Below is the text of Mr Major’s speech made to the Aberdeen Chamber of Commerce Dinner on Monday 9th September 1991.
Thank you, Mr. President, for your kind introductory remarks.
It is a great pleasure to be with you this evening. I very much welcome this opportunity to meet representatives of the business community here in North East Scotland.
This Chamber is well-known as a sturdy champion of local business in Aberdeen and Grampian. Firms in this area benefit substantially from the high standard of service which the Chamber provides for its members. I am particularly impressed by the way that the Chamber has capitalised on the economic opportunities which have come to Grampian in recent years.
A Chamber of Commerce that makes the most of these opportunities is truly serving the interests of its members and the wider local community.
But industry in Grampian – even the international oil and gas industries – can only flourish in a strong domestic economy. And a strong domestic economy requires the defeat of inflation. Control of inflation has been and remains the Government’s main economic objective. We promised we would beat inflation. It is a battle we are winning and will go on winning.
Headline inflation has been virtually halved since last October. It is now down to 5.5 per cent, the lowest figure for 3 years. Moreover, the underlying rate of inflation has also fallen dramatically – down by 2 3/4 percentage points since last autumn. Make no mistake: inflation will continue to fall in the months ahead. We are now firmly on course for inflation of 4 per cent by the end of this year.
Over the last year, inflation has risen in most other EC countries. In the UK it has fallen significantly. And by the end of this year I expect our inflation rate to be below the EC average. Indeed, our inflation rate may well be lower than that of Germany.
As inflationary pressures have eased, so interest rates have come down. Not just once or twice. But 8 times since last October. Only last week, the conditions were right for a further 1/2 per cent cut. That took our base rates to 10 1/2 per cent – the lowest level for over 3 years. Even before the latest reduction is passed on these cuts will have been saving business £5 billion a year. And the typical £30,000 mortgage payer is £65 a month better off than last year.
If the Government had predicted last autumn that inflation would be halved; that sterling would remain strong against the deutschmark; and that domestic interest rates would fall from 15 per cent to 10 1/2 per cent, we might have been accused of excessive optimism. Indeed, our opponents might well have put their scepticism in stronger language. For that remarkable combination of a steady exchange rate, falling interest rates and falling inflation is just what we have achieved.
Yet the battle against inflation is being won at a time of great economic difficulty for many. The United Kingdom economy has been passing through recession. It has been painful for many individuals and many businesses. That recession is of course by no means confined to the UK – North America, France, Italy, Australia have also seen falling output. Yet, however international its coverage, that is no consolation for all those who have been hit hard here at home.
We cannot be absolutely sure whether the recovery has started because we only get the figures some time after the event. However, there are some encouraging, if still highly provisional indications, that recovery is now underway. A number of recent press articles have drawn attention to the pick-up in retail sales, the excellent recent growth in exports and to higher than expected sales of cars. And even before the latest reduction in interest rates business and consumer confidence has been steadily improving. I remain confident that we will see a recovery in the second half of this year.
The Scottish economy is of course closely integrated with that of the United Kingdom as a whole. And it would be surprising if wider trends at United Kingdom level were not observed here in Scotland. Yet the pattern is by no means the same. All the evidence suggests that the current economic downturn will be shorter and shallower in Scotland than in the United Kingdom as a whole.
Over recent years, the Scottish economy has achieved remarkable success. Between 1986 and 1989, Scotland had a faster rate of economic growth than Germany, France, Italy, the Netherlands and Denmark. Final figures for 1990 are not yet available. But independent forecasters take the view that Scotland out-performed the United Kingdom economy in that year. It is likely to do so again in 1991 – convincing evidence of the strength of the Scottish economy and its resilience in times of difficulty.
There are many reasons underlying Scotland’s economic success. The calibre of its people. A unique highly-respected education system. Its independent financial sector. A long tradition of skill, innovation and enterprise. But let me focus on just two striking features of recent performance.
First, inward investment. Two years ago, the value of new projects attracted to Scotland reached an all-time high. Over the last year, Scotland has secured inward investment decisions worth some £400 million and 10,000 jobs. In a year when we were hit by the Gulf War and the slowdown in the world economy that surely speaks volumes about the attractions of Scotland to international mobile industry. I am confident that that proud record will continue in the years ahead.
Second, the resurgence of offshore oil and gas activity, centred here in the North East.
