The Rt. Hon. Sir John Major KG CH

Tag: CBI

  • Mr Major’s Speech to the Cambridge Chief Executives Forum – 13 November 1992

    Below is the text of Mr Major’s speech made to the Cambridge Chief Executives Forum on Friday 13th November 1992. Several phrases in the speech were inaudible.

    PRIME MINISTER:

    I’d just like to talk about some things that I think are relevant to our situation at the moment, what has happened, what is happening, and what is going to happen in the future. It’s a private occasion, so I will [indistinct] one or two matters in public, and I know that you will respect that. Let me just talk about some of the background. I think it is important to see what the background is to where we are. Two things that happened over the past two or three years. Undoubtedly good news everybody said. In one respect they were. But they had a very material effect in an economic area entirely unsuspected. The first of those two great events was the collapse of the Soviet Empire. We wanted it for a long time. The second of those two great events was the collapse of the Berlin Wall, something all of us found offensive, and were pleased to see the back of.

    There was a great surge of optimism, and understandably so, for who could possibly have defended either the Soviet Empire or the maintenance of the Berlin Wall. But what has been the practical effect of those two? Take the collapse of the old Soviet Union first. The obvious illustration is simply this. Would Yugoslavia be in flames today if there still had been the Soviet Union? And the answer is no. And so one sees that with every great and worthwhile event – and I’m not seeking to reconstruct the Soviet Empire – but I do point out that for every action there is a reaction, and one of the reactions of course is what has happened to Yugoslavia. It is a bitter, nasty, savage war. It is in danger potentially of spreading down to Kosovo, bringing in the Albanians, the Greeks and others. And it is immensely dangerous. And it is for that reason that we’ve sent some British troops there to help with the delivery of humanitarian aid, and we’ve spent a great deal of money – far more than I think most people realise – it must be well over a hundred million in the present financial year – in terms of easing the particular problems that exist in Yugoslavia. And yet despite that, this winter, despite the enormous amount of UN aid, the UN High Commissioner for Refugees, the British troops that are out there, the money we’ve spent, the aid we’ve sent, the risks the RAF pilots have taken to get into Sarajevo Airport, and they got in, I’m bound to tell you, when nobody else could or would – repeatedly day after day. Despite all that, at least a hundred thousand, and possibly a quarter of a million noncombatants in Yugoslavia this winter, men, women and children, will die. Through hunger, through lack of medicine, through cold, as a result of that particular problem. And it has destabilised an important part of the world on the very outskirts of the European Community of which we are a member.

    And then there is the collapse of the Berlin Wall. We all cheered, we all watched the television pictures, we all knew it was a historical inevitability which had to happen. But the impact of it happening has been very profound, for Europe and for business. Of course, there were two colossal political and economic discussions that I believe were made by the German Government after the collapse of the Berlin Wall. The first was the one to one swap Deutschmark for Ostmark in terms of introducing a new financial system into the new East German Lander. And the second was the belief in Germany that that great all-powerful West German private sector economy will rush into East Germany, invest, build it up, and the problems there would be solved. But East Germany is an environmental sink. And West Germany withdrew from it, and it said we don’t know what the costs are. We don’t know what the reward is. We do know that we can do far better in investing in Czechoslovakia a little way down the road than we actually can in the East German Lander. And so the investment wasn’t there. And because the investment wasn’t there the East Germans began to show signs of wanting to move to West Germany very rapidly where they would have been not welcome, and where there would have been new social problems had they done so. And so the West German Government poured massive sums of West German public sector investment subsidy into East Germany. And the practical effect of that has been German interest rates a good deal higher than they otherwise would be, Germany monetary supply getting out of control, Germany heading into inflation, and German growth in the coming year down to 1%, and still on the downward trend. And there you have one of the three great motives of the world economy.

    The United States in near recession for three years. The Japanese economy in a very sickly state by its own powerful motives in the past. Huge fiscal stimulus in Japan – they’re still not going to meet their targets. Their economy is still going down. Their industrial production in Japan has fallen five times as fast as it has in the United Kingdom or Western countries over the last few years. And there are riots occasionally in Japan because of the state of their economy. So the three great engines of the world economy, the United States, Japan and Germany, all sickly, or declining, and in the case of Germany the ramifications of German interest rate policy as the benchmark of the ERM led to that extraordinary fallacious decision of the French to hold a referendum on Europe brought about that combination of events that gave us Black Wednesday and the rest of Europe a great deal of difficulty. So, springing out of two entirely unconnected events, we see a more uncertain, difficult world, political, security and economic situation than anybody might reasonably have imagined.

    Now where are we in the United Kingdom? Let me just set out an objective that we have. An objective that I have always had. The objective I set on the first day I became Chancellor, way back in the dark ages. You may think it’s only three years! If you’d had my job [laughter] What was it, though, that objective? A fairly straightforward objective, I would have thought, sustainable, non-inflationary growth. There are two ways to get it, and how you get there depends where you start. And once you appreciate that point, you begin to see the necessity for some of the changes of policy that our less educated friends in the press would call U-turns. I’ll explain to them why they’re not U-turns, but they are a straight path to the objective one demands. Sustainable, non-inflationary growth.

    Where did I start on the day I became Chancellor of the Exchequer? With 15% interest rates, 11% inflation and rising. That was where I started at that stage. It was the constant concern of business and commerce that we were heading for hyper-inflation, and that interest rates seemed to be stuck. It was never going to be easy to get them down, and despite the fact we’d been toppled out of the Exchange Rate Mechanism without it, we would not have got them down in the way we have. But we now have a different set of circumstances. We now have inflation at 3.5%. The headline rate of inflation stayed the same, and the figures announced today were 3.6%. A more important underlying rate of inflation fell yet again to 3.8, reducing prices [indistinct] input of inflation is around about 2.5%, on some measures even less. And interest rates down 1.5%, and we now have by courtesy of events rather than management, the most competitive exchange rate. [Indistinct]. But we find ourselves in a different set of circumstances. But given that we now approach the centre of the maze, non-inflationary growth from a different position, we are in a position to operate different policies. Because we are heading on a different route. And it was for that reason, and for one other which I will come to, that I announced about a month ago in some television interviews which seemed to surprise some people that we were looking for a structure and policy for recovery and for growth. Why it should have surprised people – who on earth would have thought I would be looking for a policy [laughter] I have never myself quite understood. But there we are. Such are the ways of the world, that it seemed to be a surprise. For two reasons.

    Firstly, because I now think there is a lot of disinflation out there in the system. It is possible to move more rapidly to a more relaxed monetary policy and to recreate the conditions for investment. But secondly, for this reason. When I looked beyond the United Kingdom economy and the Germany, French, Italian economies, I looked at the economies in the United States and Japan. When I looked at what was happening in the Soviet Union, and its impact on Eastern Europe, 1,500% inflation in Russia, 2,500% inflation in Ukraine, one begins to see a set of economic circumstances coming together that potentially, in the absence of two things I will come to, could have toppled Western Europe through that narrow dividing line between recession and slump, and for that reason I think it was right, though the balance of this lay in that direction, to begin to look for recovery for growth and for stimulating the economy in a different way for the problems we face.

    There are two things the world needs – not just this country. The first, if I may take the lesser matter first, is the completion of the Single Market in the European Community at the Edinburgh Summit. We will have that. We have made great progress in the British Presidency, and we will complete the Single Market, I am sure, at the Edinburgh Summit in a few weeks time. The second is an altogether bigger problem, and more dangerous. And that is the necessity to reach a rapid conclusion to the Uruguay Round and to get a GATT settlement throughout the world. It is not tolerable for the world not have a GATT settlement, whatever the difficulties may be for any individual country or any individual Government. It is not tolerable. And. I would say to you without a single blush on my cheek that I have spent more time in the last month in seeking to get a GATT agreement than I have dealing with the occasional problems we [indistinct] [laughter] now I trust behind us. And the difficulties of the domestic economy.

    Without that GATT Agreement there is a risk of a retaliatory trade war between the United States and Western Europe. And there is only one way in which that can go. That will mean a move from recession to slump in Europe and in America, and it is folly that almost defies belief that that could be brought about for the sake of a handful of oil seeds and a barrel of grain, and it must not be allowed to happen. For that reason I enjoyed the [indistinct] with President Delors [indistinct] [laughter]. I am very pleased indeed that the European Community have now decided that they will re-engage in the negotiations with the Americans, and Mr. McSharry has been disinterred [indistinct] and brought back into the negotiating frame, and he will be off to the United States with Andriesson on Monday. And I hope that he, Mr. Andriesson and Mr. Madigan and Mrs. Carla Hills, [indistinct] that they will come back and settle.

    Once Europe and the United States have settled, the scene then moves on to Geneva. We have other problems there. Relatively small problems, bananas from the ACP countries, is it? A tricky little problem. It’s actually a tricky problem for those countries and for us, and a very serious one. But they are problems that will not hold up the GATT Round. And there’s not one single thing in the world that will do more to stimulate world trade and growth and confidence and prosperity and earnings and profits than a GATT Round. And for those countries who seek to hold it up, for one domestic reason or another, whilst with their other hand they pour out aid to the Third World, I am bound to say to them, the whole of official aid from the whole of Western Europe to the Third World is but a drop in the ocean compared with the importance to the Third World of opening up the industrial markets of the West to their products. And it is a moral matter, as well as a political and economic matter, that we get that GATT Agreement and the opening of those markets.

