John Major’s Speech to the 1996 CBI Conference – 21 May 1996
Below is the text of Mr Major’s speech made to the Confederation of British Industry (CBI) in London on Tuesday 21st May 1996.
PRIME MINISTER:
Brian – quiet relaxed day – well relatively, yes I suppose, relatively. I look along this top table here and I see this splendid collection of European tulips. I am delighted to see the CBI supporting European industry, and I look forward to European industry supporting the British beef industry – of which more later.
Over this excellent dinner, the President and I were talking about how times change. And when we were talking, in the fashion that sometimes happens, a mental image came into my mind, an old piece of flickering black and white film came in front of my eyes as a memory aid. And it was Harold Macmillan, then Prime Minister, landing at Heathrow Airport and walking down the steps of the plane with Mr Selwyn Lloyd, who was then the Foreign Secretary. And he walked down to the bottom of the steps, and there at the bottom was one single television camera and reporter. And the reporter leaned forward with his microphone to greet the Prime Minister on his return from abroad. “Welcome home, Sir”, he said.
“I am from the BBC. Do you have anything to say to the BBC?” And this was a tough question. And Mr Macmillan turned around to Mr Selwyn Lloyd and he said: “Do we have anything to say to the BBC?”. And Mr Selwyn Lloyd said: “No”. And Mr Macmillan said: “No, I have nothing to say to the BBC”. And the reporter leaned forward with his microphone and he said: “Thank you, Sir”.
Not precisely that way today. So times have changed, and that is one of the themes that I want to talk about a little tonight – that theme and the British economy, how it stands, where it is going, and the choices that we face. Because the economy has changed as well in the last couple of generations. Smoke stack industries have given way to high-tech companies; public ownership to private enterprise; the global market place has become a reality; and at home industrial relations and working practices have been transformed.
All that has happened and is behind us. But what is more important is what lies in front of us and the changes that must still come. We have, as a government, a clear economic ambition, an enterprise economy with the lowest possible taxes and with the least possible burden on business, an economy ready to compete and ready to prosper as the Enterprise Centre of Europe. A full-blooded economy cannot be built by business alone. Government must weld together policies on economic management, on tax, on education, on training, on infrastructure and a great deal else besides.
And all these of course have a direct bearing on the business environment and on the prospects for enterprise. And it is for that reason that we have put competitiveness right at the top of the agenda. Every single area of government policy, even those which don’t immediately strike people as having something to do with industry, can help make Britain competitive and we must make sure they do.
And tonight I would like to conduct something of a snap audit on how we are getting on. At the root of an Enterprise Economy is a stable economic climate. I believe that is now well in place. We are growing faster than any European economy at present and inflation is law, and staying low, and has remained lower for longer than I think anyone in this particular room can remember.
There are some people who hold out the belief that a little inflation is no bad thing. And I guess what they mean is that inflation can make people feel a little more prosperous for a while, wages rise, house prices rise, pensions seem to go up. But it is of course a mirage and it is a mirage that is no good for business. But Britain has learned that lesson the hard way. How many times in the last 50 years since the war have governments lost their economic bearing when the economy slowed? How many times have they been panicked into premature re-inflationary measures that sowed the seeds of much worse problems once the immediate economic difficulties were over? Far too frequently, as everyone in this room well knows.
When the recession of the early ‘90s hit Britain, we were determined not to fall into that trap. So we took tough action on inflation and on borrowing. It was not popular, it did hurt in the short-term, but it has worked. We have emerged from the recession in better economic shape, firstly than our competitors; and secondly more competitive as an industrial nation than we have been for very many years.
Now of course, being open-minded businessmen and businesswomen, you may be thinking well he would say that, wouldn’t he? And maybe so. But the facts speak for themselves: low inflation enjoying perhaps its best run for almost 50 years; low interest rates so you can afford to invest in a secure climate; low taxes, though I would like to see them lower yet, low taxes to leave people with more of their money, to make it worth their while taking the risk of running a business; falling unemployment, still too high of course, but the lowest of any major country in Europe. These results are the proof of the pudding, they are the benefits of working for the long term. Other long term policies taken throughout the last 17 years are playing their own individual part in building our national competitiveness.
