The Rt. Hon. Sir John Major KG CH

Tag: Investment

  • Sir John Major’s Interview on BBC Radio 4’s Today Programme – 27 June 2020

    Below is the text of the interview with Sir John Major on BBC Radio 4’s Today Programme on 27 June 2020.

    MARTHA KEARNEY

    There’s a focus on the terrible problems, the tragedies, caused by the pandemic. But we should also remember that there have been some positives too?

    SIR JOHN MAJOR

    There have been quite a few and there may be a lot still to come. Most crises throw up opportunities and I’m sure this one will. For example, they can change what was merely possible into something that becomes inevitable – because it is unavoidable.

    So among the losses of the virus, there will be gains. Some are apparent already. We’ve seen one with rough sleepers. This has been a problem for 20, 30, 40 years and yet for health reasons, it has been absolutely necessary to take rough sleepers off the streets. That has happened, is very welcome, and is great progress. We now need policy to keep them from returning there. That’s one illustration, of which there will be many more.

    MARTHA KEARNEY

    It’s an indictment that it’s taken a pandemic to address a problem like that and to have this sort of urgent action?

    SIR JOHN MAJOR

    There are some things that tend to do this. It’s likely, not certain though, that the lessons of this pandemic will lead to a tipping point in our value system. The virus has showcased inequalities, and as a result of that public opinion and priorities may change.

    If I can give some examples, everyone is aware of the remarkable job done by the National Health Service and the NHS is clearly going to have an even greater priority in funding, in research and in training than ever before. I think that the country as a whole will welcome that, and will want people who work in the NHS to be fairly treated.

    But beyond that, we’ve learned that there are many unglamorous jobs in our economy, often lowly paid, that are crucial to our way of life. I have in my mind care workers, who are generally lamentably paid – but also cleaners, porters, the refuse collectors who protect our health by collecting our rubbish, shop assistants, a huge number of people who we depend upon in our daily life. I think that has become clearer, and will have an effect on policy. It has become evident that a lot of people have been left behind by the changing nature of modern life. That has been happening over quite a long period and it hasn’t been sudden, but the shock of the virus has made that crystal clear.

    MARTHA KEARNEY

    So many of those people have borne the brunt haven’t they in terms of their health and lives?

    SIR JOHN MAJOR

    Some have lost their lives, some have lost their health. Many of the people who have cared for the sick have themselves been living in fairly deficient accommodation. Many of those who supported them have done so too, and common decency suggests that this has to be put right. I think that the national conscience post-Covid may well demand it.

    MARTHA KEARNEY

    It’s not just a question of national conscience is it? It’s a question often of Government policy, such as care-workers and we’ve seen terrible situations erupting in our care-homes. Social care has been an issue that has been neglected by many Governments hasn’t it?

    SIR JOHN MAJOR

    I agree with that. I think that it has been under-valued, and I don’t think it’s possible to under-value it any longer – and that may be an advance. I’m very conscious that it is easy for me, who is not in Government and doesn’t have to enact policy to point these things out. These are very big issues, and they are very complex for any Government. The solutions will be expensive and some of them will have to be long-term. But some are immediate. I don’t know if I speak for others when I say this, but it seems to me that ending dependence on food banks is essential. It’s truly shocking that we have food banks in 2020.

    Then there are the much bigger issues. Clean, healthy homes for example. We know that’s necessary, and steps have been made towards that by Government after Government. We don’t just need a policy for issues such as housing and those left behind by modern life. If we step back, we are still the fifth or sixth richest nation in the world and we have to acknowledge that. We need a crusade to improve the living standards of those people who have fallen behind.

    If this Government, and its successor Governments (because this is a very long-term project) tackle hardship consistently and enthusiastically – a crusade for a decade as it were – then it will do a great deal to end divisions in parts of our society.

    MARTHA KEARNEY

    You’ve acknowledged that that crusade would be expensive and you think that there might be more of a public appetite for this, but what are you talking about? Are you talking about greater Government intervention? We were looking back at some things you’ve talked about in the past, in 2015, you said some people think the solution is easy, penalise the rich, cut defences, cut overseas aid, borrow more and spend more. You’ve said that that argument is simplistic and naive. So what should the Government be doing?

    SIR JOHN MAJOR

    None of this is easy for any Government of any political ideology, but it seems to me that it is going to be inevitable that the Government takes a greater role in what happens in terms of the future, in terms of social care, simply because there is nobody else who can do it. The attractions of small Government are always ideologically obvious, but the practicalities, from where we are at the moment, are that the Government is going to have to take the lead in policies that deal with many of our social problems.

    I said that this is going to be extremely expensive, but there are other positives that are not as expensive. So how does the Government handle this? Let me make one point first, I think to put up taxes before the economy has recovered, which may take a while, would in my view be a mistake. Over time, there is little doubt that taxes are going to rise. For the moment, because interest rates are so low, and likely to remain so, it’s possible for borrowing to take the strain in a way it couldn’t have done a quarter of a century ago.

    MARTHA KEARNEY

    So even though our debt levels are now more than 100% of national income, which is eye-wateringly high in historic terms, you think there is still a case for more borrowing?

