John Major – 1996 Speech to the Institute of Directors
Below is the text of the speech made by John Major, the then Prime Minister, to the Institute of Directors on 19th January 1996.
I am delighted to be here on this occasion to have the opportunity of talking about some of the matters that lie ahead of us economically and some of the opportunities that are there for us to take.
I had the opportunity this morning to reflect on these in a rather philosophical mode. I spent the early part of this morning at Ironbridge – the cradle of the industrial revolution. And there at Ironbridge, by innovation, enterprise, investment, sweat and courage, new industries were born and the world followed Britain’s lead. It helped in its day build an unparalleled prosperity for this country.
As we meet here today we are in the middle of another more complex but equally important industrial revolution. It is one that will have a just as far reaching effect upon this country if we are successful in the way we approach it.
Last year at this very same convention centre, I set out five core principles, core themes, for our future. Today I would like to elaborate, to concentrate, upon just one of them. But let me remind you what those five themes were: to build a nation of enterprise and prosperity, a nation of opportunity and ownership, to safeguard law and order, to deliver first class public services and to defend a strong, united and sovereign United Kingdom.
All of those are important. But today I want to focus on just one of them, I want to focus upon enterprise.
Not all that many years ago Britain was universally regarded as the sick man of Europe. We had over mighty trade unions, strikes brought the country to a standstill, inflation hit all time highs and nationalised industries cost the taxpayer 50 million pounds each and every week. Today that is all behind us and I for one never wish to see those set of circumstances return to this country again.
What is true as we meet here at lunchtime, though it is unfashionable to say so, is that Britain is today building a platform for success that is outstripping more and more of our competitors across Europe.
In our adversarial political system, and I make no complaint about the nature of that, but in that adversarial political system many have a vested interest in scoffing at our success. But they can’t deny the fact of it.
We have seen the longest period of low inflation for 50 years. When inflation is there it is a mighty peril, when it has gone it is speedily forgotten. But I recall how it rendered us uncompetitive, how it destroyed our savings, how it brought this country almost to its knees in earlier years, and now we have the psychology of inflation under firmer lock and key than ever in my lifetime. I am proud of that and I have no intention of letting that lock go in the future.
We have now got the lowest basic rate of tax for over 50 years, the lowest mortgage rates for over 30 years. We have more of our people in the United Kingdom actually in jobs, and fewer unemployed, than any major European economy. And I wonder how many people in this room can remember when last that was the circumstance.
We have exports running at record levels. We have days lost for strikes falling to the lowest level since we first began to keep records of that. And Britain is the leading recipient in Europe of foreign investment. Indeed over the recent years we have received more foreign investment from outside Europe into the United Kingdom than has gone into the rest of the European Union added together.
That is what Britain has achieved. It is not a negligible achievement. Of course there is a great deal more to be done, but the position that we have reached offers very great opportunities for the future provided the policies to take advantage of those opportunities are not thrown to one side and are followed through in the years that lie immediately ahead.
I have no doubt about the key to that future. The key to that future is enterprise, enterprise at the heart of a free and prosperous society. With enterprise comes risk, but also reward. It creates competitiveness and builds prosperity and economic growth. Growth – a buzzword to some, but a reality for all our hopes. It is growth that pays for our national security,our defence forces, that pays for our social inclinations, our education system, our social provision, and so it is crucial for our future well-being.
And it is for that reason, the belief that I have that we need growth with low inflation if we are to maximise our opportunities for this generation, this country and future generations, that leads me to say that I believe that what we need to do is to promote the opportunities of enterprise for the future. And it is because of that that the government that I lead aims to turn Britain into the unrivalled enterprise centre of Europe, not just in the short term but for the long term future.
That will not be achieved without effort, it cannot be achieved by empty slogans. Britain can only do it if we believe in the values of enterprise and we then follow the policies that promote enterprise. Enterprise benefits society through the goods it makes and the services it provides, through the jobs it creates and the taxes it pays to support public services, through the contribution that businesses make to the communities around them. And it is worth considering that just for a moment. That contribution takes many forms, working to improve the local economy, to improve training, in Techs, in Chambers of Commerce and countless other local business groups, getting involved in local schools, helping voluntary groups, sponsoring sport and sponsoring the arts.
Our businesses, in my judgment, enrich our society in every sense of the word. They don’t need someone to instruct them to do this any more than they need someone to instruct them upon how to run their business.