Let me touch, for example, on privatisation. Do you remember what was said about each successive privatisation? Morally wrong, wouldn’t work, prices would rise, standards would fall, competition impractical. And we are now seeing how wrong all that was.
Who feels nostalgic now for the day to day failures of the old state-owned industries? When did you last sit – I will ask Colin – on a British Airways flight and think, if only this was still a nationalised industry? Yet we were told that privatising British Airways would make it the pantomime horse of capitalism, and some pantomime horse it has turned out to be. What a nonsense that criticism was. And when did you last open your gas bill – prices down again – and wish yourselves back in the old days? Or get sentimental about the days when a quarter of pay phones didn’t work?
It is results like that, the practical proof of the policy, that have won the argument. Private enterprise and competition motivate people. It gives them an incentive to cut prices, attract customers and improve services.
Now of course those policies are controversial, inevitably so. Every privatisation has been categorised by many people as a privatisation too far. But they have worked, they have worked, and that is what matters, and enterprise and the British economy as a whole have benefited.
Rail is the latest example. “Couldn’t be done”, the critics said, but it has been. And as of yesterday Railtrack is in the private sector with over 650,000 private investors applying for shares in the company. If Sid was in hiding, he came out again the other day in spectacular fashion. 80 percent of the passenger railway now either sold or on the market; 5 franchises, almost one-third of the passenger railway, already running in the private sector, and by the end of the month that should be up to 40 percent and that number is going to go on rising through the year as the programme rolls on.
And look at what that means for the passenger? New rolling stock on the Gatwick Express and on lines where passengers have been complaining for years, like the Kent Coast and the London/Tilbury and Southend line. New services in the Midlands and south London where the new franchises have spotted gaps in the market. And where the new passenger, charter commitments. All this at a falling cost to the taxpayer and with a guarantee of keeping fares down that the passenger has never known at any stage before in the history of British Rail. That simply would not, could not have happened; would not and could not have been affordable under public ownership.
Of course these changes are controversial; they are too disruptive to be otherwise. They are something governments do because they believe it is in the long term interests of the economy, because they believe that harnessing the innovation and energy of private enterprise gives us better public services, better infrastructure and helps build a competitive economy. And that is the point, that is what we are about. Spending the taxpayers’ money efficiently and effectively is central to all this.
The biggest budget in Whitehall is social security. If we would like a low tax economy, and we would, and I suspect you would as well, we have to get a grip of benefit spending while still being fair to the people who need help. Let no-one assume that we are unconcerned about those who genuinely need help, we are and we will remain concerned about them. But to cut down that budget fairly we need practical detailed changes. You can’t get that just by waving a magic wand. You need to encourage independence, self-provision. You need mechanisms to get back into work where they don’t need help and social benefits. You need to carry difficult, very often contentious, legislation. And that is what we have been doing, not always popular, but it is what we thought was right.
The new incapacity benefit, job seekers allowance, child support, changing the pension age – these I can promise you tend not to provide short term positive headlines for the government of the day. But they add up, they add up, they are the small ends of the candle that Gladstone referred to that build a whole candle at the end of the week. They add up in saving public spending and helping the enterprise economy by keeping tax low.
Social security has been growing at an average of 5 percent a year ever since the war. Thanks to the reforms that we have carried through, expected growth is now down from 5 percent a year to 1.25 percent a year in real terms. For the first time in generations, benefit growth will be less than GDP growth, so benefits will take a smaller share of the national cake in the years that lie ahead, and that is something that no government since the war has achieved or been able to look forward to.
And why does that matter for you? It matters for you because it helps to build a huge competitive advantage for British business. Our competitors in Europe still have to tackle their spiralling welfare bill, and their businesses may well have to pick up the tab. But we have planned ahead over many years. Britain has more invested in private pensions than the rest of the European Union added together. Ours is a system we can afford today and into the next century, and we intend to keep it that way in the future.
But what of the other things, the things that any government serious about an enterprise economy has got to do to secure those ambitions? Well first and foremost, we have to listen to what it is that business says in the wider sense, and they ask for things way beyond the obvious tax and spend elements of economic management. And first and foremost, we have to complete the task we have set ourselves of getting the education system right.
