Prime Minister's speech on economic growth
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Prime Minister David Cameron has delivered a speech in Manchester on 6 January 2011 on economic growth.
Prime Minister David Cameron has delivered a speech in Manchester on 6 January 2011 on economic growth.
Thank you very much for that introduction, Mike, and welcome everyone today. And it’s an important conference you’re having today, looking at our Regional Growth Fund and making sure it really works for people here in Manchester and across our country.
And it’s great to be back in Manchester, it’s great to be here today and it’s great to be here with Michael Heseltine because I think, actually, Michael sums up what in many ways is required as we come into this new year. And that is that combination of understanding that it’s a free-enterprise economic recovery that we need, but it also needs a healthy dose of government enthusiasm and activism to help bring that about.
And it is a new year and this coalition government has one over-riding resolution, and that is to help drive growth and create jobs right across our country. And today I want to argue that there are three essential parts to our plan. One: you’ve got to have proposals for restoring the health of the public finances. Two: you’ve got to have a strategy for growth. And three: you’ve got to make sure that growth is balanced and spread more fairly across our country. And I want to take each of those in turn.
First, restoring health to our public finances. I mean we should be clear: if this coalition didn’t have a credible plan to cut the deficit and bring stability to our public finances, we would not be sitting here today in Manchester talking about growth. We’d be talking about rising bond yields and rocketing interest costs. We’d be talking about the difficulties of servicing our debts. We’d be talking about the dangers of our credit rating being downgraded. We’d be worrying about falling confidence in our economy. We wouldn’t be looking at the danger zone that other European countries have fallen into; we’d be in that danger zone ourselves.
There are still those who argue that tough fiscal action on the one hand and a plan for growth on the other are somehow alternative strategies. I think that is incredibly misguided and I think it denies the evidence, because if you don’t have a plan to balance the books, you have no confidence; and if you don’t have confidence, you won’t have growth. It is as simple as that.
And it’s because we’ve taken tough action that today Britain is out of the danger zone and able to grow sustainably. At the end of the last year, the European Commission forecast that Britain would grow faster over the next two years than Germany, France, Japan or the United States. And that is why, despite all the calls to turn back or to delay or to somehow try and find some easier option, we will stick to the course we have set out.
Now, of course government has got to pay down its debts in a way that helps growth rather than hinders it. And that is why we’re making cuts to welfare but protecting science. That’s why, even though we’re under real pressure to cut capital expenditure plans, we’re giving the green light to massive infrastructure projects, so that in the coming years there’ll be more electrified rail - including here in the North West. The Mersey Gateway is going ahead. The Crossrail tracks are going down. The super-fast broadband cables are going to be laid. And high-speed rail is going to criss-cross this country.
And our pro-growth agenda is why - as difficult a decision as it was - we raised VAT, rather than National Insurance. Because, yes, a tax on what people spend is a tough thing to do and clearly it will have an impact, but not nearly as big an impact as National Insurance contributions and a tax on jobs, which I think would be a huge mistake.
And to those who say we shouldn’t raise any taxes at all, I would argue that you have to strike a balance. The international evidence is pretty clear about what sort of balance should be struck and, with tax rises taking a quarter of the strain and spending cuts three quarters, we are striking a balance that is fair and that is good for growth. None of this is easy, but I don’t think we should be in any doubt: balancing the books over this Parliament is absolutely essential to restoring confidence in our economy, and that is why we are sticking to this path.
The second thing, as I said, you need is a strategy for growth that goes beyond just sorting out the mess of the public finances. And that’s exactly what this government has. In the end it’s not us in Whitehall who will create growth, but you in your offices, your shops and your factories. But you need some very basic things from us to help you create the wealth and jobs.
Yes, economic stability and low interest rates. Yes, lower taxes and less red tape, which is why we’re cutting corporation tax to the lowest rate in the G7 and we’ve brought in a new one-in, one-out rule for regulation. But government’s support for business cannot end there. That would be laissez faire and that is not what this coalition is about. We’re about actively getting behind businesses.
Now, what does that mean? Well, it means being clear about which are the high-growth industries and working strategically to strengthen them. The pharmaceutical industry is already a huge strength in our economic armoury, but we can’t be complacent about that. That’s why we’re introducing a Patent Box offering a 10% tax rate on patent income to encourage companies not just to experiment and innovate and employ scientists here, but actually to invest and employ people to exploit those innovations. And I have personally been on the phone to some of the biggest pharmaceutical companies, like Amgen, like Pfizer, to encourage them to do just that.