But this enterprise culture, this opportunity, this belief in enterprise and all the wider benefits it brings, would be very easy to destroy. Vilify our businessmen for their very success, interfere on the grounds that the government knows best, make it impossible for them to earn a fair reward for their efforts, that would do it, that would destroy what is currently being built in this country for the benefit not just of businessmen but of all the people of this country.
And there is an idea, passed on from generation to generation by a curious mix of the well meaning, the envious and the confused, that it is wrong for business to make a profit. What nonsense that is. It is about time not just the politicians but that business defended the need to make a profit in the common wheel as well as in the interests of the shareholder. Profit should be applauded, not condemned. It is not a dirty word except to the peddlers of envy. It funds investment, it generates jobs, it is not only respectable, it is essential for the future that we wish to build.
If there is no profit then there is no enterprise. If there is no enterprise then there are no jobs. If there is no enterprise and no jobs then we will all be the poorer.
Government has its own role in fostering enterprise. I am not in favour of unadulterated laissez faire. Enterprise depends on government to follow sensible economic policies and create the right tax and regulatory environment, and we Conservatives are tax-cutters by conviction whenever we have the opportunity. And when I say tax-cutters by conviction, when I look at the demands for the future, the demands that demand an enterprise system for this country in the future, I don’t just refer to income tax when I refer to the Conservatives being tax-cutters by conviction. Taxes on capital are like taxes on jobs. If they are too high it is not worth building up a business and employing people. And that is why I want to cut, and in due course, and I offer you no timescale for this, but that is why I want to cut and in due course abolish both capital gains tax and inheritance tax.
Our opponents, playing their old game of the politics of envy, claim that reducing these taxes only benefits the few. But what that shows is how little they truly understand enterprise and all its effects. By denying businessmen and their families the rewards of their efforts, these taxes discourage enterprise, discourage job creation and discourage the growth of prosperity right across this country.
This country today, Britain today, now has the lowest tax burden of any major European economy. Forty-two percent of our national income is spent by the government on behalf of the taxpayer. That is going on for 10 percent less than the European average. That gap is worth 60 billion pounds a year, the equivalent of around 30p on the basic rate of income tax. So we are doing far better than Europe, even our competitors admit it. Even Germany, for so long seen as the strongest and most competitive economy anywhere in Europe.
But listen to what the Head of the German CBI had to say about the German economy just the other day: “We have too rigid labour laws, we have too high social costs and taxes. We work the shortest working week in Europe. The German government spends 50 percent of GDP as opposed to 42 percent in Britain – no wonder we have a problem.” That is the voice of modern Germany looking enviously at the situation that is applying in modern Britain.
And I believe that 42 percent that we spend, that we the government spend on behalf of the taxpayer, still isn’t good enough. I want to get government spending down to below 40 percent of our national income in the first instance. We need to raise our eyes beyond the competition with our European partners. We need to compete worldwide where half of all our trade goes outside the European Union, with Japan, with the United States and with countries like Korea, Singapore and Taiwan.
It is not just enough to have warm aspirations and to set soft targets. Controlling public spending requires tough decisions, determination and foresight. And here we have built up an advantage over our competitors. We have taken many of the difficult decisions and accepted the political unpopularity that inevitably goes with them. And I believe we were right to do so.
Elsewhere that has not happened. Throughout Europe governments are waking up to the gap between the expectations of their citizens and the state’s ability to support them. And that is not some abstract problem. In France it erupted on to the streets. But we foresaw the problem and began to tackle it years ago.
Let me give you just one of a number of examples. By encouraging occupational pensions we have ensured people’s security and limited the burden on the state. And as a result we now have in this country, in Britain, more invested in pensions for the future than the rest of Europe added together.
And it is the same for the rest of our welfare system. Social security currently costs every worker 15 pounds every single day of the year. Until we began to reform it a few years ago, spending on benefits was set to grow faster than the economy as a whole, Clearly that couldn’t go on. Our reforms are now beginning to give us a social security system that is fair, that is reasonable and that the taxpayer can support, one which promotes incentives to save and be self-reliant – the values of an enterprise economy and above all makes it worthwhile to go out and get and accept a job.
But there is no point giving people incentives to get a job if firms themselves cannot afford to create jobs. Too often in Europe that is precisely what is happening. Approaching 20 million adults in Europe, as we meet here today, are unemployed. From the 1950s onwards, in good years of growth as well as bad years of no growth, the underlying level of unemployment has risen across Europe. I believe that that is a problem that Europe dare not ignore and I have repeatedly raised this point at European meetings.
