Mr Major’s Speech to the Annual CBI Dinner – 21 May 1991
Below is the text of Mr Major’s speech to the Annual Dinner of the CBI, held at Grosvenor House in London on Tuesday 21st May 1991.
PRIME MINISTER:
Well Brian, My Lords Ladies and Gentlemen,
I think I just heard a new version of confidence and optimism in the suggestion that I am going to tell you what the election date is. I do know it has been a subject of very considerable speculation as to when the election will be. All I can say to you is anybody who knows me well would think it is most unlikely it is going to be during the middle of the England/ West Indies test series. And even more unlikely that it is going to be straight down the middle of my son’s GCSE examinations. I don’t know how we will do in the test series, and to be strictly fair, I don’t know how he will do in his GCSE examinations. But I have given him one piece of advice. However he does, I told him, “don’t ever forget how you did, because you never know, thirty years on, how important it might be, to some people.” Brian, thank you very much indeed for inviting me to join you for a second successive evening.
I was your guest here last year, and on that occasion, Roland Smith, who is hiding here somewhere in his usual anonymous way, sent up to the top table a Manchester United scarf, I can’t think why he did that. He sent up nothing this year, I suppose they haven’t been doing too well lately. Brian, this evening I want to look at a series of themes of concern, I believe, to all of us and to look forward to the opportunities opening up for Britain as we approach the millennium. And with that in mind, for it is a very remarkable period we have ahead of us, I want firstly to congratulate the CBI on publishing a ‘New Agenda for the 1990s’: an agenda which focuses quite directly quite specifically on the challenges and the opportunities, that lie ahead. And rightly it looks at not only those opportunities, but also back at the very remarkable transformation in industry during the last decade.
Ten years ago, the CBI gave an earlier lead. They published an Agenda for the 1980s entitled ‘The Will to Win’ and that document was one of the first signs that after the 1970s, and all the difficulties of that period, enterprise was coming to life again. And now, industry must look forward once again, raise its sights as it looks towards the year 2000, plan for it, prepare for it and in doing so remember also the lessons of the past.
In his foreword to that Agenda, your President concludes and I quote “British business has not only shown the will to win but the ability to do so in some of the toughest markets there are”. He is right about that. And my first message to you this evening is a simple one and a clear one. Never under sell what you and British business have achieved over the last decade. Now that same document also warns that the United Kingdom must not reverse the changes we have seen in that decade nor forget what the situation was like in the late 1970s. And that is a critical message. How easy and comforting it might be to forget but how dangerous it would be. In the late 1970s, wealth was being destroyed not created as the CBI itself said failure was almost expected, success was a surprise. Industrial profitability collapsed, productivity stagnated, Britain’s share of world markets contracted, inflation escalated to a peak four times as high as the levels we are experiencing today, and spend-thrift Government was borrowing up to 10 per cent of our national income. We must never return to the policies which created those problems.
But in the 1980s we began to regain ground. Productivity was transformed. In manufacturing, often looked down on by some, in manufacturing it grew faster than in any other large economy and output in manufacturing rose to record levels. Profitability recovered and recovered spectacularly. After years of decline, our share of world markets is holding firm, our manufacturing exports increased by nearly 60 per cent over the decade and our car production for export almost doubled over the last year.
Now those are remarkable and successful improvements. But I understand very clearly that right now industry is facing difficulties as we bring inflation down. I know that times are tough and I am very well aware of the problems confronting many of you. But I do believe that we must keep those current problems in perspective. Your President has called them temporary difficulties. He is right. It is a British characteristic, endearing perhaps but often damaging, to accentuate the negative and overlook the positive. But we should not lose sight of the gains that you have made in the recent years. For I believe that they are fundamental and that means that we will soon be in a position to build on past successes once again, and we also need to bear in mind that in no sense are we alone.
Growth is still slowing in Europe and in North America. Unemployment is rising there too, indeed unemployment is far higher in France, Italy, Canada and Australia, than it is in this country. And yet however international and temporary the current problems, I understand very well that is no consolation for those who lose their jobs or for the companies which are facing financial crisis. And it is for that reason that I am absolutely determined that the defeat of inflation must remain our top priority. Never again, never again must our economy have to face the painful but necessary retrenchment of the last few months. This Government’s policies are clear. We must concentrate on getting the economy right. We must conquer inflation and we must have minimum interference in industry.
