Speech by the Chief Secretary to the Treasury.
Good afternoon and thank you for inviting me to speak here today.
It’s a pleasure to be speaking with so many senior professionals in the investment relations profession.
Investors that are critical to securing our economic stability, promoting our economic recovery, and restoring UK economic prosperity.
We know that’s not an easy task in the current environment.
But in the two years the Coalition has been in office, we have already achieved a huge amount.
First and foremost, cutting the deficit by a quarter from its peak.
Safeguarding our economic stability.
And securing record low gilt yields, helping millions of businesses secure loans, and families pay their mortgages.
It’s that resolute commitment that has secured our economic stability and kept us insulated from the storm that engulfs our nearest neighbours.
And it’s that stability that is the vital precondition of growth.
Tackling the deficit is a central plank of our strategy for restoring the UK economy to good health.
But fiscal rigour is just one prong of this Government’s economic strategy.
As well working tirelessly to stabilise the public finances, we have also put in place a bold strategy for growth and economic reform.
- A strategy that includes building the most competitive tax system in the G20
- Making the UK one of the best places in Europe to start and grow a business
- Boosting export to secure a more balanced economy
- And ensuring that we invest in our infrastructure and the skills of our workforce to secure growth not just now, but for decades to come.
It’s a strategy that puts business, enterprise and innovation at the heart of our economy.
A strategy for sustainable growth, that supports the ambitions of the private sector right across the UK.
A strategy that makes the UK one of the best places in the world to invest.
Let me take competitiveness first.
In the decade before we came to power, UK competitiveness had slipped dramatically…falling out of the top 10 according to the World Economic Forum.
We are reversing that decline.
Because of the changes that this Government has already made, we’ve already broken back in to the top 10.
But we are going even further in the years ahead.
Cutting the headline rate of corporation tax to 22% by 2014.
A rate that is the lowest in the G7, the fourth lowest in the G20.
A sign that we are open for business.
An invitation for investment and a spur for prosperity and job creation across the economy.
Reducing income taxes especially for people on low and middle incomes.
Furthermore, we are lifting layers of bureaucracy that continue to suffocate our most entrepreneurial start ups.
To date the Red Tape Challenge has reviewed nearly 1500 regulations over half of which will be scrapped or improved.
Last year alone the Government saved business over £3bn a year in reduced regulatory costs.
For the same reason, we are also overhauling our cumbersome planning rules.
Through our reforms we will embed a presumption in favour of sustainable development…and we will replace 1000 pages of guidance with just 50.
Access to finance
At the same time, as we remove the barriers to growth, we also need to help ensure that businesses have the finance to fuel their success.
Of course, in an uncertain environment, banks across the board are de-leveraging and repairing their balance sheets.
It’s absolutely right that they do so, unwinding the excesses of the last decade.
But where there are strong, successful and ambitious businesses looking for finance, we are making sure that they can get it.
It’s why we secured agreement with the big UK banks to provide £190bn of new lending to UK companies in 2011…£11bn more than the previous year.
And it’s why we have also announced a new National Loan Guarantee Scheme to give smaller businesses access to cheaper loans…
A vital step to mitigate the impact of ongoing Euro area uncertainty on the costs of funding for UK banks.
Using our balance sheet to help our record low gilt yields feed through to market rates for businesses across the UK.
And in the year ahead we are going even further to broaden access to finance.
Encouraging businesses to capitalise on non-bank lending channels.
Helping to address the ‘equity gap’ that confronts many SMEs in the UK.
And ensuring that businesses can secure the investment they need to seize new opportunities not just here in the UK, but in some of the fastest growing economies in the world.
The last two decades have been an unparalleled period of growing global interaction and trade.
The financial crisis laid bare just how interconnected the world had become.
And when we talk of economic challenges, it’s impossible to ignore the global dimension.
But at the same time, when we talk of economic opportunities, we have to look at the unprecedented potential beyond our own borders.
In particular, as China grows at 9% and India at 7% a year…we are investing more time and more effort than ever before, to support British companies to expand in high growth markets around the world.
We are focusing our embassies around the world on commercial diplomacy.
And bolstering UK Trade & Investment with £30m of extra funds to enable it to support a further 25,000 SME exporters every year, and £10m to support midsized exporters seeking to enter new markets.
Our ambition is to double British exports to £1 trillion a year by 2020, with most of that growth coming from increased trade with emerging powers.
Over the last year, the value of UK goods exports to India grew by 40 per cent, and China by over 20 per cent.
In the first quarter of this year, the UK exported more cars than it imported for the first time since 1976, driven by strong demand from the US, Russia and China.
And we are building on our unparalleled strengths in the financial services to develop and promote London as a home to the offshore RMB market.
But the opportunities flow in both directions.
Just as we are encouraging our businesses to reach out to world markets.
We are eager for global investors to invest in the UK.
Through UK Trade & Investment we have redoubled our efforts to broadcast “Britain is Open for Business”.
And the Olympics and Paralympics later this year afford an unparalleled opportunity to showcase the UK’s industry, skill and entrepreneurial ambition.
Running alongside the Games we’ll be hosting the Global Business Summit to bring together global investors and local businesses to build the kind of success that we’ve seen in the last year.
Becoming the number one destination for inward investment from Kuwait and Qatar.
£1.5bn of investment by Tata owned Jaguar Land Rover in new technologies and products at Halewood, providing 1000 new jobs.
Thai investment in the Redcar Steelworks in the North East, kick starting steel production there for the first time in two years.
And two weeks ago, over £1bn of investment from General Motors to support over 2000 jobs through renewed car production at Ellesmere Port near Liverpool.
