My speech to the British Chambers of Commerce Annual Conference
Thank you, Adam.
And thank you to the British Chambers of Commerce, and your Director-General, John Longworth, for inviting me to speak to your Annual Conference today – for the second time in this Parliament as Shadow Chancellor.
As I said when I spoke to your conference two years ago, the Chambers of Commerce truly represent the authentic voice of UK business.
Over the last two years you have proved that on the national stage with your successful campaigns on tax incentives for business investment and greater support for exporters – although I know there is more work to do.
And can I say from my own direct experience in government and as a local MP our local Chambers in Leeds and Wakefield have been hugely important in shaping the future of our local economies.
If you want to know the views of local small and medium sized businesses up and down the country then it is local Chambers of Commerce that you turn to.
But you do much more. In Leeds, where we have eight MPs – 5 Labour, 2 Conservative and a Liberal Democrat – it is not easy to put politics aside to forge a cross-party consensus on vital economic issues which matter to our area – one of the biggest economic powerhouses in the UK.
But we know in Wakefield and Leeds and across our city region that it is only by putting politics aside and forging a common view on transport, planning, winning inward investment, getting the best deal for our area that we can deliver the jobs and investment our areas so vitally need.
And it is our local Chamber in Leeds that has brought together business, all us MPs, the City Council and our LEP, to form Team Leeds to work together for the great good.
Without the Chamber this would not have been so successful – and I know this is a pattern that is repeated across our country.
I know it is not fashionable to talk in Britain about the importance of consensus – locally or on the national stage.
And let us not be naïve – consensus is not always a good thing, as we learned to our cost when Britain joined the ERM.
But I know too that the most important things businesses need are stability and predictability – government decisions made and then stuck to so that you can plan ahead.
I know how frustrating politics can be when it looks as though politicians are continually moving the goal posts.
And that it is the clear view of business that, where possible, we politicians should seek consensus where we can in the national interest:
.. on the need to reduce the deficit, reforming our financial system, forging a new industrial policy, devolving powers down to business and our local economic leaders, investing in skills and our economic infrastructure.
I only wish we could achieve such a consensus on Britain’s continued membership of a reformed European Union.
We all know the EU needs to reform to deliver value for money for taxpayers, open up markets and secure rising prosperity.
But we are clear that there is no future for Britain in walking away from our biggest market.
We believe Britain is better placed to shape Europe’s future, and back British business, jobs and our national interest, if we are fully engaged rather than having one foot out of the door.
We would hold an in-out referendum if there was a further transfer of powers – a prospect we believe is possible, but unlikely in the next Parliament.
Not an arbitrary timetable for a referendum, which puts Tory party politics before the national economic interest, and is creating huge uncertainty for business.
To walk away from our EU membership would be reckless, foolish and deeply damaging. It would be anti-investment, anti-jobs and anti-business.
Which brings me to my fellow morning speaker, Michael Gove – one of the ‘exiters’ in the current Cabinet who has said that if a referendum was held now, he would vote for Britain to leave the EU.
Today is the first time we have shared a platform in this Parliament – and probably the first time the BCC has had two successive Education Secretaries back-to-back at your conference.
I have to say, I am very pleased that Michael has been here speaking this morning before me – any politician who accepts an invitation to speak on the morning of the 1st of April – Aprils Fools day – is always taking a risk. So I am glad Michael has helped share the burden.
I am also proud to be a member with Michael of the Prime Minister’s Holocaust Commission where I know we will put any party politics aside as we put in place a permanent memorial so future generations continue to remember and learn from that horror.
But I have not agreed with many of Michael’s school reforms.
I share his emphasis on rigour and school standards.
I fear his method – relying largely on a policy of allowing good schools to expand, but letting weaker schools slowly decline, is condemning too many young people to a second class education.
I favour a tougher approach to under-performance – which ensures our teachers are properly qualified and intervenes to tackle under-performance rather than waiting for weaker schools to wither away.