There is a great deal to be proud of. Higher education in particular has expanded beyond imagination in the last few years. Higher education is now a reality for 1 in 3 of our young people. At the start of the 1980s, that was 1 in 8 of our young people. So you can see the scale of the changes.
Our new vocational qualifications, because we believe, I passionately believe, that so-called blue collar qualifications are every bit as valuable to the economy as white collar qualifications, and we need those blue collar qualifications if we are to have the right sort of industrial society that we need to compete not just with Europe but with Asia, the United States and Japan in the years that lie ahead. That is why we looked more towards vocational qualifications, that is why our new vocational qualifications are taking root and winning support, not least if I may say so, to Brian Nicholson’s pioneering work over the last few years which is immensely valuable not just in the short term but in the long term, and I am delighted to express my thanks to him for that this evening.
And our schools are changing. They are now among the world leaders in the use of information technology. And I would like to keep them there to develop those skills and the advantage they give those children in their future when they leave school, and the advantage that they will give you, as employers, having youngsters coming out of school with a secure basic knowledge of the information technology that is here to stay, whether people like it or not. We either embrace information technology and play our part in leading the world economy, or we push it to one side and we watch other people forge ahead. And that is why Ian Taylor and his colleagues in government are seeking to do all they can to embrace the advantages of information technology.
No-one knows better than the audience gathered here in this room this evening, the importance of having young people come out of schools with the basic skills in place. Our young people today are your workforce and your successor’s workforce tomorrow. If they are allowed to go through schools with literacy problems and numeracy problems, no amount of training later will compensate. It will not compensate for their quality of life, and it will not compensate for the workforce that you need.
Tackling that problem is a long haul: the national curriculum, tests and league tables to measure schools’ performances. I personally believe that they are essential and I will tell you why, it is a perfectly common sense reason.
If you wish to teach a child well, you need to know what it is that the child may not have understood. That is why you need tests. If you can identify what they have not understood, then you can correct the weaknesses and teach them it again until they do understand it but if you never find that out, those children will find themselves hobbled as they move on to higher and more difficult areas of learning. That is why we are seeking to change the culture of education, to bring back methods that work, to turn our back on fashionable theories that I believe have failed a generation or more of our schoolchildren.
We now have a school inspectorate to punch home that message. Gillian Shephard has made it clear that she will give OFSTED – the Office of Standards in Education – more powers of inspection if they need them to tackle problems and drive up standards still further. Standards – standards – standards. It is time we were unashamed to use the word “excellence” when we set out what we wish to achieve in education. That must be our watchword and I believe in that we would have the support of every employer in the country.
The fact is, Mr. President, that business and Government must work together to address the challenges of the future, that is essential. Neither of us, neither Government nor you in business, whatever great captain of industry you may be, none of you will achieve what you want entirely on your own.
Let me give you an example, transport, roads, something I know of great concern to the CBI, that Brian and Adair come to talk to me about every other day, so I know the concern you have about it. Many people recognise the reality of how tightly we have to control public spending and in that climate we simply can’t rely on spending ever more taxpayers’ money on any matter, even one as important as roads. Instead, we have to get the best possible value out of every pound that is spent and that is why the emergence – now out of its chrysalis stage but not in full flower I think – of the Private Finance Initiative is so important, helping us to get what we want for public money, driving the hard bargains in road-building that you would drive in your own commercial enterprises, harnessing skills and ideas and starting projects that otherwise without PFI might never have got off the ground. Over £1 billion of privately-financed roads are now either awarded or in the pipeline, 37 separate schemes in all. There is the Channel Tunnel rail link, a £3 billion project, where the private sector is making a huge contribution in terms of management and money.
It is not just transport but health too, also vitally important for employers. You want the minimum amount of sickness amongst your workforce and increasingly the days that people are taking off sick are falling year after year as health care and diet increasingly improve but health too is being transformed: five major hospital projects with capital values of over £10 million have reached an advanced stage in the last six months compared with only one a year for the past ten years.
Just last week, an exciting new £200 million investment was announced for a social security card that will modernise our benefit payment system and crack down on taxpayer fraud.
Of course it will take time to change the culture as we are seeking to do but we are slowly but steadily doing that and we welcome your help in pointing out what needs to be done and where we can improve the way that PFI works.
