New Year economy speech by the Chancellor of the Exchequer
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
In a keynote speech the Chancellor explains the five components of the government's long-term economic plan.
Thank you for inviting me to speak to you today here at Sertec.
I’m here because you’re a great manufacturing company, of the kind we need to see many more of in this country.
You make parts for British cars that are exported all around the world.
When we hear on the news that our economy is recovering, people wonder what it means for them.
For some it feels abstract, remote.
But here there’s nothing abstract about the 200 new employees this company has created in the last year.
Or the 400 additional people that Sertec has announced today it will be taking on in the next four years.
That’s a vote of confidence in the workforce here.
It’s a vote of confidence in the Midlands.
It’s also a vote of confidence in the economic plan that is working for Britain.
This factory is a good place to talk about that plan.
For you know more than most that the world does not owe Britain a living.
Car manufacturing is fiercely competitive.
Components can be sourced from around the world.
You know that there are hundreds of companies in dozens of countries that would like to be manufacturing the products you make here.
And it’s only because of your skill and your professional approach that the work comes here – here to this company.
If the quality slipped, or the costs went up or the company was badly run – then the jobs would go elsewhere.
What is true of this company is true of our country.
It’s because the rest of the world sees that Britain is a country where we’re now back in control of our destiny, a country where we’re supporting business, that jobs – like the ones here today - are being created across our country.
Over one million new jobs.
But if our country is badly run, if the finances are in a mess, and costs go up, and businesses don’t feel welcome, then jobs would quickly disappear from Britain again.
Our country was in a real mess a few years ago – more so than almost any other major country in the world.
Hundreds of thousands of people lost their jobs.
Millions of families like yours have seen their incomes squeezed.
Britain was made a lot poorer.
That’s the terrible price people totally unconnected with politics and politicians pay when you get the wrong economic policy.
It’s why getting the right plan – and holding to it – is so important.
We’ve got the right plan now.
It’s a long term plan for turning our country around.
I’ve never promised it was going to be easy.
I went out of my way to say the opposite – and be open with you about the difficult sacrifices we had to make.
And like the success of this company, it’s been a team effort – with a lot of hard work.
Now that team effort is paying off.
The plan is working.
For the first time in a long time, there’s a real sense that Britain is on the rise.
Jobs are being created.
The deficit is coming down.
That brings its own risks.
As we start the New Year, I want to warn you about a dangerous new complacency around at the moment.
You hear some talking as if the hard part of the job is done – and we can go back to the bad old habits.
But beware those who come along this year and promise you easy answers, no more sacrifices, just more spending on this and more spending on that, all paid for by more borrowing.
For the truth is there are still plenty of risks out there.
Our biggest trading partner, the Eurozone, is still weak.
And there are fears about slowing growth in the emerging economies further afield.
Here at home, the banking system is still not working as we need it to, so we’re still fixing it.
We have to do even more to encourage the exports and investment and saving our economy needs for a responsible recovery.
Above all, we’ve still got a huge amount to do to reduce the deficit and get our debts falling.
And it’s worth remembering, as the festive season comes to an end, that our own independent Office for Budget Responsibility, is predicting a slowing of quarterly GDP growth this year.
So it’s far too soon to say: job done.
It’s not even half done.
That’s why 2014 is the year of hard truths.
The year when Britain faces a choice.
Do we say: the worst is over; back we go to our bad habits of borrowing and spending and living beyond our means – and let the next generation pay the bill?
Or do we say to ourselves: yes, because of our plan, things are getting better.
But there is still a long way to go – and there are big, underlying problems we have to fix in our economy.
More difficult decisions.
That’s the choice in 2014: to go on working through a plan that is delivering for Britain, putting us back in control of our destiny with the security and peace of mind that brings;
or squander what we’ve achieved and go back to economic ruin.
Ultimately it’s your choice – a choice for the British people.
Our long term economic plan has five key parts to it.
The first is to go on reducing the deficit so we deal with our debts – because that’s the way to safeguard our economy for the long term and keep mortgage rates low.
If 2014 is a year of hard truths for our country, then it starts with this one: Britain should never return to the levels of spending of the last government.
We’d either have to return borrowing to the dangerous levels that threatened our stability, or we’d have to raise taxes so much we’d put our country out of business.
Government is going to have to be permanently smaller – and so too is the welfare system.
When I took this job, Britain was borrowing more than £400 million every single day to pay for government spending.