    SIR JOHN MAJOR

    I think it will be inevitable in the short-term. It would be politically impossible for any government not to deal with these problems. They will neither wish to, nor will be able to ignore them and I don’t think that, at this moment, they can tax. So I think there is scope in the short-term. Not forever – and there is no magic money tree, let me make that clear – but for a period, until the economy has recovered and taxes for some people can then go up.

    MARTHA KEARNEY

    The money would be spent on the left behind people? Continuing perhaps with the furlough scheme in some sense after it’s due to end?

    SIR JOHN MAJOR

    I don’t want to be prescriptive about what needs to be done. There is a whole range of options and priorities may become clearer as we move out of lockdown. But clearly the Government is going to have to borrow a great deal, and there are one or two imaginative things that previous Governments may have been against, which they may wish to look at. As an example, I think you can use borrowing as a social tool. For decades, our nation has been told to save for retirement and, over the last few decades, many people have done so in order to be secure in their retirement.

    With interest rates now at their present level, which is in some ways helpful, the people who have saved and who have done what Governments have asked them to do, are now earning nothing on their savings. This is causing resentment and embarrassment.

    One option might be to offer very long-term bonds, say twenty years, to UK nationals at a slightly higher rate of interest, and perhaps with the added advantage that if the investor dies during the period of the investment, then the sum they invested is excluded from inheritance tax. There are lots of variants, investment in bonds for hospital building or social housing. Of course, the Government can borrow more cheaply from the markets, but that often means a foreign commitment rather than a domestic commitment. I think there would be an appetite for domestic investment from many people in the UK.

    MARTHA KEARNEY

    I wanted to move onto another very important area and one which I know you care a great deal about, the future of the United Kingdom itself. We’ve seen different parts of the United Kingdom, different countries, moving in different directions and at different speeds over coronavirus measures. How do you see the future?

    SIR JOHN MAJOR

    The priority in the future is, in my mind, to keep the United Kingdom as a single entity. I believe every part of it is better off within the United Kingdom rather than split away, for a range of complex reasons that I and many other people have made clear in the past.
    As policy develops, it would be much more difficult for the Scottish Nationalists, for example, to win a referendum in the short-term, because of the economic difficulties that they, too, will face as a result of Covid. In that period, the UK Government should work very hard to try and reconnect to a greater extent with the way the Scots think and act, and try and persuade away the arguments for breaking away from the United Kingdom.

    There may be a breathing space to do that, and we should hug the regions closely and make sure they are properly consulted – as they should be. They need to be given a great deal of freedom as they are now, but we must do everything we can to keep the United Kingdom as an entity. Without it, we are all much weaker.

    MARTHA KEARNEY

    And finally, we’ve been talking about the kind of lessons to be learned in social terms and in economic terms? What about the way that the pandemic has been handled so far? Do you think that there’s an urgency that we look at what has been happening in recent weeks in order for us to be able to handle any potential second wave more effectively?

    SIR JOHN MAJOR

    In due course there will be a full-scale Inquiry, but the time for that is not yet. It might be practicable to have what you might call a “quick and dirty” look to see what lessons can be learned in case it returns in the winter, or next year. But we mustn’t overlook, and I hope we won’t, the many positives there have been across the country that have arisen solely because of the crisis that we’ve passed through.

    MARTHA KEARNEY

    Sir John Major, many thanks indeed for talking to us.

    SIR JOHN MAJOR

    Thank you.

  • Mr Major’s Speech to North East Businessman of the Year Award – 7 January 1992

    Below is the text of Mr Major’s speech at the North East Businessman of the Year Award Dinner in Newcastle on Tuesday 7th January 1992.

    PRIME MINISTER:

    Today I have been able to see at first hand the continuing strength and the enormous diversity of the North East economy. This morning I visited Vickers – one of its oldest and most famous engineering firms. I spent a most enjoyable time clambering around Vickers’ new Challenger II tank. And inevitably my thoughts went back to the last occasion when I climbed on top of a Challenger tank. Just ten months ago in the desert in Kuwait.

    Everyone who went through the Gulf War knows of the efforts made by the Vickers Gulf team. Their ingenuity, their persistence and their sheer hard work ensured our tanks, guns and equipment were ready for action at all times. It made a vital contribution to the war effort – and I was delighted to see that contribution suitably “honoured” last June. It was thoroughly well-deserved.

    At Newcastle Business Park, I opened the new British Airways flight reservation centre. BA is, of course, just one of many enterprises attracted to the new Newcastle Business Park. With some £140 million in private investment, it is already 95 per cent sold or let. And by companies that read like a Who’s-Who of modern, innovative industry.

    That demonstrates another vital feature of this region. An understanding of the need to diversify: an eagerness to use both the public and the private sector to create new facilities; and a determination to attract new enterprise and new firms that will ensure the future growth of the North East.

    Finally, at Amec Offshore, or Press Offshore as many of you will know it, I had the opportunity to see the oil rig fabrication yard. In 7 years, the company’s turnover has increased 10 fold and its workforce by a factor of 4. Today, it has announced a further contract which will create 200 new jobs at Sunderland. Amec Offshore is surely a classic example of the way forward: building on our traditional engineering-based skills and applying them to a new and expanding sector.