But my great frustration is that we – you and I – have so far failed to persuade him that vocational learning should be a first-class part of the curriculum, that theoretical learning is not the only route to excellence.
Just a few months ago I met the Chief Executives of a number of big IT companies at E-Skills. They were singing the praises of the IT Diploma, which they designed.
I remember the head of Vodafone telling me he knew this qualification would work when the head of a school’s computer science department complained he could only teach it in partnership with the business department. “Exactly” cried the Vodafone executive, “teach them how to use IT to solve problems. That’s what we want.”
But the IT Diploma has been scrapped with no adequate replacement.
And vocational learning has been downgraded in the school curriculum and derided as ‘soft’ by the Education Secretary. That is no way to use the talents of all and to raise aspirations.
You have told us that qualifications need to fit the realities of the modern economy.
That is why, following our review by Professor Chris Husbands, we will introduce a new gold standard vocational qualification. And we will insist that all young people study maths and English to 18 as part of the new ‘Tech Bacc’.
We will also put business in the driving seat on vocational qualifications and apprenticeships – so that you can shape qualifications and decide what qualifications work best for you and your employees and who delivers the training.
We will ask you to tackle free-riding and deliver an increase in the high-end apprenticeships in these sectors and supply chains, including in all companies seeking to bring in more skilled migrants.
You will decide what qualifications work best for you and your employees and who delivers the training. And we will devolve decision-making so that local businesses, LEPs and local colleges can work together to meet the skill needs of their areas.
TWO YEARS ON
Adam, I said I last spoke to this Conference two years ago.
Our economy was stagnating and deficit reduction was grinding to a halt.
QE was being accelerated alongside low interest rates, but business investment was still falling and the much needed balanced recovery was proving elusive.
And with living standards falling, all of us here today – politicians, business leaders, and journalists too – were vying to see who were least popular with a worried and hard-pressed public.
I can see some of you thinking – some things don’t change!
But two years on, some things are changing.
After three long and difficult years of flatlining, our economy is finally growing again. Business confidence is up.
But we all know there is a lot of work still to do:
- To get the deficit down, but do so in a fair way
- To secure a long-term and balanced recovery
- And to ensure that this economic recovery is felt by and shared by all working people and tackle the insecurity that too many people feel about the future.
So today I want to talk to you about these three challenges and how the next Labour government intends to work with you and other political parties to rise to meet them.
GROWTH AND THE DEFICIT
Let me start with deficit reduction.
When I spoke here two years ago I started by saying that on this central economic objective, the Chancellor and I agree – Britain needed a credible plan for deficit reduction. And it still does.
Of course, the contentious issue of the past few years has been the pace of that deficit reduction and its impact on growth.
The Chancellor set out to get the deficit down faster than the plan he inherited. But having choked off the recovery, he is in fact now reducing it at a much slower pace than he or we planned.
We will inherit a deficit of £75bn next year. That is why I have been clear with my party that the next Labour government will have to be very different from our predecessors.
We will be cutting spending in 2015-16 and not raising it, with no more borrowing to cover day-to-day spending. We will get the current budget into surplus and the national debt falling as soon as possible in the next Parliament. And we want every tax and spending commitment in our manifesto to be independently audited by the Office for Budget Responsibility.
We will have to make tough and difficult choices.
That is why Labour called for, and last week supported in the House of Commons, an overall cap on structural social security spending. It is also why we have supported increases in the retirement age as life expectancy rises and said that we cannot continue to pay the winter fuel allowance to the richest pensioners.
And it is why we have embarked upon a Zero-Based Review of every pound of government spending.
And because we must make tough choices about priorities when resources are tight, we have set out difficult choices on tax too.
We are determined to get the deficit down but, at a time when living standards are still squeezed and public services are under pressure, this needs to be done in a fair way. That is why, as we finish the job of balancing the books, we will, for the next parliament, reverse this government’s top rate tax cut on earnings over £150,000.
