The Rt. Hon. Sir John Major KG CH

Prime Minister of Great Britain and Northern Ireland 1990-1997

1995Prime Minister (1990-1997)

Mr Major’s Speech to the Institute of Civil Engineers – 17 July 1995

Below is the text of Mr Major’s speech to the Institute of Civil Engineers, made in London on Monday 17th July 1995.


Well Nick, thank you very much indeed and thank you for inviting me this evening. I apologise for being a few moments late and for leaving pretty rapidly when I have finished speaking to you. I am afraid other events some way beyond our shores have been capturing my attention today, and will do later on this evening and I am sure you will understand that.

Nonetheless, I wanted to take the opportunity of coning here this evening to talk to an audience both concerned with, and involved in, manufacturing and construction. And I do that for the reason that Nick set out. There is no doubt in my mind that Britain’s prosperity depends upon the success of our industries today and in particular our manufacturing industries.

I don’t take the view prevalent in some quarters that manufacturing is of secondary importance, I think it is of primary importance. I dislike it intensely when I pick up things in the shops that say made somewhere else, when I believe it should be made here, and I dislike intensely being abroad and finding things not with a Made in Britain label. Nothing has given me greatest pleasure in the last few months than the truly remarkable performance of our exporting industries, not least our manufacturing exporting industries.

So I will turn to some of the points that Charles Gallagher made on housing in a short while, but what I would like to do is to start by saying a word or two about how wider economic policy impacts upon manufacturing, and then of course upon home building, road building and the other sections of the construction industry.

I know that the last few years have not been very easy for many people in industry. Some were hit by the roller coaster on which the British economy rode in the late 1980s and at the beginning of the early 1990s. A roller coaster, if I may say, is something that we have seen all too often in the period since the Second World War. And I know the difficulties that many people have faced.

But I would like to test upon you an instinct that I have. Ever since I was a small boy growing up, I have seen the British economy in boom and bust, boom and bust, boom and bust, as it has ridden that sort of roller coaster. And I have to say to you that I don’t believe during those years we have gained as a result of that, I don’t believe we have gained because of artificial stimulus and then coming out of the boom and into a low.

What I wish to see, and what economic policy is geared to, and this is partly why things have been held so steady after the last few years, with the reward still to come, is a position in where we have low inflation and steady growth, not for 1 or 2 or 3 years, but as a continuum year, after year, after year, to [indistinct] the right sort of backcloth against which we can get the right sort of investment to ensure that British manufacturing industry is profitable, not just in cycles but continually. So my overriding economic concern has been to put an end to the sort of boom and bust cycle which in my judgment has bedevilled our country for decades. And it is because of that, it is now I think widely acknowledged, that hidden behind the pain of the recession and the turmoil of politics, the underlying health of the British economy has made very remarkable strides over the last few years.

And I think it is just worthwhile setting out some of those changes. We hear so much, we read so much, about the things that are wrong and the things that need to be done. It isn’t a bad idea occasionally just to take an audit of the things that have been done and the things that are going right.

We now have the fastest growing economy of all the major companies in Europe and there is every sign that that is likely to continue – the highest growth last year, perhaps this year, and continued growth at trend or above trend rate in the year after that. Total industrial production up by more than 3.5 percent in the last year and is now at record levels, above the levels at the height of the boom in the late 1980s. Not, I know, a perception, but in fact the reality.

Unemployment in this country has fallen by two-thirds of a million since 1992. No other country in Europe has begun to approach that level of reduction in unemployment and we now have one of the lowest unemployment rates anywhere in Europe and in many countries beyond it.

Manufacturing productivity has grown steadily throughout the 1990s, up a further 3 percent in the last year. The CBI report showed that export orders were at their highest levels for 18 years. And about 9 months out of the last 14 or so we have seen new record levels set for exports. Exports in the three months to April were no less than 9.5 percent higher than the year before, and in the same period imports grew just by 2.5 percent.

There aren’t many people sitting in this room who can remember when last we had that set of economic circumstances. It may just sound like a statistic to say that exports are up, but it means manufactures are up, it means people are in work, it means the cotton mills are spinning, it means we are actually making things that people are prepared to buy at the price at which we are selling them. And we are now in the United Kingdom hugely competitive.