But as a result of the painful cuts we’ve made, the deficit is down by a third and we’re borrowing nearly £3000 less for every one of you and for every family in the country.
That’s the good news.
The bad news is: there’s still a long way to go.
We’re borrowing around £100 billion a year – and paying half that money a year in interest just to service our debts.
We’ve got to make more cuts.
£17 billion this coming year.
£20 billion next year.
And over £25 billion further across the two years after.
That’s more than £60 billion in total.
Some say they’d deal with the deficit, but they shy away from committing to numbers. So this year, we’re going to ask Parliament to vote on these plans.
I want our country’s commitment to economic stability entrenched.
Even after we’ve reduced the amount we borrow each year, that still leaves us with a high debt from all the past borrowing.
That debt leaves Britain vulnerable – and I want to make us safe.
So I’m going to ask Parliament to vote too this year on a new charter for budget responsibility that will commit us to reducing those debts.
It means not spending again when borrowing falls, including using surpluses in good years to reduce debt – so in future, we fix the roof when the sun is shining.
These votes will force Parliament to make a choice and confront the truth.
We also need to confront truths about the cost of living.
I know it has been hard for families since the crash.
It is not a case of not understanding these difficulties.
It’s a case of being honest about why things are difficult and what we can actually do to make things better.
The truth is that Britain is poorer because of the great recession that happened, and families feel that.
As the economy recovers, so too will family finances.
People’s earnings are expected to go up.
Inflation has fallen, and that helps.
So too does the government’s action to cut the costs we impose on your family gas and electricity bills.
But there’s no point pretending that there’s some magic wand a Chancellor can wave to make the whole country feel richer than it actually is – or that I can control the global oil price from an office in Whitehall.
It’s simply not being straight with people.
The only way to improve people’s living standards for the long term is for Britain to earn its way in the world and create more, better jobs – just as this company is doing every day.
And if government wants to find a direct way to put money into people’s pockets, you do that by permanently cutting people’s taxes by permanently cutting the spending those taxes pay for.
That’s what the second part of our long term plan is about: cutting income taxes and freezing fuel duty to help hardworking people be more financially secure.
This April, you’ll see what that means in your wage packet.
That’s when we increase the tax-free allowance to £10,000 - and it means in total an extra £60 or so a month for the typical worker.
I’m also freezing fuel duty again this year, so your car will cost £11 less to fill up than it would have done.
And from next year, there will be tax free childcare - to help working families.
Making tax promises like these is meaningless unless you’re prepared to say how you’d pay for them.
We’ve paid for every single pound’s worth of these tax cuts – all £50 billion in total – without a single penny of extra borrowing because we’ve made the savings needed in the cost of government.
It’s all about fairness and whose side you’re on.
And while no sensible Chancellor ever rules out tax changes, our whole economic plan can be delivered by reducing spending further not by increasing taxes.
That’s how you create a country where people who work hard and want to get on are supported.
You all know that there is no better financial security than having a job – and so that’s the third part of our plan: creating more jobs by backing small business and enterprise with better infrastructure and lower jobs taxes.
Thanks to this plan, there are now a record number of people in work in our country.
But as you know here at Sertec, the competition is fierce and the work can go anywhere in the world.
If we are going to go on being a country where companies grow, invest and want to take on new people, then we’ve got to make ourselves the best place in the world to do business.
That’s why I’m cutting business taxes, introducing an employment allowance that will benefit small firms most.
It’s why I’m helping with high street business rates and now I’m abolishing jobs tax altogether for those aged under 21.
These are all steps we’re taking as part of our plan to create more jobs in Britain.
Others say they’d do the opposite.
They say businesses should pay more with a higher corporate tax rate.
I think that would send a disastrous signal to the rest of the world about the direction Britain was heading in.
It would cost jobs and investment.
It would be a massive own-goal for Britain.
It would also be a mistake if we didn’t invest in future infrastructure that our country needs to be prosperous.
Like the new power plants that keep factories like this going, and the roads and railways and broadband that carry our goods and services.
That’s why we’ve made spending on these things the priority when money is tight.
It’s why I say we need more homes, and to support families who dream of owning a home with our Help to Buy.
And it’s why we’re prepared to take controversial decisions on long term things like high speed rail, and the search for cheaper gas in shale.
Because I don’t want to condemn our country to ageing infrastructure and expensive energy when so many others in the world are heading in the direction of the future.
A strong economy and a fair economy go hand in hand.
