Secretary of State for Wales: Callaghan Lecture
Cheryl Gillan speech and support of ninth Chambers of Commerce Business Week at St David’s Hotel and Spa, Cardiff Bay.
Introduction
Ladies and Gentlemen
It is a great pleasure to speak to you today and to support the ninth Chambers of Commerce Business Week.
Events such as this are an important reminder of the vital contribution you all make in building a strong economy and in creating jobs across Wales.
Before I start I would like to say a few words on behalf of my colleague Vince Cable, the Secretary of State for Business Innovation and Skills.
I know many of you will be disappointed that Vince has had to withdraw from speaking to you later this week.
He too is disappointed not to keep this engagement as he tells me Lord Callaghan was a very influential figure in his life.
But I am pleased to say Vince intends to come to Wales shortly and my office will be working on his programme.
For me, it is a particular pleasure to be speaking here at the St. David’s hotel on the edge of Cardiff Bay.
I spent the first ten years of my life in Llandaff.
What brought my family to Wales - as it did many others - was trade and commerce in the shape of the docks down here in the Bay, out of which my grandfather and great grandfather sailed.
Of course, the view today from the shores of the Bay is very different from their time.
Though, naturally, they would recognise the Pierhead building - just across the water from here - as a lasting symbol of Cardiff’s maritime and industrial heritage.
Cardiff Bay today is largely unrecognisable from the area Lord Callaghan represented with such distinction as the local Member of Parliament for 42 years.
Private enterprise provided the drive and energy for the thriving commercial centre that was the old Cardiff Bay,
And in recent years it has been transformed through private investment, in partnership with the UK government, the Assembly, and the local authority.
What is still an area of work and enterprise is now also a place of leisure, where the people of Cardiff and beyond come to relax and enjoy time with their families.
I never cease to be amazed by the scale of the change in Cardiff Bay.
It truly is a symbol of the modern Wales.
Vibrant.
Progressive.
Outward looking.
True to its past, but optimistic about its future.
It serves as testament to the ability of areas such as these, where traditional industries have declined, to regenerate.
To diversify.
And to emerge, phoenix-like, to a new and successful future.
It illustrates, too, what can be achieved when governments - national and local - agencies and the private sector work together.
It is a lesson that will serve us well in the months and years ahead as we strive for sustained economic growth, built on firm financial foundations and decisions taken in the national interest.
Economic backdrop
We need to be honest about the scale of the challenge we face here in Wales.
Wales is still the poorest part of the United Kingdom.
Our average wages are lower.
Our unemployment rate is still unacceptably high and over half a million people in Wales are classed as economically inactive.
We have nearly 100,000 children growing up in severe poverty
And at the same time, the UK as a whole faces staggering financial difficulties.
Such is the legacy that was bequeathed to us by the previous government that for every four pounds we currently spend, one is borrowed.
Increasing our national debt by £3bn a week.
We are already spending in debt interest around three times as much as the Welsh Block Grant
It doesn’t take a genius to work out that the more government borrows the more it has to repay.
This erodes confidence in the markets, and ultimately the economy as a whole.
Without confidence there can be no growth.
We risk higher interest rates
Hurting every individual, every family, and every business in the country.
With that comes higher mortgages and lower employment.
Doing nothing is simply not an option.
Even the previous Chancellor of the Exchequer acknowledged this when he spoke to you last year.
And Labour now find themselves in the rather bizarre position of opposing every reduction in public spending.
Whilst still being signed up to a policy of cutting an unspecified £44bn over the next four years.
I look forward to hearing what their new leader has to say about the financial mess they left us in when he or she is named on Saturday.
Because up until now they haven’t told the country where the cuts they were planning were going to be made.
We do not relish having to take these difficult decisions.
But we certainly will not shy away from them.
Whilst we may have inherited the problem, to fail to address it would be irresponsible.
And we would only have ourselves to blame.
We are not going to make that mistake and jeopardise this country’s future.
So in the first four months since taking office we have taken the unavoidable, but tough decisions the governor of the Bank of England and the G20 called for.
Our long term approach is building confidence in our future.
It’s not just about cuts.
We know the debts are huge.
Unchecked they would double to £1.4 trillion in five years.
£22,000 for every man, woman and child in the country.
That’s why we established the independent Office for Budget Responsibility.
It has set out independent forecasts that show the scale of the problem.
So people can see an independent assessment of the nation’s finances.
The Chancellor’s emergency Budget in June set out a comprehensive blueprint to eliminate the bulk of the deficit over the course of this Parliament.
The Comprehensive Spending Review next month will take this further.
Now, I speak to you at a time of some uncertainty.
Corporate social responsibility
We should be in no doubt that when the Chancellor stands up on 20 October to deliver the outcome of the Spending Review, there will be profound consequences for all sectors and for all parts of the country, including Wales.
But we will not allow the books to be balanced at the expense of those most in need.
