Iain Duncan Smith – 2002 Confederation of British Industry Speech

Below is the text of the speech made in December 2002 by the then Leader of the Conservative Party, Iain Duncan Smith, to the Confederation of British Industry.

A lot has happened over the past year since I spoke at your National Conference, but very little has happened to change my view of the way this Government is running our economy. Indeed, my views have only been reinforced.

Last year, I warned that Labour’s approach to the public services would not deliver the improvements we all want to see, and I said that their failure to deliver real reform would end up costing you money and eventually undermine our economic stability.

This is the message I have been giving the Government ever since I took over as Leader of my Party.

Well, they are still not listening.

The Chancellor has enjoyed the benefit of the doubt from media commentators who rarely referred to him without the words ‘iron’ or ‘prudent’ appearing in the same sentence.

The story coming out of Number 11 was one of stability and optimism.

Small wonder. When the current Government came to office in May 1997, this country had low inflation, falling unemployment that was less than in France, Germany, Italy or Spain, the lowest business taxation among our major competitors, and a third of all EU inward investment.

Until then it was so easy for him to sneer at anyone who dared to doubt him.

Only last Monday, when the Chancellor addressed the CBI, he was all-to-ready to dismiss your concerns about the incessant creep of regulation. But last Wednesday was a significant day in the history of this Government. Last Wednesday the cracks began to show.

The Iron Chancellor has got metal fatigue.

‘I do not accept that Britain is a worse place to do business than it was five years ago’, he said. ‘That would be defeatist and wrong’.

But now we know this: Just because Gordon Brown does not accept something doesn’t mean it’s not true.

In his pre-budget report, the Chancellor refused to accept that the downgrading of the growth forecasts was his fault.

He blamed it on the world economy; he blamed it on the threat of terrorism; he blamed it on everyone else.

But the fact is that the Chancellor simply got it wrong.

Forecasts for world trade and world growth have changed little since the time of the Budget. Independent forecasters told him that his estimates were too high, but he just didn’t listen.

Everybody else knew, but the Chancellor did not.

So in just 7 months he has had to nearly double the amount of UK borrowing in the coming year to safeguard the public spending increases he has promised.

And, of course, he would have far less flexibility to respond to the changing economic conditions if the UK were part of the Eurozone, because joining the Euro means giving away the ability to control our own economy.

Now I know some of you will disagree with me here, but I believe it is simply not in our long-term economic interests to enter the Euro.

However there is one thing that I think we can all agree on, that the briefing and counter-briefing between the Prime Minister, the Chancellor and their acolytes can only damage British business.

The flaws now appearing in the Government’s economic management and their failure to reform public services has sparked a bitter feud in Downing Street.

But we will all suffer if the Prime Minister and his Chancellor now indulge in the blame game.

You need certainty and stability, not spin and mutual recrimination.

If the Government wants us to join the Euro, it should make the case and get on and hold a referendum. If it does not, it should shut up and let businesses plan accordingly.

With our policy you get that, with the Government’s current policy you don’t.

The Chancellor has been able to increase borrowing by £20 billion over two years, thereby attempting to ensure he can meet the spending commitments he has set himself.

This is the way New Labour judges success. It’s about what you put in not what you get out.

So they are committed to huge increases in public sector spending over the next few years, spending which presumes a buoyant economy and a thriving business sector.

But as the CBI has shown have shown, their approach to business is threatening to undermine their approach to public services.

Over the last five years, despite what Gordon Brown thinks, Britain has become a less attractive place for business to invest.

I know that. Your members know that. Everybody knows except the Chancellor.

The burden of regulation – and the gold-plating of regulations by the British Government – will do significant damage to the performance of British businesses.

I know that. Your members know that. Everybody knows except the Chancellor.

Because the reality is that he simply doesn’t understand how business works.

Business and enterprise create jobs and generate wealth. Jobs and wealth raise living standards, encouraging a strong economy.

And a strong economy is the foundation stone of strong public services.

So you might expect a Government that says it’s committed to improving public services to be equally committed to supporting business.