    This combination of enterprising incoming firms and traditional strong businesses has given the North East greater resilience in recent years. I know times are hard. I don’t pretend otherwise. But in many ways the North East has proved more robust than other areas in recent months; it has built on its long-standing record in the engineering-related industries and transformed it into a worldwide reputation for success.

    And increasingly the North-East offers a greater diversity of enterprise and employment opportunities than ever before. Whole communities are no longer dependent on single industries; and that offers greater security to future generations than their predecessors ever enjoyed.

    Perhaps that success is best demonstrated by the attraction of well-known Japanese inward investment – Nissan, Fujitsu and Hashimoto. They could have gone anywhere in Europe. But they chose Britain. Chose England. Chose the North East.

    But the future for the North-East is also:

    – about new investment by successful UK firms – Glaxo, MTM and British Airways;

    – about the work of the Tyne and Wear Corporation to rehabilitate old industrial areas, and promote major commercial developments alongside the Tyne and Wear; and about the parallel activity of the Teeside Development Corporation alongside the Tees;

    – about the development by ICI at the Belassis Technology Park to encourage and attract small technology-based businesses;

    – and about the innovation centre at the Newcastle Science Park linked to the City’s university and polytechnic.

    With such a record of innovation, diversification and growth, you may well wonder why this Government is sometimes accused of having no industrial strategy. Well it’s partly politics of course. But also, if by industrial strategy, you mean an obsession with regulation, with intervention, with Government interference, with excessive taxation, then certainly we have no such strategy. What we have is quite different and, I believe, better for our longer term interests.

    Our industrial strategy is clear. It is based on creating the framework in which business and industry can flourish in a decade that will be more competitive than any we have previously known.

    – That is why low inflation is our top priority. Without that our companies cannot compete;

    – that is why we reward initiative and success through lowering taxes: we now have one of the lowest rates of corporation tax in the industrial world; we have cut income tax rates and our objective is a basic rate of 20 per cent;

    – that is why we will continue to return nationalised industries to the private sector – we are already discussing the ways in which British Rail and British Coal can be privatised;

    – and why we will continue to free up the labour market.

    Mr. Chairman, we have no intention of adding £1,000 to the annual tax burden on the average family; or of setting a 59 per cent top tax rate.

    And we have:

    – no intention of creating a national investment bank with regional branches trying to second guess business and markets;

    – no intention of introducing a minimum wage, thereby destroying the jobs of many lower-paid workers;

    – no intention of introducing a statutory training programme with every company subject to a half per cent of payroll tax, whatever their size or profitability at the time;

    – no intention of reversing the reforms that have transformed our industrial relations in this country.

    That is also why I was not prepared to sign up to the new Social Chapter at Maastricht. We could not see decisions taken in Brussels that would have reversed the better balance between the two sides of industry that we have achieved.

    Of course, that does not mean we are seeking lower standards for our workers; indeed, people know that in many areas standards in this country are higher than in other European countries. These are matters to be settled between individual employers and their employees – not by central government. And not by agreements at European level between trade unions and employers subsequently imposed by European directives – even though it might be opposed by the British Government, British management and workforce alike.

    We are a trading nation. We cannot flourish unless we can compete on level terms with other countries. That is why we consider a successful outcome to the current GATT negotiations so vital. It is why we are working so hard for the successful completion of the Single Market. And it is why I fought at Maastricht to make sure that in future countries which sign up to Directives implement them in full – or face penalties if they do not do so.

    Mr. Chairman, I recognise that for many sectors in our economy times are hard – in some cases very hard indeed. With growth faltering overseas in the world’s largest economies, our economy has not performed as well in the last year as had been hoped.

    But let us not get these matters out of perspective. We are at a different stage of the economic cycle than many of our competitors. For while Germany and Japan will continue to slow in 1992, I do not doubt that we will see recovery here in Britain.

    I know there is much speculation about the date of the turning point in the UK. Some economic pundits talk of little else. Yet in reality, there is no magic moment, no precise point when recession lies clearly in the past, while recovery stretches out into a better future. Inevitably economic data will show ups and downs and irregular patterns as recession ends and recovery begins.

    Recent economic figures certainly do not support the sudden swing into pessimism which has overcome certain commentators. Of course, there is no point in excessive optimism or trying to talk up the economy. But there is equally a risk in going too far the other way. And I certainly believe that the recent pessimism has been overdone.

    There are plenty of encouraging developments. If you listen to some of the dismal Johnnies you might never realise what has been achieved in the last year.

    We have reduced inflation from almost 11 per cent to around 4 per cent; it is now firmly under control.

    – We have cut interest rates eight times – faster and further than almost anyone expected: for some on annual mortgages, those cuts are only now feeding through into lower mortgage payments.

    – Thanks to our ERM membership, we have been able to bring our interest rate differential against the deutschmark to its lowest level for decades. In the 1980s sterling rates were on average 5 per cent higher than DM rates – today that differential is around 1 per cent.

    – Retail sales are higher than a year ago – and many stores are reporting record sales.

    – The trend rate of increase in unemployment has now slowed substantially.

    And real incomes are rising.

    Too many people seem to be losing sight of the issues that really matter. Governments cannot – and should not – try to adjust the economy month by month, or week by week. Policy cannot – and should not – react to every monthly economic statistic that is released. Our job is to provide a stable and predictable economic framework, with responsible monetary and budgetary policies so that business and individuals can have the confidence to take the right decisions.