And that hasn’t happened by magic, it hasn’t happened by the government retreating and saying well we will just wait and see what happens. It has happened because we have taken decisions, a lot of them very unpopular, some of them Charles mentioned, but decisions that were necessary to close the fiscal gap and make sure that we had a disinflationary economic scenario.

Manufacturing investment rising, up by another 8 percent in the last year. Research and development, crucial in the 1990s and the next decade to make sure that we stay ahead of all of our competitors, research and development spending by companies grew faster here in the United Kingdom last year than it did in the United States, in Germany or in Japan. And again I ask the question – who last can remember when we had that set of circumstances to improve our prospects for the future. And this improvement in the fundamentals is only now just beginning to feed through into living standards. The average household will probably be around 5 pounds a week better off this year, a modest beginning, but it is now beginning to feed through.

And the biggest thing I believe that bothers the housing market that Charles was talking about are not individual measures but the impact upon confidence generally as a result of a world recession that impacted particularly badly in the south and east of the United Kingdom where people were most heavily borrowed. And that will take time to settle down but it is crucial that that returns both for the short term and the medium term.

But what is most important about the fact that living standards are starting to rise and that consumer spending is starting to rise, is the result that that will have in economic growth. Because the fact is that the rise in living standards and the rise in consumer spending, which is likely to follow, if on this occasion the result of economic growth and not the cause of economic growth. Time after time in the past we poured out resources in order to create the economic growth artificially by spending, instead of letting the economy grow and generate the resources for growth. But because we have done it that way round on this occasion we have the best possible prospect of sustained low inflation growth for years to come that we have had for any time that I can remember.

Now all of the industries, not just the relatively wide span of industries represented here, all industries now face the best economic climate that we have seen in this country for three decades, and I think that is something that should make us both optimistic and proud of what has been achieved.

Let me say something about a core part of that – getting inflation down. Yes, it was painful. There were many who argued against the high interest rates that were vital if we were to conquer rising prices. But I thought they were right, the government stood their ground, and as a result both inflation and interest rates are now down to levels that we haven’t seen for very many years. In the short term both those in industry and home owners may feel that they benefit from rising inflation, debt can be paid off more quickly and house prices soar. And industrialists and home owners, both almost by definition large borrowers couldn’t be expected to welcome the higher interest rates needed to bring inflation down.

But they are essentially short term views. On any longer term view they are precisely the groups who actually have most to gain from a continuing low inflation world. Companies need a predictable economic environment if they are to plan ahead with any confidence. Inflation undermines that right across the board, it erodes competitiveness with low inflation countries overseas. If we had let inflation run we wouldn’t have had these record exports, not a chance that we would have had those record exports. And it also of course confuses market signals so that companies can’t tell whether a rise in prices reflects an increasing demand or simply an excessive growth in the money supply. And it encourages wage demands which bear no relationship whatsoever to productivity improvements. And how many times in the last 50 years did we pass through that cycle to the damage overall of our future prospects?

We are not going to go through that again. I know it has been painful to get inflation down but we have got it down, and we are keeping it down. And I would suggest to you this evening that industry has a real interest in keeping inflation under lock and key.

And the prospect of long term economic stability also offers a very great deal to those who are investing a large proportion of their lifetime’s savings over 20 years or more in one asset, namely their house. Because keeping inflation low is the only means of ensuring that interest rates stay low as well. And they of course are an important component part of the housing market. If you were to look today at that vital nexus between interest rates, net disposable income and house prices, you would find that it was more favourable to buy a home at the moment than it has been at any time for the last 20 or 30 years.

So the problem is not the capacity to buy, the problem is the confidence factor that people are waiting to be certain that unemployment is on a downward trend and that the prospects for the future are rosier than many people feared after the recession through which we have passed.

If you took, for example, a home owner on an average mortgage, payments are now over 130 pounds a month less than they were when interest rates peaked just over 5 years ago, and that dwarfs any other changes in the capacity for people to buy that people normally talk about.

