Below is the text of Mr Major’s speech in London to the Lord Mayor’s Banquet, held on 16 November 1992.
My Lord Mayor, My late Lord Mayor, Your Grace, Your Excellencies, My Lords, Aldermen, Sheriffs, Ladies and Gentlemen.
May I begin by thanking you for the toast this evening and congratulating you on your election. Let me give you a message of good cheer. I hope the six months after your election are less eventful than the six months after mine. And may I say, on behalf of all of us here, how glad we are to see the Lady Mayoress at your side tonight, and how much we admire her courage after her recent accident.
It is a time-honoured tradition to speak to this audience about foreign affairs. I can imagine how much you are looking forward to a detailed exposition of Title 6, Article KI, Clause 2, Line 3 of the Maastricht Treaty.
But tonight I would like to break with tradition. I will talk about the international situation for a while, but primarily I intend to talk about confidence. About recovery. About the future of our country. About how to generate growth and bring lasting jobs and prosperity.
It is fitting to do so here – surrounded by so many who have a leading role in commerce, in industry, in the media, in the professions. All have a vital part to play in building up our confidence in our country and our future.
It is only three years ago that Western leaders spoke with euphoria of a “New World Order”. They looked forward to a new age of prosperous, stable democracies.
The Cold War has gone. The Soviet Empire has gone. The Berlin Wall has gone. But so have their simple certainties. The collapse of the Communist system has left a vacuum and it will take time for freedom and the market to fill it. Throughout history, such circumstances have been fertile breeding ground for extremism and unrest. We must work to ensure the late twentieth century is an exception. But the genie is out of the bottle, and that narrow line between patriotism and nationalism is in danger of being overstepped in many countries.
So there is great hope – but greater uncertainty. And we are living through a fundamental reappraisal of how the West should respond in difficult economic circumstances.
Britain is in a unique position to influence that response. As a permanent member of the Security Council, as a member of NATO, the CSCE, the Commonwealth and the European Community, we are at the centre of the overlapping groups of nations which seek to order the world’s affairs. Our role as a leading power in Europe has brought added value to our relationship with the United States.
And let me pay tribute here to President George Bush. There are many dangers in today’s world. But the world is safer today than when George Bush first took office four years ago, and much of that is due to his leadership and his values. As we congratulate President-elect Clinton, let us not forget our old friend George Bush, and say to him: you have been a true friend to our country and you will always be an honoured guest here.
As we look at our overseas responsibilities we know we have a special responsibility for Hong Kong. There is no one better than Chris Patten to lead Hong Kong through to 1997 with energy, skill and wisdom. I hope the Chinese Government will look at his proposals for Hong Kong, not with suspicion, for which there is no cause, but in the spirit that we and he intend. “One country, two systems”, was what Deng Xiaoping promised. Our proposals are entirely consistent with that philosophy. They do not threaten China. They do benefit Hong Kong. And we want a happy, prosperous and confident Hong Kong to be our enduring legacy to China after 1997.
There are few greater human tragedies than in Yugoslavia. Over recent months Britain has led the international community in a search for a peaceful settlement and in efforts to bring humanitarian relief to those in need. We have sent trucks, mechanics, winter shelter, medicines, food and clothing. And our RAF pilots have led the repeated air lifts into Sarajevo with great courage and tenacity for many months. In August we mobilised the world community on behalf of peace in Yugoslavia. We have sent British troops – the Cheshire Regiment – to help deliver humanitarian aid in difficult and dangerous circumstances. We owe that help to the innocent victims of the conflict. We owe it also to ourselves, for if the conflict spreads it could spread far beyond the borders of the former Yugoslavia itself.
It is a moot point whether the Yugoslav war would have begun if the Soviet Empire had not collapsed. But it is in our long-term interests that a new democratic Russia emerges confident and free. Last week President Yeltsin visited London and agreed a Treaty of Friendship and five other agreements. It was the first such Treaty between our countries since George III and Catherine the Great.
President Yeltsin sees clearly that Russia’s future can only lie in democracy and a free market. There are powerful forces ranged against him. No one alive in Russia today knows first-hand what a modern market economy is. The Russian people are being asked to make enormous short-term sacrifices for the longer term gain.
The route mapped out for them by Boris Yeltsin is a hard one, but it is the only one. The alternative would be to turn the clock back to the grisly apparatus of repression. Back to the old structures which once supported the Soviet State and have now gone, and – hopefully – gone for good. I hope that for their own sake as well as for ours, the Russian people will follow the lead that President Yeltsin has set them. It will not be easy. We cannot bear their sacrifice for them. But we can help them. Support them. Encourage them. And so we shall. Because we have the chance in our generation to fashion a new Europe from West to East. One where inter-locking trade interests enable future generations to live in greater security than we have known before. There is no greater prize than that.
Of course the Russians and others are struggling to reform against a uniquely difficult background of world recession. In America – as in Britain – consumers and businessmen have been battling to reduce their burden of debt, built up in the boom years of the late 1980s and impeding recovery today.