    So those are some of the things that are important. Let me turn to the measures the Chancellor announced yesterday. What actually lay behind them. I think there is a certain amount any Government can do to stimulate the right economic [indistinct] I don’t kid myself for a second that the Government can do it all, for we can’t. The people who produce this country’s growth and prosperity and jobs are the people like you who run businesses, predominantly medium-sized businesses, from one end of this country to the other. Our job as Government is limited to trying to produce the right economic [indistinct] and trying to produce the right psychological atmosphere or confidence which has been so sadly lacking over the last few months.

    We have passed through, are passing through the first ever south-east based white collar recession that we have ever known. It is a recession that encompasses the homes of the opinion formers. Very easy for the great denizens of Fleet Street not to worry about the recession closing a steel works up in Scunthorpe. But it’s actually putting out of work the man with the Mercedes who lives next door. It comes a lot closer to home. And it engenders a different atmosphere among the opinion formers. And – I don’t know if any of you remember Itma – it’s being as gloomy as keeps you going – an expression, if given the choice, I would pin from one end of Fleet Street to the other. For surely it is the way in which they have conducted their writing on economic matters over the last few months, and getting [indistinct] out in a quite damaging way, it does make it more difficult to [indistinct] interest rates, it does make it more difficult to encourage growth, and that psychological belief that we are actually in a position to be confident, to be successful, to grow, is vitally important.

    I have very few prejudices, though those few I have are increasing in number. But one prejudice I assuredly do have. I am sick and tired of the British habit of writing down our country, its prospects, what it is, what it stands for, what it can do. You don’t see that in other countries. They instinctively beat their chest in favour of their country, whereas the dear old British laconically lay back and say well, yes, we don’t do that very well. You can’t expect us to deliver on time. It’s not the way we treat it. And all this nonsense. But the reality is it is nonsense. And it’s damaging nonsense. And it is actually time that we started standing up and saying this is a brutal and competitive world, and we have got to stand up for ourselves. By we I mean the politicians, business, opinion formers, the media, actually stand up for Britain and say we can do things better than other countries, and you just watch what we’re going to do. Because that is the way in this increasingly competitive world that we’re really going to make our mark. The measures that Norman Lamont introduced yesterday were very sharp, three-quarters of a billion [indistinct] empty properties to lift that overhang by the housing market, help to re-stimulate the housing market, improve the balance sheets of many people in doing so.

    The change in the first few allowances in manufacturing industry. I must admit to you a heresy that I hold and have long held, held in the Treasury when I was overruled – more difficult to overrule me today [laughter]. I do not myself believe manufacturing industry is an add-on extra, and our policy is going to reflect that in a way it hasn’t in the past, and if that is a culture shock to a theologian or two in Great George Street, it is a culture shock he or she will have to live with [laughter]. And then I think beyond that the reduction in car tax to help the engineering industry was self-evident and a straight forward point. The addition of an extra £700 million of export credits to markets, if we’re going to take advantage of the export opportunities that actually exist. That is there. There is a risk with an export credit guarantee, a taxpayer [indistinct] risk, but I think in present circumstances it is acceptable. And the idea of releasing the future accumulated receipts of local authorities is two-fold. Firstly, to encourage them to sell the land and buildings and homes they no longer need, and secondly, giving them the opportunity to utilise that money to construct new properties, construction industry, and to deal with renovations and repairs in their existing properties, for that is peculiarly intensive in labour terms.

    So those are some of the measures that Chancellor mentioned. There are two others to which I would turn very briefly, for I think the impact of them has not yet. When I first went to the Treasury I was confronted by something called the Brierley rules. The Brierley rules were a set of rules developed by a great and good mandarin, Sir William Brierley, to set as many road blocks as it possibly could to any relationship between the public sector and the private sector on infrastructure subjects. And it was a very important piece of Treasury theology that there was that dividing line, and if you go across it these rules made jolly sure that [indistinct]. And I had the privilege of meeting Sir William Brierley just after he retired. And I asked him about these rules, and I said, “what d’you think of them?”, “absolute rubbish, he said”! What we have now done is go a long way further. It is actually to set out a series of circumstances in which the public sector and the private sector can combine to produce the right sort of infrastructure.

    I do mean things like the Channel Link, the Birmingham road, new developments like the [indistinct] Dartmouth crossing, like underground railway, large-scale infrastructure projects in partnership with Government and the private sector. A concept we haven’t seen before. Areas of the public sector leasing rather than buying to enable the right sort of capital development to proceed without being artificially delayed by public expenditure considerations in the short term. It is pragmatic, it is difficult, but I think it is highly practical. And not only do I think it is highly practical, I think it is very much in our own commercial and industrial interests to develop the sort of infrastructure that will make sure our British economy is as efficient as any economy anywhere.

    So there is a great change. It will take a while to come about, the East-West, the whole series of other projects that otherwise might not take place probably will take place now over the next few years as a result of this important change. And there’s one other that will have a mixed blessing. Some will dislike this next point very much, but I see great advantage. And that is that we are producing a Green Paper to look at the capacity for tolling roads, taking decisions like that, in order to improve the physical infrastructure. Why not let the private sector build roads, and toll them, and take that expenditure wholly out of the public sector and improve our infrastructure at the same time. It happens in France, Italy, it happens right the way across Europe. It doesn’t happen here. Take that money over 15 years out of the public sector figures, and you have extra resources to help elsewhere, to research and development and science, with education, the health service, and people will actually have a better physical infrastructure as well. So we are producing a Green Paper, another huge change of political theology. It has not yet been fastened upon by the opinion formers and others, and the Green Paper will come out in the course of the next few months.

    These are not short term measures. These are not measures to get us over Christmas, or over the next week or over the latest scandal that undoubtedly will erupt somewhere around the world. These are matters addressed to the medium and the far distance. With one single shining objective in the middle of them. To make sure that we have the right structure for British business, British industry, and British commerce, to maximise its opportunities, its profits, its prosperity, its growth, and its employment creating new jobs. Many years ago the old CBI had a slogan. I thought it was the best slogan the CBI ever had, and I myself am sorry that they didn’t stick with it from the 1970s when they thought of it till today, Britain Needs Business was their slogan. Gloriously ambiguous. But it is true. Britain is a [indistinct]. We are a trading nation. We always have been. We never had our eyes fixed down at our bootstraps. Our eyes, our prosperity, have been fixed on markets overseas, on innovations, on developments, on research and development, on new ideas. More Nobel Prize winners for science and industrial matters in this country per head of population than any nation in the world including the Japanese who always get the credit. Because Britain does need business. Our prosperity does, our future does. Unless we are able to recreate that entrepreneurial spirit we had in the ’80s, and it slipped away from us, at the end of the ’80s in the excessive boom that was created and inevitably followed by the recession as people who had over-borrowed got trapped into high interest rates as the Government tried to force down the inflationary [indistinct].

    So it is a great change. People will accuse us of a U-turn in policy. I don’t [indistinct]. It is a policy going the direction I have always wanted. It is upon that British, industrial, commercial, and, yes, manufacturing base that our future depends. And you may expect the direction in which Norman Lamont went yesterday to be the direction in which the Government will move in the future. And I for one believe two things. [end is indistinct].

  • Mr Major’s Speech to the Scottish CBI – 10 September 1992

    Below is the text of Mr Major’s speech to the Scottish CBI at the Forte Crest Hotel in Glasgow on Thursday 10th September 1992.

    ALISTAIR MCCALLUM:

    Prime Minister, President, My Lords, Ladies and Gentlemen, welcome to CBI Scotland’s Annual Dinner. I hope you’ll have a very happy evening. The Grace will be said by Dr. William Morris. The Rev. Dr. William Morris.

    THE REV. DR. WILLIAM MORRIS:

    Let us pray.

    Oh, Lord, since these good things are of Thy giving

    Help us to use them all for wiser living

    Each use restraint, reduce inflation

    To be a slimmer, fitter nation

    And not be sunk in deep depression

    When waist and hairlines face recession

    Oh, Lord Thou dost with steady interest wait

    Which of Thy family will devaluate?

    Lord, guide us in our problems from on high

    And, for this evening, bless the CBI

    Amen.

    THE PRIME MINISTER:

    Alistair, thank you very much for your kind words, and perhaps first I can offer my thanks to you and your colleagues in the CBI for your hospitality here this evening. I knew when I arrived a couple of hours ago that this evening was going to be a special evening [Laughter] and so, for one reason or another it has so far proved. I was piped in, I was offered what I was told, in that lovely bowl, was a half glass of whisky. If that was half a glass of whisky, I’m half a Dutchman. [Laughter].

    Then we had what I can only call a rather novel Grace from Dr. Morris …., [Applause]. It’s always good to see the Church join the State in a little battle against inflation [Laughter] so the CBI has lost none of its originality, and none of its hospitality, and then when Alistair and I stood up for the Loyal Toast a few moments ago, you may or may not have noticed, but a part of this platform nearly collapsed. I felt rather like the Nationalists on Election night [Laughter] but let me turn from the ridiculous to the relevant.

    I want, if I may, Chairman, to speak tonight about the economy of our Country, the whole of our Country, every part of it, its role in Europe, and its future prospects, and they’re big subjects all of them, but what I want to seek to do this evening is to put them into proper perspective because far too often comment on the economy is partial, and is narrowly focused. It takes no account of the wider domestic and international scheme. It’s a snapshot, not a portrait; a detail, not a landscape. It’s too often darkly lit because too many always think it’s fashionable to be gloomy about our future. They forget what we’ve achieved so they underrate what we can do.