The rapid growth in North Sea activity last year set new records. Exploration and appraisal activity on the UK Continental Shelf reached its highest ever level. Spending committed to new projects was also at a new record. And so was the value of new orders placed for goods and services. Despite increasingly intense competition – particularly from Europe – UK companies’ share of that total was also a record. It rose by 50 per cent in a year to £4.78 billion.
The pace of recent developments and the continued high discovery rate means that a new peak in combined oil and gas output is now expected by the middle of this decade, with welcome implications for Grampian, Scotland, and the wider UK economy.
Last year, gas production hit a new record [of some 50 billion cubic metres]. Output is now expected to continue to grow strongly for the rest of the decade. With completion of the new gas pipeline tying the Beryl and Brae fields to St. Fergus, and the development of the large gas condensate Bruce field, gas supplies landed through St. Fergus will increase substantially within the next couple of years. The development of central and northern North Sea gas condensate fields like Bruce and East Brae signals a wholly new phase in the development of the UK’s gas resources.
Oil exploration so far this year remains at very high levels: I am told that the North Sea has now overtaken even the Gulf of Mexico as the highest area of offshore drilling activity anywhere in the world.
And oil production is expected to pick up again following completion of the outstanding safety work associated with the Cullen Report. The Piper field itself is now expected to be back on stream ahead of schedule by early next summer, with a new platform incorporating all the safety and engineering lessons learned from the Piper Alpha disaster. As other significant new oilfields like Saltire and Scott come on stream, total oil production should climb steadily over the next three to four years towards a second peak very close to the previous record set in the mid-1980s.
Until comparatively recently it was still widely assumed that Britain’s self-sufficiency from oil production in the North Sea would be lost by the early 1990s, and that production would fall away steadily thereafter.
These developments provide a clear vindication for our approach to the oil and gas industries. A flexible and attractive tax regime. Non-intervention – leaving the market to make the necessary adjustments to oil price changes. By our approach I believe we have helped ensure that the UK will remain a major oil and gas producer until well into the next century. We helped to create the conditions which have enabled Scotland’s offshore supplies industry to write one of the most remarkable technological success stories in the history of this century.
But there is of course more to Grampian than oil and gas. Long before oil was discovered in the North Sea, Grampian was justifiably noted for the quality and natural produce from its countryside. The Aberdeen Angus, the golden Glenlivet malts, the fish harvested from the dangerous waters of the North Sea. I have seen some of these products already today when I paid a most useful and enjoyable visit to the Knockando Distillery on Speyside. So interesting was it that my staff are encouraging me to sample (and I choose my words carefully) the distillery again – and again – and again.
Industries such as these provide crucial employment in rural parts of Grampian and elsewhere in the North of Scotland. We in Government recognise the importance to those areas of the continued success and prosperity of a range of industry.
Earlier today, I launched formally Grampian Enterprise Limited, the local enterprise company for the North East. I was struck by the feeling of purpose and commitment which I sensed. The calibre and enthusiasm of Ian Wood and his colleagues are impressive. The staff are clearly committed to Grampian too. I am delighted that through the Scottish Enterprise initiative, the Government have provided the opportunity – and the resources – to enable business people to give a grass-roots lead to training and economic development in Scotland in this way.
The opportunity is indeed immense. It gives business people the chance to shape the provision of economic development and training programmes to suit local needs. But it is potentially much more significant. The initiative puts business in the key position to lead the skills revolution which our economy needs. It provides an opportunity to influence the thinking and the planning – and thus the competitiveness – of the myriads of companies which make up our economy and which determine its performance.
Governments cannot do that. But we can provide the resources – the Scottish Enterprise budget for this year is £450 million – for business people to deliver the results. I know that those who have given so much of their time to get the enterprise companies off the ground can rely on their colleagues throughout industry and commerce to feed in ideas, support, and fresh perspectives. I am sure that you will play your part in making the initiative a success.
Mr. President, there is much more that could be said about the economy of Scotland and of Grampian in particular. You may well be relieved to hear I do not plan to say it.
But there is one strand which sums up the message I would leave with you tonight. It is this; Grampian and Aberdeen have certainly had a great deal going for them – perhaps even more than other parts of Scotland. But their success is not, I believe, due to that alone. It is because they have made the most of their opportunities. The efforts of individual people and individual businesses have been paramount. That is why, Mr. President, I have very much enjoyed being with you and your members this evening. It is precisely the qualities which I see around me here that I want to foster not only in Scotland, but in the rest of the United Kingdom and indeed in Europe.
I thank you, Mr. President, for your hospitality, and wish you and the members of the Chamber every success for the future.