SPEECH STRANGFORD CONSERVATIVE ASSOCIATION
FRIDAY 18 MAY 2012
INTRODUCTION
This Government came to power in May 2010 with one absolutely overriding and essential priority to deal with the greatest budget deficit in our country’s peacetime history. As a result of that deficit the United Kingdom is currently borrowing £181,000 a minute. For every £4 spent by government, £1 is borrowed. And we are currently paying well over £120 million a day in interest.
As I have said before, that is dead money that will never be spent on a single hospital, school or university here in the UK.
In fact, the money being paid out in interest on our debt this year alone could pay for 48,600 MRI scanners, 1.5 million nurses, 1.2 million teachers, or 399,000 doctors across the whole of the UK.
What got us into this mess was years of government simply borrowing and spending money it did have could not afford. The fact that our national debt has now hit around £1 trillion is evidence of that. Every post-war Labour government has left our country an economic basket case for an incoming Conservative government to work to resolve.
And the last Labour government left the biggest basket case of all.
It was built on an absurd and arrogant belief in Gordon Brown’s notorious words that there would be ‘no more boom and bust’.In fact, Mr Brown gave us the biggest ever paper boom and left us the biggest ever real bust in which Ed Miliband and Ed Balls were not fringe players. They were key members of the team that gave us boom and bust. And they are living proof that no-one should ever trust the old proverb that two Eds are better than one.
Labour has a so called plan B. It is the same as the Plan that got us all here in the first place - Tax more, spend more, and borrow more. In that failed prescription there is a dark and dismal past. If we were to be gulled to return to it, an even darker future as our army of international creditors, from Beijing to Bangalore, stampeded to the exits. You do not escape a debt crisis by adding to the debt.
And in our case failure to cut the deficit would simply mean offloading the debts of this generation onto our children and grandchildren. I see nothing remotely progressive, kind or moral in that. Yet, the recent local elections in Great Britain and the depressingly low turnout show us that there is deep and understandable disquiet about our national condition and a distrust of fine words from any politician, including those of the present government.
I do not for a moment discount that. And the Prime Minister has been open and explicit that he is listening and will listen. Beyond the grim realities of declining living standards that are the inevitable consequence of over-spending or over-borrowing, public or private, we have to do much more to explain to the public that the choice is not between austerity and growth. Anyone in their right senses would prefer the latter over the former.
A Labour trick is to accuse us of preferring austerity to prosperity or favouring the rich over the poor. This is a travesty. There is no swift or simple remedy and no magic cure.
My contention is that growth is not happening fast enough, not because we have too little government, but because we have too much.
This is partly for reasons over which we have no control. The villains of the piece are those who foisted on Europe for political purposes, and without anything like adequate diligence, a single currency – the Euro – which is causing misery for millions.
And we shouldn’t forget the key role played by the Conservative party over two decades in keeping us out of the single currency, as a result of which we have kept a flexible exchange rate and the power to set our own interest rates.
None of us can predict how the euro crisis will pan out but we must be in a position to seize opportunities as they arise. General Motors showed faith in British manufacturing yesterday, we must make sure the conditions are right for other companies to follow suit.
REBALANCING THE ECONOMY: But we must do more to promote a dynamic, vibrant private sector that drives economic growth.
Here in Northern Ireland, according to one survey, public spending accounts for the equivalent of 77.6 per cent of GDP. This is unsustainable in the long term. I’ve said many times that re-balancing the economy here could take up to 25 years. But it has to be our priority, not by taking a massive axe to the public sector, but by creating the conditions that enable the private sector to grow.
We need to move away from the idea that the state is the sole, or indeed best, provider of each and every public service and that the answer to every known problem is to spend yet more public money. And we need to end the anti-business culture that’s held us back for too long by backing business to the hilt.
That’s why the Government is cutting corporation tax from 28 to 22 per cent to give the -UK the most competitive business taxes of any major economy. It’s why on coming to power, we stopped the planned increase in employer National Insurance Contributions – the Jobs Tax – and we are introducing a £20 billion National Loan Guarantee Scheme to help get cheaper loans to business. It’s why we are scrapping needless red tape and regulations that would have cost business over £350 million a year.