    Chairman, it’s only two years ago that business was demanding two things from the Government, and, as Chancellor at that time, I remember the insistence of business, and I remember well what they were seeking from the Government. Business wanted a stable pound, and it wanted lower inflation, and it wanted this, I think, for good reasons. Inflation robs people of their savings.

    It impoverishes those on fixed incomes. It wrecks profits and investment. If Britain has higher inflation than our competitors we lose competitiveness and we lose jobs. Inflation loads the scales against us, and business wanted stable exchange rates because it wanted certainty. It wanted a climate in which it could plan for the long term. I believe that business was right to demand low inflation, and stable exchange rates. They are the essential preconditions for sustained economic success.

    Two years ago, before we joined the Exchange Rate Mechanism, inflation was over 10% and seemed to be rising. We forget too readily the alarm that that caused. Now inflation is 3.7% and falling, and we overlook too readily the opportunities that that offers. We saw such figures before. We saw them briefly in the mid-1980’s but they didn’t last. This time I am determined that that regime of low inflation will last [Applause] and as it does so wages are moderating as well. There has been a crucial change in the inflationary climate in industry. Growth in underlying earnings is down to 6%, the lowest that we’ve seen for a quarter of a century.

    We forget also that, two years ago, exchange rates against our European trading partners, where 60% of our trade now goes, exchange rates against our European trading partners were uncertain and volatile. Now they’re kept within a 6% band in the Exchange Rate Mechanism, and, in due course, will move to the two and a quarter per cent band. Sterling still fluctuates, of course, against the dollar and other currencies, as we’ve seen all too vividly in recent weeks, but it does now have a fresh and certain stability against the currencies of our main trading partners.

    Chairman, as the fear of inflation and exchange rate instability has diminished, so the cry of many of the Government’s critics has changed. Now, we have the inevitable chorus of quack doctors peddling their remedies. There is, I think, a difficulty with these remedies. As we’ve learned from experience, miracle cures simply don’t work, never have, and never will. We need to face our problems squarely. It’s too easy to regard Britain’s problems as unique, or to blame them on the Exchange Rate Mechanism. Neither point is true. The problem of slow growth, a difficult problem, one we face at present, the problem of slow growth is not peculiar to Britain. It is, at the moment, a worldwide problem. We’ve seen the same chain of events in the United States, in Canada, in Australia, in New Zealand, and elsewhere, and in all those Countries, not just in the UK, in all those Countries businesses and individuals took on too much debt in the late part of the 1980’s. Asset prices, especially property, rose sharply on the back of that, and general inflation began to accelerate. Eventually, of course, as interest rates rose and debt burdens became intolerable, people’s top priority was to reduce their debts, and, as a result, businesses stopped expanding, and consumers stopped spending. Some of those Countries have lower interest rates than Britain, but as the United States has illustrated in recent months, the problems of adjustment are just as difficult.

    Equally, I dare say any businessman returning from Continental Europe will have become only too well aware of economic difficulties faced there – weakening activity, low confidence, and rising unemployment, so the process of adjustment has been painful everywhere, but it is necessary, and it is not something that Governments can simply wish away. Improvement rests critically on the decisions which individual businessmen and consumers have to make about how they adjust their own finances.

    I will tell you what my conviction is. My conviction is that adjustment is best managed within the framework and the discipline provided by our membership of the Exchange Rate Mechanism. That discipline ensures that we keep in line with our major competitors in Europe. One thing is certain. If we have inflation around 4%, and our principal competitors have inflation around 2%, then we will lose markets, competitiveness, jobs, and prosperity. It would, at this moment, be madness to let our competitors steal the edge on inflation. I am absolutely clear that for us to compete effectively in Europe, we would need our present policies, whether or not Britain was a member of the Exchange Rate Mechanism, and as we have seen in Scandinavia this week, it is a cold world outside the Mechanism for many Countries that one day wish to join it.

    I was pleased to note, Chairman, that the CBI, in your August Economic Situation Report, firmly endorsed the view that our exchange rate against European currencies, is an exchange rate at which industry can compete successfully, and Howard Davies repeated this very clearly when he addressed the TUC this week. I am sure that that is the right view. As the Chancellor has made crystal clear, there is going to be no devaluation, no realignment, and the export performance of many British, and notably many Scottish companies, provides convincing evidence of our current competitiveness.

    I know that things are not easy, even in Scotland – even in Scotland, which has outperformed so much of the United Kingdom in recent years, and sometimes I think we perhaps overlook, pass along and miss the remarkable changes that have come about in many parts of the United Kingdom, not least in Scotland. Anyone coming back, as I’ve done today, to Glasgow, and remembering the Glasgow of 15 years ago, would not recognise the same City, so great have the changes been [Applause] and then for the first time since records began, Scottish unemployment is below the average for the United Kingdom as a whole. Too high, I know, and I wish to see it lower, but when last was it ever below UK average? Never before. It is now as a result of the changing prospects in Scotland, and the enterprise of the businessmen in this room, and their predecessors in recent years in Scotland, so let me take this opportunity tonight to pay tribute to the response that industry has already made, and continues to make, in adjusting to the new disciplines of the Exchange Rate Mechanism. Costs have been brought under control. Exports are at record levels, and so is manufacturing productivity. Those are real achievements, and quite apart from being genuine achievements, they are the surest possible foundation for the future. Of course, there are problems caused by the weakness of the dollar, a dollar that has fallen by over 20% against the Deutschmark, and if that weakness were to persist, it would have damaging consequences, not least the distortion of international trade and investment.

    Let me say this to you, Chairman, for it is something that I believe passionately – all my adult life I’ve seen British Governments driven off their virtuous pursuit of low inflation, by market problems or political pressures. I was under no illusions when I took Britain into the Exchange Rate Mechanism. I said at the time, that membership was no soft option. The soft option, the devaluer’s option, the inflationary option, in my judgment that would be a betrayal of our future at this moment, and I tell you categorically that is not the Government’s policy. [Applause].

    All too often at difficult times in the past the solution was the same. Let the exchange rate go, and every time, sooner or later the result was the same – rising import prices, rising wages, rising inflation, and a long term deterioration in Britain’s competitiveness which offset any short term gain that there had been. Look for example, at the formal devaluation of 1967. The pound devalued by 14%. Did that lead to a sustained improvement in the UK’s competitiveness? It did not. A brief flurry only. Retail price inflation doubled over the following year, and any improvement in competitiveness swiftly ended. No greater competitiveness, and doubled inflation. What sort of target is that for British industry?

    Since the late ‘60’s the pound’s external value has halved. There were some who saw that as a way to steal a competitive advantage. They were wrong. Maynard Keynes, whom I have to tell you I don’t often quote – Maynard Keynes was right when he said, and I quote “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency”.

    There is a question, a question we might usefully ask ourselves – let me ask it, Chairman. Why is the Deutschmark so preeminent in the currency markets of Europe? It’s not because of current German economic performance. It is because the Deutschmark has an anti-inflation record, and maintains its value. Those who want freedom from the influence of the Deutschmark should realise that they can best get it from matching the Deutschmark’s anti- inflation record, and that is what we are determined to do in this Country. [Applause].

    We shouldn’t expect the road to permanently low inflation to be quick or to be easy, and we still have some way to go. Our inflation is above that of France and Germany, our most important competitors. Well over half our exports go to Countries with lower inflation than ourselves, so we must bite the anti-inflation bullet, or accept that we will be forever second rate in Europe. I refuse to accept such a future for this Country. We face difficulties, I know, but we have the prospect of non-inflationary growth, sustained non-inflationary growth in our grasp, and I am not prepared to let it go. There should be no doubt in anyone’s mind, the Government will stick to its policies, low inflation, free markets at home and abroad, low taxes, and firm controls on public spending. Those policies are good for business, and good for Britain, and they are our policies.

    Let me turn to something else that I believe is good for Britain, and good for business, and that is the Government’s European policy. In December, the Heads of Governments of the 12 will meet at Holyrood House in Edinburgh, the high point of the British Presidency. I’m delighted that so important an occasion will take place in Scotland, and I hope the famous, or perhaps in Glasgow I should say, the infamous Edinburgh climate will be benign.

    Earlier this week I spoke at some length about the Maastricht Treaty. Tonight, I would add only this. Britain stayed firm at Maastricht, firm in its determination to resist the encroachment of European regulations into the workplace. We rejected completely the Social Chapter, and we did so because our ambition is to free industry to compete on its own terms in the widest possible market for its products. Free trade is the route to growth. Free trade is the way out of recession, and to our Presidency of the European Community falls the task of completing two great efforts to liberalise international trade, the single market of the European Community, and the Uruguay round of negotiations under the General Agreement on Tariffs and Trade. When completed, the single market will be the biggest free trade area in the world – 340 million customers. A vast opportunity right there on Britain’s doorstep, right there on Scotland’s doorstep, and to us, the British Presidency, comes the responsibility for bringing it about, so we will be working hard for liberalisation, liberalisation in areas like transport and energy, removing barriers wherever they remain, seeking a level playing field for British business, making sure that the single market becomes a reality and not a slogan, and as we do so, we’ll be working at something else no less important, working at the ambitious task of completing the GATT round, and here agreement depends, not just on 12 Nations, but on over 100 Nations from every part of the globe. Nevertheless, progress is critical to the recovery of the world economy. It’s important to Britain. There are still far too many Countries, even rich, developed Countries, which maintain high tariffs against our manufactured goods. We need the new opportunities a GATT settlement could bring to our service industries, and a growth in world trade that a GATT settlement would bring about is a growth that the world in its current economic situation cannot afford to turn aside. The sooner we have that GATT agreement, the better it will be for every Nation in the world. [Applause].