    I believe we can look forward to 1992 with confidence. It is not just the Government but virtually every international, City and academic body that expects a return to growth. For we are getting the fundamentals of the British economy right. We have made clear our commitment to exchange rate stability through membership of the ERM. We have brought inflation down and will keep it down. We can look forward to growth founded on economic stability and low inflation.

    But, while we can create the right climate for future growth, it is up to business to seize the opportunities and build our future prosperity.

    What does that mean in present circumstances? Ultimately, at its very heart, business seizing opportunities is about the behaviour of individuals. About how they act. How they decide on their actions. About their skill; their foresight; their knowledge; and the sheer hard work, that they bring to decision-making.

    And it is also often about an independence of thought – what you might term being “canny”. Persisting with a view based on the evidence that the individual believes to be right. Having the initiative to look at a problem in a different way – and thus perhaps seeing the solution and way forward that escaped everyone else. It is about being able to spot and assess opportunities. And then having the skill, foresight and the courage to take the risk and then turn those opportunities into realities.

    And that of course is what tonight’s Businessman of the Year Award is all about. We are here to celebrate successful risk-taking, the very heart of a successful commercial economy. It was that spirit of enterprise which built the North-East in the first place. Now it is transforming the structure and diversity of its economy once again. It will enable that economy to grow and expand in the years ahead.

    I am confident about our prospects for the 1990s. In the last decade the Government and business – working together – turned an uncompetitive, ramshackle, over-regulated economy into an enterprise economy that out-performed most of its competitors. Now, as we come out of our difficulties, we must build on that. We will come out of the recession as we need to – with low inflation, a stable exchange rate and the prospect of steady, sustainable growth.

    If we build on that; if we ignore siren voices offering quack remedies; if we turn aside from re-regulation and higher taxation; if we build an enterprise partnership between Government and industry, then we can create a level of prosperity that exceeds anything we have known before.

    That must be our objective for the 1990s.

  • Mr Major’s Speech to Conservative Party Conference – 11 October 1990

    The text of Mr Major’s speech to the 107th Conservative Party Conference, held at the Bournemouth International Centre on Thursday 11 October 1990. The speech was issued as a Conservative Party news release, reference 637/90.

    CHANCELLOR OF THE EXCHEQUER:

    Let me turn immediately to the concern that I know is in most people’s minds. Two years ago inflation seemed beaten. Continuing growth, falling taxes, rising prosperity. That was what people had come to expect.

    Then we hit difficulties. In essence the case was simple. We grew too fast. We spent too much. We saved too little. And too much of what we spent was borrowed. The result was inflation at home and a trade gap abroad.

    Our objective must be to get back on course: most importantly to reduce inflation; and then eliminate it. And we must close that trade gap. At the moment we import far too much that both could and should be made here in Britain.

    Too often our industry – especially manufacturing industry – is portrayed as though it was the weak link in our economy – constantly in need of a crutch.

    That image is insulting to industry; more importantly, it simply is not true. Manufacturing industry is fitter and more competitive than for years. Increasingly it is attracting the best and brightest of our young people. An independent report recently argued that Britain has the potential to become the manufacturing dynamo of Europe in the 1990s. We have provided the right tax regime – the best in Europe. We have provided the right industrial relations framework – the best in Europe. Now we need to match that with the right low inflation economy and make that the best in Europe.

    On Monday of this week we took an historic step towards that when sterling joined the ERM. No one should think this will be an easy option. Or a soft one. It is not a quick fix. And it was not intended as such. It will not remove the need for tight domestic policies. But it will help us to get our inflation rate down and to keep it down.

    Membership of the ERM will not make it easier overnight for our industry to compete in Europe. But it will help to keep the exchange rate stable and to provide the certainty which industry needs to plan for the future. And we have gone in at a rate at which industry can compete. It is now up to them to stay competitive by keeping costs down.

    But let me correct one misconception that seems to have appeared. Joining the ERM does not mean that we are now on a road leading inexorably to a single currency. It does demonstrate yet again that we take our commitment to Europe seriously and that we mean what we say. But we also mean it when we say that we cannot accept the Delors plan and we will continue to press our own alternative that we believe will better promote European integration and keep the Community together.

    Joining was not a light or casual decision. But it was the right one. And it does target inflation as the poison in the economy that must be destroyed. Only as we do so can we take further steps to reduce interest rates and mortgage rates. I want to see that as much as anyone. I do understand – very well – the difficulties many people and many small businesses are facing. But I know too, that the countries that achieve the lowest inflation rates are the countries that will enjoy the lowest interest rates.

    The trouble with inflation is that the welcome bits come first – more money, cheap goods, expanding output. The unwelcome bits follow – soaring prices, collapsing businesses, lost jobs.

    But the cure works in reverse: high interest rates, bankruptcies, and tightening belts come first. Then we get stable prices, competitive businesses and a growing economy. In recent months we have been right at the nasty end of the cycle – feeling the pain but not yet seeing any of the benefits.

    Although oil prices have not fed through fully into the Retail Price Index I am now in no doubt that inflation will fall sharply over the next year. That will be next year’s reward for this year’s policy.