The global green energy market - everything from wind turbines to home insulation to solar panels - it’s going to be worth trillions of pounds in the years to come and I’m determined that the UK should have a big piece of that pie. So, if you look at what we’ve already done: supporting wave and tidal technology; bringing in legislation for the Green Deal to get millions of homes insulated and create thousands of new jobs at the same time; putting £60 million into updating our ports - one of which I visited this morning - so that wind turbines can be built here and manufacturers can be based in our ports.
Tourism is another industry we should get behind. The rewards for growth here are immense. If you just consider this: for every half a percent increase in our share of the world tourism market we can add £2.7 billion to our economy and an extra 50,000 jobs. Now, we have the Royal Wedding, the Olympic Games, the Diamond Jubilee just round the corner. I think now is the time to really go for it and increase our share. Just yesterday I met with businesses who are helping to create a £100 million marketing campaign to roll out the welcome mat and say to the world, ‘Come on over to Britain’.
So getting behind tourism, energy, pharmaceuticals, advanced manufacturing, aerospace, all of those industries of the future - I think this is crucial. But it would also be a big mistake if we stopped just at those big-ticket industries. Because if you look at where growth has come from in recent years, you see that it is the small, innovative companies that hold an immense amount of the potential. Over and over again studies show that about one in 20 companies - the small, high-growth firms - are responsible for half of new job creation. One in 20 firms, half of the new jobs. So far from ignoring the start-ups - the insurgents if you like - we should be laying out the red carpet for them. That is what we are doing: creating a new Entrepreneur Visa for anyone with a great idea who wants to set up a business here; nurturing small clusters of innovative companies and web start-ups, as we are in the new Tech City - our own Silicon Valley - in East London. And, as I announced yesterday, expanding the New Enterprise Allowance so that people who are unemployed can get the tools and capital they need to start their own business.
Our Growth Review and the Chancellor’s budget will look systematically at all those things that we need to help start-ups and small business expansion. From venture capital to bank lending; from opening up government procurement that helps firms to expand, to cutting back the bureaucracy that can get in the way of their growth - we will do all of those things. But being a pro-growth government means something else too. It means making sure the whole of the Whitehall machine - not just the Treasury and the Business Department - but the whole of the government machine is geared up to boost enterprise. That is what our Growth Review is going to do - making sure this is a mission that cuts right across government.
I am asking the Department for Local Government to reform the planning laws that make it much easier to get wealth-creating projects underway. I am encouraging the Department for Energy and Climate Change to forge ahead with the world’s first carbon capture and storage demonstration plants and new nuclear power stations. This has got to apply to every department.
I am working with the Foreign Office to link up our country to some of the fastest-growing parts of the world and personally leading massive trade missions to high growth countries. We are expanding trade promotion, strengthening old relationships and forging new ones. Make no mistake - this government wants to do everything we possibly can to drive growth and make the next decade the most entrepreneurial and the most dynamic in our nation’s history.
The third part of the plan - and it is absolutely crucial - is to make sure that growth is balanced right across our country. For a long time we saw a dangerous imbalance in our economy, tilted too far towards unsustainable spending and borrowing and away from private sector investment and exports. But perhaps the most marked imbalance - the one felt most acutely by millions of people - was the imbalance between different parts of the country. Over the past decade around half of economic growth was concentrated in London and the surrounding regions. If each of the regions had grown at the same rate as the country as a whole, the UK would be £38 billion better off.
Now, I do not think we should look at the economy as a sort of see-saw and think that if you pull one sector or one part of the country down on the one side and the rest of our economy automatically rises up on the other. Yes, the banks need to recognise their responsibility to our economy as a whole by lending properly to good businesses again, but in the end you cannot sustainably rebalance our economy by making banking weaker or the City of London smaller. You do it by making other regions and other industries stronger.
