Building Britain’s recovery
Slowly Britain’s economy is healing. Confidence is seeping back into business. The most recent BDO Optimism Index shows UK business confidence at a 13-month high.
According to the latest PMI figure, levels of production and new business in UK manufacturing are rising at their fastest rates in just over two years. And it’s a similar story in services, with the sector growing faster than at any time since 2011. These signs of recovery in the UK were reflected in the IMF’s increased growth expectations released last week.
It hasn’t been easy. Our road to recovery has been bumpy. We’ve still got a way to go. As part of a global economy, we are never isolated from the economic realities of the rest of the world. But finally, I believe, we’re turning a page on the mess we inherited.
This crisis wasn’t created overnight. The deep imbalances within the UK’s economy, may have come to a head under Labour, but they’d been building up for decades since the Big Bang in the mid-80s.
Yet the previous government’s economic model didn’t do enough to stop them. It relied too heavily on one region: London and the South East, snd too much on one section of the financial services sector, to generate growth and tax revenue. Profits made through either exotic or just plain risky financial products were then recycled elsewhere in Britain to subsidise growth beyond the Watford Gap with a major expansion in public sector jobs used to mask a lack of private sector growth particularly in the North.
That myth of prosperity – a house of cards built on excess government debt, excess private debt and an unbalanced economy, with private debt reaching 450% of GDP at the height of the financial crisis - meant that when the crash came, Britain fell harder and deeper than it should. It left good businesses, across sectors, denied the oxygen of credit. It meant companies going bankrupt and workers losing their jobs.
You don’t recover from a shock like that overnight.
Of course there are some people who believe that in government you can pull a single lever or push a magic button and immediately everything will be fixed. While others argue that if government would only remove itself entirely from the economy a thousand flowers of recovery would bloom.
As an old-fashioned Liberal, I believe it’s about getting the balance right between a government that gets out of the way of businesses to enable them to do what they do best - create jobs and drive growth - and a government that steps in, when needed, to set the rules of the game essential to ensure a sustainable and competitive economy and to support business through access to modern infrastructure and a skilled workforce.
For me that’s partnership: government working with business, to put in place the foundations of a stronger, more balanced British economy and set in motion a genuine and lasting recovery. And together, we’ve already created a million more private sector jobs since the election. There are now more people in employment than ever before. And more of them are in private sector jobs than ever before. A recent report also shows that the growth in vacancies is at a 3 year high.
Every month, I visit a lot of outstanding businesses across the UK. And what the business people I meet tell me is that although conditions are still tough, they’re more optimistic about the future. They have ambitions to grow and they’re starting to invest.
No turning back
And, as the voice for business, you’ve always been straight with us about what government needed to do to rebalance and retool Britain’s economy for greater success and more long-term sustainable growth.
You asked us for a credible plan to tackle the deficit and reduce government debt and you told us to stick to the plan when we made it.
We did: reducing the deficit by a third as a percentage of GDP. And this year, borrowing £49 billion less than the previous government. That is the equivalent of our annual budgets for Defence and Home Office combined.
Believe me it isn’t easy. These are difficult choices to make. But there can be no turning back. We won’t falter in our commitment.
In the past, people may have doubted whether the Liberal Democrats would step up to the line in government. We have. We’ve put the economy before politics. We’ve put our nation before party. Because that is the right thing to do.
The naysayers said it couldn’t be done. That our two parties would fail to achieve what was needed. But across government, we’ve faced up to those tough choices and we’ve taken the big decisions necessary: to achieve £11.5 billion of additional savings in this Spending Review.
Investing in growth
You asked us to achieve those essential savings, whilst also protecting and boosting investments essential to our long-term growth. We did: setting out, for the first time, a long-term Infrastructure Strategy to rebuild and repair Britain’s roads, transport, communication and energy systems so our 21st century economy can flourish.
But most importantly, we’ve been able to back up those commitments: recycling the savings we’re making day to day so we can guarantee £300 billion of capital spending by the end of the decade. £100 billion of this has already been allocated for infrastructure to support. The biggest investment boost to our railways since Victorian times; the most extensive upgrade of our roads since the 1970s; the largest public housing programme of the last 20 years. And plans to extend access to superfast broadband across the country and bring forward a green revolution in the way we power our economy.
This is our partnership with business in action. We understand that to invest, businesses need to be confident and certain about government’s commitment to making these projects happen.
The UK Guarantee scheme gives them that confidence underwriting our belief in the long-term success of British business and the British economy by providing the Treasury financial guarantees necessary to kick-start private investment in major infrastructure projects.