    So, it’s not only our self interest that’s at stake. A GATT agreement already, in my judgment, long overdue is vital to the developing world, it’s essential to the survival of a world trading system that’s far too vulnerable to national protectionism. It is, that GATT agreement, one of the engines to restore growth. Negotiation of this in Europe, is a matter for the Commission, but we, the British Presidency, will press them, help them, cajole them, until that settlement is reached, but that is only part of our European agenda.

    We’ve already agreed far-reaching plans to reform the Common Agricultural Policy. We’ve agreed to liberalise air fares, to prepare membership negotiations for the EFTA countries, to put subsidiarity, that principle of minimal interference in national matters, and turn it from a slogan into a reality in practice. We have resisted extravagant plans for increasing the Community’s budget. All these bear tribute to Britain’s influence, an influence, I tell you frankly, that would not have been possible if we had sat carping on the sidelines rather than moving our Country into the very heart of the European Community …..[Applause] and only by that policy, by placing us where we can best maximise our influence, only by that policy can we maximise our influence and our control over decisions that affect our Continent and people. There is no other way, and to those who say, sometimes directly, sometimes subliminally, to those who say, “Withdraw from Europe”, “Pretend it doesn’t exist”, I say to them ,”Where have you been, Rip Van Winkle, that you ignore the largest market for our goods and a principal source of our future prosperity?”. I have not a shred of doubt that if we are to build the prosperity for this Nation that we need, then we need that British influence in the heart of the Community to build the sort of Europe, and the sort of Community that we wish to see: free, open, liberal with trade, and respecting the national identities and cultures of each of its member States. That is the ambition we have for the Community, and that is what we shall press for in our Presidency, and long beyond it. [Applause]

    Chairman, I want to conclude by looking at a different Union, a special Union, that very special partnership between Scotland and England. We should never express the value of that Union in purely economic terms. By the start of the 18th Century we had already shared a Monarch for a hundred years. Since your Stuart King, James VI, went South to succeed Queen Elizabeth, the last of the Welsh Tudors, that Royal bond, that military strategy formed good reasons for a closer Union, but it was the economic opportunities that persuaded many Scots of a necessity of Union with England in 1707, and that economic Union has prospered, and today Scotland can justly claim to have one of the most modern and diverse economies in Western Europe, and since 1707 Scotland and England, with Wales and Northern Ireland, have carried out a remarkably successful joint enterprise. It is the Union, with Scotland’s distinctive contribution, which has made all of this possible. It is since the Union, and because of the Union, that Scottish values, Scottish traditions, the Scottish Church, are to be found around the whole world.

    I believe the result of the General Election showed that there remains in Scotland, a strong desire to keep Britain united. [Applause]. I believe that when Ian Lang and I made that a central plank of our General Election campaign, we reached out above the normal issues of inflation, and mortgages, and education, and health, and touched something that is a very basic instinct for people in every part of these united Islands of ours and I don’t believe it was an accident that while all the other Parties suffered reverses in Scotland, the Conservatives defied the polls and the pundits, and won both seats and increased our share of the vote, but that is in the past. We must look to the future, and now we must uphold, develop, and strengthen that remarkable magical Union that has lasted for so long, and that in essence, Chairman, is what taking stock is all about.

    Ian Lang and Peter Fraser have already met a wide range of groups and individuals, each of whom has a special interest in and particular perspective on the role of Scotland within the United Kingdom. Their door will remain open to anyone with a genuine commitment to the integrity of the Union, and with ideas for making it work better. When I come to Scotland, or when I see Scots South of the Border, I will always be receptive to proposals designed to strengthen Scotland’s place in the United Kingdom, and it is as part of that continuing process of taking stock that I have invited a number of leading Scots from a variety of walks of life, to come and meet me in Edinburgh tomorrow so that we can exchange and generate ideas. I know that what they say will be immensely valuable. I’m looking forward to what I hope will be a wide ranging and productive discussion, and I want to hear myself, personally, from Scots, how they believe we can build up and strengthen that Union. These are matters of immense importance, not just to Scotland, but I think to every part of the United Kingdom. Sometimes I think the debate in Scotland has not focused on a wide enough canvas. It isn’t just a question of keeping Scotland in the United Kingdom. It is not just a question of that. It is a question of the contribution and the importance of Scotland to every single part of the United Kingdom. We would not have the United Kingdom without the support and the strength of each of its component parts. It is that capacity of each of the parts of the United Kingdom to come together with common aims, common purposes, common beliefs, but retaining the distinctive cultures of the English, the Welsh, the Irish, and the Scots, that makes this such a remarkable United Kingdom. We propose to strengthen it and build it.

    Chairman, in the few moments I’ve had this evening, I’ve taken the opportunity to touch on a number of important subjects – inflation, our position In the European Community, our future, and the constitutional links of such vital importance between the component parts of the United Kingdom. I’ve spoken about our policies, our strategy for the United Kingdom, but that strategy is something we can only make together – make together in partnership between Government and industry, Scotland and England, Britain in Europe, Britain and Europe. Those are the partnerships that matter. Those are the partnerships that will build, for this generation and the next, a higher quality of life, a higher standard of living, a more secure present and future than ever we have known at any stage in the past. Those are the ambitions we have. They are ambitions, I believe, that are shared, not just in the instincts of Government Ministers, but in the instincts of businessmen, business women, individuals up and down every portion of our land. Together we can make sure that those instincts can build a better future for all of us.

    Chairman, you are our host, and I have both the privilege and the pleasure of thanking you not only for an excellent dinner, but for a great occasion, and the very great privilege also of inviting everyone to join me in proposing a toast to our hosts this evening.

    The toast – the CBI, Scotland. [Toast]

    The CBI Scotland. [Applause].

  • Mr Major’s Speech to the Annual CBI Dinner – 21 May 1991

    Below is the text of Mr Major’s speech to the Annual Dinner of the CBI, held at Grosvenor House in London on Tuesday 21st May 1991.

    PRIME MINISTER:

    Well Brian, My Lords Ladies and Gentlemen,

    I think I just heard a new version of confidence and optimism in the suggestion that I am going to tell you what the election date is. I do know it has been a subject of very considerable speculation as to when the election will be. All I can say to you is anybody who knows me well would think it is most unlikely it is going to be during the middle of the England/ West Indies test series. And even more unlikely that it is going to be straight down the middle of my son’s GCSE examinations. I don’t know how we will do in the test series, and to be strictly fair, I don’t know how he will do in his GCSE examinations. But I have given him one piece of advice. However he does, I told him, “don’t ever forget how you did, because you never know, thirty years on, how important it might be, to some people.” Brian, thank you very much indeed for inviting me to join you for a second successive evening.

    I was your guest here last year, and on that occasion, Roland Smith, who is hiding here somewhere in his usual anonymous way, sent up to the top table a Manchester United scarf, I can’t think why he did that. He sent up nothing this year, I suppose they haven’t been doing too well lately. Brian, this evening I want to look at a series of themes of concern, I believe, to all of us and to look forward to the opportunities opening up for Britain as we approach the millennium. And with that in mind, for it is a very remarkable period we have ahead of us, I want firstly to congratulate the CBI on publishing a ‘New Agenda for the 1990s’: an agenda which focuses quite directly quite specifically on the challenges and the opportunities, that lie ahead. And rightly it looks at not only those opportunities, but also back at the very remarkable transformation in industry during the last decade.

    Ten years ago, the CBI gave an earlier lead. They published an Agenda for the 1980s entitled ‘The Will to Win’ and that document was one of the first signs that after the 1970s, and all the difficulties of that period, enterprise was coming to life again. And now, industry must look forward once again, raise its sights as it looks towards the year 2000, plan for it, prepare for it and in doing so remember also the lessons of the past.

    In his foreword to that Agenda, your President concludes and I quote “British business has not only shown the will to win but the ability to do so in some of the toughest markets there are”. He is right about that. And my first message to you this evening is a simple one and a clear one. Never under sell what you and British business have achieved over the last decade. Now that same document also warns that the United Kingdom must not reverse the changes we have seen in that decade nor forget what the situation was like in the late 1970s. And that is a critical message. How easy and comforting it might be to forget but how dangerous it would be. In the late 1970s, wealth was being destroyed not created as the CBI itself said failure was almost expected, success was a surprise. Industrial profitability collapsed, productivity stagnated, Britain’s share of world markets contracted, inflation escalated to a peak four times as high as the levels we are experiencing today, and spend-thrift Government was borrowing up to 10 per cent of our national income. We must never return to the policies which created those problems.

    But in the 1980s we began to regain ground. Productivity was transformed. In manufacturing, often looked down on by some, in manufacturing it grew faster than in any other large economy and output in manufacturing rose to record levels. Profitability recovered and recovered spectacularly. After years of decline, our share of world markets is holding firm, our manufacturing exports increased by nearly 60 per cent over the decade and our car production for export almost doubled over the last year.

    Now those are remarkable and successful improvements. But I understand very clearly that right now industry is facing difficulties as we bring inflation down. I know that times are tough and I am very well aware of the problems confronting many of you. But I do believe that we must keep those current problems in perspective. Your President has called them temporary difficulties. He is right. It is a British characteristic, endearing perhaps but often damaging, to accentuate the negative and overlook the positive. But we should not lose sight of the gains that you have made in the recent years. For I believe that they are fundamental and that means that we will soon be in a position to build on past successes once again, and we also need to bear in mind that in no sense are we alone.