That’s global investment securing local jobs, and boosting manufacturing in every part of the UK.
It’s exactly the kind of global investment we also need to help fulfil this Government’s ambitious infrastructure plans.
Investment that we know is critical to boosting growth and productivity across the economy.
Even at a time where we are tightening the purse strings, we are committed to replacing and renewing our ageing infrastructure network.
For example, this Government has found the money, even during this period, to increase investment in our transport infrastructure.
The challenges are significant…replacing around a fifth of the electricity generation that is due to come offline in the next decade…meeting our low carbon energy targets…and relieving pressure on congested road and rail networks.
But the UK is no stranger to pioneering and world beating infrastructure.
Our infrastructure used to be one of the most advanced and innovative in the world.
The first locomotive passenger-carrying railway, the first underground railway station, and the first high voltage electricity distribution…all brought to life here in the UK.
Even today, parts of the UK infrastructure network compete with the very best.
Our electricity transmission network is the most reliable in the world, with amongst the lowest prices in Europe.
And our broadband coverage compares well to other Western European countries.
We know the industry has the skills, we know investors have the appetite, and this Government is demonstrating its ambition to develop world class infrastructure right across our network.
National Infrastructure Plan
Through the National Infrastructure Plan we are the first British Government to take a strategic and coherent look across our infrastructure network to provide a strategic plan for renewal.
It’s a plan that sets the stage for some £250bn of investment over the next decade, and provides details on a long term pipeline of over 500 public and private infrastructure projects.
It includes commitment to new spending on our part.
The biggest rail investment programme in the country since Victorian times
Over £1bn to tackle congestion on the national road network.
£100m to bring world leading superfast broadband and wifi connections to ten super connected cities across the UK.
And £3bn towards the initial capitalisation of a Green Investment Bank 3bn.
Investment that will deliver vital improvements to our infrastructure network, stimulate new local and national economic growth, but also unlock vital private sector investment.
Private Sector Investment
We cannot meet the UK’s infrastructure needs through public spending alone.
Private sector investment is critical to realising our ambitions.
The detailed infrastructure plan, and our upfront commitment to investment aims to provide private investors with the clarity and certainty that investors have consistently demanded from Government, and rightly so.
Infrastructure investment has a long lead time and pay back period.
Investors and constructors need long term confidence, certainty and stability if they are to invest in infrastructure.
At a time of market instability, where returns on most types of investment are volatile and uncertain, investors across the board are looking to de-risk and secure long dated income producing assets.
Infrastructure investment has the potential to offer those secure, sustainable and long term returns that institutional investors are looking for.
That’s why are working closely with UK Pension schemes to help develop and support a new Pension Infrastructure Platform to facilitate new investment in UK.
That platform came into existence in March, and we expect the first £2bn of investment by the beginning of next year.
Moreover, we have also established an investors’ forum with UK life and insurance funds to unlock further investment.
Looking, for example, at how we can make UK infrastructure investment a more standardised asset class for funds to invest in.
But this isn’t just about domestic investors.
There are huge opportunities for international investors as well.
Be it Japanese investment in the Gunfleet Sands Offshore Wind Far.
Abu Dhabi Investment Authority investment in Thames Water.
Or most recently by the China Investment Corporation investment in the same company…the CIC’s first major investment in Europe right here in the UK.
As Lou Jiwei, Chairman of the CIC said in the FT, investment in infrastructure represents a “win-win” situation for all.
Providing investors with solid returns over a long period and opportunities to diversify away from Government yields
Providing the UK with the investment we need to galvanise our recovery.
We are eager to build on that strong foundation and promote greater inward investment in the huge array of infrastructure opportunities in the coming years.
- Opportunities such as the High Speed 2 rail link from London to Birmingham
- The Thames Tunnel project to create a cleaner, healthier River Thames
- Significant investment in offshore wind energy development
- And a major programme of investment in new nuclear power stations
- And regenerating the Battersea Power Station site in London and supporting an extension of the Northern Line.
As a Government we are committed to bring our full attention and our full weight to bear on delivering these ambitious plans.
In the National Infrastructure Plan, we identified the top 40 projects and programmes of national significance that will most support economic growth.
And I am chairing the Cabinet Committee responsible for overseeing those projects…
Whatever the hold up, whatever the problem - regulation, procurement, planning - if we can help unblock it, we will.
It’s my job to make sure Whitehall keeps it foot on the gas, and delivers on time and on budget.
This year we have already confirmed our decision to proceed with the High Speed Two rail link
We have agreed to support Network Rail to invest a further £130 million in the Northern Hub rail scheme - subject to value for money.
We have announced the 10 cities that will share £100 million of public funding to deliver ultrafast broadband coverage to 1.7 million households and 200,000 businesses, along with plans to extend mobile coverage to 60,000 rural homes and along at least ten key roads.
And since the beginning of 2011, the Government has granted development consent for 18 energy generation projects - including a biomass project at Stallingborough in Lincolnshire just last week.
It’s exactly the kind of resolve and determination that we need, facing the tough economic conditions that we do.
And it’s matched by right across Government as we drive through a bold programme of economic reform to return the country to prosperity.
- Tackling the crippling legacy of debt
- Restoring our competitiveness
- Boosting private sector growth
- Investing in our infrastructure
- And making the UK one of the world’s most attractive destinations for inward investment.
All of you here have a critical role to play in helping secure the UK’s economic recovery, and I would like us to work together towards that goal.
I look forward to hearing what more we can do to promote greater investment in the UK, and I look forward to working with you in the years to come.