We have to make sure the recovery supports those who work hard and play by the rules.
That’s why the fourth part of our economic plan is about reducing immigration and capping welfare.
Migration, when it’s controlled, is an important part of a successful economy.
But uncontrolled immigration, of the kind we saw over the last decade, brings pressures on public services and leads to abuse of our welfare system.
That’s why we’ve tightened the rules so people can’t just come to this country to claim benefits - and it’s why for the first time we’ve introduced an immigration cap.
That new fairness applies across our welfare system too.
Britain is a proud country that does, and in my view always should, protect the most vulnerable through our welfare system.
But it should not be a welfare system that offers up benefits as a lifestyle choice.
We need to be fair to those who need our welfare system – and fair to those like you who pay their taxes for that system.
Benefits are now capped, so no family gets more for being out of work than the average family gets from being in work.
And with our new Universal Credit, we’re going to make sure it always pays to work.
In 2014, we’re bringing in more changes.
The long term unemployed are no longer going to get something for nothing.
They’ll have to put back into their community, including compulsory work, with our Help to Work.
And this year, we will for the first time set a cap on the overall welfare budget so it can be properly controlled.
State pensions won’t be included in that cap.
As the Prime Minister said this weekend, we are committed to giving everyone who’s worked hard and saved though their lives the generous state pension they deserve.
And the country can only afford to do so because of the difficult decision we’ve taken on increasing the pension age as the population lives longer.
That saves many billions of pounds for taxpayers; and we need to save billions more from the rest of the welfare budget.
When you think about the competition this factory faces from around the globe, and the kind of world your children are going to grow up in, wouldn’t it make more sense that your government was spending your money on things like schools and science and a better NHS than more welfare?
So here’s another hard truth: welfare cannot be protected from further substantial cuts.
I can tell you today that on the Treasury’s current forecasts, £12 billion of further welfare cuts are needed in the first two years of next Parliament.
That’s how to reduce the deficit without even faster cuts to government departments, or big tax rises on people.
So when you see people on the telly who say that welfare can’t be cut anymore - or, even worse, promising they will reverse the changes we’ve already made and increase housing benefit - ask yourself this:
what public services would they would cut instead?
what taxes they would put up in their place?
or would they borrow and spend more, and risk our country’s economic stability again?
This is what I mean when I say Britain has a choice.
The truth is there are no easy options here, and if we are to fix our country’s problems, and not leave our debts to our children to pay off, then cutting the welfare bill further is the kind of decision we need to make.
The final part of our economic plan is all about delivering the best schools and skills for young people so the next generation can succeed in the global race.
I want the new jobs being advertised right here at this company to go to local kids coming out of the schools and colleges here.
But that’s only going to happen if standards are high enough.
One of the most depressing discoveries of 2013 was that over the last decade Britain’s education fell even further behind other countries in the world.
Reversing that is essential.
That’s why were turning more and more schools into academies, and creating new free schools.
It’s why we insist on exam standards that are more rigorous.
We’re also creating many more apprenticeships, so more young adults get a chance to earn and learn in companies like this.
And this autumn we’ll start lifting the cap we impose on the number of university students.
If Britain is going to compete in the global race to the top, there should be no limits on aspirations – we need all our young people to develop their talents to the maximum.
So that’s our long term economic plan – with 5 key points.
Cutting the deficit.
Reducing taxes for hardworking people.
Creating more jobs by backing business.
Capping immigration and welfare.
Delivering the best schools and skills.
It is a plan that is working.
But growing the economy, helping businesses succeed, reducing the deficit: these are not an end in themselves – they are a means to an end.
So let me set out clearly what that end is, what our long term economic plan is really for – what the motivation behind it is.
Our plan is about more than rescuing our economy from the brink of collapse.
It’s about instilling a new belief in Britain.
So we can all live in a country that is in control of its own destiny in this world.
A country where we can have the peace of mind that comes with knowing you can provide for your family.
A country that offers security and a better life for the next generation.
Peace of mind.
A better life for our children.
Controlling our own destiny.
Our economic plan is for the long term.
And just as there are no short-cuts to the work you do here, there’s no short-cut to that economic security for Britain.
Thanks to the hard work of the British people, our economy is on the mend – and our country is doing better.
But what was hard won, can be easily lost.
So we have a choice in 2014.
We can give up, go back to square one, risk everything.
Or we can confront the hard truth that more difficult decisions are needed – and work through the plan that is turning Britain around.
I say: let’s finish the job.