We have already removed huge burdens from industry. A whole mass of restrictive administrative red tape that tied up your employees and your business and we haven’t finished with those changes. Our deregulation initiative will continue to pursue ideas for removing more burdens from industry whether imposed at home or from Europe we will seek to have them removed where ever we can.
We have cut corporate taxation and then cut it again and again. The main rate of corporation tax is now lower than the special rate for small businesses when this government took office and with the Chancellor’s further cuts announced in the Budget, we will have the lowest corporation tax levied by any of our major competitors.
But we know one thing very well. We know Governments can’t run businesses as well as private enterprise can. And that is why we privatised no fewer than 44 large businesses no less than two thirds of the nationalised sector that we inherited in 1979. And in doing so, we have turned a national burden into a industrial success and brought in 28 billion pounds for the tax payer as well. And nor have we finished in that regard. We will return more nationalised industries to the private sector, including British Rail and British Coal. And we will open up more national and local Government activities to private sector skills.
To provide a stable framework for enterprise in an unstable world involves difficult economic judgements. But no Government can hope to get those right unless its objectives are clear. Our economic objectives are clear – to drive down the rate of inflation; to reward success and enterprise by cutting and simplifying taxation on individuals and on companies; to open up markets for businesses at home and abroad; and to restrain government and make it more efficient and more sensitive to the individual citizen. Of these, of course, the reduction of inflation is the most important, and it is down – coming down. Last Friday, we saw spectacular evidence of this. The annual rate of increase in the Retail Price Index, that headlined figure of such importance in our national inflation psychology, plunged nearly 2 full percentage points to 6.4 per cent. It was the biggest monthly fall that we have seen in a decade. The rate of inflation is now 4.5 percentage points below last Autumn’s peak. Of course, that is still not good enough and not for a second would I pretend that it was. We expect to see inflation fall and fall again. We expect to see it fall to 4 per cent by the end of this year. Underlying measures of inflation are inevitably falling more gradually, but make no mistake about it, on any sensible measure, inflation is now coming down and will continue to come down. So we are winning this most crucial battle. And our forecasts point to a welcome resumption of growth in the second half of this year. It will not be dramatic or sudden but it will be secure and it will be well-based.
The task for business in this climate is to prepare for this recovery ahead. And the task for government is to assist the recovery by maintaining the stable policy framework that we have now put in place. I believe that this framework offers a robust defence against the inflationary surges we have suffered in the past. Against a return to the miseries of the 1970s, and even against the lesser resurgence of inflation that we have experienced in the late 1980s. Inflation peaked last year at less than half the excesses of the 1970s, and yet despite that, it has proved painful to correct and we must now ensure that it never recurs.
Our new policy framework allows for the domestic management and monetary policy within the external discipline of the exchange rate mechanism. That is a discipline on both Government and on industry, sometimes tough but necessary. And it is a discipline that delivers the two most precious requirements for industry, low inflation and stable exchange rates. Already we are seeing the benefits of joining the exchange rate mechanism. Renewed international confidence in Britain’s economic strategy. A confidence that has enabled us to cut interest rates by 3 full percentage points without de-stabilising the pound. And others predicted, you recall, that we would have to devalue within the mechanism if we were to cut rates. They were wrong and we can now see that they were wrong.
We have stability against the currencies of our European trading partners at a time when the dollar has oscillated widely. And there is widespread confidence that within the exchange rate mechanism framework, we will see further falls in inflation throughout the year, and that interest rates can and will fall further too. I share the confidence in that judgement.
Exchange rate mechanism membership has made explicit our need to compete. Industry must break free of the bad old habits of paying itself, on the shop floor and in the board room, a level of salary and money that it cannot hope to earn.
The retail price index is no longer sending dangerous misleading signals to wage negotiators and I welcome very much indeed the signs that pay settlements are now coming down. The faster they do the clear the evidence that inflation is coming under control and the sooner recovery can begin and bring new jobs to our economy.
There should be no such thing as automatic pay increases. Pay must be linked to performance and to productivity. It is a principle that helps incentives, it involves employees in their business and it is also a principle which I wish to see being applied increasingly throughout the public sector as well as in the private sector.