So how do we go about that? Do you sit in Whitehall looking at a map of Britain, deciding where to plonk some big bureaucracies, dispatching officials to pick winners, fund pet projects and roll out grand top-down initiatives? Recent history tells us no. You cannot impose regional growth from above. You have got to give local people real power to drive it. In the next few years people all over our country - North, South, East, West - are going to see a real change in the way local economies work. Powerful mayors in our biggest cities - mayors with clout and a passion to make change happen; a new network of Technology and Innovation Centres, bringing together the best minds from our universities and the sharpest brains in business to get good ideas into the market. New Local Enterprise Partnerships - coalitions of business, councils and communities like the one I saw in the Wirral this morning, where already leaders like Terry Leahy are working to get big projects off the ground. This is a step change in the way regional growth is driven.
And part of that step change is why we are here today - the Regional Growth Fund. We are saying to people - if you have got an idea to bring investment and wealth to your area, whether it is a local wasteland that needs decontaminating before it can be built on, whether it is a run-down dockside that could be transformed into a retail area with some start-up capital, there is £1.4 billion in there waiting in the Regional Growth Fund to help make those good ideas happen.
So that is what you will get from us: a plan that brings some sense and some stability to the public finances; a plan that actively drives growth and gets behind enterprise; a plan that helps to rebalance our economy, empowering local communities to take charge and drive wealth creation. There are no short-cuts to economic recovery, and I do not promise that the road ahead is going to be an easy one. But I do believe that if the people of this country pull together, if central government, local government, business and communities work together, then I am confident that we can have strong growth, we can build a more prosperous and fairer economy and we can have a brighter future for everyone in this country to look forward to.
Mr Prime Minister, I’m a small businessman in Manchester, I’ve got lots of friends who are in the same position; the number-one thing we talk about in the pub when we’re talking about difficulties for businesses is employment law. I got an email the other day from - I think it may have been the Federation of Small Businesses or possibly the Chamber - that said that there’s a 56% increase in claims against small businesses, a lot of them spurious. The legislation just seems to go more and more in that direction. Is there any chance that that might get repealed or rolled back?
Yes, there is. I mean, I think that we really have to look at this. I would say, when I talk to small businesses I think the issues are - I’d say that bank lending is still a very big issue for small businesses, but I think that next is absolutely red tape and the requirements through law - often very well intentioned, but it’s just the agglomeration of all the rules coming out of tribunals, coming out of Whitehall, coming out of Brussels, that people - we’re basically making it more difficult for one person to say to another person, ‘Come and work for me’. And if you’re trying to cut unemployment that is fatal.
So yes, we should be looking at these and we’re having, what I explained in my speech, a Growth Review where we go through every single department and ask them, ‘Well, what is it you’re doing to make it easier for a business to start up? What are you doing to make it easier for a business to employ someone? What are you doing to make it easier to fill in a tax return? To make an investment? To buy a property? To get planning permission?’ So, I think it’s absolutely front and centre of our concerns and I think we should be looking particularly at some of the issues around tribunals and things like that where additional costs and burdens have been placed particularly on small businesses and we need to find ways of avoiding that.
So, I hope in the coming weeks we should be able to make some good progress on that and also there’s the opportunity of the Chancellor’s budget and the Growth Review as I explained, which he chairs; the Chancellor sits around in this Growth Review challenging all the departments on the regulations that they’ve either produced in the past or are thinking of producing in the future as well as asking the positive things they should be doing.
One other area or small business I would raise is procurement. The government is an enormous procurer of goods and services but the government all too often tends to think, ‘Well, you know, I’ll just pick up the phone to Accenture or Capita or whoever’ rather than opening it up to small businesses. So, making it easier to bid for government contracts, having an easier system so you can register online, not make some massive payment and then you’re free to bid for all government work. All those sorts of things, I think, should make a difference.
Hello Prime Minister, Lord Heseltine. I’m Michelle Charters from Kuumba Imani Millennium Centre which is a multi-purpose, multi-cultural centre in the heart of Toxteth. It was an investment that we were proud to receive. It’s been a journey in terms of maintaining the building which is a £3.2 million building, but in terms of this particular growth fund, as a social enterprise - because we do have charitable status, Company Limited by Guarantee status and we run as a social enterprise - you talk about clearing banks. We as an organisation could potentially go for a £1 million bid but in terms of the clearing banks for the North West and particularly our area - because whilst you have invested in Liverpool and Toxteth there still is a requirement for a lot of investment, especially at this time because there’s lots of black voluntary-sector organisations that have actually hit the deck and are no longer exist. But there are opportunities and the third sector has very much, and historically, you know, done the innovative and the unique approach to tackling the many issues in the many communities throughout the country. Is there, or could you give me some indication as to who is the contact for me in my city?