Let me say a word about our relationship with the European Union and the importance of it:
We must fight together, business and Government, for the things that matter to you in Europe: extending the single market in the areas that still have to be opened up such as energy and pension funds and completing the process in telecommunications. Never forget that the single market, vital and important though it is, is not yet completed. Making sure that others observe the rules that they have signed up to; we invariably do – our law officers insist upon it – and we must make sure that everyone else does as well, wherever we can, using whatever allies we can – and we do have allies on this issue – to stem the flow of new regulations and taking a cool-headed view of what will really serve the interests of British business in the long term.
We have our own distinctive, British view of how the European Union should develop and in many important ways it is different from the views of many of our European partners but nobody should misunderstand the significance of that difference but if they do, let me make it clear that Britain is in the European Union, it is going to stay in the European Union and it is going to fight in the European Union for the sort of business environment that is right for business prospects in this country and to try and build the sort of European Union with which the British nation are comfortable.
No-one regards our friends in other European countries as anti-European when they fight for what they believe is the right sort of development for the European Union. Well, I propose to say something very controversial! I think I have exactly the same right to fight in the European Union for the sort of European Union that we wish to develop for the future but no-one should doubt that we will be in there pitching for that particular development.
We work together with our European Union partners where we can but that does make it, to my mind, doubly important that when agreements are made those agreements are held to. At Maastricht, I obtained an opt-out from what became known as the “social chapter” and I did it for this reason: because I believed it would add to the cost of business, reverse trade union and other reforms we put in place over the last 17 years and would push up unemployment. I have no intention of losing the benefits of that opt-out from the social chapter and let me tell you something about it.
I do not believe it is right for politicians to seek popularity across Europe by laying benefits upon people in work at the expense of employers with the absolute certainty that it will make it more likely that those people still out of work will remain out of work because it will be too expensive to employ them in the future. There are 20 million European adults out of work. In this country unemployment, thank goodness, has been falling for two and a half years and is lower than any of our partners in Europe of any significant comparable size to the United Kingdom but that is not true across Europe and I do not see it as a moral position for governments to add costs to employment in the certainty that that will mean that the people who are out of work today may stay out of work for many years in the future. It is not just industrially “bonkers”, I believe it is morally wrong and we will not sign the social chapter.
Let me, however, add another point. At Maastricht our European partners agreed that we would not be part of the social chapter but today there is a threat to that opt-Out: the health and safety articles of the treaty were agreed in 1985 to deal with genuine matters of health and safety but recent attempts to use them as a basis for imposing the working time directive on Britain go beyond what we agreed to and not only that, the breach the understanding I reached at Maastricht when I negotiated our opt-out from the social chapter. I have said to our European partners in unmistakable terms that we must change the health and safety provisions so that they reflect the more limited scope that was originally intended and that the British Parliament originally agreed to and I take this very seriously. We cannot be expected to have confidence in European agreements if they are subsequently undermined by shifts in interpretation. I do not wish to be misunderstood about this. If old agreements are to be broken, I do not see how we can reach new agreements so before there could be any agreement of any sort in the forthcoming inter-governmental conference we have to ensure that agreement on the social chapter and our opt-out is, secure and cannot be undermined.
Mr. President, the most urgent issue facing us in Europe as we meet this evening is the crisis in the beef industry across the Continent and the export ban on British beef and on British products. We are taking every necessary step to tackle the problem of BSE in Britain and we are doing that in the interest of the British beef industry. We wish to eradicate BSE in our own interest, not under pressure from our European partners but in the interest of our own beef industry.
The incidence of BSE has already come down radically, with the measures we have taken it will be eradicated slowly but certainly. The new measures we have taken to ensure the public is safe are costly measures, many are also painful for the farmers and difficult to implement speedily but we are absolutely determined to do everything necessary to ensure there is no risk to the consumer and that is why we have found so frustrating the lack of progress in persuading our European partners to agree on a strategy to lift the ban.
The European Commission, President Santer and Commissioner Fischler have been very helpful. A majority of member states supported the latest Commission proposal to lift the ban on some beef derivatives as a first step but others ignored the scientific evidence, and did not support lifting that ban. The result is that so far we have no tangible progress in the European Union.