None of these are simple jobs to get started. For example, it’s going to take an estimated investment of £200 billion by 2020 for us to realise Britain’s low-carbon ambitions.
The UK Green Investment Bank, with £3.8 billion of investment support for green projects, sends a powerful message to business: that you can invest with confidence in a greener Britain.
And business is responding. Every pound the Green Investment Bank invests mobilises £3 of private sector funding. It’s kick-starting important projects like the conversion of the Drax Coal Power Station to use bio-mass fuels, the energy impact of which, when completed, will equate to us taking 3 million cars off the road and contribute around 10% of the UK’s 2020 renewable electricity target.
The publication of Strike Prices for renewable technologies and other energy reforms announced by my Liberal Democrat colleagues Ed Davey and Danny Alexander will unlock up to £110 billion energy infrastructure investment and support 250,000 jobs by 2020.
From our cities to our rural communities, every one of these massive infrastructure programmes will help create jobs, provide housing and boost growth.
Working with business
To make us even more competitive, you asked us to cut corporation tax. We did: to the lowest rate of any major Western economy, and one of the lowest rates in the G20.
You asked us to make it easier to hire new employees. We did: reducing the National Insurance bill for companies and protecting the flexibility of our jobs markets.
You asked us to deregulate. We are: getting rid of unnecessary red-tape, being ruthless about what new regulations are introduced and identifying where we can do more.
You asked us to help more good businesses get the credit they needed. And we are: There’s further to go, but the credibility we’ve gained through a disciplined fiscal approach has helped keep interest rates historically low saving money and supporting businesses and families across the country.
Our Funding for Lending Scheme is also helping to boost lending ensuring loans and mortgages are cheaper and more readily available.
And through the building of the Business Bank we’re tackling those long-standing problems that meant too many small and medium businesses struggled to get access to finance for growth, even before the credit crunch hit. With access to £1 billion of government capital, the Business Bank will help boost the flow of credit moving around our economy further and ensure your businesses can access a greater, more diverse range of lending providers and products. We are now accepting proposals from lenders for our £300 million co-investment programme.
Many businesses rely upon employing highly-skilled people from all over the world. To help with this, you asked us for a sensible approach to immigration. And Vince and I have worked hard to secure a system that strikes the right balance between, on the one hand, ensuring businesses can still attract those hardworking and skilled people, from around the world, who want to make a contribution to Britain’s economy and, on the other hand, ensuring we finally have a system that works and in which the public can have full trust.
And the Liberal Democrats will continue to fight hard to represent businesses to ensure they can attract the brightest and best.
Yes to Europe
On Europe, you’ve asked us to act in Britain’s long-term best-interests and I want to be absolutely clear here about the Liberal Democrats’ approach to this in the coalition government. We believe Britain needs to be in Europe not out and that we should be leading in Europe in favour of reform. Yes to being in Europe. No to exit. Yes to a referendum when the rules change for Britain. No to a referendum when Conservative backbenchers demand it. Yes to reform. No to years and years of lonely renegotiation that will cede control not strengthen it and damage our position within the single market.
And I welcome the CBI’s recent comments and analysis on Europe. I was interested to read in John [Cridland]’s Times article earlier this month the words of Norwegian Conservative MP Nikolai Astrup, who said, “If you want to run Europe, you must be in Europe. If you want to be run by Europe, feel free to join Norway in the European Economic Area.”
The CBI is right to say that. We don’t want to end up in a half-way house in Europe, following not leading in a way that doesn’t benefit business, doesn’t deliver jobs and doesn’t support Britain’s growth.
A revolution at the centre
More widely, you asked us to reform the way government works with business. We did: our industrial strategy sets out, for the first time, a plan to drive long-term growth, working across government and with business. And I want to thank everyone at the CBI who worked with us on developing this strategy.
We’ve now launched strategies for 8 key sectors, with our Automotive Strategy released most recently. And last week, we also announced the latest successful bids for our £3.2 billion Regional Growth Fund. With £506 million awarded this round, I saw for myself the impact, in terms of jobs and innovation, this long-term approach to support and investment is making in companies like Toyota and Rolls Royce.
While back in Whitehall, we’re doing what generations of politicians have promised, but failed to do, giving power back to local leaders and businesses to enable them to forge their own path to growth. This includes the creation of Local Enterprise Partnerships and, for the first time, the localisation of business rates and new borrowing powers for capital investment. So Local Authorities have more control over how this money is spent and an even greater incentive to grow their business base.