Let me say a word about competitiveness. We need to ensure sustained growth, and there is only one way we can be certain of doing that, and that is by improving our competitiveness as a nation. That will deliver better living standards to all, it will increase employment and it will encourage [inaudible]. And to set out our determination to do that by setting out two White Papers in the last couple of years, not talking in generalities but talking specifically about what we seek to do and measuring what we need to do to improve the competitiveness of British industry. We made more than 300 detailed commitments in the first of those and now we are making dramatic progress in delivering them.

Let me turn to the construction industry particularly. The key elements, as I have sought to set out, of the best economic outlook are now in place. But the element that I return to that is missing, is confidence, and I want to return to the way we are tackling that in a moment. But let me turn next to some broader issues affecting the future of the construction industry.

That industry is beyond a doubt one of the great industrial sectors of our country, it provides nearly half of all our industrial investment, it is the biggest employer in Britain and it is crucial to our export prospects. In a quite literal sense, Britain’s future is being built by your industry day after day. So I don’t need any persuading whatsoever of the importance of the construction industry to UK plc. And I share the disappointment that you will have had that figures published in recent days show that many of the difficulties of the recession haven’t yet been put as firmly behind that industry as they have in other sectors of the economy.

And let me add that whatever may have been the perceptions of some in the 1980s, we have a very strong commitment to make sure that British industry succeeds both here and around the world. To put it at its bluntest, when it comes to exports, I am less interested in laissez faire than in winning the contracts abroad, and we have changed government policy both in the Department of Trade and Industry, and in the Foreign Office, to make sure that that happens and it has made a material difference to Britain’s capacity to win orders in some of the toughest markets of the world. And that is a permanent change, that is going to continue. I want to see British exporting industry win markets overseas and we will take the detailed government decisions to make sure that we assist them in doing so.

So what in practical terms can the government do, in addition to what is already being done, to help ensure that happens? Let me turn to some of those areas. Certainly we can help with education and training, so vital to an industry that has long since moved away from the idea that workers can be recruited off the nearest street corner.

Earlier this month – to the dismay of our political components – I merged together the Department of Education and the Department of Employment. Some people said well it just shows that the wicked Tories don’t care about the unemployed. It actually shows precisely the reverse, it shows that we are more concerned than anybody else to make sure that those people who are unemployed have the opportunity and the training, not just once but right the way through life, to get themselves back into permanent employment.

The aim of that merger was to give Britain a head start in the field that will determine competitiveness in the next millennium, and that field is lifetime learning for people who are unemployed. We cannot any longer afford to think that people stop learning in their teens or their early 20s, we need to make sure that they have access to the right skills right across their adult lifetime. At the specific request of this industry we have retained the statutory underpinning of the Construction Industry Training Board, and that is playing a full part in training and enterprise councils.

And it is also playing a part, I am delighted to say, in the development of the new modern apprenticeships that we have been floating over the last couple of years or so. And we are determined to make sure that the needs of industry are not just an optional extra in our education system, but are increasingly the driving force that underpins our education system. It is not good enough for us to say that our education system is as good as this country or that country or some other country, what we need to make sure is that our education system and our training system is as good as any other country, not just a random selection of countries.

Neither is it any good for us just to say well we can compete with France or Germany. Indeed we can, we complete hugely successfully with France and Germany at the moment. But only half our market is in the European Union, the other half is in the wider world and we have to compete with the United States, with Japan, with the Pacific Basin and with Latin America as well. And so those points on education and training are even more valid in every aspect.

Then of course we can deal with an ugly word, but a real concept – deregulation. We can strip some of the burden of red tape from industry’s shoulders. In 1991 we changed the building regulations to make them less detailed and prescriptive. The introduction of development plans which will be in place in most areas by the end of year should produce more consistent quicker planning decisions and fewer appeals, both I think are of particular importance to the construction industry.

I have no doubt that there is a great deal more that can be done in that direction, we are seeking to do it and I am open to hear from industrialists such as you precisely the areas where it is most important for us to look at and to make changes. Because the intention is to make sure that government helps, and not hinders, the competitiveness of British industry.

In the Government changes a few days ago, Michael Heseltine took with him responsibility for competitiveness and deregulation, responsibility he had before and took with him to his new position, so I can tell you that both the Prime Minister and the First Secretary are determined to see those issues at the top of the Government’s agenda and we do not intend that any jobsworth official will be able to defend a piece of unnecessary red tape that we believe can usefully go, so I offer you tonight this invitation through your industry representatives.