Since the election, over half a million new private sector jobs have been created and here in NI there are 27,000 more people in employment.
And in the past year businesses have invested over £119 billion – up £3 billion on the previous year. But we need to go further and faster to compete with hungry growing economies outside Europe. It’s worth remembering that Ronald Reagan reduced taxation and exempted micro businesses from costly employment regulation. America’s enterprise economy created 20 million jobs. In the same period, employment in Europe stagnated.
It’s why we’ve introduced the new Enterprise Allowance to help unemployed people start their own businesses.
ENTERPRISE ZONES: It’s why, in last year’s budget, we introduced the option of creating Enterprise Zones. This was not a vague suggestion. These were part of the Finance Act passed into law last year.
There are now 24 across England, 4 in Scotland and 7 in Wales.
It’s a shame that the Northern Ireland Executive is the only devolved administration so far not to have pursued this idea. But this is entirely a devolved decision.
It’s why we have asked the Independent Pay Review Bodies to consider how public sector pay can be made more responsive to local labour markets.
We know that Northern Ireland has successfully attracted many jobs in the financial sector because we have a skilled work force with lower costs than London. If this works for the private sector, why not for the public sector too? We should aim to attract public sector jobs priced out of expensive mainland locations.
Regional pay will also help address the wage imbalance in Northern Ireland where public sector wages are, according to a survey last year, 41.5% higher than those in the private sector, making it difficult for private companies to recruit. Rather than glibly dismissing this imaginative idea, we should give it serious detailed consideration.
Here in Northern Ireland many of the policy areas to develop the economy are in local hands and I am working closely with Executive ministers to rebalance the economy. I’ve spent nearly five years visiting businesses across Northern Ireland. As I’ve said many times we have some absolutely world-class companies. We just don’t have enough of them.
Until recently we were renowned here for innovation and enterprise.
Even during the troubles we had great success stories like FG Wilson and great entrepreneurs like Allen McClay. And today we have world class companies like Wrightbus, Norbrook and Randox.
So I see no reason why, given the right business environment, we cannot once again become an economic powerhouse.
CORPORATION TAX: Northern Ireland has two challenges unique within the UK:
· the economic legacy of the troubles and
· a land border with a country that has a significantly lower rate of corporation tax.
That’s why at the last election we Conservatives promised a consultation paper looking at potential mechanisms for devolving corporation tax to the Executive and Assembly here.
That became a Coalition commitment which we delivered last year.
The consultation that followed was dynamic, led to the formation of a new grouping, Grow NI, and generated over 700 responses, the vast majority in favour of devolving corporation tax.
We set up a Ministerial Working Group, chaired by David Gauke, the Exchequer Secretary, which will report later this summer on the cost, the process and the legislation. No decision has been made but I remain enthusiastic and I remind you that this would not reduce the amount of money circulating in Northern Ireland. It would simply leave more in private, productive hands to help grow the economy.
SHALE GAS: We have one unexpected and potentially huge windfall: the chance to develop shale gas. The USA, with its “can do” culture, has taken full advantage of its shale gas deposits and has not just halved the price of gas - it’s now a quarter of that here - but has also ended America’s dependence on unreliable and dictatorial regimes. Incredibly, the USA may become a net energy exporter.
There are huge deposits in Northern Ireland which may be commercially exploitable. Of course we must respect environmental considerations, but some of the opposition has been, frankly, alarmist and has ignored the American experience. If developed safely and responsibly, shale gas could generate massive economic activity and a wealth of new jobs.
LINKS: Another issue of vital importance in rebalancing the economy here is communication.
Last year, it was a genuine team effort by NIO and Executive Ministers that safeguarded the Belfast to Newark service. It was clinched by the Chancellor, having visited Northern Ireland, agreeing to devolve long distance APD and negotiating directly with the airline.
Similarly, in the last few weeks, I have been in close touch with Willie Walsh and was able to announce recently that, following Lufthansa’s decision to sell BMI, BA have not just saved the Belfast City to Heathrow flight but will improve the service.
As someone who, along with many businessmen and women, spends many hours a month flying in circles over Buckinghamshire, I welcome my colleague and Secretary of State for Transport, Justine Greening’s aviation review and I will be arguing strongly for more capacity.