The injustice of the failure to manage our economy means the poorest are often the most dependent on public services.
So we have been looking at the welfare bill and at individual benefits as part of our spending review.
We have done so in such a way that protects those protects those in genuine need.
That protects those with disabilities.
And protects those who can’t work.
But also encourages those who can work to get into work.
That is the purpose behind our welfare reform.
Likewise, we will not allow the problems we already face in Wales to be exacerbated by the tougher spending climate.
We will carry out the unavoidable deficit reduction plan in a way that works towards strengthening and uniting the country.
The Chancellor is right when he says Britain can get back on the road to economic recovery without sacrificing growth or becoming an unfair society.
Yes, the days of bottomless public funding streams and unfunded policy commitments are at an end.
In tough economic times it is vital we live within our means.
Those of you working in the private sector know that only too well.
So why should government and the public sector be any different?
Like recent developments here at Cardiff Bay, with governments and agencies working hand in hand and with, most importantly a strong private sector, we can rebuild our economy.
And emerge from the Spending Review period stronger than ever before.
The spending review will be focused on fairness and deficit reduction.
At the weekend the Chief Secretary to the Treasury announced further measures to meet these twin goals.
This includes making £900 million available to tackle tax avoidance, evasion and fraud.
Doing so will raise an extra £7 billion each year by 2014/15 from those who currently avoid paying their fair share of tax.
The changing economy
The stories of economic rebirth in Wales do not, of course, begin and end with the Cardiff Bay development.
History has shown how adaptable the Welsh economy is, as sectors have declined and others have risen in their place.
A largely agrarian economy up until the early 18th century, gave way to small scale industries.
From textiles and milling, to slate mining and, in the 19th century on to the heavier industries of coal mining and, later, steel and tinplate.
Wales was the cradle of the industrial revolution - a fact recognised when Blaenavon, not too far from here, was awarded World Heritage status by UNESCO.
I strongly support Merthyr Tydfil’s bid for World Heritage status because I believe it is right we recall its place in history and how in the 1800s it was the iron capital of the world.
We should remember too the miners, the steelmen, the labourers, the farmers, and the factory workers, who helped shape the world around us.
The decades since the Second World War saw a significant shift into service industries with many of these jobs, for the first time held by women.
And in recent decades we have seen growth in other sectors, with an influx of foreign investment during the 1980s and 90s leading to further employment in high-technology, in aerospace and others.
Here, as in my own world of politics, women are making progress.
I was pleased to meet the apprentice of the year at Airbus last year-a very capable woman making a contribution to a great industry.
Today, further areas are gaining prominence.
Tourism.
Energy.
The first shoots of green technology.
As well as the burgeoning creative industries, which I had a chance to see firsthand on my recent visit to the new BBC drama village just across the water from here - as well as to the studios of all our broadcasters operating in Wales.
It is clear there is a wealth of talent in Wales and the Welsh workforce has shown itself to be supremely adaptable over the years.
The ingredients for rebirth and regeneration are there.
We need to do all we can to encourage businesses to see what I see - a country ready for investment and ready for work.
To put an end to the scourge of long term unemployment that has blighted so many families and communities for far too long.
It is vital, not only to get through these tough economic times but also to emerge stronger from them.
And that the companies responsible for creating the jobs of the future are given the right conditions to grow and to flourish.
Support for business
I believe our recovery needs to be led by you, the private sector
The public sector is a vital employer. And I have no wish to denigrate the fantastic job that our public servants do
But with over a quarter of the Welsh population employed by the state, everyone must acknowledge that the size of the public sector in Wales is unsustainable.
It is only by growing and developing our private sector that we can rebalance our economy.
And at the same time reverse the years of social and economic decline.
We already have some real success stories in the private sector in Wales.
Recently I visited the liquefied natural gas terminal at South Hook near Milford Haven.
The company estimates the terminal injects in excess of £1bn into the local economy and has created significant job opportunities in Pembrokeshire and the surrounding community.
Its value cannot be overstated.
Nor can that created by firms such as Ultrapharm.
A company which relocated from England to Pontypool and has doubled its workforce in two years.
And which recently landed a lucrative contract to provide gluten-free products to Marks and Spencer.
Firms like Admiral lead the way in what Wales can achieve.
A model employer.
With record profits.
And ambitious plans for the future, including a new HQ in Cardiff housing 3,000 staff.
We should celebrate the fact Admiral is a FTSE 100-listed company.
But we should also be asking why it is Wales’ ONLY FTSE 100-listed company.
We should also be asking why major investors like Bosch have moved out of Wales after contributing so significantly to our economy for more than a decade.
Asking what more could have been done to keep them here.
And creating the right economic conditions to make sure we retain investor confidence in Wales.
We need to nurture our home-grown businesses with an environment that helps them to succeed as well as attracting companies from abroad by making Wales a truly great place to do business.