And while we have supported – and indeed began – successive cuts in the main rate of corporation tax to make our tax system more competitive, down from 33 per cent in 1997 to 28 per cent by 2010 and 21 per cent today, we do not think we can justify another tax cut for large businesses in 2015, when so many small and medium sized business are under such pressure.
The next Labour government will instead cut and then freeze business rates for 1.5 million business properties, a tough choice we need to make to help more businesses when resources are tight.
Different and fairer choices. But with the deficit and debt now set to be much higher over the rest of this decade than anyone envisaged back in 2010, there will be no complacency from me and the next Labour government on deficit reduction and spending control.
SUSTAINING THE RECOVERY
The second challenge we face is to deliver the balanced investment and export led recovery we badly need.
The Chancellor’s latest Budget revealed that economic recovery is still very reliant on consumer spending.
Billed as a Budget for savers, it actually forecasts the savings ratio falling each year for the next five years as hard-pressed households draw down their savings and increase borrowing.
And while the OBR is once again forecasting that business investment will rise this year, with bank lending to business still falling and the economy expected to slow again next year, this is no time for complacency.
There are a number of areas where we believe action is needed.
On housing, the danger is that by boosting demand while failing to build more homes, the Chancellor will deliver an unbalanced recovery and make home ownership even further out of reach for the aspiring first time buyers his Help to Buy scheme should be helping.
The new Governor of the Bank of England is right to be worried that the recovery is not yet secure or balanced. That is why it is vital that the Chancellor acts to support growth and investment by getting more homes built for the millions who aspire to get on the housing ladder.
We have a lopsided housing market because rising demand is simply not being matched by rising supply.
And the danger is that the Bank of England Governor may be forced to act to rein in the housing market in some parts of the country and we’ll see rising interest rates for all.
It is why we have urged the government to bring forward investment in affordable homes and called for much bolder measures to boost housing supply including a Help to Build scheme to give government guarantees to SME house-builders.
But securing a strong and balanced recovery also demands we do more to secure long-term business investment.
We welcome the Chancellor’s decision to reverse the cuts to capital allowances he made in his first Budget, but there is much more we need to do to build a modern industrial policy.
Some of you will say government should just get out of way. And let me say, if government action is undermining confidence and investment then that is what government should do.
But on innovation, skills, planning, infrastructure – for government to walk away would be for government to abandon the long-term partnership we need to succeed.
You know in your own businesses you have no future trying to undercut emerging market economies like India, China and Brazil on cost and wages. And we cannot succeed as a country and win the global race through a ‘race to the bottom’ on wages and standards. That way is doomed to fail.
So to drive innovation the next Labour government would continue to support the technology strategy board and its catapult centres – successful initiatives we started.
Chuka Umunna and I have asked Mike Wright, Executive Director at Jaguar Land Rover, to lead a review for us on how we can help strengthen our manufacturing supply-chains and deliver the skills and innovation Britain needs to succeed, small and large businesses working together to invest and export.
To back our cities and sub-regions, we will make Local Enterprise Partnerships fit for purpose and devolve power and resources so that, working with Universities, local government and local business, they can do their job.
To support business lending, we propose to use revenues from the planned increase in the licence fees for the mobile phone spectrum, expected to be over £1billion in the next parliament, to capitalise the British Investment Bank so that, region by region, we can get small and growing businesses the finance they need to grow and create jobs.
To invest in our infrastructure, and following the path-breaking report by the Chair of the Olympic Delivery Authority, Sir John Armitt, we will set up an independent infrastructure commission to end dither and delay in infrastructure planning and build the consensus on infrastructure that we need to invest for the long-term.
In each of these vital areas of economic and industrial policy, Chuka Umunna and I know there is no quick fix. As a country we have to earn our way to rising prosperity.
BUILDING PUBLIC SUPPORT
But we also know we will not succeed unless we use the talents of all and ensure that everyone can benefit from economic recovery and not just a few.
Which brings me to my third challenge – sustaining public support for a modern economic policy.
We meet here with economic recovery finally getting going again after a long and protracted period of stagnation, and that return to growth is something to celebrate and nurture.