    And there is a further point. The first time I addressed this Conference was as a Social Security Minister. I noticed then that many pensioners were on social security benefits. Not because they were feckless. They weren’t. Not because they had not saved. They had – and often from modest incomes throughout a lifetime of work. No, they were on benefits because rampant inflation in the 1970s wrecked the value of their savings. I believe that was unforgiveable; we must never let it happen again.

    In recent weeks we have heard little enough of these realities from Labour. One of the main causes of our present difficulties is that, after the Stock Exchange crash in 1987, we reduced interest rates too fast. In retrospect it was a mistake. But we did so because we feared recession. So, at the time, did everyone else: economists, businessmen, pundits, even – heaven help us – the Labour Party.

    So I was astonished to hear Mr Kinnock claim that, at that time, in 1987, he was saying “Steady, steady!”. Now in retrospect that would have been right. But Mr Kinnock? “Steady, steady”, somehow I don’t recall that. So I looked it up. And, try as I might, I couldn’t find him saying that. Almost everything else, it is true, but not “Steady, steady”! Now it may be that I’m being unfair to Mr Kinnock. So let us try a larger sample.

    – Hands up those of you would heard him say “Steady, steady”?

    – Hands up those of you who think he could have said anything as sensible as “Steady, steady”?

    – Hands up those of you who believe he would say anything as short as “Steady, steady”?

    I will let you into a secret. I will tell you why Mr Kinnock always speaks at such length. It’s because he has nothing worthwhile to say. And because he has nothing worthwhile to say, the poor chap never knows when he’s finished. We know when he’s finished. The day after the next General Election.

    By the way, I did find out what he said in 1987 – and I quote;

    “This is a time of judgement and that judgement should be a big cut in interest rates”.

    So much for “Steady, steady”. So much for Mr Kinnock’s memory. And so much for our prospects had we taken his advice.

    For what he really proposed was a policy that would have given us far higher inflation today. And what he plans now would give us even higher inflation tomorrow.

    For every pressure group he has a spending promise. Many are appealing. Some are appalling, others are frankly loopy. But together they are unaffordable. Even the large tax and national insurance increases they admit to could not pay for Labour’s real programme. But, of course, if they kept their promises, tax increases would be bigger. And if tax increases were not bigger then they could not keep their promises. That’s why Labour will not price their programme. But in due course, we will. Just to help them out – and also, of course, to help keep them out.

    There is now only one solitary part of John Smith’s economic programme that still survives: credit controls. The problem for him is that they don’t work, they’re out of date and the rest of the world is ditching them. What a commentary on the modern Labour Party. As the Third World tosses out failed economic policies, John Smith picks them up. Well, after this week he’ll have to pick up a few more if he wishes to look distinctive.

    But put aside for a moment the rights and wrongs of any particular policy. Consider their priorities: the State and tax and spend. And the individual can pay and be controlled. Doesn’t that just sum up the essential differences between our two parties? They are the party that builds up choices by the State. We are the Party that provides choices for the individual.

    They are, of course, closer than us to the trade union leaders. But we know what that means. It means that when it comes to the crunch the trade unions will put their arm around Mr Kinnock’s shoulders and say “Neil”. And he will.

    By contrast, our Party is about people and for choice. People know what we stand for. Our policy is to promote economic well-being. Over the years we have succeeded.

    We have done so because we have been prepared to take the long view, to make fundamental changes, often controversial at the time. To deregulate, to denationalise, to allow enterprise to flourish, and to encourage people to take responsibility for their own lives. This approach is often less cost than promising that the Government will do everything for everybody. But, in 11 years, it has improved the prospects for the future out of all recognition.

    We owe a great deal of that to the policies pursued by Geoffrey Howe and by Nigel Lawson.

    Our approach has been based on the fundamental premise that people want opportunity:

    – Opportunity to do more for their children;

    – Opportunity to improve the standard of their life;

    – Opportunity to obtain the dignity of independence and self-sufficiency in retirement.

    And not only for the better off.

    – Do council house sales help only the privileged?

    – Or employee share ownership?

    – Or lower basic rate taxes?

    We know the answer to that. They do not.

    The changes we have introduced give choice and opportunity to millions of people who never had them before. That is what we have achieved in the last 11 years. It is a truly remarkable achievement. And it could not and would not have happened without the leadership of Margaret Thatcher.

    And that is what we must continue to build on in the future. As we do so, the Labour Party will accuse us of being materialists. I plead guilty. In that one charge they admit the dramatic improvements in living standards we have brought about.

    Of course the charge is meant to make us look selfish. But does it?

    What materialism means for many people is that they are better fed, better clothed, better housed than ever before. They own homes, cars, washing machines and televisions, on a scale earlier generations never dreamed of. They live in a society where literature, art and music are available in abundance. In which political and personal freedom are taken for granted. In which the class barriers that once strangled social mobility are gone.

    And what our opponents cannot stomach is that they live in a society that knows it is the free market and capitalism that have delivered this improvement. For here as elsewhere the market economy has won the political, the social and the economic argument and Socialism has lost.

    Since 1979 we have rebuilt a market economy; we have untangled bureaucracy, we have denationalised industries and reformed trade unions. And it has worked. We enter the 1990s in incomparably better shape than we entered the 1980s.

    – Investment is far greater.