This is why we are reforming the corporate tax structure, aiming to have one of the most competitive tax regimes in the G20 within the next four years.
It is why we are simplifying business regulation with a ‘one in, one out’ rule that means new regulations can only be introduced if another is removed.
And why we are looking at “sunsetting clauses” to ensure that regulations only stay in force as long as they are needed.
It is why we are reforming the banking system, to ensure that viable SMEs have access to the vital flows of credit they need to compete and to expand.
However, it concerns me that only this week it was reported that the amount of bank lending to UK manufacturers has barely changed in the past two months.
This despite the government and business leaders stepping up calls for banks to relax borrowing to business.
Inward investment can, as in the 80s and 90s, be a vital part of our recovery too, providing sustainable, highly skilled work.
The likes of Airbus, Corus, Sharp have made a huge contribution to Wales and we need to do all we can to send out the message that Wales is open for business.
I am certainly encouraged by the 3,400 jobs created in Wales last year directly as a result of foreign investment, but we need to do more.
I will be meeting shortly with Lord Brittan, the government’s new trade adviser, to discuss how we can bring new investment into Wales.
And working with Business Secretary Vince Cable, the Foreign Office, and the Deputy First Minister to further define how we maximise opportunities for Wales of foreign investment, business and trade.
We must also look to increase our export market.
At its peak, Cardiff was the largest coal exporting port in the world.
It is said the first £1mn cheque was written at the Coal Exchange building not far from here during a transaction at the turn of the 20th century.
No-one can deny that the days of large-scale coal and steel exports have gone.
But that doesn’t mean we can’t look to export.
We also need to ensure that more is done to encourage entrepreneurs and start-ups in Wales.
It is frankly unacceptable that levels of business start-ups in Wales are not only amongst the lowest in the UK, but that they have been falling since 2004.
In the Budget, the Chancellor set out certain measures to address this issue.
Such as a freeze in National Insurance on the first ten employees of start-ups outside London and the South East.
And the extension of the Entrepreneurs’ relief rate from the first £2mn to the first £5mn.
But we need to go further, engendering a real entrepreneurial spirit in Wales, capable of creating jobs and wealth for the future.
We need events like the Fast Growth 50, which celebrates the success of rapidly growing Welsh businesses.
And we need to ensure this spirit and belief exists not just amongst our current business community.
But also amongst our young people, as the recent Skillscymru event at the Millennium Stadium highlighted.
It must filter through our universities, through our schools and our local communities.
There is a role here too for businesses who can often reap the benefits of in-house training and apprenticeship programmes.
Working together
Now, you will know that we as a government do not hold all the levers in this regard.
Education, as well as a good deal of business support, is a matter for the Welsh Assembly government.
It is absolutely vital, therefore, that the relationship between the UK government and WAG remains strong.
That we work together, setting aside political differences, to really deliver for Wales.
My first phone call after the release of last week’s unemployment statistics, was to the Deputy First Minister.
To discuss not only the welcome fall in the unemployment rate, but how best to tackle the slight rise in Jobseekers Allowance claimants.
A matter on which I am also engaged with the Secretaries of State for Work and Pensions, as well as for Business Innovation and Skills.
Almost every issue affecting Wales requires, to a greater or lesser degree, interaction between governments and government departments
And I made clear in Opposition that I believe the Wales Office has a vital role to play in this
In my first few months as Secretary of State, I have tried to ensure the Wales Office takes on a far more active role in facilitating relations between governments, and also between the UK government and Wales more broadly.
It should lubricate and simplify relations.
It should ensure that policies on either side of the border dove-tail, while accepting that devolution CAN mean doing things differently.
Or that policies instigated by the UK government in non-devolved areas are properly targeted and deliver for Wales.
I have a vision, too, for the Wales Office as a facility for the Welsh people and Welsh businesses, large and small.
To help champion their cause and to be a voice for them in the heart of government.
Conclusion
We are all aware that we face some difficult challenges in the coming months.
The unavoidable action the government is taking will, of course, lead to far more straitened times in the public sector.
But as a government, we have been clear from the outset that we want to act not just for the short term but for the medium and long term good of the country.
There is a horizon beyond the immediate pain of the Spending Review.
And we have an opportunity to once again rebalance our economy in Wales
Away from public subsidy.
And towards successful and sustainable enterprise.
We all have a role to play in that.
The UK government.
The Welsh Assembly government.
Councils.
Communities.
And you, the business community.
As a government we will want to provide conditions for businesses to flourish, creating wealth and employment.
And to provide incentives for people to get off benefits and back into work.
Like Lord Callaghan knew, I also know we have the talent and drive in this country
Our capacity for rebirth and regeneration is without question.
Just look outside.
I have no doubt if we all work together towards this goal, we will rise to the challenge of the times ahead and emerge to a strong and successful future.
Thank you.