    Growth is still slowing in Europe and in North America. Unemployment is rising there too, indeed unemployment is far higher in France, Italy, Canada and Australia, than it is in this country. And yet however international and temporary the current problems, I understand very well that is no consolation for those who lose their jobs or for the companies which are facing financial crisis. And it is for that reason that I am absolutely determined that the defeat of inflation must remain our top priority. Never again, never again must our economy have to face the painful but necessary retrenchment of the last few months. This Government’s policies are clear. We must concentrate on getting the economy right. We must conquer inflation and we must have minimum interference in industry.

    We have already removed huge burdens from industry. A whole mass of restrictive administrative red tape that tied up your employees and your business and we haven’t finished with those changes. Our deregulation initiative will continue to pursue ideas for removing more burdens from industry whether imposed at home or from Europe we will seek to have them removed where ever we can.

    We have cut corporate taxation and then cut it again and again. The main rate of corporation tax is now lower than the special rate for small businesses when this government took office and with the Chancellor’s further cuts announced in the Budget, we will have the lowest corporation tax levied by any of our major competitors.

    But we know one thing very well. We know Governments can’t run businesses as well as private enterprise can. And that is why we privatised no fewer than 44 large businesses no less than two thirds of the nationalised sector that we inherited in 1979. And in doing so, we have turned a national burden into a industrial success and brought in 28 billion pounds for the tax payer as well. And nor have we finished in that regard. We will return more nationalised industries to the private sector, including British Rail and British Coal. And we will open up more national and local Government activities to private sector skills.

    To provide a stable framework for enterprise in an unstable world involves difficult economic judgements. But no Government can hope to get those right unless its objectives are clear. Our economic objectives are clear – to drive down the rate of inflation; to reward success and enterprise by cutting and simplifying taxation on individuals and on companies; to open up markets for businesses at home and abroad; and to restrain government and make it more efficient and more sensitive to the individual citizen. Of these, of course, the reduction of inflation is the most important, and it is down – coming down. Last Friday, we saw spectacular evidence of this. The annual rate of increase in the Retail Price Index, that headlined figure of such importance in our national inflation psychology, plunged nearly 2 full percentage points to 6.4 per cent. It was the biggest monthly fall that we have seen in a decade. The rate of inflation is now 4.5 percentage points below last Autumn’s peak. Of course, that is still not good enough and not for a second would I pretend that it was. We expect to see inflation fall and fall again. We expect to see it fall to 4 per cent by the end of this year. Underlying measures of inflation are inevitably falling more gradually, but make no mistake about it, on any sensible measure, inflation is now coming down and will continue to come down. So we are winning this most crucial battle. And our forecasts point to a welcome resumption of growth in the second half of this year. It will not be dramatic or sudden but it will be secure and it will be well-based.

    The task for business in this climate is to prepare for this recovery ahead. And the task for government is to assist the recovery by maintaining the stable policy framework that we have now put in place. I believe that this framework offers a robust defence against the inflationary surges we have suffered in the past. Against a return to the miseries of the 1970s, and even against the lesser resurgence of inflation that we have experienced in the late 1980s. Inflation peaked last year at less than half the excesses of the 1970s, and yet despite that, it has proved painful to correct and we must now ensure that it never recurs.

    Our new policy framework allows for the domestic management and monetary policy within the external discipline of the exchange rate mechanism. That is a discipline on both Government and on industry, sometimes tough but necessary. And it is a discipline that delivers the two most precious requirements for industry, low inflation and stable exchange rates. Already we are seeing the benefits of joining the exchange rate mechanism. Renewed international confidence in Britain’s economic strategy. A confidence that has enabled us to cut interest rates by 3 full percentage points without de-stabilising the pound. And others predicted, you recall, that we would have to devalue within the mechanism if we were to cut rates. They were wrong and we can now see that they were wrong.

    We have stability against the currencies of our European trading partners at a time when the dollar has oscillated widely. And there is widespread confidence that within the exchange rate mechanism framework, we will see further falls in inflation throughout the year, and that interest rates can and will fall further too. I share the confidence in that judgement.

    Exchange rate mechanism membership has made explicit our need to compete. Industry must break free of the bad old habits of paying itself, on the shop floor and in the board room, a level of salary and money that it cannot hope to earn.

    The retail price index is no longer sending dangerous misleading signals to wage negotiators and I welcome very much indeed the signs that pay settlements are now coming down. The faster they do the clear the evidence that inflation is coming under control and the sooner recovery can begin and bring new jobs to our economy.

    There should be no such thing as automatic pay increases. Pay must be linked to performance and to productivity. It is a principle that helps incentives, it involves employees in their business and it is also a principle which I wish to see being applied increasingly throughout the public sector as well as in the private sector.

    And nor must productivity gains simply be swallowed up by pay rises. Each business has the responsibility to decide for itself what margin must be left to help profits, to sustain investment, to generate future growth. And it must also decide what level of wages it can afford to pay its own employees. No-one else can make that decision for a business and by contrast, any proposal from whatever source it may come, any proposal to impose a minimum wage will dramatically drive up industrial costs and massively increased unemployment.

    Any attempt to link the lowest wage to the average would set off a pay spiral that would destroy jobs and cripple industry’s ability to create incentives and raise productivity.

    I believe such policies would be an industrial and economic tragedy for this country, if they were ever to be implemented and we must ensure that they never are.

    Precisely those same principles underlie our policies for training. We prefer incentives to intervention, and choice to compulsion. As I am sure you will know, yesterday, I helped to launch three White Papers which will, I believe, come to be seen as a turning point in the history of education and training in Britain and I am very pleased to pay tribute to Ken Clarke who is here this evening and Michael Howard who I think is not here, for the enormous work and innovation that they put in to ensuring that those White Papers were produced in, the form that we were able to publish them yesterday.

    And tonight I want to make it clear that at the earliest possible opportunity we will be giving legislative force to those proposals. An education bill to start the process will, therefore, be at the heart of our legislative programme. And along with those elements of those reforms which are already underway, such as the introduction of the national curriculum, the creation of grant-maintained schools and in the training field, the piloting of a new system of credits for school-leavers. The effects of these reforms will be truly revolutionary. I believe that they represent nothing less, nothing less than the most radical reforms since the great Butler Education Act of 1944.

    And that parallel is apt. It’s apt because one of our aims is to meet a great but unfulfilled objective of that particular Butler Act. And that objective is this we are determined to improve the quality of vocational education and the esteem in which it is held. That is an ideal that has never fully been realised in post-war Britain.

    But our ambitions go wider, they are to provide new links between the school room, the college, and the world at work. We have deliberately put forward our proposals for education and training together, precisely because we see them as being complementary, and they will, in consequence, extend choice and provide new opportunities for many more young people than ever before.

    And at the heart of these reforms, is our determination to break down the artificial barriers between academic and vocational education, between blue collar worker, and white collar worker between pin stripes and overalls. Such divisions are wrong, they are outdated, they are wrong. Wrong for industry, wrong for our economy, and utterly wrong for our future. These measure we have brought forward sound the death-knell for those divisions.

    At present, we have too many young people without the skills or motivation to get off to a good start in their working life. Time was, when school leavers took up an apprenticeship. Over a period of years they required a recognised trade and that was their training for a life-time of employment. That was fine, of course, if their employment lasted a life time. But tomorrow’s employees will be different, those youngsters leaving school today will face a different world and a different environment. They may have to train, then retrain, then retrain, and then perhaps retrain again and again during their working life, if they are to keep up with the skill and speed with which skills and innovation moves in the modern world. And all that means, a different approach to training. And that’s why are embarking on a programme designed to give more choice and more training to young people leaving school; to provide greater training flexibility for young and old; to maintain standards of academic education, while bringing up vocational standards; and to end the barrier between polytechnic and university.

    I know that this audience will welcome that. The CBI has played a vital part in helping to launch the skills revolution in Britain. Your President has a strong interest in education. I am happy this evening to be able to pay tribute to his work as Chairman of the Trustees of Education 2000.

    It is employers, you, employers, who now take on the lead role in the Training and Enterprise Councils. I know looking round the room amongst those who I have met before, that many of you here tonight are involved in the detailed decisions involved in public expenditure of 2.7 billion pounds a year on training, enterprise and vocational education. And now we are planning more – much more for the future.

    We announced yesterday that we would make training credits available to 16 and 17 year old school-leavers. This ambitious programme will be based on one essential principle, to create opportunity through choice, that is the principle underlying training credits.

    Choice for young people to buy the training they need.

    Choice for employers to provide workplace training.

    Choice, locally, within the TEC’s, to set the right training priorities for the needs of business in each area.

    And we will use that power of choice in the market to deliver opportunity for the workforce of the 21st century. And the whole country will gain as a result of that policy.

    And I believe it will gain too from another policy, from the proposals we will bring forward in our Citizens’ Charter. This is no gimmick, this charter, it will have teeth, it will bite, it will change the way in which public services are delivered and in which the consumers of public services have redress against the quality of those public services. And I will tell you why it will do these things, and what our ambition is for it. I want to make the public sector more responsive to the needs of the public, more responsive by defining standards of service and putting in place mechanisms to ensure that they are met.