WELFARE REFORM: The Labour Party thinks that governments spend money more wisely than individuals. I don’t. I say all of this as somebody who is convinced that capitalism is the most practical system for producing wealth and creating prosperity for all. In fact, liberal capitalism is the only truly moral means of achieving those objectives, because it is the only system consistent with civil and political liberty, and public good. Of course capitalism is not perfect. It produces inequalities.
Left entirely to its own devices it can not only produce great wealth, but also great disparities in wealth. As a Conservative, I believe that the State does have a positive duty to intervene to help the most vulnerable in our society. Hence my support for a welfare system financed out of taxation, which has been a vital safety net for millions of people. But today our welfare system is broken.
There are around five million people currently on out of work benefits, one million of them for a decade or more. Almost two million children are living in households where nobody works, 65,000 of them in Northern Ireland.
And there are more than 10,000 households across the UK where no one has ever worked. This year in Northern Ireland, we will spend almost £1.5 billion on out of work benefits. Even during the boom years, with employment levels up by some 2 million, nearly half the rise in employment in the UK was accounted for by foreign nationals. Meanwhile in Northern Ireland 200,000, people are stuck on out of work benefits unable or unwilling to take advantage of the job opportunities that are being created. Or take those who are just parked on disability benefits without regular checks to see if their condition has changed.
In Northern Ireland 1 in 10 of the population claims Disability Living Allowance – double the UK average. That can’t just be down to the legacy of the troubles; the number of people claiming DLA has actually increased by 25 per cent since 2002.
As a constituency MP, I constantly see people who want to work but who would be worse off if they actually took a job. Some claimants face losing as much as 96p in every pound they earn through tax and benefit withdrawals.
Would any of us here be willing to accept 96 per cent tax rates?
Yet this is what we are asking of some of the poorest members of society.
The reality is that no amount of tinkering can deal with a system that is now so obviously failing the very people it was set up to help.
Only a root and branch reform will do; and that’s why the Coalition has embarked on the most radical shake up of welfare for sixty years.
We came into office committed to building a new welfare contract with the people of the United Kingdom based on clear principles.
First, for those who are able to work, the contract has a simple message.
We will make work pay. And if you take steps with us to find and stay in employment you will receive our support in return.
Second, we will continue to protect the most vulnerable.
Those who are too sick or disabled to work will always receive support from the State, as they should.
Third, we will deliver to the UK taxpayer a system fairer to hard pressed taxpayers, by ending the something for nothing culture that has grown in recent years. It is simply not fair that households on out-of-work benefits should receive a greater income from the state than the average working household receives in wages.
So the Government will introduce a welfare cap, linked to average weekly earnings, which will limit the amount of benefits a household can receive to a maximum of £26,000. That’s the equivalent of a gross salary of £35,000 at a time when here in Northern Ireland the median full-time public sector salary is nearly £29,000 and in the private sector it’s just over £20,000.
There are some who argue that these changes are all well and good for GB, but Northern Ireland is a special case and needs insulating from reform.
I am the last person to ignore Northern Ireland’s history or the legacy of the troubles. But if anything I would argue that Northern Ireland is a special case precisely because the reforms are so badly needed here and I am working closely with Executive Ministers and the Department of Work and Pensions to ensure that the broad reforms are adapted to the special circumstances of Northern Ireland.
Northern Ireland has proportionately one third more households living on out of work benefits as the rest of the UK. And of course in Northern Ireland, it is among those for whom worklessness has become a way of life that paramilitaries, on both sides, continue to prey and recruit.
So, if we are finally to put Northern Ireland’s troubled past behind us, move beyond the peace process and build a future for our children based on real prosperity, the only way is to eliminate the deficit, create a dynamic private-enterprise economy and push through radical welfare reform that makes work pay.
This is an incredibly exciting moment. Over the next couple of years we have a series of events that will put Northern Ireland on the world stage: Titanic, the Jubilee, Irish Open, City of Culture, World Police and Fire Games, Olympic Torch, Tall Ships and the, Fleadh. Let’s also look beyond that to a dynamic, prosperous future for Northern Ireland. Incredible opportunities are opening up.
We must not be frightened of new ideas. We must be open to innovation.
We must grasp this moment.