Through our City Deals, we’re giving our 8 largest cities outside London the freedom back to manage investment, improve their skills base, and guide transport and infrastructure in their area. These first 8 City Deals will create an estimated 175,000 new jobs, with a further 20 deals now being negotiated.
This local revolution to create jobs and drive growth is at the heart of the vision Lord Heseltine set out and which this government is taking forward.
With £2 billion set aside to help every area boost local infrastructure, tackle local skills needs and build local houses, this is money local areas can use in addition to the £5.3 billion of EU structural funds and existing local authority resources to grow their economies and create local jobs.
A joined-up conversation about growth
But as we devolve power locally, we also need to change the way we work at the centre. Take a project to kick start local business growth where a Local Enterprise Partnership working with local businesses might have plans for some big commercial development. At the moment, they can’t just talk to one person in Whitehall to get that first hole dug. They’ve got to talk to the Department of Communities and Local Government about planning, check with the Department of Transport that local roads will be accessible and the Department for Culture, Media and Sport to ensure there’ll be broadband businesses can use. That’s even before they’ve met with the Department for Business or UKTI to discuss potential support for the businesses themselves.
That’s why I’m a chairing a new committee, working with the Chancellor, that will knock down these walls and bring all these departments together so that where there’s an opportunity locally, you can rely on us centrally to deliver what we’ve promised and change once and for all the Whitehall culture that says devolution is good, as long as it’s not my department you’re talking about.
16 to 24 review
We recognise that our work is far from done and one area that, I believe, needs urgent reform is the range of skills, training and employment support available to prepare our young people for a competitive working life and equip you with a skilled workforce for the future.
Sat at home, trying to figure out what to do with the rest of their life, the average school leaver doesn’t have a clue about which government departments or agencies look after the schemes that are out there to help them.
What they do know is that to succeed they need a job and that if they are to give themselves a fighting chance of getting a good one they need some skills and training. But right now it’s too easy for those young people who don’t think University is right for them to get lost in the maze of different employment and skills programmes available and never find the advice, support and options they need.
It’s the same for businesses looking to take on young people. I know that individually many of you have amazing programmes in place to employ and promote young people in your companies, but that even before the economic crisis, you were frustrated by the complex and confusing web of government initiatives, bodies and agencies that exists to help you.
Those employers that do make it through the system find the programmes available useful. But again too many employers lose their way. They’re put off either because they can’t find what they want in their area or because they find it just too complicated to get involved.
That’s why I’m pleased to announce that this summer the Cabinet Office will lead a comprehensive government review into the employment, education and training provision available for 16 to 24-year-olds. This will report to the Prime Minister and myself in the autumn.
What we want is a simpler, easier to use system that lays down a clear route ahead into work for our young people and gives businesses a coherent offer to find the workers they need.
For example, what if instead of the usual five different conversations you need to have with government to sort out your businesses’ recruitment, apprenticeship and training needs, you could have just one: focussed at the national level for large employers and at the local level for SMEs?
Pound for pound, penny for penny, we need to make sure that the money we spend helping our young people to progress is spent in the right way to ensure they can stay in education, or find a job. We can’t just wait until they turn up at the Jobcentre at 18.
A million new jobs
It’s only through working together on issues like this that we’re stronger and just as you’ve challenged us I need to ask you for your support.
Since the coalition came to power, businesses up and down the country, including many represented here this evening, have created a million jobs. I want to pay tribute to you for that.
But tonight, I want to ask every British business leader within this room and across our country to join me in the commitment the Liberal Democrats have set in government: to create a million more new jobs in our economy in profitable, competitive and successful businesses. Because for me, there is no better or more powerful way for us to extend opportunity across our country and help our people progress than through work.
And tonight I want to set out this challenge: there are around 5 million businesses now operating in this country and it doesn’t take an economist to work out that if we could get just 20% of them to create one new job or apprenticeship in the next 2 years we’d reach our target of a million new jobs. After all, only 100 thousand of those 5 million employers presently even offer apprenticeships.
And from April next year, we will offer every business a £2,000 cut in their National Insurance bill. This means a company could employ one person on £22,000 or four people on minimum wage without paying the government a single penny of National Insurance.
This is going to take an unrelenting focus from government and business in partnership with each other.
We’re doing what we can. We’re delivering what you need. And now we need you to do what you do best: investing the money, digging the foundations, developing the technologies and creating the jobs and apprenticeships that will help us boost Britain’s recovery, that will help us build our new economy and make our society fairer.