    I want to bring business skills into the public service, through competitive tendering for the provision of services, contracting out, privatising and market-testing those activities best supplied by private enterprise.

    I want to introduce new performance incentives for public sector employees. But there is a counterpoint to that. There must also be penalties for poor performance in the public sector as well.

    I want to give greater authority and independence to those who monitor, audit and inspect public services.

    And I want to examine way of providing effective redress to those who suffer, when standards slip.

    Those are the principles of the Citizen’s Charter that we will introduce in a White Paper before the summer recess. We are, of course, already applying many of these principles. I have spoken earlier of the momentum of our privatisation programme. We are encouraging more contracting out of public service provision – and enjoying the benefits that it provides. In Westminster, those benefits are clear. They already contract-out printing, office cleaning, leisure centres, refuse collection, street cleaning and catering. What Westminster has done, others should do. And I hope will do, in the future.

    And there is a further point. The opportunity to tender for local services has encouraged the growth of successful small businesses right around the country. But it is where the market cannot reach that we need to be most vigilant in setting standards.

    Where services remain in the public sector, they must offer the same standards of courteous and efficient service that the best private sector companies provide. The Citizens’ Charter aims to ensure that is what they do.

    But I am aware, Mr President, that it is not only officialdom that needs to listen and to respond; Government must do so too.

    A fortnight ago, the Department of Trade and Industry set out, as one of its formal objectives, its requirement to listen to the concerns of business and consumers – and see that these are genuinely taken into account in the development of government policies. I would like to take this opportunity to endorse that new role for the department.

    Communication between government and industry will grow in importance as we approach the conclusion of Europe’s single market programme. The deadline of January 1 1993 is fast approaching. And there is much still to do. The single market will not exist until all its measure have been introduced, then implemented and then enforced in every country in the Community. And I emphasise the implemented and enforced. We must ensure that Community legislation is not approved but then ignored in countries throughout the Community. In this country, we put into effect the legislation to which we have committed ourselves. Let me say this evening, we expect no less from every country throughout the Community.

    Mr President, the Single Market will be an example of the benefits that can come from removing unnecessary regulation. The same must apply to what is called the “Social dimension” of the Community. We will continue to make clear to Brussels the dangers involved in ill-considered regulation. Employment and prosperity flow from free markets, not from bureaucracy and imposed uniformity.

    I have made clear on a number of occasions my absolute determination to place this country at the very heart of the European Community. And business, I know, has an unparalleled determination to compete with Europe’s best and to win in that competition, both in the Community and beyond the Community. And that is why our struggle against inflation is not just a matter of short-term economic tactics but a matter of priceless importance and of long-term strategy.

    Inflation is a distortion. Inflation is a handicap we cannot afford in the 1990s. If we have it and others don’t, we lose our markets our prospects and our prosperity. That is what is at stake as we battle to get inflation down to a very low level, at least as low as elsewhere in the Community. So we must reduce inflation to the point where it plays no part in people’s decision-making, no part in where or when they invest, how they plan for the future, with whom they have the confidence to compete in business, we cannot be satisfied with anything less than that.

    In recent months, we have brought our inflation rate down closer to the European average. But we must go further, and find for ourselves a place amongst Europe’s best. Then we will be well-placed to fight for free markets and firm counter-inflationary disciplines in the year ahead.

    Your President has rightly called this decade, the decade of Europe – one of opportunity and challenge. Both Government and industry have the chance to set themselves on a course that will yield the benefits of stability, growth and prosperity.

    I have every confidence, every confidence in industry’s ability to rise to that challenge – to plan, to invest, to succeed. That is what you are about as businessmen. That is what we expect you to do; that is what we know that with the right environment you can do and you have done in the past. That is what we invite you to do in the future. Mr President, I cannot overestimate the importance of the success that is necessary for business in this country upon your success as businessmen and as businesses, upon your success rest our country’s prospects for the future. I hope you appreciate, as I am sure that you do, how crucially important that is. So is it my pleasure and privilege tonight, Mr President, to propose tonight’s toast to British business. I propose a toast willingly and with fervour, I propose a toast in the belief that we have the best business disciplines in the world and that with the right economic climate we can capitalise upon those disciplines and storm markets in every part of the world. So my toast tonight is to British business and I will invite you to rise and drink that toast, a toast to British business, may it prosper and profit in the years ahead.

  • PMQT – 21 March 1991

    Below is the text of Prime Minister’s Question Time from 21st March 1991.

    PRIME MINISTER

     

    Engagements

    Q1. Mr. Eastham : To ask the Prime Minister if he will list his official engagements for Thursday 21 March.

    The Prime Minister (Mr. John Major) : This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I will be having further meetings later today.

    Mr. Eastham : Noting that unemployment has gone up by more than 300,000 in 10 months, to the highest rate in any EC country, may I ask why we have the second deepest recession in 10 years when we have our own coal, our own natural gas and our own North sea oil bringing in £90 billion? The CBI is telling us that by the end of the year 2.25 million people will be unemployed and that unemployment will increase further next year. What is the Prime Minister’s excuse for that?

    The Prime Minister : The hon. Gentleman will also have seen the very strong welcome from the CBI for the measures in the Budget that will help the cash flow and reduce the taxation of businesses. He will also be aware of the unprecedented amount of help available for people who are unemployed. We have geared that particularly to the areas where unemployment is most severe.

    Sir Timothy Raison : Will my right hon. Friend consider the grave famine that is developing in Africa? Will he make sure that we and the European Community deliver quickly as much aid as possible?

    The Prime Minister : My right hon. Friend the Minister for Overseas Development is studying precisely that matter at the moment.

    Mr. Kinnock : Does the Prime Minister agree that Question Time is an appropriate moment for him to apologise to taxpayers for the £14.3 billion that his Government have wasted on the poll tax fiasco?

    The Prime Minister : The right hon. Gentleman should explain his phoney figures, for he will know that included in his figure is £3 billion for non- payment created partly by his own side urging people not to pay and that the vast majority of the remainder is money that is available to provide extra money for local services. Would he remove that extra money for local services?

    Mr. Kinnock : It was the Prime Minister who described the poll tax as uncollectable when he spoke to his hon. Friends earlier this week. After wasting all that money, why is he not big enough simply to say sorry?

    The Prime Minister : The right hon. Gentleman did not listen. The money that he has counted as wasted is money that will be available for local services. If the right hon. Gentleman thinks that money is wasted on local services he should make it clear.

    Mr. Batiste : Will my right hon. Friend try to find time to reschedule his visit to the Vickers tank factory in Leeds which he had to cancel a few weeks ago due to bad weather? Is he aware that many people there would like to hear from him, following his visit to the Gulf, how the Challenger tank performed and would like to express to him the urgent need for the Government to come to a decision on the replacement contract for the Chieftain tank?

    The Prime Minister : I was certainly sorry– [Interruption.] –that I was unable to make that particular visit. [Interruption.] I am always happy to spread a little amity in the Chamber, so I repeat to my hon. Friend that I am sorry that I was unable to visit the factory, when I would have been able to tell the workers that the Challenger tank performed absolutely magnificently in the Gulf–far above the expectations that anyone could have had of it. I hope that we shall soon be able to draw all the lessons that we need from that and make a decision on Challenger 2.

     

    Q2. Mr. Sillars : To ask the Prime Minister if he will list his official engagements for Thursday 21 March.

    The Prime Minister : I refer the hon. Gentleman to the reply that I gave some moments ago.

    Mr. Sillars : Is the Prime Minister aware that the toast in Scotland tonight will be to absent enemies–Thatcher and the poll tax– [Interruption.]

    Mr. Speaker : Order. We use the constituency name here.

    Mr. Sillars : It will not really matter in Scotland, Mr. Speaker.

    Mr. Speaker : But it does here.

    Mr. Sillars : I am talking about the right hon. Member for Finchley (Mrs. Thatcher) and the poll tax. When will the Prime Minister acknowledge his personal political debt to the non-payers who destroyed the poll tax by making it uncollectable? If we had not done so, it would still be here, she would still be here and he would not be the Prime Minister.

    The Prime Minister : In what he has just said the hon. Gentleman makes clear precisely why his party is so unattractive and undesirable. I am sure that his remarks are not remotely the feelings of the people of Scotland.

    Mr. Tracey : Will my right hon. Friend sympathise with the disgust of the great majority of the British public at those people who have not paid their share towards local government finance? Will he give an undertaking that people who have not paid their community charge will be pursued?

    The Prime Minister : I certainly will. My hon. Friend might share my view that the disgust is redoubled at those people in elected positions who have perhaps persuaded people not to pay.

     

    Q3. Mr. Kennedy : To ask the Prime Minister if he will list his official engagements for Thursday 21 March.

    The Prime Minister : I refer the hon. Gentleman to the reply that I gave some moments ago.

    Mr. Kennedy : As regards the scheme for a reduction in overall poll tax figures, announced by the Chancellor in the Budget statement this week which has become known, I gather, as the Ribble Valley rebate, will the Prime Minister explain why those who will benefit most are those best able to pay and why the people who are still on rebates in the lowest category of income, by the Government’s definition, will not enjoy the same degree of reduction from the real poll tax figure which they have to pay? Can that possibly be just?

    The Prime Minister : I would not have expected such a stupid question from the hon. Gentleman. Even he should recognise that one cannot give a rebate to people who are not expected to pay in the first place.

    Mr. Burt : Should not the real apologies in local government come from the spendthrift Labour councils which have broken ceiling after ceiling and from the Opposition Front-Bench spokesmen who still refuse to spell out their proposals to control local authority finance?

