the first priority for the Coalition Government must be to restore confidence in the UK’s finances - and both parties are completely signed up to that. Confidence is the bedrock of growth - without it, investors won’t come here, businesses won’t expand, and individuals won’t learn new skills.
So we have to get to grips with our record budget deficit - running at over 11% of GDP.
That was the Chancellor’s reason for bringing forward tough measures, involving some painful decisions, in his emergency Budget last month. A clear plan to eliminate the structural deficit, by the end of this Parliament, can leave the markets in no doubt that this Government will live within its means.
Of course, it is not just a question of confidence in the UK economy, vital though that is. If we do nothing, by the end of this Parliament we would be spending £70 billion, just on debt interest alone.
Instead, we can invest that money in the infrastructure, skills and innovation that we will need in future.
Rebalancing the economy
Because, alongside balancing the books, we also intend to re-balance the economy. We cannot rely on financial services alone.
That means building our manufacturing knowledge base and investing in growth sectors. It also means helping to raise the status of engineering and manufacturing, and valuing them far more than we have in the past.
The public perceptions of these careers, a hangover from our industrial past, are a world away from today’s exciting reality. Closing that gap will be important if we are to attract the next generation.
We can learn a lot from Germany in this area. The long-term partnerships which all the major German engineering manufacturers have with the schools and universities in their area, play a vital role in inspiring young people and selling careers in engineering to them.
Munich’s Technical University, for example, actually has a facility on the VW-Audi site, and the students get hands-on experience - no wonder the car-maker can famously boast of its ‘Vorsprung durch Technik. It gets the brightest and the very best.
Backing for business
But in all these areas - whether building up the knowledge base, investing in sectors, or developing new talent - Government’s job is not to tinker and meddle in the way companies are run. It’s to create the right environment so businesses can plan and invest with confidence for the long-term.
Nowhere is this more urgent than in the tax system, which has grown increasingly complex and burdensome.
Last month’s emergency Budget set out measures designed to ensure that businesses once again benefit from a simple, more predictable and stable tax system - saving time and compliance costs. We are cutting the main rate of corporation tax from 28% to 24% over four years, so by 2014 this country will have one of the lowest rates of any major Western economy. That has meant we have had to reduce capital allowances to help fund the broader corporation tax cuts.
But it’s important to remember that, by 2014/15, the benefits to manufacturing from the corporation tax cuts will outweigh the changes to allowances by about £250 million. And even after these reforms take effect, more than 90% of businesses will still have all their investment costs covered by the annual investment allowance.
We are also taking swift action to tackle another major barrier to business growth - the unnecessary red tape that emanates from Whitehall. As a former businessman myself, I know how regulation chokes innovation and stifles growth. It’s become a huge problem and we are determined to cut it.
So we are adopting a new ‘one in, one out’ system of control, which means that before a Minister can introduce a new regulation, he must first demonstrate that he has cut the existing burden. In addition, we are conducting a fundamental review of those regulations we inherited which, if they were implemented in full, could cost business another £5 billion.
But, alongside our efforts to cut costs and set companies free from the stranglehold of Government, we are also laying down the policy frameworks that will enable businesses to plan their long-term market strategies. Let me look at two specific areas - energy and skills.
Meeting our commitments to generate more of our energy from renewable and other low-carbon sources, while ensuring the security of our energy supplies, is a crucial issue for this Government.
We have asked the Committee on Climate Change to advise on the level of ambition we should have for increasing the target for generating renewable energy. At the same time, we will facilitate a new generation of nuclear power plants - if they can be built without public subsidy - by ensuring the right planning and regulatory environment to enable the private sector to deliver.
Meeting these challenges will require no less than £200 billion of investment in our energy infrastructure over the next decade, so it’s essential we develop a stable market that will attract key players.
We are committed to introducing a full system of feed-in tariffs in electricity. The details are currently being worked through, but they will be based on the principle of making flat payments to producers for every kilowatt hour [KWh] of renewable energy they generate for the national grid.
We are also maintaining the system of banded Renewables Obligation Certificates. These require licensed suppliers to source a specific, and annually increasing, proportion of their sales from renewable energy sources. The feed-in tariff and the Renewables Obligation are important financial mechanisms for supporting the renewable energy market. But, of course, these measures alone will not stimulate the order of investment that’s required.
That’s why we have pledged to set up a Green Investment Bank. This new facility will bring the right expertise together, to ensure that finance gets to those projects that will develop the commercial solutions needed, to reduce carbon emissions.
Our commitment to the low-carbon economy will ensure businesses of all sizes - from established multinationals like Siemens, to fledgling hi-tech start-ups - can use the UK to establish their niche in the global supply chains that will emerge to feed the demand. It will establish the UK as the principal destination for low carbon investments.
I know we are talking to you about making your next generation wind turbines here in Britain - I very much hope our discussions will have a successful outcome.
We are already supporting technological research in this field. In the past fortnight the Energy Minister Charles Hendry has announced a £5 million grant to Siemens, who are working with partners including UK firm Converteam, to develop a next generation offshore turbine. I hope many more partnerships like this one will flourish.
Now let me turn to skills. Already, in our first few weeks in office, we have redirected £150 million, to create up to 50,000 extra apprenticeships. These apprenticeships are based in the workplace and led by the employer, so young recruits will learn alongside experienced hands.
We will also improve the take-up by students of Science, Technology, Engineering and Maths. That’s why we are going to work with the Technicians Council, set up specifically to help manufacturing develop the skills needed for the future. And we are setting further education colleges free from unnecessary bureaucracy, enabling them to respond directly to the needs of employers and learners, and not the whims of politicians and bureaucrats.
Of course, many companies have their own excellent training programmes and we would encourage more to follow suit. Siemens is doing some inspirational work in this area, particularly at its base in Lincoln. Its advanced apprenticeship scheme and graduate development programme are instrumental in creating a pool of skilled manufacturing staff, not just for the company itself, but right across an area of the country, known for its concentration of engineering companies.
Siemens’ agreement with the University of Lincoln to create the UK’s first purpose-built school of engineering for 20 years is clearly evidence of the company’s commitment to developing a skills pipeline in this country, and is commendable. It should inspire other large engineering firms to emulate your example.
It also demonstrates how cross-border collaboration, in this instance between a world-renowned German engineering company and a British university, can bring benefits to both parties, and to the economies of their respective countries. That’s why the Coalition Government is committed to engagement with our partners in the European Union - and not just on economic matters, but also on the other pressing issues we must tackle together such as climate change.
As I said at the start, Britain is once again open for business. So it’s worth remembering that around half of all UK exports go to other EU countries, and they account for over half of our inward investment. Quite simply, we cannot afford to be anything other than a constructive, outward-looking member of the EU.
We are equally committed to being a good and effective partner for all businesses, whether UK owned and run or a multi-national like Siemens with a strong base here.
And we are absolutely determined to ensure that the UK is one of the best places in the world to do business - so more firms will start up here, locate here and thrive here.
Enterprise, investment and innovation are this nation’s route back to economic health. So we stand ready to work in partnership with every business, and every country, as we strive to get our economy growing once again, to create jobs and secure prosperity in the years ahead.