If you see areas that you think are unnecessary, that we can get rid of because they cause a great deal of hindrance and very little help, the offer is there: tell us where it is and we will examine whether we can do anything about it. I can’t offer you a blanket promise that we will but if you have got a good case, then you have got a very realistic chance of seeing that burden removed.

Let me say a word about capital expenditure because I am well aware of the importance of Government expenditure to the construction industry.

There will be people who will say that the best help the Government can provide is through plenty of public sector construction work and of course for some people, however much of your money we spend on construction projects, it will never be enough but we have what by any standards is a pretty substantial capital spending programme under way. In the next three years, we will spend over £5,000 million on road-building, a programme doubled in real terms – a dreadful jargon phrase but we all understand what it means in this room – since 1979. £4 billion a year through the Housing Corporation, a figure which rises to £6.5 billion if you include private finance. Housing Corporation spending support has risen by 40% over the last five years. Overall this year, net public sector capital spending is expected to be around £22,000 million and in addition to that of course there is the Private Finance Initiative which has now sunk roots and is beginning to expand and that offers the private sector in general and certainly the construction industry in particular dramatic new opportunities. It should mean that year after year more capital projects begin than would ever previously have been affordable under the old Treasury rules.

We are now beginning to see some progress being made: the international passenger station at Ashford and the Heathrow Express are already under construction; competition for the Channel Tunnel rail link is well under way; contracts are in the final stage of negotiation for the construction of two new prisons; and private finance is already contributing over £1.8 billion a year to housing associations.

That, of course, is the Private Finance Initiative still in its infancy. I know that some people have been concerned that it has been slow to get off the ground and I certainly would have preferred it to have moved more speedily myself. I suspect that is inevitable with any significant departure from previous policy but it is nonetheless important to me and I know to you that the benefits of the Private Finance Initiative should be felt as rapidly as possible. I can certainly tell you today that we are looking at the Private Finance Initiative, it is under constant review and I am open to examine any suggestions that further measures may be needed to accelerate projects brought forward under the new rules.

There is also, of course, a new source of spending, one that had perhaps been underestimated and that is the tremendous sums now being released by the national lottery for good causes, a large proportion of which will end up on construction projects. When the lottery is in full flood, as it will be very shortly, in a year or so, it will be spending something like £1.8 billion a year and a very significant part of that will also be on construction and whether that is a small-scale scheme such as the construction of new village halls and community facilities or large prestige projects such as new sports stadiums or national monuments to mark the millennium, I expect that lottery funds will keep a sizeable slice of the British construction industry in work for some years to come. Those funds, like the Private Finance Initiative, are only now beginning to come on-stream but by the end of this decade I expect they will be a very significant part of the construction scene as a whole.

Let me say a word about the report by Michael Latham. I think it was a splendid report. Government can help the industry I think by throwing our support behind the programme of change for the construction industry that Michael Latham identified a year or so ago. When I read his report, it seemed to me that his prescriptions rested upon one very profound truth: the success of this industry, like all others, ultimately depends upon satisfying the customer and the culture of conflict, claim, counter-claim which has been ingrained for so long will not give the client what he wants nor encourage him to build more often.

Michael Latham addressed that point and he offered a new vision for the construction industry based on teamwork but he also gave us a vision for the future, not a magic wand for the present. His suggestions will require determination and commitment from the industry to change on the scale that the car industry has already changed. It is of course important that they do so and it is of course for the industry to consider such changes, not for the Government to impose them but I don’t have very much doubt that the industry will take up the challenge of improving its performance that Michael Latham threw down and we know from survey upon survey that there is a wide spread of capability in British industry.

It is vital that the best practice be spread more widely and that can be influenced directly by setting higher quality standards in supply chains. Michael Latham asked the Government to do two things: the first was to become best-practice clients of the industry; I accept that goal. I have asked the Efficiency Unit under Peter Levine to carry out a scrutiny of our construction procurement to that end and I expect to see the results of that very soon. In the meantime, we published a White Paper called “Setting New Standards” which spells out what we see as best practice and the principles which will guide us in our construction procurement.