    – More people are in work.

    – Real take home pay is higher.

    – Strikes are down dramatically.

    – And half the State sector is back in private ownership.

    And the prizes before us now are enormous. The 1990s will be a period of immense opportunity. Increasing trade will flow from the completion of the Single Market and the opening up of Eastern European economies.

    I have no time for the misery mongers with no faith in our future. It’s about time people stopped talking this country down and started talking it up. Throughout much of the 1980s the British economy outperformed the rest of Europe.

    Overseas investors have shown their confidence in our country and our workers – and that is why we attract more inward investment than any other European country. We should have more faith in ourselves. And that must be one of our aims for the 1990s.

    And when inflation comes down, as it will; when interest rates can prudently be lowered, as in due course they can; when 11 years’ improvement to the economy brings more prosperity, as it must; the electorate will know which way to turn.

    Once again, it will put its trust in a Government that delivers. That keeps its word and keeps it nerve. That knows what we should aim for and plans to achieve it. A Government, above all, with the will, the authority, and ‘The Strength to Succeed’.

  • Mr Major’s Written Parliamentary Answer on Investment – 4 July 1989

    Below is the text of Mr Major’s written Parliamentary Answer on Investment on 4th July 1989.

    Mr. Butterfill To ask the Chancellor of the Exchequer if he will list the total investment growth figures for each of the last 10 years; and if he will make a statement.

    Mr. Major The figures for total investment growth in the United Kingdom at 1985 prices, over the last 10 years, are shown in the table.

    United Kingdom total Gross Domestic Fixed Capital Formation (1985 prices) per cent. change on a year earlier
    Per cent. | change

    1978 3.01
    1979 2.80
    1980 -5.37
    1981 -9.58
    1982 5.42
    1983 5.03
    1984 8.60
    1985 3.80
    1986 1.66
    1987 7.98
    1988 12.25

    Source: CSO.

    Between 1980 and 1988 the United Kingdom had the fastest growth of total investment of all the EC countries.

    Mr. Patnick To ask the Chancellor of the Exchequer what proportion of investment in United Kingdom industry over the past 10 years can be accounted for by internally generated funds.

    Mr. Major Companies’ undistributed income is used to finance a variety of expenditure, including investment, but it is not possible to say to what extent investment has been financed by internally or externally generated funds.

  • Mr Major’s Written Parliamentary Answer on Investment – 30 June 1989

    Below is the text of Mr Major’s written Parliamentary Answer on the Investment on 30th June 1989.

    Mr. Gordon Brown To ask the Chancellor of the Exchequer whether he will show for 1988 the total level of fixed investment by industrial and commercial companies in (a) plant and machinery, (b) dwellings, (c) company cars, (d) other vehicles, (e) other new buildings and works, (f) purchases less sales of land and existing buildings and (g) all fixed assets.

    Mr. Major Total fixed investment by industrial and commercial companies in 1988 is estimated at £37,461 million. The analysis by type of asset is not yet available. An analysis will be published in the 1989 edition of the “United Kingdom National Accounts” in September, but will not distinguish between company cars and other vehicles.

    Mr. Jack To ask the Chancellor of the Exchequer what are the latest projections for the growth of manufacturing investment in 1989.

    Mr. Major The latest Department of Trade and Industry investment intentions survey published in June projected manufacturing investment in constant prices to rise by 15 per cent. in 1989 on a year earlier. The latest CBI quarterly trends survey published in April confirms this buoyant outlook.

  • Mr Major’s Parliamentary Answer on Investment and Consumption – 4 May 1989

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

    Mr. Brazier To ask the Chancellor of the Exchequer what has been the rate of growth of (a) total investment and (b) total consumption over the past seven years.

    The Chief Secretary to the Treasury (Mr. John Major) In the seven years to 1988, total consumption grew, in real terms, by 25 per cent., while total investment grew over twice as fast – by 54 per cent.

    Mr. Brazier Does my right hon. Friend agree that total investment has grown so much faster than consumption not only as a result of the level of confidence that business feels in the Government’s economic policy, but as a reflection of the fact that there is some remaining over-manning from the grotesque levels that we inherited when we took office? Does my right hon. Friend further agree that it is a healthy feature of economies at this stage of development, such as those just ahead of us like America and Japan, that employment moves as a result of investment from manufacturing to the service sector?

    Mr. Major My hon. Friend is right about the confidence of industry. As my right hon. Friend said a moment ago, total investment is now higher as a proportion of gross domestic product than it has been for many years. On the future of manufacturing industry in particular, the Department of Trade and Industry investment intentions survey forecasts further investment growth in 1989 of 11 per cent. My hon. Friend is right on over-manning, but he should observe that not only has it fallen in many industries, but has done so at the same time as employment has grown in the service industries and in other industries.

    Mr. Beith Does the Chief Secretary realise that few people outside his own supporters – and not all of those – believe that the enormous switch in capacity from consumption to export will take place on a scale sufficient to wipe out our balance of trade deficit? Does he find it possible to believe that that will happen when world trade is expected to slow down? He is presuming that exports will rise 4 per cent. a year faster than imports.

    Mr. Major Invariably, there are Doubting Thomases about. We shall have to wait and see. Exports have been doing extremely well in recent years and there is every sign that that will continue. The hon. Gentleman will welcome that when it comes about for it will be a considerable achievement by British exporting industry.