As I told the House of Commons earlier today, this can no longer be tolerated. If some of our partners are unwilling to extend goodwill to us we shall have to withhold our own. As long as there is no agreement on a process leading to a progressive lifting of the ban, we shall not be able to cooperate where others need our agreement in the European Union. We shall also actively pursue our legal case against the ban.
I do not embark upon such a course lightly but the scientific evidence so clearly on Britain’s side is being set aside. Progress on lifting the ban to help the British beef industry has to be at the forefront of our efforts in Europe but cooperation must be a two-way street, Business as normal is impossible in present circumstances and that includes the inter-governmental conference so let me be clear:
This is not an “empty chair” policy. We will be there arguing our corner at every meeting, arguing it as hard as ever but we will not agree to measures where our agreement is needed. This is by no means the way in which I wish to do business in Europe but I see no alternative.
I now seek a rapid agreement through negotiation with the Commission and with our partners. I will do everything I reasonably can to make this possible. We can then return to normal business and nobody wishes to see that more than I do but mercifully, Mr. President, there is more to life than Europe and beef. Although half of our trade is with the European Union, the other half is not and the opportunities here are immense. If I had one wish for our European partners, it would be that the whole of the European Union would lift its eyes, look beyond competition between France and Germany and Portugal and Britain and look at the competition in the Pacific Basin, in the United States, in Japan and in growing ways in Latin America.
The opportunities for we British in those markets are immense. We have fantastic advantages in overseas markets: a strong economic base at home, the great plus of the English language – the business language of the world and increasingly the language in which the whole world communicates – historic links right the way around the world; this is not nostalgia, these are opportunities for British industry and commerce. We are much more heavily involved in overseas investment activities than any other country except the United States; we have far more investment for example in the United States than the Japanese do, we are just sensible enough not to buy their golf courses and their mountains and it is not controversial — and relative to GDP the United Kingdom is the number one investor among the G7 just as we lead the field in inward investment.
As we dine together this evening, Michael Heseltine I am reliably told is in China. No difficult votes, he is in China! – with 270 businessmen and women, leading Britain’s largest ever trade mission there. I have led similar missions myself most recently to India, to South Africa and Israel; Ian Lang is back from Japan and he is off to Russia next week and that is just the tip of the iceberg; over the last year, there have been 80 ministerially-led trade missions taking thousands of businessmen all over the globe and generating business worth hundreds of millions of pounds.
We have already done – you and I – much of the hard work to guarantee a bright future but now we must make sure that we build on it and do not throw it away. There can be no question of letting up on inflation, no question of loosening the purse strings, no question of taking the more insidious route – the smile, the handshake and the signature on the social chapter – that signs away British jobs and nor can we let our education system fall victim to wrongheaded fashion again. Any or all of those would be to betray the hard work that we and you have done to build up the prospects that we now enjoy.
We live in the most competitive world economy we have ever known. Some people may find that threatening, I don’t. The future will bring new challenges but we can face then with the policies and the principles that are steering this country to a better economic future, we have never sought to duck change or to hide from challenge, we know that change can be turned to our advantage and that is what we have sought to do.
We are ahead of the game with many of tomorrow’s challenges precisely because we have tackled problems that have beset the British economy for decades. Our competitors know that but perhaps we as a nation should acknowledge it more often because if we fail to recognise our own achievement we may not secure and build upon the opportunities that they present.
My ambitions for the future are rooted in the policies and principles that have delivered results. We have policies that have brought low inflation, let us build on them and get inflation lower still; we have policies that have brought us falling unemployment, let us build on that and get it lower still; we have policies that have brought taxes down, let us build on that and get them lower still.
I want this country to have the self-confidence it should have with its own achievements, I want it to lift its eyes and to capitalise upon the strong economic base that we now have. Let us not set limits on what we can achieve. Let us look firstly to protect our achievements and then to build on them to deliver the increasing prosperity that is now within our grasp. Government can’t do that alone, neither, I believe, can industry but together we can. Here in this room, if I may say so, are many of the engines of growth in the British economy. The opportunities there – I know and you know – are more real and more within our grasp than they have been for very many years past. All I would have to say to you is quite simply this; those opportunities are there, let us take them, grasp them and build on them. For the British economy much has been achieved but with our work and our help the best is yet to come!