When I say dare not ignore, I don’t just mean talk about, I mean determined policies that will actually encourage business to create jobs for the future. It is often said, not least by our political opponents, that we British are often isolated on some aspects of European policy, that we won’t accept the European consensus. Well I make no apology for rejecting consensus when that consensus in my judgment is wrong and not in the British interest.
Our political opponents say it is tedious, nationalistic of us, to oppose signing the social chapter. They think we should sign it. I believe we should not sign it and I believe this because of the facts of what it is, but more relevantly what it would do to the prospects of people in this country, as it has already done for the prospects of people across Europe.
And let me spell it out for you, because the campaign of mis-information about the cuddly sounding social chapter deserves to be exploded.
At present unemployment in Germany is 8.5 percent and rising. France and Italy 11.5 percent. Spain 22.5 percent. But here in Britain unemployment is 8 percent and falling. It has been falling month in, month out, month in, month out for around about two and a half years.
And why is it that Britain is doing better at creating jobs than the rest of Europe? In Britain, for every 100 pounds spent on wages, an employer has to add an extra 18 pounds for non-wage costs for every employee. But that same employer would have to add, not 18, but 32 pounds in Germany for every employee, 34 pounds in Spain, 41 pounds in France and 44 pounds in Italy. Why should entrepreneurs create jobs in those countries at that expense if it is cheaper to create jobs and more profitably in this country?
Our political opponents try to denigrate our record. They claim those new jobs are temporary and not real. Well let me nail that lie immediately. A higher proportion of the workforce are temporary employees in Germany, France and Spain. In Spain almost one-third of the workforce are temporary, and that compares with 7.5 percent only of employees in the United Kingdom. And why is there that disparity? Because temporary jobs are higher elsewhere because it is a loophole to escape the costs of restrictive employment and social regulations. These are the sort of costs that could be imposed on British business if we ever signed up to the social chapter.
Our opt-out that I negotiated at Maastricht, and to which I shall passionately hold for as long as I am in politics, that opt-out helps to protect Britain’s competitiveness at home and in Europe, and if we surrendered it that competitive edge would no longer be safe.
In many areas proposals under the social chapter will be put forward for decisions by qualified majority voting. I have no doubt that if it suited them, others would find a way to blur what can be imposed by majority voting and what cannot. If Britain were in the social chapter we would have precious little say over which bits of it applied to the United Kingdom. We could not rely on being able to block proposals that we thought were damaging. To think that we could pick and mix if we joined the social chapter is naive and wrong. There would be no opportunity to pick and mix.
Experience of negotiating in Europe has taught me that we must not just look at what is in the Social Chapter today, we must also look at what it can be used for in the future. The reality is that it will become the channel through which our European competitors could impose upon the United Kingdom their social costs, regulations and potentially their trades union laws.
Measures on working conditions could be imposed upon us and what does that mean? A ban on overtime, the Social Chapter already producing proposals regulating paternity leave and part-time employment. And then there is consultation: huge numbers of decisions businesses take clogged up by harmonised European rules about who needs to be consulted, how and when, with the inevitable cost, delay and difficulty in making those decisions in the interests of the country, the company and the workforce and that would put a very significant spanner in the works of successful businesses.
The fact is no-one knows precisely what the European Community might or might not propose under the Social Chapter or how the European Court would interpret it. It is a blank cheque, the thin end of a very dangerous and uncompetitive wedge.
It sounds very attractive to some politicians, it sounds like painless charity. It may sound nice for those people with jobs but I believe that it is dishonest because loading costs and regulation onto business makes it more expensive to employ people and that means only one thing: employers cannot hope to create new jobs and might well have to scrap existing jobs.
The Social Chapter should be seen for what it is – a European jobs tax, a tax on jobs by the front door and in time a tax on jobs by the back door and that is why I judge it to be immoral. That is why, if I had signed the Social Chapter, I would not have been able to look the unemployed in the eyes again. Europe needs more jobs; it does not mean more taxes on jobs – that is not in the interests of Europe and it is emphatically not in the interests of the United Kingdom. [Applause].
I opposed the Social Chapter at Maastricht and I opposed it on principle. I believed then that it would cost jobs and not create them and I was right. I still believe it. Our enterprise economy is not negotiable, our economic success is too valuable to be wrecked by Socialist experiments.