    Mr. Soames Is my right hon. Friend able to quantify the proportion of the trade deficit that is accounted for in inward investment?

    Mr. Major There is a substantial amount of capital inward investment, which reflects, to a large degree, the confidence of external investors in the management of the British economy. On the balance of trade, a substantial part of the growth in the trade gap relates to the growth of investment in goods for production and investment.

  • Mr Major’s Speech to the American Chamber of Commerce – 27 April 1989

    The text of Mr Major’s speech to the American Chamber of Commerce on 27th April 1989.

    CHIEF SECRETARY TO THE TREASURY:

    I am grateful for this opportunity to address the American Chamber of Commerce. I believe it is true to say that the bilateral links between our two countries have never been stronger, either at a political or a commercial level. At present the US is the largest recipient of UK direct overseas investment and US is the largest direct investor in the UK. These investment flows are very welcome, and are the most tangible sign possible of mutual confidence in our respective economies. We see a similar pattern in visible trade. UK exports to the US, and US exports to the UK, were both around 18 billion dollars in 1988.

    Our two countries also share similar convictions about the importance of enterprise, choice, initiative and the need to minimise government controls over industry and commerce and, for that matter, the individual, too. We also agree that the Government has an important role to play in providing a stable background in which industry can operate effectively. The main job is to reduce the current level of inflation and seek to eliminate it in the future. Inflation is the first and most serious problem we face. It undermines business and personal planning. It destabilises industrial relations and it can destroy within a few years the savings of a lifetime. That is why the elimination of inflation must remain the central economic objective. This is why monetary policy has to remain tight to maintain downward pressure on it. And it will remain tight, so inflation should turn down later this year. I know that people dislike the short term discomfort of high interest rates. I understand that. But they are absolutely necessary if we are to avoid the long term pain of an inflationary spiral that would damage our economic competitiveness, our industrial and commercial growth and our individual prospects. We have made it absolutely clear that we are not prepared to take risks with inflation.

    Much has changed these last ten years. During the 1980s the UK has grown faster than all other major EC countries, and – if it is not ungracious to say so before this audience – even more rapidly than the US. In the previous two decades the UK was at the bottom of the growth league. Now it is at the top. The same story holds for investment. In the 1980s the growth of total investment here was higher than in any major European country, after being pathetically low in the 60s and 70s. Last year alone the growth of business investment was over 14 per cent and we expect a further 8 per cent this year. Over the past 7 years total investment has grown over twice as fast as total consumption. By contrast, during the 70s, consumption grew over 5 times faster than investment.

    This investment is critical and has enabled our industry to improve its productivity considerably. Indeed, the growth of productivity in the UK during the last decade is second only to Japan of all the major industrial countries and manufacturing productivity has grown more rapidly even than in Japan. Recently debate has focused on the trade deficit. For last year the published figures show a current account deficit of 14.5 billion pounds or 3.2 per cent of GDP, although it must be said that these figures certainly overstate its size. The balancing item – which consists of an unknown mixture of unidentified capital inflows and unrecorded net exports – was even larger, at 15 billion pounds, than the total recorded deficit. Nevertheless it is clear that the current account deteriorated significantly between 1987 and 1988. I want to consider three aspects of this: what caused the deficit, whether it poses a threat and how it will be corrected.

    Firstly, what caused the deficit?

    The main reason for the balance of payments deficit is the dramatic surge in investment I referred to a moment ago. That has not been accompanied by a comparable increase in savings, so UK has had to import capital from abroad. The net capital inflow is the necessary counterpart of the current account deficit. With the world economy becoming increasingly integrated, it is inevitable that there will be differences in patterns of saving and investment in different countries, and hence balance of payments surpluses and deficits.

    It is clear that consumer spending in the UK has also been growing rapidly, although, as I have said, at only half the rate of investment. The successful supply side policies of recent years, together with this extra investment, have enabled our economy to increase output substantially. But last year domestic demand from both companies and persons grew even faster than industry’s capacity to meet it. The excess was diverted partly into imports and partly into inflation. This unwelcome resurgence in inflation is a worldwide phenomenon. In response, there has been prompt action to tighten monetary policy around the world, reflecting a common determination to get inflation under control, and keep it under control.

    Does the deficit pose a thread?

    The forecast we made at the time of the Budget indicated a balance of payments deficit of 14.5 billion pounds, around 3 per cent of GDP.

    Given the underlying strength of the economy this is readily financeable. There are three key points which keep the UK deficit in its proper perspective.

    First, the UK’s net overseas asset position is extremely strong. Indeed the ratio of our net overseas assets to GNP is by far the largest of any major economy.

    Second, the nature of the present deficit is quite different from those the UK faced in the 1970s. In those days, the UK government was borrowing overseas to fund an excessive spending programme. By contrast we are now running a substantial budget surplus of around 3 per cent of GNP. In the three years to March 1990 we will have repaid around one sixth of the outstanding government debt. As a result the public sector is adding to total savings, and not contributing to the deficit in any way.

    Thirdly, the most important point to bear in mind when putting the balance of payments deficit in context is its composition. Only about one quarter of the growth in the value of manufactured imports between 1987 and 1988 was accounted for by consumer goods (including cars).