    The Prime Minister : Of course, they will not spell out their proposals. They do not know what they are. They are still dithering.

     

    Q4. Mr. Lofthouse : To ask the Prime Minister if he will list his official engagements for Thursday 21 March.

    The Prime Minister : I refer the hon. Gentleman to the reply that I gave some moments ago.

    Mr. Lofthouse : Does the Prime Minister recall that on nine occasions he supported the poll tax legislation through the House and cast his vote accordingly? Does he now regret that? If he had his time again, would he give such strong personal support to that legislation?

    The Prime Minister : I indicated clearly throughout the debates on the community charge that I thought that the principle was correct. The hon. Gentleman will know our new proposals in a matter of moments and he might reserve judgment until then.

    Mr. Lester : Does my right hon. Friend agree that, far from what Opposition Members say, the greatest contribution that this place makes to society is that we all believe in the rule of law and in the ways in which one can change laws within the democratic framework, not by protesting or refusing to pay the poll tax?

    The Prime Minister : I agree with the principle of what my hon. Friend said. However, I think that he was being over-generous when he said that everyone in the House believes that. Clearly, some Opposition Members do not.

     

    Q5. Mr. Alan W. Williams : To ask the Prime Minister if he will list his official engagements for Thursday 21 March.

    The Prime Minister : I refer the hon. Gentleman to the reply that I gave some moments ago.

    Mr. Williams : Does the Prime Minister recall that in the 1989 autumn statement he predicted that inflation would be down to 5.5 per cent. at the end of last year and that he revised that figure to 7.25 per cent. in the last Budget? In fact, it turned out to be over 10 per cent. What credibility should we give the Chancellor’s forecast that inflation will fall to 4 per cent. by the end of the year when the rise in average earnings is 9 per cent., electricity prices are to go up by 13 per cent., water charges are to go up by 16 per cent. and petrol will rise by 20p a gallon?

    The Prime Minister : The hon. Gentleman is accurate in saying that inflation is currently higher than I expected it to be. However, he will also know that it is not just my right hon. Friend the Chancellor’s forecast that inflation is falling dramatically. That forecast is shared by almost every independent forecaster and I think that the hon. Gentleman will see the accuracy of it in the months to come.

     

    Q6. Mr. Bellingham : To ask the Prime Minister if he will list his official engagements for Thursday 21 March.

    The Prime Minister : I refer my hon. Friend to the reply that I gave some moments ago.

    Mr. Bellingham : Will my right hon. Friend find time today to consider the part played by small firms in turning west Norfolk into an economic success story? Is he aware that during the past few weeks they have lobbied hard for various Budget measures? Does my right hon. Friend agree that the Chancellor listened to them and that Tuesday’s Budget was an outstanding Budget for small businesses?

    The Prime Minister : It certainly was an outstanding Budget for small businesses and my hon. Friend, who has a long-standing interest in them, is in a good position to judge that. His view was reflected by the National Federation of Self Employed and Small Businesses, which described my right hon. Friend’s Budget as

    “one to bring a smile to small businesses.”

    That is the clearest possible illustration of the way in which small businesses have accepted the Budget.

     

    The Gulf

    Q7. Mr. Corbyn : To ask the Prime Minister what further plans he has to visit the Gulf region.

    The Prime Minister : I refer the hon. Gentleman to the reply that I gave some moments ago.

    Mr. Corbyn : That is rather strange since the question was about the Gulf.

    The Prime Minister : I have no immediate plans to do so– [Interruption.]

    Mr. Speaker : Order.

    Mr. Corbyn : I am quite good at lip-reading and I assume that the Prime Minister said that he was not preparing to go to the Gulf region again. I put it to you, Mr. Speaker, that the Prime Minister should visit the Gulf region and assess the results of the war. There were 150,000 casualties and deaths, there is martial law in Kuwait and environmental destruction throughout the region. It is the product of arms sales. Does the Prime Minister consider that all the money that has been spent by the Government on the Gulf war compares unfavourably with the miserly figure of £28 million spent on the African famine? Should not the right hon. Gentleman now create peace in the Gulf and give resources to solve the African famine?

    The Prime Minister : The hon. Gentleman in his litany missed out one or two material facts–the liberation of Kuwait for a start. He also missed out the fact that the Iraqis were murdering Kuwaitis, dismantling Kuwait, damaging the environment and committing unpardonable sins. I very much regret that the hon. Gentleman does not recall that.

     

    Engagements

    Q8. Mr. Carrington : To ask the Prime Minister if he will list his official engagements for Thursday 21 March.

    The Prime Minister : I refer my hon. Friend to the reply that I gave some moments ago.

    Mr. Carrington : The proposal in the Budget to establish high street share shops is greatly welcomed by all of us who want shares in public companies to be more widely held by the public at large. Will my right hon. Friend confirm that high street share shops must conform to all the provisions of the Financial Services Act?

    The Prime Minister : I confirm that to my hon. Friend. The proposed high street share shops will be subject to the Financial Services Act. That will certainly be made clear and I very much hope that this new way of distributing shares will be successful.

  • Mr Major’s Speech at the 1990 CBI Dinner – 17 May 1990

    The text of Mr Major’s speech to the CBI Annual Dinner, held on 17th May 1990.

    CHANCELLOR OF THE EXCHEQUER:

    I am very pleased indeed to have this opportunity to address your Annual Dinner, in this your silver jubilee year.

    Over the years the CBI has become a pre-eminent representative for industry and business. Not only pre-eminent but vocal. No one could accuse you of being shy in expressing your views either publicly or in personal discussion; and the Government invariably considers what you say with great care – even though we cannot always adopt the policy prescription you set out. It has long been a forthright and constructive relationship; and I hope and expect it will continue to be so.

    It is particularly important it remains so at present. For the economy is now entering a crucial period, which will test all that has been achieved in the last decade and which will set the base for our prosperity in the ‘90s. I believe that the British economy will pass that test – indeed do better than pass – but it may not be easy, for Government, or for business.

    Our objective in managing the economy and industry is simply stated: it is to outperform our competitors. We need to show the successes achieved in the ‘80s – in productivity, in export markets, and in increased investment in new equipment, innovation and training – these successes were not just a flash in the pan; rather that they were an example of just how much attitudes and performance have changed in Britain.

    The truth is that while 1990 is proving, as we expected, to be a difficult year, the 1990s will offer British businesses unparalleled opportunities. There is no need for despondency or hand-wringing. There is a need for businessmen and women everywhere to look to the future and plan for it. For the decisions which will spell success or failure for British firms in the years to come are already upon us.

    At the moment, we are confronted with an unwelcome resurgence in inflation and a difficult short-term outlook. That has led some commentators to write off the last few years as no more than a brief interlude of success, and to say that now we might be sliding back to where we started at the beginning of the ‘80s. I understand this fear. But I disagree with it. I believe that this thought is wholly wrong, and potentially very damaging. I was pleased to see John Banham making these points with his usual force a few days ago.

    Of course there have been setbacks. And I do not belittle the problems we face in the short-term. But however intractable they may seem to some, they are as nothing compared with the deep-seated weaknesses of the British economy at the beginning of the ‘80s. At that time our economic base was weak and uncompetitive, unhealthily reliant on declining industries, and contained some real pockets of economic deprivation.

    That was so because for too long, Governments had disguised the symptoms of decline, and neglected the disease itself. As a result, the real cure, when it came, was all the more painful. But it was the essential precondition for a sustained revival in our economic fortunes. With great effort the trend of decades was reversed, and we began to make up ground on our competitors, and even to out-pace them in many respects.

    And as many here tonight will testify, underpinning that recovery at national level were countless individual success stories: the thousands of people who began the decade working for someone else, and ended it as owners of businesses, creating still more jobs for others; the millions of individuals and families who in the ‘80s took the first step towards home-ownership, share-ownership or capital ownership. Remember too the re-birth of many of our regions, towns and cities – Glasgow’s nomination as this year’s European City of Culture being a striking example of this. The pessimists who look at where we are and worry should look also at where we have come from and how much has been achieved.

    All in all, it has been an astonishing economic transformation, and one whose benefits will continue to work through the economy for years to come. And it has a lesson for us. What was achieved in the ‘80s can be built on in the ‘90s.

    For the moment, the immediate priority of economic policy must be to bring down inflation. I am acutely aware that the measures we have to take hurt many of the people who regard themselves as the Government’s natural supporters – in particular, small businesses, and home-owners on modest incomes. I know there are some who are puzzled that we should keep in place policies that bear heavily on these groups. I understand that. But it is not hard to explain, not when one recalls the damage done by the high inflation of the ‘70s throughout society, to business, to investment, to industrial relations, to savers and those on fixed incomes. Anyone who recalls those days will know one thing very clearly: a period of high interest rates is infinitely preferable to the alternative of high inflation for good.

    And that is the problem: the only alternative to high interest rates is inflation. I know there are always plenty of people peddling apparently easy options, but that magic potion – a pain-free cure for inflation – simply does not exist. Nor will membership of the exchange rate mechanism of the EMS remove the need for a tight monetary policy. I am sure we will benefit from joining the ERM and join it we most certainly will when our conditions are met. But it is an added discipline, which will reinforce domestic monetary restraint, not replace it.

    There can be no doubt that interest rates have to be used to bear down on inflationary pressures. And there can be no doubt that they are working. The effects are clearly there for all to see – in the housing market, and in the high street.