But instead, this Government’s anti-business policies are striking at the very heart of our enterprise economy and threatening to undermine our public services.

They have created a vicious cycle: the Government’s approach to business contradicts its approach to public services.

And its approach to public services perpetuates its destructive approach to business.

Ultimately, the success or failure of this Government lies in the hands of the Chancellor – the man who even his own colleague calls the ‘money god’.

Well, he is a false idol.

Five years ago, he said: ‘We will not impose burdensome regulations on business, because we understand that successful business must keep costs down’.

Yet you have shown that Labour have added £47 billion of extra taxes onto business since 1997. In total, you estimate that business is paying up to £15 billion a year including tax and red-tape.

Two weeks ago, I attended a dinner at the Institute of Directors. One of their surveys shows that as many as 93% of businesses believe that the burden of red tape relating to employment law has got heavier in the past five years.

Last year, Labour passed the Regulatory Reform Act, promising more than 250 regulations would be cut. But more than a year later only six Regulatory Reform Orders have actually been passed

According to the Financial Times, Government Officials say that these orders are simply too bureaucratic to draw up.

Now, the Government wants to introduce yet more regulations through costly and bureaucratic regional assemblies throughout England. They say these will help economic regional development, but there is absolutely no basis for this claim. Indeed, the evidence suggests the opposite.

And if we wanted still more proof that this Government doesn’t understand the needs of business, let us consider the decision to increase National Insurance contributions from next year.

This means an extra £4 billion a year in higher employers’ contributions for a start. Then, of course, businesses could come under pressure to pay even more as employees seek to win back some of their extra contributions through higher pay claims.

Did Labour tell you about this before the last election?

I was struck when you said that France is the only one of our top five trading partners to have a larger burden of business taxation than we do.

In the 80s and 90s,a lot of hard work transformed a failing economy into one of the best places in the world to do business,

All that work is now being thrown away.

That transformation took place because we had a Government which understood and worked with business, not against it.

But now we have a Government that thinks it knows how to run business better than you do.

A Government that has presided over half a million manufacturing job losses over the last five years.

A Government under which business investment has suffered its sharpest fall for three decades.

And a Government under which the UK has recorded a trade deficit every month since January 1998.

Last month Patricia Hewitt blamed the quality of British management for the growing productivity gap.

Notice it is not the fault of the DTI or the Treasury or the fact that this Government has introduced one new regulation every 26 minutes of every working day. Apparently it’s all your fault.

And they must take responsibility for the problems in the wider economy too.

They must take responsibility for the massive expansion of means testing in the tax and benefits system, which has imposed yet more administrative costs on business.

The entire tax credit system is so confused that millions who are entitled to them cannot even be bothered to take them up.

The government must take responsibility for distorting incentives to work.

Because of the way tax credits work, two and a half million people on low incomes now face effective marginal tax rates of 40% or more and nearly two million face a marginal rate of 60% .

And this Government must take responsibility for reducing incentives to save.

Last week, I challenged the Chancellor to apologise for the damage he has caused to the pensions industry with his £5 billion a year raid on pension funds, a measure that will have cost £40 billion by the time of the next Election.

I told him that 300,000 stakeholder pension schemes – 90% of them – have no members.

I told him that the proportion of recently-retired pensioners taking an income from an occupational pension has fallen to just 59%.

But the Chancellor refused to apologise and refused to accept responsibility.

Once again, the Chancellor thinks he knows best.

And this is also his approach to the public services.

That is why he sets targets and imposes restrictions on professional people. Public Service Agreements were supposed to deliver value for money and ensure that the money going in to public services was met with improved outputs.

But in reality, they have simply led to a culture of deceit, where professionals are forced to manipulate figures to meet centrally decided targets.

Huge pressure is brought to bear on doctors, nurses and teachers by bureaucrats who have boxes to tick.

The government has allowed political objectives to take priority over public service.

Hospital trolleys have their wheels removed so that they can be called beds.

Hospital corridors have partitions erected so that they can be called wards.