Let me say a word about our success at attracting inward investment. We are again here outstripping the rest our European partners but does anyone seriously believe that Japanese and American companies would still be coming here in their droves if we crippled ourselves with extra social costs as other people have done? I don’t think they would. Those companies bring not just jobs and investment; just as importantly, they bring innovations, new technology, new management techniques and the spur of competition and we must build on these skills but for that we need people who are able and motivated to learn from the success of others, people who can keep up with the pace of change, people who can dictate the pace of change for the future. I don’t doubt for a minute that the British nation are capable of that; they have the ability, the inspiration but it needs nurturing and above all, tomorrow’s businesses need a workforce with first-class education and skills, enterprise and education go together.
Education is the raw material not just for a satisfying life for the individual but for providing the skills that industry and commerce will need in the years that lie ahead and yet for too long too many of our children were getting a very raw deal from our education system. It would have been very easy to leave things as they were to avoid a row with the establishment and with establishment thinking, not to traipse into that secret garden of education that was kept so quiet and secret for so long. We could have avoided change and avoided many rows but I believe it would have been wrong to do so, so we tackled the problem and we took the rows because I believe there can be no compromise on standards in education – our future and our children’s future is too important for that.
Despite the scars – and there have been one or two – I am proud of what we have done in changing the education system. Thanks to the national curriculum, children are now taught the basics from an early age; now we are making sure we give our children the best possible start in nursery education; special literacy and numeracy centres will ensure children don’t miss out on the essentials; children are tested on a regular basis at 7, 11 and 14; exam results are published for all to see, giving parents the information they have always deserved but once did not get, essential information to exercise choice, a choice that now includes grant-maintained schools, city technology colleges so often sponsored by individual companies or individual businessmen, grammar schools, specialist schools and the whole system backed up by far more regular inspection and far more effective inspection than education in this country has ever known before.
Look at what we have done in some of those aspects of education by establishing a proper framework of vocational qualifications and by introducing modern apprenticeships. For far too long in this country education was regarded as a matter for academics and not something that should teach practical vocational skills as well and the way in which it led to an artificial class distinction between white-collar jobs and blue-collar jobs in my judgement was wholly wrong and did immense damage to this country over so much of the last century.
Look at the success also of investors in people and what the techs are now beginning to achieve. Look at the number of our young people who are now going on to further education, to higher education, to university. For many of my generation, that still remained an impossible dream. Today, one in every three of our young people go on to university; only fifteen or sixteen years ago, that was one in eight – today it is one in three.
We are seeing a revolution in education, a revolution in standards, a revolution in achievement. Of course, there is a great deal to be done and I am determined to continue to do it but it could not have been done unless we, the Conservative Party, had been in Government and it would not be carried forward in the future unless we remain in Government to carry out and carry through the education policies that we have been following. Our ambitions for enterprise and the whole quality of our life in the future depend upon carrying those policies forward.
I have spoken about how the Government is fostering enterprise but enterprise – important though profit is as I have acknowledged – is not only about that. The core of enterprise is not Government either, it is individuals, individuals with a special spark of magic, of imagination, of innovation, of a willingness to take risks, that “get up and go!” instinct that drives them to achieve what many other people believe to be impossible, often flying in the face of conventional wisdom, individuals inspired by a dream not of what is but a dream of what might be.
We do well to remember, those of us who promote innovation and enterprise and perhaps even more so those who despise it and fear it, that it wasn’t Government that invented the steam engine, the telephone, the motor car, the radio, it certainly wasn’t the Government that built British Railways – it was Government and nationalisation that ran down the service of British Railways and once again it will be private enterprise that builds it up when we have finished the privatisation of them – and indeed, Mr. Chairman, I somehow doubt it was a government that invented the wheel many years ago though I have to say I can read the memos that would have come to me at the time explaining how the invention of the wheel would undoubtedly have destroyed jobs and how we should not maximise this new and startling invention.
This spirit of enterprise isn’t confined to inventors who have changed the world, it is what has made thousands upon thousands of people every year set up in small businesses putting their security and their livelihoods on the line because they have an idea that they believe will work and they have that instinctive gut instinct that has always been in the British nation that they wish to set up something themselves, run it themselves, build it up for themselves in their interests and in the interests of their own families. That is a culture that we should encourage and it does mean putting aside another culture, it means putting aside the old culture of disparaging success and all those who aspire to it. If we wish to be a successful society, we cannot afford to be an envious society and we should turn our back on all those who preach envy whenever they have the opportunity. [Applause].