    The remainder, fully three quarters, was up of goods for production and investment. The significance of this is that it represents British firms investing both to modernise and increase output. The fact is that we are in the midst of an investment boom that any previous government would have given their eye-teeth for. The short term impact on the balance of payments should be the precursor of long term improvement in productive capacity and efficiency. There is more to the trade gap than video recorders.

    In the first quarter of this year the current account deficit was around a fifth lower than the peak registered in the fourth quarter of 1988. The latest figures provide further evidence of the trends I mentioned a moment ago. Goods for production and investment continue to represent the major part of our imports. Indeed imports of consumer goods fell by 1 per cent between the fourth quarter of 1988 and the first quarter of 1989.

    I am also glad to see exports performing well as capacity constraints are eased by the rise in investment and the slowdown in domestic demand. Manufactured exports reached their highest ever level in the first quarter of this year, whether measured in value or volume terms. They have increased 13.5 per cent in volume terms since the first quarter of last year. Our exports of consumer goods are doing particularly well.

    How will it correct itself?

    This illustrates what we have always made clear: that the balance of payments deficit is the result of private sector decisions, and that therefore it is through changes in private sector behaviour that the gap will be closed.

    It is now clear that the current level of interest rates is beginning to have the effect we intended. Higher interest rates make saving more attractive and borrowing less so. They will also reduce the growth of consumption to a more manageable level, and in so doing reduce the growth of imports of consumer goods. And the evidence of improvement is gradually accumulating: the housing market has slowed down considerably both in terms of prices and turnover. The decline in turnover is important because many consumer spending decisions (eg buying carpets, curtains, refrigerators) are associated with moving house. Recent statistics on retails sales and M0 can confirm that consumer spending growth is slowing down in response to the tightening of monetary policy against the background of a budget surplus. That is welcome but we must recognise that the process of reducing the deficit will take time. It will not happen overnight.

    Of course, the current investment boom, which is adding to the deficit in the short term will, over time, play its part in reducing the deficit. These investments will lead to increased capacity, greater competitiveness and a better export performance, as well as displacing some imports. Either way the new output will help to reduce the balance of payments deficit.

    I have no doubt that improved competitiveness is the key to a more prosperous and stable economy. To achieve that, companies must not only invest, not only improve the quality of their goods but also increase their competitiveness by constraining their unit wage costs. Achieving this is an important function of good management and prudent investment. And I must tell managers bluntly that the Government will not permit the depreciation of sterling as a way of artificially improving competitiveness. Such a policy is not sensible. It is not prudent. And it rarely works. it would simply raise import prices and add to inflationary pressures.

    It is instructive to look back at experience in the 1970s. In 1974 the UK had a balance of payments deficit of 3.8 per cent of GDP, somewhat higher than last year’s outturn. Over the period 1973-1978 the effective exchange declined by a quarter yet the UK’s competitiveness – measured in terms of relative unit labour costs – did not improve but actually further deteriorated by 5 per cent. I can also assure you that the Government will not attempt to reduce the deficit by protectionist measures such as import controls. We are a very open economy and can only be hurt by a slide into protectionism.

    The Government’s role in improving competitiveness is to strengthen economic performance through supply side measures, namely deregulation, privatisation and tax reform. Over the last decade nearly 40 per cent of the state owned commercial sector has been transferred to the private sector since 1979 and a further 20 per cent is in train. The abolition of exchange controls and various other deregulatory measures have all helped to make markets more efficient. The latest White Paper shows the government’s continued commitment to creating an environment in which enterprise can flourish. It lists no less than 120 deregulatory measures achieved in the previous 18 months and specified 80 measures scheduled for the future. And we now have a tax structure which rewards enterprise and initiative, with one of the lowest corporate tax rates in the world.

    Business is responding to this invigorating climate. New businesses are being created at an unprecedented rate. New firms are registering for VAT at an average rate of 1,300 a week. These new enterprises will compete for business in home and export markets and will play a part in lowering the deficit.

    The Government is playing its part in helping the market to operate more efficiently by improving the flow of information from retailers to manufacturers. From the beginning of June more inflation will be available from Customs and Excise marketing agents about the sort of goods being imported by different companies. This will enable British firms to contact the importing companies to see whether they could compete with those imports. I am sure they can and I hope they will.

    Conclusion

    To summarise: the trade deficit resulted from excessive growth in domestic demand last year. To combat this, monetary policy has been tightened considerably in the last year (both in the UK and the US). UK fiscal policy is extremely prudent. Higher interest rates will encourage additional savings, discourage borrowing and slow down spending. The private sector will respond to these policies although it would be foolish to expect the deficit to narrow immediately. By their nature these adjustments take time. But they will take place.
    What is clear is that the current economic position bears no relation to the balance of payments crises in the 1960s and 1970s. The prophets of doom and gloom should lift their eyes from the history books and look instead at the remarkable transformation that has taken place in the Government’s own finances and on the ground in Britain’s industries.

    The productivity and profits of UK companies are at record levels. The number of people in work is at its highest ever level. And we are seeing the longest sustained fall in unemployment since the War. Our current prosperity is based on extremely strong foundations, business is investing to make sure it continues and I have no doubt that it will do so.