Secondly, Michael Latham asked us to legislate to deal with abuses of current contractual arrangements, to provide for quicker dispute resolution and greater security of payments. I am certainly prepared in principle to do that but in order to do so we need to find practical options which command broad support within the industry and its clients. With your help we will get that and then I will be prepared to take action.

Let me return for a few moments to support for exports. We can provide support in the area of export promotion. Last year, the construction industry alone reported export orders totalling around £7 billion. During this year, Department of Environment ministers will lead ten trade missions to fifteen countries, Russia to Lebanon, from Vietnam to South America. We set up an Export Promotion Initiative; under this, 124 secondees from British industry, including a number from the construction industry, have been drafted into the Government and their aim is to make sure that we are as effective as possible to both fostering and promoting British exports.

You know better than I do from day-to-day experience that world markets are fiercely competitive at present. It is important that our exporters should know that the Government will help them as vigorously as they can and I am determined to ensure that that is precisely what we do.

Let me add a word about one of the highest-profile aspects of industrial investment going on in Britain today. I spoke of it in private to the Conservative 1922 Committee of back-benchers last week and I am happy to speak about it publicly today and that is the development of the information super highway.

I say “high profile” because you can hardly walk down a street in Britain today without tripping over some member of the construction industry installing new cables. We are now in a different age, an information age. It is quite literally a third Industrial Revolution; it affects every business. Exploiting its potential is vital for the maintenance of our competitiveness both short-term and long-term and because Britain was one of the first countries in the world to privatise and liberalise its information and telecommunications industries, we are now one of the world’s leaders in the field. The cable industry alone is in investing £10 billion and every penny of this £10 billion is private money, every penny is a vote of confidence in the future of this country and of its industries and increasingly, major commercial and industrial developments will expect and require built-in cabling facilities just as automatically as they would expect to be connected up to the electricity and the water supplies. Our political opponents, who opposed deregulation every step of the way, have recently stumbled across the idea of the information super highway, they even claim to have embraced high technology.

Well I have to say it is not evident in what they do. Their approach remains as mired in the steam age as ever as we move forward to the information super highway age.

Let me illustrate why I say that. They want state direction of this development, they want Government guidance for investment, they want to create a monopoly. I only have to ask you what would have happened in the past in those circumstances. What would have happened if investment in building up the railways during the first industrial revolution had had to wait for Government guidance? We wouldn’t have had an Industrial Revolution and I very much doubt that we would have had any railways either. And what would happened if the state had imposed a monopoly at the time on the invention of the printing press? We might have had one newspaper so I suppose it wouldn’t have been wholly bad! It certainly has a modicum of appeal after the last two or three years, dependent of course upon which particular newspaper it is that would have survived but it would of course like most monopolies have stifled creativity, limited access and as ever driven up prices, no good for the country, no good for competitiveness and of course, the same thought applies today. The route forward for new industries, as for old, is not for Government to dictate, still less to permit monopolies. Our job is to create the conditions for private enterprise to flourish and then to let private enterprise get on with it and that is the role and the ambition that I have for the private sector.

Let me turn back to the housing market and home ownership, a subject as Charles Gallagher said, of some concern to this audience but let me make it immediately clear in the light of what Charles said that the Conservative Party is and as far as I am concerned always will be the party of home ownership and what is more, the only party that cares truly about home ownership in this country.

Over the past sixteen years, I think we have given evident illustration of that. It was the Conservative Party that promoted home ownership, the Conservative Party that actually sold off local authority houses, the Conservative Party that was opposed by both our main political opponents on each and every occasion that we developed those particular policies. That was the position in the past and however the surface oratory might have changed elsewhere, the gut instincts most certainly haven’t and so for us a strong and steady expansion in home ownership isn’t simply a welcome offshoot of rising living standards; it is at the very core of what the Conservative Party is about and of our vision of the sort of society that we wish to create. That has always been our position. We believe in ownership, we believe in security, we believe particularly in home ownership for the security and freedom of choice that it actually offers to the individuals and that is why we have consistently promoted it. Since 1979, the number of home-owners has increased by four million and more than 1.5 million of those were council house tenants exercising the right to buy so there shouldn’t be a shred of doubt about the overall commitment of the Conservative Party to home ownership both in the short-term or the long-term, it is [indistinct] of our bone and sunk deep in our marrow and that is not going to change.