Okay, let me ask Michael to address the issue about the clearing banks. What Michael was saying was basically, for those organisations that would like to bid for less than £1 million, the clearing banks will be bidding for a series of £1 million that they can then disaggregate and they should be able to do that on a regional basis. But, I’ll ask Michael to answer that.
There’s one other point I’d make to you which is, I’m a huge supporter of what was called the third sector - I rather like to call it the first sector because often actually it was voluntary bodies and charities that were first to help the homeless or to regenerate communities or to provide schools and other functions. And I think that we should actually big up what the first sector does rather than talk it down. I recognise that when a government is making spending reductions, sometimes those organisations can be hit and I think we need to move to a world where those organisations are much more funded by results rather than having a drip feed of money from government. So, we are establishing a transition fund of £100 million this year and next year which is available for social enterprises and charities to bid for if their funding has been adversely affected. So, there’s that fund as well as the regional growth fund. But Michael, do you want to answer the point about how the banks are going to try to disaggregate this money and who people should contact?
Well, the discussions with the banks have not yet been concluded. They’ve been started and we’re now working through with them to see whether we can find an effective way of delivering this disaggregation that I mentioned. But I think terms of, you wanted to know who and where you approach? Well, there’s a team of officials from the business department here led by Mike Geoghegan sitting in the second row there, and at the working session after this I suggest you talk to one of them. I think the answer to your question would be you talk to the Government Office of the North West who will first be able to answer your question, secondly direct you to where the most likely opportunity lies.
And could I just quickly ask you, what is your government doing to get a grip on the situation with flu vaccine? People are very worried about it, they don’t seem to be able to get hold of it, despite the reassurances that it is, apparently, around.
Flu vaccine, clearly we keep a very, very close eye on this. I’ve had regular conversations with Andrew Lansley about it. The way it works in this country is that GPs are responsible for ordering in advance the flu vaccine, which they did this year and ordered very large stocks of flu vaccine. Clearly those stocks are being used up and in some places, yes, there have been some shortages and the Department of Health is meeting urgently and working hard to work out how we can help address that issue. One way we can do that is obviously there’s a stock, there’s a national stock of flu vaccine from the pandemic of 2009, and while that vaccine is slightly different to the vaccine we would now be giving anyway, it does have some of the common characteristics, so one of the urgent discussions at the Department of Health right now is to work out whether that vaccine, the stocks of vaccine from the previous pandemic, would be useful. But we’re working extremely hard to make sure we get this right.
Prime Minister, good afternoon. My name’s Jeff Kaplan; I’m from an organisation that’s worked very closely with the Northwest Development Agency to support tourism and the northwest has had a much greater impact on offering fantastic tourism experience to its visitors over the last sort of few years. With the demise of the agency and other funding, we’re seeing infrastructure for tourism support dropping. There’ve been closures announced of tourist information centres and other funding being dropped. You mentioned earlier on about your support for tourism as being one of the key sectors. Where is that going to come from?
Okay. Well, first of all, I think we’ve got to end this idea that the way you improve everything in life is spending more money on it. Part of the reason is the government has run out of money, the last government spent it all. We arrived and we famously had the instruction from the outgoing Chief Secretary, ‘I’m sorry, I’ve spent all the money.’ So we’ve got to try and think of ways that we can actually help improve our country while actually using public money much more carefully. That’s why yesterday I launched this £100 million fund to promote Britain overseas where half of the money is coming from business. We challenged them. We said, ‘We’ll put up £50 million if you can provide the rest,’ and up came British Airways and a number of hotel groups and holiday groups and lastminute.com and others, and they’ve produced the money, so we’re going to have a very large advertising and promotional campaign for the whole of the United Kingdom in the run-up to these great events, Diamond Jubilee, the Olympics and also the royal wedding. And I think that is a good way, as Michael Heseltine was saying, of leveraging in, gearing up money from elsewhere.
The Northwest Development Agency, yes, it is going. I think the LEPs are going to be stronger, partly because they are more focused on specific areas, and I think people will bring more passion to them, and I very much saw that in Merseyside this morning and I’m sure I’d see it if I was talking to the Greater Manchester LEP here.