I don’t interpret enterprise narrowly. It is not just a business culture, it is a set of values that can be expressed in countless other ways as well – and it is – in charities, sports clubs, schools, hospitals and throughout the public service. I wonder how many of the successful businessmen here today actually use those precise same skills on behalf of the community generally in some other way, in hospital trusts, in school governorships, in sports bodies, in arts bodies, in whatever it may be? I suspect a very large number use that skill for enterprise that is their profession in the interests of the community in other ways as well and it is a Socialist myth that enterprise creates a selfish and greedy society; it is a myth that society can only be made fair and just by bureaucracy meddling and corporatism; it is a myth that you can make the weak stronger by making the strong weaker.
No-one disagrees in politics today that we have common obligations to help and protect people in our society who are vulnerable. The argument between the parties is not upon that principle, it is upon whose policies can create the wealth to do it. There is no point in having your heart upon your sleeve if your business enterprises are so unsuccessful there is no money in your wallet in order to meet the social obligations that all of us wish to accept.
I speak as a Conservative, Conservative by instinct not by learning. Some people occasionally say: “What great Conservative philosophers did the Prime Minister read?” and I say to them: “I didn’t read any Conservative philosophers, I learned my conservatism in the back streets of Brixton when I saw how Socialism had failed the people who lived there and I saw the only opportunity for getting out of that was to give people individual opportunity and choice for the future and make sure that opportunity and choice was available to everybody in this country wherever they came from, whatever their background, whatever their income, whatever their class, whatever their colour and whatever their creed!” That is what made me a Conservative and it is what keeps me a Conservative and it is the only thing that is going to make this country great. [Applause].
I stand for enterprise opportunity for the whole nation, one nation, undivided and whole, not one nation racked by false of devolution that will set one part of the United Kingdom against the other within immense damage to all of us in the years that lie ahead if such policies were to be carried through.
Mr. Chairman, you cannot build such a nation – the nation of enterprise, of hope and prosperity, the inclusive nation, with everybody having those choices that I passionately believe they should have – on warm words and soft policies and no substance. You cannot build it if your policies are for the short term and not for the long term, you cannot build it if you will not take the decisions unpopular in the short term that you believe to be right for the long term but you can build it if you are prepared to make the decisions you know are right, to defend those decisions and to promote them in Britain’s long-term interests.
I will tell you what I believe: I believe we are building a nation that creates prosperity by encouraging ownership, not ownership by the state extending its powers and right to meddle under the cloak of public interest, not ownership by the bureaucrat at the taxpayers’ expense but individual ownership through enterprise, shares, pensions, savings, homes and small businesses, the right to own and the power to choose. Those are the things that genuinely give people a stake in society for this generation and the next. That, I believe, is the way to build a nation that provides a ladder of opportunity and rewards success, a nation where there are incentives to work and a safety net for those who need it. That has been an intrinsic part of Conservative philosophy and Conservative gut instinct since the party had its founding days and it will never change. That is the Britain that we are building, the Britain that I care about, an enterprise Britain, a nation that is successful and of which we can be proud.
If I had a single wish, it would be that the people of this country could see the success of this country, its values, its institutions and its nation, with the same clarity that the rest of the world can see the success and the values of this country.
As we take the decisions ahead to build that enterprise Britain, some of them will be difficult. Not all decisions will be easy, not all the rewards will be swift but there is no choice. we must travel the enterprise road or we will fall behind those countries that do. The choice is very clear and I have made my choice. We will build this country as the enterprise centre of Europe and we will not be deflected. I believe in that we will be successful and I wish each and every one of you the same success in your individual endeavours. It is the amalgamation of those endeavours that will build up our nation.
It is our job as Government not to carry out your job for you but to provide the opportunity, the economic background and the incentives to encourage you and not discourage you and prevent you from playing your part in building up this country and its enterprise prospects for the future. It can be done. We are outstripping others. What would be fatal would be if we were to let go of the policies we have followed for so long and that are beginning to show the clearest fruits of success at present; if we were to throw them away in the future, generations ahead would look and say: “Why did they do it? On the eve of such success, why did they turn away from the opportunities that lay in front of them?” I do not believe that we will. I believe that enterprise centre of Europe is being built and will be built and I intend to see it through.[Applause].