    But I am afraid their job is not yet done. Yes, we are seeing an effect, demand is cooling, but as I have said before, it needs to stay cool for a time while we work off the inflationary hangover. In particular, it will be a few months yet before we see an improvement in the RPI, and in the meantime it has reached an extremely unpalatable level. Of course the RPI overstates the real problem: the idiosyncrasies of the headline rate are well enough understood, and I need not rehearse them again here. But the fact remains that inflation, however you measure it, is unacceptably high, and we must force it down closer to the average of our competitors, and when we have done that we must try to get it down even further still.

    We must do so because the reduction of inflation is not some abstract totem. It is the absolute precondition of all our hopes for the coming years. Low inflation will deliver them. High inflation will destroy them. From this it will, I hope, be clear that I have no intention whatsoever of relaxing monetary policy prematurely, and if necessary, I shall tighten it. And I should add that when I am able to reduce interest rates, I will do so cautiously and prudently. My aim is a resumption of steady and sustainable growth combined with low inflation.

    Because interest rates are so painful we need the best possible information about how they are working. That means we need to monitor what is happening in the economy with great care. And yet in recent years a problem has arisen: in a buoyant, unregulated economy the behaviour of firms and consumers has often been in sharp contrast to many of the established economic wisdoms.

    Most notably, we have found that people are prepared to live with far higher levels of borrowing and far lower proportionate saving than in the past. One reason for this is that credit has become far more widely accessible than in the days of the mortgage queue. But it is also the case that years of sustained growth in incomes and wealth here made people and firms more confident that they can service their borrowing in future.

    These factors have proved important upward pressures on demand and to an extent they were predicted. But what we failed to predict was how far, if at all, they would be offset by external shocks such as the stock market crash, and how much and how fast they would respond to the progressive tightening of monetary policy over the last two years.

    Such unpredictability is, I suspect, inevitable in a free and open economy, and I make no complaint about it. The freedom is worth the uncertainty. However, in addition to our inability to predict future behaviour accurately, it has become increasingly difficult to assess the present state of the economy with certainty – because of the growing gaps and inconsistencies in our official economic statistics.

    The development of the latest outbreak of inflation highlights this very clearly. On the basis of the information available, in common with other countries, policy was directed at avoiding a crisis in confidence and a recession in the wake of the stock market crash. Having avoided that recession, as we now know, policy should have been tighter to bear down on strengthening inflationary pressures. With hindsight, we see that policy mistakes were made – but only with hindsight. At the time, we were not exactly overwhelmed by calls for higher interest rates, and the statistics we had to hand did not reflect the buoyancy of the economy. Again, even when tighter policy was put in place, we still underestimated the strength of demand we were trying to counter.

    Since coming back to the Treasury I have given considerable thought to how to cure these statistical shortcomings. It is important we do because we need to ensure that we have the best information we can get, and as soon as we can get it, about the level and nature of activity in the economy, since it will inevitably carry on changing with ever growing speed.

    The statistics we have at present do not provide that. Too often the first estimates of key indicators have been radically different from the final revised figures. And many of the accounts do not add up. There is for example a huge balancing item (a technical term for errors and omissions) in the balance of payments statistics for 1989 of over 15 billion pounds. And our information on service industries is very patchy – even though they now account for over half our national output.

    In Parliament the Treasury and Civil Service Committee has emphasised the costs to economic policy of unreliable statistics. I know too that representatives of business have been pressing for similar improvements.

    I have therefore announced today a package of improvements to statistics that should considerably improve our ability to monitor and forecast developments in the economy.

    There are a number of elements to the package. It will involve enhancing existing surveys to collect more information on service industries, investment and profits and it will involve a thorough on-going review of the balance of payments statistics.

    I expect the first of these improvements to be introduced by the Autumn and Winter. Taken together with the improvements already in hand, the results of this package should be a substantial improvement in the quality of our key economic indicators. I believe that is essential.

    There will obviously be compliance costs, but we shall ensure that these proposals do not lead to unnecessary or excessive burdens on business. They will be kept to the absolute minimum necessary.

    I have no doubt that the modest price of the new information will be well worth paying, not least because there will be tangible benefits for business as well as government. Better statistics mean better understanding on the part of government and business. And this in turn should lead to better decisions. That must be good for us all.

    But more crucial than the decisions Government takes are the collective decisions of all of you in business, commerce and industry. On this front, I have two particular points I want to make.

    The first concerns the familiar problem of high wage settlements. In particular cases no doubt high settlements are justified. But often they are not. And at present it is clear that pay increases overall are running ahead much too fast. Too many negotiators simply assume that they have to match or more than match the RPI regardless of their business circumstances. This morning’s figures for unemployment show graphically what happens if you take that approach. Higher pay and higher costs squeeze profits, investment and output and lead inevitably to higher unemployment. Sometimes restraint is necessary – and that applies as much to management’s salaries as to those of their workforce.

    Some companies may imagine that if they price their goods out of markets the Government will accommodate this with a lower exchange rate. John Banham and Trevor Holdsworth have repeatedly pointed out the folly of such thinking – and they are right. It would be a great mistake to think the exchange rate can only move in one direction.

    My second point concerns investment. There is no more welcome sign of the improved health of British industry than the record rise in investment over the last three years. I welcome this unreservedly – even though it is costing the Exchequer a massive nine billion pounds a year through capital allowances. I recognise that the slowdown in demand and output makes it harder for companies to invest for the future. But wherever they can invest I hope they will. And I believe they would be wise to do so. For investment needs and opportunities do not simply disappear because the short-term position is tight.

    Indeed, in many respects the medium-term investment prospects in the world economy are very good indeed – especially in Europe. We are now only two years away from completion of the European Single Market – a huge market with a population approaching that of the US and Japan combined. The dramatic developments in Eastern Europe are creating fresh opportunities for business ventures of all kinds and will continue to do so. To give one example, hitherto East Germany has traded mainly within the Eastern bloc and UK exporters have sold very little there – only one hundred million pounds in 1989. As it becomes integrated in the Western economy we should aim and expect to account for as high a proportion of East Germany’s imports as we currently do of West Germany’s. In the long term that should bring as much as a tenfold increase in our exports, to one billion pounds – a substantial rise by any yardstick. And of course that is only one of the economies being opened up in Eastern Europe.

    I have no doubt British exporters can take these opportunities. In the last year exports have increased by 11%, which is the clearest possible illustration that many British companies are ready to profit from these developments. But many are not. I am concerned when I hear of British companies that have not yet developed strategies for getting the most out of the Single Market. Enormous opportunities exist, but only for those ready to compete for them. And that means preparing now. Not tomorrow. That will be too late. Others will be there before you.

    No-one should under-estimate the challenges before us, or the rewards available if we meet them. The 25 years since the CBI was formed have brought their share of problems, but looking across the span of years we can see also the enormous improvements they have brought to the general living standards and quality of life in this country.

    None of that would have been possible without the growth of British industry and commerce. It is incomparably better managed, better equipped, more profitable, and more productive than it used to be. The climate in which it operates is altogether better. Now is the time for you to build on these strengths; and to carry them forward into the 1990s. I am sure you will do so.

  • Mr Major’s Parliamentary Answer on the CBI – 4 May 1989

    Below is the text of Mr Major’s response on the CBI, made on 4th May 1989 in the House of Commons.

    Mr. Cran To ask the Chancellor of the Exchequer when he next intends to meet the director general of the Confederation of British Industry; and what will be discussed.

    Mr. Major My right hon. Friend meets the director general of the CBI from time to time, and a wide range of matters are discussed.

    Mr. Cran Does not my right hon. Friend agree that British management must continue to resist excessive wage claims such as we are beginning to see, if for no other reason than the need to continue to improve our international competitiveness? Does he agree, further, that management must show leadership and ensure also that their own snouts are not too deeply in the pay trough?

    Mr. Major I am not sure that I would put the second part of my hon. Friend’s question in precisely that way, but I certainly agree with the underlying sentiment. I do not defend unjustifiably high salary increases, whether for directors or for the work force. That should be clear. On his substantive point, there must be a clear danger to industry and competitiveness if wage costs outstrip productivity growth. It is an important function of management to make sure that they do not.

    Mr. Robert Sheldon When the right hon. Gentleman meets the director general, will he explain to him something that he himself seems to be reluctant to accept – that is, how he hopes to reduce the balance of payments to a reasonable level with a high pound and high interest rates?

    Mr. Major I am bound to say to the right hon. Gentleman, in terms of the strength of sterling, that it is a matter of record that some of the countries with the strongest exchange rates over a lengthy period – Japan springs immediately to mind – have an extremely good exporting performance.

    Mr. Jack When my right hon. Friend next meets the CBI, will he discuss the encouraging trends towards higher levels of exports from the United Kingdom? Will he give industry every assistance to increase the amount and value of our exports?

    Mr. Major We are certainly delighted to see the increasing trend in exports. We wish that to continue. The most important thing that we can do for industry, whether in regard to exports or internal sales, is to get firm control of inflation. That is central to our policy.

    Mrs. Fyfe When the Minister next meets the director general of the CBI, will he place on the agenda the concern of the Equal Opportunities Commission about the taxation of workplace nurseries? Will he further tell the tigress that her cubs were better looked after than the vast majority of working women’s children are after 10 years of the tigress being at No. 10?

    Mr. Major That may well be a matter that the director general would wish to discuss. I shall bear the hon. Lady’s comments in mind.