But with youth unemployment still very high, and living standards still falling for millions – meaning that most people are still not feeling any recovery at all – this is no time for complacency.
In my view, Britain has always succeeded, and can only succeed in the future, as an open and internationalist and outward-facing trading nation.
The next Labour government will back enterprise, support innovation and ensure great ideas and risk-taking are valued and rewarded.
Only by backing entrepreneurs and supporting wealth creation can we generate the profits to finance investment and win the confidence of investors from round the world.
But at a time when most people in our country are seeing their living standards falling year on year, we cannot take public support for this open, global vision of a dynamic market economy for granted.
At a time when politicians and business leaders often seem to compete with each other for bad headlines, be it MPs expenses, tax avoidance schemes, or rising energy prices, none of us can afford to bury our heads in the sand and ignore the legitimate and mainstream concerns of people across our country that our economy is not currently working for them and their families.
That is why we believe it is so vital that government works closely with all businesses – large and small: to promote open markets, competition and long-term wealth creation; and to reform our economy so that, by using and investing in the talents of all, we can deliver rising living standards not just for a few but for everyone in every part of the country.
Our task is to show that a dynamic and open market economy can work to raise living standards for all.
And when it doesn’t – because competition or regulation or tax law fails – then business and government must work together to solve the problem and win back public trust.
Markets promote growth and innovation and reward entrepreneurship – and when they are competitive they should set prices, not Government or anyone else.
But being pro-market and pro-competition also means acting when markets fail and competition does not operate, for instance in banking and in energy, otherwise we risk public support.
So in banking, we will ask the CMA to report on how to create at least two new sizeable and competitive banks to challenge the existing high street banks to ensure that the market is competitive for the long term.
As the OFT found last month there is a lack of competition in our banking system and small and medium-sized businesses are being let down. We need to reform our banking system so that businesses can get the funding they need and we can earn our way out of the cost-of-living crisis.
Similarly, we need action to make our energy market more competitive so that it works better for both household and business customers.
That is why we have said that we will introduce a new, tougher and more transparent regulatory regime for what remains a highly concentrated utility industry.
And while these long-term reforms to increase competition are being introduced, we believe it is right and fair to give households and businesses some respite with a 20 month price freeze just as we introduced a one-off windfall tax to give the taxpayer redress after the post-privatisation excesses in the 1990s.
This isn’t just to benefit households – as Ed Miliband said last week it is deliberately to also benefit 2.4 million businesses across the UK.
And there is a third area where we need urgent action – youth jobs.
In your Budget submission you rightly said that tackling high levels of youth unemployment must be a major priority. Sadly there were no new measures on this in the Budget, despite the number of young people on the dole for more than 12 months almost doubling since the last election.
As a country we simply cannot afford to be wasting the talents of thousands of young people and leaving them stuck on the dole for years on end. It’s bad for them, it’s bad for our economy and it’s bad for taxpayers who have to pay the bill.
So if we form the next government we are determined to tackle this problem with a Compulsory Jobs Guarantee.
The government will work with employers to help fund paid work with training for six months. It will mean paid starter jobs for over 50,000 young people who have been left on the dole for over a year by this government. But it will be a tough contract – those who can work will be required to take up the jobs on offer or lose their benefits. A life on benefits will simply not be an option.
After the global banking crisis and with bank bonuses soaring again this year, it’s fair to pay for our jobs plan with a repeat of Labour’s tax on bank bonuses, and to raise the bank levy to help make work pay by expanding free childcare for working parents.
So, in conclusion, let us work to reduce the deficit in a fair way, deliver a strong and balanced recovery and rebuild public trust that an open and dynamic economy can work for all working people and tackle the cost of living crisis.
That is the agenda that Ed Milliband, my Shadow Cabinet colleagues and I have been setting out in recent weeks – pro-business, but anti-”business as usual”.
Let us together build a long-term consensus to secure the skills, and the long-term investment and market reforms we need to deliver rising prosperity for all. I do believe the future of our country depends upon it.