Below is the transcript of Mr Major’s speech in Aberdeen, given on 9th September 1991. [Parts of the transcript were unclear, and are marked with ….]
Can I say thank you for the opportunity of meeting you all here this evening. I have spent the day in Aberdeen and the area and it has been a very worthwhile day. One of the pleasures of being Prime Minister is that you are able to escape from London and I do belong to those species of politicians who do not believe that the world begins and ends in the Greater London area.
So it has been an intriguing day from the Cardon [phon] distillery, to schools, the Chamber of Commerce, the lunchtime speech to the Aberdeen Press and Journal and also to open Grampian Enterprise’s new building where they are going to produce all these splendid … and other ideas of Scottish enterprise that are going to provide so much training for us in the future.
So I have had the opportunity of getting a very clear bird’s eye view of much of what is happening up here and from my point of view it has been an immensely worthwhile occasion.
Let me just say a brief word or two about one or two of the matters that are still to come in the months … the rest of this year. And no I am not going to talk about the general election.
Let me say a word about the progress of the economy as where I think we now are. Across the United Kingdom as a whole the recession has been quite deep, it has been deeper I think it is fair to say than we anticipated at the start or indeed had anyone anticipated, it has been uneven. Contrary to the pattern in recessions that we have seen almost as far back as you can go, the deepest part of it has been in the south and the east because predominantly that was where the largest borrowing was and that therefore was where the largest impact was with the monetary policy as we sought to end it.
The way it now happens I think is for a sufficiency of months to be absolutely certain … but I think it has been happening for a sufficient number of months to be absolutely certain about it … is that we are I believe increasingly clear that we are through the worst of the recession and that we can now look forward to the regeneration of confidence in the months ahead.
There are several things I believe that makes that perfectly clear and the first of those is the direction of inflation and by inflation I do not just mean the Retail Price Index, important though that undoubtedly is, I mean the trend of underlying inflation as well. That has been dropping now for some months and it is clear we have it by the scruff of the neck and it will go on dropping in the months ahead. It is very likely that we will have a lower inflation rate than Germany at some stage between now and the end of the year and we have not had that for very many years indeed.
The second matter which I think is increasingly impacted upon the business mind if not the public mind is the effect of having joined the Exchange Rate Mechanism. In the last year, since we joined it when I was Chancellor last October – and I am bound to say it seems longer, I cannot think why – but in the year since we joined it last October we have seen interest rates in the United Kingdom come down by 4.5 percent, we have seen them rise in Germany and many other parts of Europe, and yet sterling, despite this dramatic narrowing of interest rate differentials has stayed absolutely stable around its central point of 2.95 deutschmarks.
Not many people expected that to happen but I believed that it would and thus far at least events have shown that that was the right judgment.
So we are increasingly getting to the position where we have a stable exchange rate, which is one of the key ingredients that the business sector repeatedly have said to governments that they need, they need to be clear where they are on the exchange markets, increasingly that is the case. We now have inflation coming down as well so we have two key ingredients that are critical to business confidence.
The third one is where we have had so much problem in the months that have immediately gone past, there has been a decline in consumer confidence and consequently in spending and consequently in the market for your products whether in the retail sector or in many parts of the country though that is so I know in Aberdeen for other reasons in the construction industry.
But there are signs now that consumer confidence is reviving, this morning’s figures I think tend to indicate that, but there have been other leading indicators as well. And if that is correct, and I think the balance of probability is that it is correct, we will be having another of the ingredients in place that we need to return to sustainable growth and that is the return of consumer and investor confidence.
Now if those three factors are in place – the stable exchange rate, the falling and thereafter low inflation rate and the return of consumer confidence – we are going to find ourselves very well placed indeed for an upturn in the economy in the year ahead.
Some people say will it be speedy? Well I would say to you, though it will seem to you I daresay a curious thing for me to say, I hope not too soon because what I do not want to see is the economy coming so speedily out of the recession that we have had that we create that hump and collapse that we have seen so frequently in the past, that boom and stop scenario. I do not want that, I want a gentle and sustainable, sustainable, growth out of recession in the months and the years ahead and that is what we are gearing policy to achieve.
But apart from the fact that I think that is the most stable way to move the economy out of recession, it is also the most sensible way if we look at what we actually need to achieve in the 1990s. Out there is a more competitive world day by day than we have ever known before in our history as a great trading nation. All over the world people who were tame and happy recipients of our products and expertise years ago are now our principal competitors, all the way across south-east Asia you see the most immense changes in attitude, in producing techniques, in management skills, areas where we had huge markets and now we must fight not only for those markets but against those people for other markets.
And then you see the changes there have been in Latin America and elsewhere. We are in a world where the most competitive and the most efficient have tremendous horizons and where the uncompetitive and the inefficient have no horizons whatsoever because these days if you are not efficient and you are not competitive and you do not provide what people want then you will not survive let alone thrive in the 1990s. In Europe there is a special point to be made and that is the fact that we will soon have the Single Market completely in operation, we will have an open more liberal market across Europe than we have ever seen before, it will not be perfect but it will be a good deal better than anything that has been in place. And the countries and the businesses that will scoop the pool in that huge and rich market are the efficient ones that a stable economy, sustainable investment, sustainable growth, low inflation and the right business climate in order to have the confidence to go out and seek and win those markets.
That I believe is a huge prize, it is a prize that I am not prepared to take any risks with and that is the essential reason that I say we must come out of this bitter and nasty recession at a sustainable pace to give industry and commerce the right climate to capitalise on those opportunities in the 1990s.
It is interesting, is it not, … I gave you some illustrations a moment ago in terms of what is happening in other parts of the world but we have seen politically as well the huge changes that are taking place in Eastern Europe and the great changes in terms of technology, many of the things that people will buy as their everyday consumer durables by the turn of the century, probably the majority of those things that they will buy have not yet been invented in the early 1990s. That is the pace of change and particularly technological and innovative change that we are actually seeking to live with at the moment and the environment in which we have to ….
So it is an exciting time, it is a time when the opportunities are different and a time when if we get the economic management wrong you will not be able to take advantage of those opportunities, that is why I will be cautious in bringing us, with Norman Lamont, out of the recession. But I do believe we are coming out of it in the right way and I think because of the survey released this morning, added to the earlier evidence we have seen, are the clearest opportunity that that is actually what is happening.
So 4 percent inflation by the end of the year is a target, a target that now I am confident we will meet and perhaps beat .. and that is I think a very happy and worthwhile development.
So let me just say in conclusion how pleased I have been to have the opportunity of speaking to some of you and soon to have the opportunity of meeting more of you. I am aware of the work of the Chamber of Commerce out in the area, I know how many companies are members, I know the opportunities that you will have to work with the Chamber of Commerce to exploit the export markets that I have mentioned.
I would just say to you opportunities are there if we have … and the skill and the enterprise and the courage then we must take those opportunities and build for ourselves in the 1990s a business structure and a prosperity structure for this and the next generation on a scale we previously had not imagined and had not seen. I wish you well.