58% of households in this country are now owner-occupied, one of the highest proportions in Europe and we have made pretty dramatic progress but I agree with the survey that Charles referred to there that still remains a great untapped demand for home ownership. Surveys show four out of five would want to own their own homes; perhaps in ten years’ time, that may have gone up but certainly in all age groups the desire instinctively of young people today is not to go and live in a house owned by someone else but to be able to purchase a house that they own themselves, that they can decorate themselves, that they can live in and know that it is theirs both for the short- and the long-term and that is intrinsic and that was why in our White Paper last month we sat out a clear target, a further 1.5 million home-owners within the next ten years.

Many of the ways of achieving that will simply come from the stability of economic circumstances, from that nexus I spoke of earlier of keeping interest rates down low so that people actually find themselves in a position to be able to buy. If we hadn’t closed the fiscal gap, including the painful decision of reducing mortgage interest relief a little, what do you think would have happened to interest rates? Would we have managed to get them to come down or would they have gone back up towards 15%, the lingering impact of which is one of the things that have caused most concern to the housing market?

What I am seeking to do is deliver the circumstances not just to generate a little extra housing activity in the short-term but provide the right sort of circumstances for the housing market to return to being what it always has been, a central aspiration for people in this country and moreover with the right economic circumstances, an affordable central aspiration for the people in this country.

There are some things we can do to give it a push. For example, the new housing association properties will automatically be available for sale to tenants on request and the resources will be available to put back into new construction in terms of it being recycled. One gets two bonuses for the price of one – the home-owner actually begins to own his own home and the housing associations have resources that would not otherwise be available for reinvestment in bricks and mortar and new building.

We are looking at new options to bring private finance and owner occupation right into the heart of those great big social housing estates, areas that would benefit enormously from the initiative and dynamism of the private sector and also the social stability that would come from mixed occupation.

There are a range of options that we are looking at because I care not just for the wider economic reasons but for the philosophical reason I set out a few moments ago to ensure that those people in this country who wish to become home-owners have the opportunity of becoming home-owners.

Of course, the general condition of the housing market is of concern to people, it is of concern to me but I doubt there is anyone here who would want to go back to the unsustainable and frankly illusory world of rampant house price inflation which we saw briefly in the late 1980s. I remember very well those circumstances and I remember meeting audiences like this audience which said to me on that occasion: “House prices are going up so fast that at the bottom end of the market young people can no longer afford to get into the market and that will have a ripple effect up the market over a period of time!”.

Let us not forget the problem that is being solved by keeping down inflation and the right sort of economic judgements for the future because it is, as I indicated earlier, more favourable now to purchase a home than it has been for a very long time but on the other hand, aside from that rampant and rather absurd circumstance that existed briefly in the 1980s, a strong but not overexcited housing market is an important part of a balanced economy, as Charles indicated earlier.

We have been giving serious consideration in Government to a wide variety of proposals that have been put to us on how we can halt the housing market grow. The proposal that Charles made is one of the proposals that we are looking at along with others. We haven’t yet decided which action would be appropriate from Central Government or what action could be effective and that is the judgement that we have to make. I am not interested in a judgement that will achieve short-term applause in the press and the media and elsewhere but bring long-term problems. I am not interested in something that will bring short-term applause but actually will have no real practical effect on what happens. I want to decide what is going to be effective before I decide what it is the Government might be able to do so you cannot expect me to go into detail about what options might or might not come to be in the future but perhaps I can set out for you some of the principles which are guiding us as we examine this matter.

First, we have to recognise that the main issue is confidence about future capital values, not current affordability. I have no doubt whatever that houses are a very good buy at present levels of prices and interest rates; with the number of households continuing to grow, houses will be a sound investment over a five or a ten-year time-scale but confidence in that is not reflected in the market and nothing will induce people to commit their capital until that perception is changed and so we need to test any proposal against whether it is likely to change that perception and so stimulate the housing market. That is the acid test that we will have to provide in Government.