On tourism, the opportunity is immense. Basically, about 55% of people who come to Britain only visit London and that is pathetic. We could do much, much better than that. We’ve been spending lots of money on it, we haven’t cracked it. We need to convince the rest of the world what we all in the UK know, which is some of the best sites, some of the most exciting places, some of the most thrilling experiences in Britain are outside London. Now, we need to market ourselves better and we need to do that in the ways that I have suggested, and there’s an enormous upside for parts of the country outside London where we should be attracting tourists. We should be doing far better in terms of Chinese tourists. I had a meeting recently with the Chinese ambassador and asked, ‘What would make more Chinese people come to Britain?’ And it wasn’t, actually, ‘Spend a bit more money on this facility or that facility,’ it was simple things like actually making sure you can fill in a visa form in Chinese or making sure that there are better shopping facilities near the places where they come in and go out of.
So there is a huge range of things that we can do. One of the things that I am going to do is make sure that we have a consistent Tourism Minister - the last government chopped and changed them the entire time - put someone good in the job, as I have done with John Penrose, help them to get on with it and let them work with business and the industry, and I think there is an enormous opportunity to grow tourism in this country and not just by spending government money. Sorry, that was a long answer but it is a subject that I am particularly passionate about.
Lord Heseltine, do you have even a guesstimate in the government’s mind about what percentage of the fund will come to the northwest?
After my long answer that was an incredibly short one! As Michael said, the key thing is trying to make sure that the money is going to areas that are over-dependent on the public sector and where the private sector recovery is most needed. That is a very simple fund. This was very much a creation of mine and the Deputy Prime Minister; we wanted to keep it very, very simple with a large amount of money - all about jobs - dispersed as quickly as possible and directed to areas of the country that are over-dependent on the public sector with the maximum impact on the growth of the private sector and the commercial sector, because that is what is required. It is a very simple idea.
I do not even know whether we will get a bid from the northwest!
I think you can see the answer from the enthusiastic number of people that are here, Michael; I am sure they did not just come for the coffee and the biscuits, or even to listen to my speech.
Prime Minister, you keep mentioning this phrase ‘overdependence on the public sector.’ There are probably several organisations in this room who actually do depend on the public sector and that is not necessarily a bad thing. The public sector still has a role to play. Do you honestly think that the measures that you are actually implementing to weaken the public sector will not adversely affect private-sector jobs and futures in this region?
Of course, the public sector is hugely important in our country. The fact that we have well-funded hospitals, excellent schools and well-organised police forces is vitally important. But do you know what, whoever was standing here, this year they would have to be reducing public spending. The reason is that our budget deficit that we inherited was 11% of our GDP. Now, if we look at what has happened in Greece, if we look at what has happened in Ireland or we look at countries like Portugal, our 11% deficit was bigger than the deficit in Greece, bigger than the deficit at the time forecast for Ireland and bigger than the deficit in Portugal. So, whoever was standing here would have to making reductions in public spending. You cannot do all of this or even most of this by tax increases; if you do, it will be much more damaging to the economy.
So, the question is not whether we have to make reductions in public spending; it is how we make reductions in public spending. I would argue that what the coalition government has done is relatively protect capital spending - so the list of projects I gave you is going ahead - we are reducing welfare, which does not have a bad economic output and we are doing things like protecting the science budget. So I would argue that you have got to make reductions in public spending but we are doing it in a way that actually will make sure that we protect those things that are most helpful towards economic growth.
In terms of overdependence on the public sector, because it is clear the economic recovery has got to come from the private sector because the public sector has run out of money, it seems to be axiomatic, important, vital and obvious that you should focus the effort and the money that you do have on helping those areas that have a relatively large public sector and that may be adversely affected by public spending reductions.
So, as I say, these public spending reductions will be happening whoever was standing here, whoever was in government; the key thing is who is going to fire up the private sector best to help take on those people who lose their jobs and is that government going to focus its effort on areas which have relatively large public sectors. That is what we have chosen to do. As I said, it is incredibly sensible, very, very clear, and we have to make sure that it works.
Can I thank you all very much indeed for listening to my speech and for listening to Michael. We are now going to move to the more technical part of the day when you get some question and answer sessions and instructions from officials at the business department and elsewhere about how to make these bids work. Can I thank you for coming, can I thank the Manchester Chamber of Commerce for hosting us, and thank everyone for their vital work in making sure this Regional Growth Fund gets going, gets going early and really helps those parts of the country that will need it most. Thank you very much indeed.