Examining boards manipulate A-level results to meet the latest Government objective.

And if after all this the target is still missed, the Government simply changes the target.

In fact, the Government has missed 40% of the targets it set itself in 1998 and 75% of the targets it set two years ago.

All this, despite the huge amounts of money going into public services.

This Government is very good at spending people’s money but not very good at producing the results people want to see.

They’ve spent more on the police – but street crime actually rose by more than 30% last year.

They’ve spent more on education – but 200,000 seven year-olds still can’t master the basics of reading and 1 in 4 eleven year-olds can’t deal with even basic maths.

They’ve spent more on the health service – but while activity has scarcely increased the number of administrators has.

All this suggests that productivity in our public services is deteriorating rather than improving.

And yet the Chancellor’s promise of more money for the public services has raised expectations and sparked a new round of public sector wage claims.

The Government has promised that it will be uncompromising, that higher wages have to be earned through modernisation and reform.

But how are these productivity gains to be measured?

By whom are they to be measured and over what period of time?

And what will happen to the wage increases in future years if the productivity gains fail to materialise?

For all of the tough talking coming out of No. 10 and No. 11, no-one is providing the answers to these questions.

Instead, yesterday morning we had stories emanating from Downing Street that future fire disputes would be made illegal. This morning the Minister responsible for the Fire Service both denied any plans for a strike ban and said he was ‘keeping all options under review’.

At a time when lives are at stake, the public has a right to demand clarity and consistency from its political leaders; instead it is being fed a daily diet of spin and political posturing.

We simply cannot allow this current dispute to drag on for weeks or even months. I welcome the fact that the FBU has suspended its next strike and is seeking talks with its employers at ACAS.

The firemen should not go back on strike. No more lives should be put at risk from industrial action.

The Prime Minister already has the power under the Trades Union laws passed by the previous Conservative government to seek an injunction against the FBU.

How ironic that the Government talked over the weekend about new powers to ban strikes, while their new Criminal Justice Bill is about to scrap powers they already have. And he also has Emergency Powers to keep the public services running.

So he does have the tool at his disposal to bring the current dispute to a swift end. He should use them.

At the beginning of the 21st century it is simply unacceptable for people in this country to be left without adequate fire cover.

It is equally unacceptable to have a model of public service delivery that has scarcely changed since the end of the Second World War.

And why does this affect you?

Not only because business suffers when employees can’t read or write properly;

Not only because business suffers when employees spend long periods on sick leave waiting for treatment;

And not only because business suffers when employees spend hours stuck on congested roads or waiting for trains which never come.

This Government’s failure to improve public services affects you because, as they fail, Labour’s only answer is to plough more and more money in – and that ultimately means more taxes.

Labour are investing in failure and you and I are funding that investment.

But there is an alternative.

It’s not the scare tactics that the Government likes to deploy; it’s not simply a choice between spending more money or cutting that money.

The choice is this:

Between spending more and more on old, unreformed public services.

Or delivering the reforms which are the only way to achieve real improvements.

Between a Labour Government that believes taxing more, spending more and reforming nothing.

Or a Conservative Party that believes in lower taxation and less regulation as the best way to a dynamic economy and thriving public services.

We have already begun to set out how we intend to go about this task, by taking politicians out of the day-to-day running of schools and the health service and by cutting the bureaucracy Police Officers face everyday.

So our direction on public services is clear.

But it’s also a choice between a party which thinks that Governments make the best managers and one which says managers make the best managers.

I am pleased that, following on from our successful regulation summit in September, Tim Yeo and his team will be inviting respected figures from the business community to join a new Conservative Regulation Commission.

This will examine both specific regulations and the general burden of regulations and provide a systemic approach to reducing them.

I hope you will agree to play your part in this to find a way through the jungle of red-tape this Government has created.

So – the Conservative approach will be very different.

We have to break the cycle of failure this Government has created.

We have to support business.

Because we recognise that business is the very heart of a successful enterprise economy; an economy we need to create if we are ever to deliver our objective of delivering world-class public services.