And nor must productivity gains simply be swallowed up by pay rises. Each business has the responsibility to decide for itself what margin must be left to help profits, to sustain investment, to generate future growth. And it must also decide what level of wages it can afford to pay its own employees. No-one else can make that decision for a business and by contrast, any proposal from whatever source it may come, any proposal to impose a minimum wage will dramatically drive up industrial costs and massively increased unemployment.
Any attempt to link the lowest wage to the average would set off a pay spiral that would destroy jobs and cripple industry’s ability to create incentives and raise productivity.
I believe such policies would be an industrial and economic tragedy for this country, if they were ever to be implemented and we must ensure that they never are.
Precisely those same principles underlie our policies for training. We prefer incentives to intervention, and choice to compulsion. As I am sure you will know, yesterday, I helped to launch three White Papers which will, I believe, come to be seen as a turning point in the history of education and training in Britain and I am very pleased to pay tribute to Ken Clarke who is here this evening and Michael Howard who I think is not here, for the enormous work and innovation that they put in to ensuring that those White Papers were produced in, the form that we were able to publish them yesterday.
And tonight I want to make it clear that at the earliest possible opportunity we will be giving legislative force to those proposals. An education bill to start the process will, therefore, be at the heart of our legislative programme. And along with those elements of those reforms which are already underway, such as the introduction of the national curriculum, the creation of grant-maintained schools and in the training field, the piloting of a new system of credits for school-leavers. The effects of these reforms will be truly revolutionary. I believe that they represent nothing less, nothing less than the most radical reforms since the great Butler Education Act of 1944.
And that parallel is apt. It’s apt because one of our aims is to meet a great but unfulfilled objective of that particular Butler Act. And that objective is this we are determined to improve the quality of vocational education and the esteem in which it is held. That is an ideal that has never fully been realised in post-war Britain.
But our ambitions go wider, they are to provide new links between the school room, the college, and the world at work. We have deliberately put forward our proposals for education and training together, precisely because we see them as being complementary, and they will, in consequence, extend choice and provide new opportunities for many more young people than ever before.
And at the heart of these reforms, is our determination to break down the artificial barriers between academic and vocational education, between blue collar worker, and white collar worker between pin stripes and overalls. Such divisions are wrong, they are outdated, they are wrong. Wrong for industry, wrong for our economy, and utterly wrong for our future. These measure we have brought forward sound the death-knell for those divisions.
At present, we have too many young people without the skills or motivation to get off to a good start in their working life. Time was, when school leavers took up an apprenticeship. Over a period of years they required a recognised trade and that was their training for a life-time of employment. That was fine, of course, if their employment lasted a life time. But tomorrow’s employees will be different, those youngsters leaving school today will face a different world and a different environment. They may have to train, then retrain, then retrain, and then perhaps retrain again and again during their working life, if they are to keep up with the skill and speed with which skills and innovation moves in the modern world. And all that means, a different approach to training. And that’s why are embarking on a programme designed to give more choice and more training to young people leaving school; to provide greater training flexibility for young and old; to maintain standards of academic education, while bringing up vocational standards; and to end the barrier between polytechnic and university.
I know that this audience will welcome that. The CBI has played a vital part in helping to launch the skills revolution in Britain. Your President has a strong interest in education. I am happy this evening to be able to pay tribute to his work as Chairman of the Trustees of Education 2000.
It is employers, you, employers, who now take on the lead role in the Training and Enterprise Councils. I know looking round the room amongst those who I have met before, that many of you here tonight are involved in the detailed decisions involved in public expenditure of 2.7 billion pounds a year on training, enterprise and vocational education. And now we are planning more – much more for the future.
We announced yesterday that we would make training credits available to 16 and 17 year old school-leavers. This ambitious programme will be based on one essential principle, to create opportunity through choice, that is the principle underlying training credits.
Choice for young people to buy the training they need.
Choice for employers to provide workplace training.
Choice, locally, within the TEC’s, to set the right training priorities for the needs of business in each area.
And we will use that power of choice in the market to deliver opportunity for the workforce of the 21st century. And the whole country will gain as a result of that policy.
And I believe it will gain too from another policy, from the proposals we will bring forward in our Citizens’ Charter. This is no gimmick, this charter, it will have teeth, it will bite, it will change the way in which public services are delivered and in which the consumers of public services have redress against the quality of those public services. And I will tell you why it will do these things, and what our ambition is for it. I want to make the public sector more responsive to the needs of the public, more responsive by defining standards of service and putting in place mechanisms to ensure that they are met.