Second, let me say we are not an interventionist government by instinct or by philosophy, we are not permanently searching for excuses to interfere in the private sector. The case for a specific intervention would therefore need to be very powerful in order to persuade us.

Thirdly, we believe that the best help we can provide to the housing market is by keeping interest rates as low as possible and once people have confidence in that they will not have the lack of confidence that comes from believing their mortgage is going to be at some level this year but half as high again eighteen months on and so they are discouraged from taking on the commitment so keeping stability and interest rates at a low level is an important component in restoring confidence to the housing market and that means we must stick to our fiscal target of continuing to reduce Government borrowing. We are not therefore in the business of taking any action which could only be afforded by jeopardising our attainment of that target.

Let me say a word about the housing market as a whole. Britain’s housing market is worth about £750 billion pounds. That is around two-and-a-half times the total amount of money which Government spends each and every year so there are, to say the least, serious limits on the amount of leverage which Government action can exercise over the housing market. We would need to be persuaded that any resources we did commit would have an appreciable effect.

Let me stress again that we are looking at options but that no final decisions have yet been taken on them but I would be misleading you if I gave you the impression that I thought there was an easy way. I think anyone would be misleading you if they gave you the impression there was an easy way for the Government co change perceptions about long-term housing values. There isn’t. It will change I am confident because of that innate desire for home ownership but it cannot easily be changed by a single fiscal amendment.

Let me, however, mention one particular issue in conclusion, one that Charles touches upon. Some people assume that the reductions we made in mortgage interest relief in 1993 indicated that we had a long-term objective to eliminate mortgage interest relief altogether so let me make the position about that entirely clear.

The reductions in MIRAS were a necessary part of an overall package of tax increases needed to bring Government borrowing back under control. Without those tax increases, Britain’s fiscal position would have deteriorated, driving interest rates and of course mortgage rates far higher than they went so my attitude towards every part of those tax increases was the same: all of them were necessary and none of them were desirable and we have made clear that we will not further reduce MIRAS though it is too soon to make binding pledges up or down beyond that. That is a matter for budgets and manifestos but certainly there will be no further change in the present Parliament.

Let me add something to that. I am very well aware of the symbolic value of mortgage interest relief at source. I know there are a number of groups, including I dare say this audience tonight, who support it and I can tell you tonight we don’t have any present plans to eliminate it as I tried to set out for you over the last few moments.

Our philosophical aim is clear: instinctively and by training we are committed to private ownership. No part of private ownership is more important to the individual and his or her family than the ownership of his or her home. The commitment therefore to home ownership is rock solid and central to the philosophy of my party, to my instincts and that will remain so both in the short-term and the long-term.

Let me just summarise something about some of the things I have been saying to you:

It is ultimately the imagination, the creativity and the dynamism of the private sector – not the public sector – that will determine the future prosperity of this nation and in that dynamism and in that future prosperity a vital role will be played by the manufacturing and the construction industries. That will not just be true this year and next year; it will be true when we go right through into the next millennium and far beyond it. I am sometimes accused of being a romantic in some respects, certainly in terms of seeing the “Made in Britain” label – I would agree with that; certainly in terms of believing that we are entering into a new Industrial Revolution and the construction industry and manufacturing industry have a key role to play in that revolution. Again, I would admit to that particular label. Unless we succeed in those industries, the economy as a whole will not succeed; unless we succeed in the economy as a whole, we will not lever up the increased living standards that I believe are imperative for this country.

The economic policy that we have embarked upon and the stability and economic growth that it looks as though we have established will do nothing less than double the living standards of every British family in the next twenty years. Twenty years – if I may say with respect looking round the audience – many of you can remember back twenty years without a great degree of difficulty. What I invite you to do tonight is to bear in mind that this stability of economic growth that we have put in train will double from its present position living standards over the next twenty years. That is going to have its implications not just in a narrow sense but in a wide sense – on the country as a whole, on the manufacturing industry, on the construction industry and on each and every family. That is what we are committed to and I can promise you we shall continue with those policies. I want your industries to succeed and as far as we are able to – for we will not always be able to deliver precisely what you would ask of us – we will give to you full, active and continuing support in your endeavours in those industries; they are vital to us. You deserve our support and you will have it.