I want to bring business skills into the public service, through competitive tendering for the provision of services, contracting out, privatising and market-testing those activities best supplied by private enterprise.
I want to introduce new performance incentives for public sector employees. But there is a counterpoint to that. There must also be penalties for poor performance in the public sector as well.
I want to give greater authority and independence to those who monitor, audit and inspect public services.
And I want to examine way of providing effective redress to those who suffer, when standards slip.
Those are the principles of the Citizen’s Charter that we will introduce in a White Paper before the summer recess. We are, of course, already applying many of these principles. I have spoken earlier of the momentum of our privatisation programme. We are encouraging more contracting out of public service provision – and enjoying the benefits that it provides. In Westminster, those benefits are clear. They already contract-out printing, office cleaning, leisure centres, refuse collection, street cleaning and catering. What Westminster has done, others should do. And I hope will do, in the future.
And there is a further point. The opportunity to tender for local services has encouraged the growth of successful small businesses right around the country. But it is where the market cannot reach that we need to be most vigilant in setting standards.
Where services remain in the public sector, they must offer the same standards of courteous and efficient service that the best private sector companies provide. The Citizens’ Charter aims to ensure that is what they do.
But I am aware, Mr President, that it is not only officialdom that needs to listen and to respond; Government must do so too.
A fortnight ago, the Department of Trade and Industry set out, as one of its formal objectives, its requirement to listen to the concerns of business and consumers – and see that these are genuinely taken into account in the development of government policies. I would like to take this opportunity to endorse that new role for the department.
Communication between government and industry will grow in importance as we approach the conclusion of Europe’s single market programme. The deadline of January 1 1993 is fast approaching. And there is much still to do. The single market will not exist until all its measure have been introduced, then implemented and then enforced in every country in the Community. And I emphasise the implemented and enforced. We must ensure that Community legislation is not approved but then ignored in countries throughout the Community. In this country, we put into effect the legislation to which we have committed ourselves. Let me say this evening, we expect no less from every country throughout the Community.
Mr President, the Single Market will be an example of the benefits that can come from removing unnecessary regulation. The same must apply to what is called the “Social dimension” of the Community. We will continue to make clear to Brussels the dangers involved in ill-considered regulation. Employment and prosperity flow from free markets, not from bureaucracy and imposed uniformity.
I have made clear on a number of occasions my absolute determination to place this country at the very heart of the European Community. And business, I know, has an unparalleled determination to compete with Europe’s best and to win in that competition, both in the Community and beyond the Community. And that is why our struggle against inflation is not just a matter of short-term economic tactics but a matter of priceless importance and of long-term strategy.
Inflation is a distortion. Inflation is a handicap we cannot afford in the 1990s. If we have it and others don’t, we lose our markets our prospects and our prosperity. That is what is at stake as we battle to get inflation down to a very low level, at least as low as elsewhere in the Community. So we must reduce inflation to the point where it plays no part in people’s decision-making, no part in where or when they invest, how they plan for the future, with whom they have the confidence to compete in business, we cannot be satisfied with anything less than that.
In recent months, we have brought our inflation rate down closer to the European average. But we must go further, and find for ourselves a place amongst Europe’s best. Then we will be well-placed to fight for free markets and firm counter-inflationary disciplines in the year ahead.
Your President has rightly called this decade, the decade of Europe – one of opportunity and challenge. Both Government and industry have the chance to set themselves on a course that will yield the benefits of stability, growth and prosperity.
I have every confidence, every confidence in industry’s ability to rise to that challenge – to plan, to invest, to succeed. That is what you are about as businessmen. That is what we expect you to do; that is what we know that with the right environment you can do and you have done in the past. That is what we invite you to do in the future. Mr President, I cannot overestimate the importance of the success that is necessary for business in this country upon your success as businessmen and as businesses, upon your success rest our country’s prospects for the future. I hope you appreciate, as I am sure that you do, how crucially important that is. So is it my pleasure and privilege tonight, Mr President, to propose tonight’s toast to British business. I propose a toast willingly and with fervour, I propose a toast in the belief that we have the best business disciplines in the world and that with the right economic climate we can capitalise upon those disciplines and storm markets in every part of the world. So my toast tonight is to British business and I will invite you to rise and drink that toast, a toast to British business, may it prosper and profit in the years ahead.