In Japan, growth is stalling. In Germany, people are facing what Chancellor Kohl recently called the “hour of truth”. In Italy, the Government has had to take drastic measures to restrain the growth in public debt. In France, unemployment exceeds 3 million and yet their real interest rates are nearly twice as high as ours.
There is evidence of an instinct that is dangerously strong in times of economic difficulty: to look inwards, put up the shutters and slam the door on the free trade that has brought prosperity to the post-war world.
My Lord Mayor, you referred to the GATT round. I agree with you. It is vital we get an early and comprehensive settlement. It is not tolerable for the world to fail to agree. We cannot let a handful of oil seeds or a sack of grain get in the way of the boost such a settlement would give to the world economy. At a conservative estimate, it would add nearly 200 billion dollars to world output. Two hundred billion dollars of prosperity, income and jobs.
Nor is an agreement merely an economic necessity. It is a moral imperative. Because it is not only the businessmen of Europe and America who stand to gain from the successful completion of the Uruguay round. Developing countries in the third world, aspiring market economies in eastern Europe: both need the opportunity to sell, so they can earn their way to the prosperity we tell them will follow from economic reform.
We, too, stand to gain enormously from a successful outcome. The stakes are high. Of all the successive rounds of negotiations to liberalise world trade that have lubricated post-war economic growth, this is the most ambitious. It needed to be, because trade today takes new forms, susceptible to new and less visible barriers. Of course, the old battle against tariffs is not over. British manufacturers still face some swingeing imposts, not least in the United States, where a successful Uruguay round will open up new opportunities to our textile, chemical and ceramic industries.
As the City well knows, British financial services meet more subtle but no less damaging national restrictions. Our “intellectual property” – books, cassettes, discs, software – is still counterfeited in many countries. Our foreign investments are hampered by some countries’ dog-in-the-manger restrictions on the repatriation of profits. All these trade barriers and abuses are being tackled in the Uruguay round that now hangs in the balance.
What is true for Britain is true for Europe. The European Commission has suggested that the Community could quadruple its exports of services with an agreement. European industries have much to gain from success. That is why, during our Presidency of the Community, I have put Britain’s weight behind the effort to secure agreement; supported the Commission’s negotiators; constantly warned our partners of the danger of delay. We have lost no opportunity of pressing for a settlement.
But, even as President of the Community, Britain is now able to conduct the negotiations. That is the duty of the Commission. Responsibility for trade matters cannot be escaped or buried behind newer preoccupations. Brussels must not fail in this fundamental duty. Britain will give every support to a settlement. Nothing would break the clouds of world recession more surely than the boost to confidence of a successful Uruguay round.
The GATT settlement is a vital complement to the opportunity opening before Britain in the single European market. 1993 will see the culmination of a European effort in which Britain has taken the leading part. It is a clear example of the cold, hard common sense and commercial self-interest that lies behind our decision to be part of Europe.
Well over half of all our trade is with the European Community. Inward investment flows here to take advantage of British skills and a flexible British labour market – and Britain’s opportunity to sell into the biggest free trade area in the world. We have the lion’s share of inward investment into the Community; but we get it because we are in the Community.
The single market in Europe is an opportunity for which Britain is uniquely well placed. We have now put in place the policies and the measures. We must now ensure Britain takes full advantage to advance the recovery we all want to see. As more and more people – businessmen, consumers, house-buyers, investors – start to look forward with more confidence to what the future offers, that will itself provide the engine for recovery.
Our economic policy objective has always been the same: sustainable non-inflationary growth.
The essential precondition – lower inflation – is now clearly in place. When I became Chancellor three years ago inflation was rising towards 11 per cent and many feared it would rise still further. Interest rates were 15 per cent and seemed stuck there. How easy it is now to forget the perils of that position. That was why we joined the ERM. For two years that policy succeeded beyond all expectations: inflation fell to under 4 per cent, and interest rates fell from 15 per cent to 10 per cent.
Our commitment to maintain low inflation remains as strong as ever. Inflation ravages peoples’ savings. And if people cannot be confident even in the value of money, how can they be confident about their economic future? But we now face a world where the inflationary pressures are weak. And that has given us the opportunity to loosen monetary policy and create a more competitive environment for business and industry.
Since we left the ERM, we have reduced interest rates by a further 3 per cent. Down to 7 per cent, the lowest in the European Community. Down by 8 per cent over the last two years. Down to the lowest level for nearly 15 years.
This should provide a huge boost to industry. The cut last week will take a further £1 billion off industry’s interest costs – provided it is passed on to borrowers, to small businesses as well as large, as I trust it will be. This brings the total saving to industry to over £10 billion a year. And low interest rates also provide additional spending power for consumers: £145 a month off repayments on an average mortgage.
In addition, we now have an exchange rate that is fiercely competitive. Not just in export markets but here at home too. And the Government is determined that that competitive advantage should not be frittered away by higher inflation.
It was against this background that Norman Lamont presented his Autumn Statement last Thursday. And what he set out to do was to demonstrate how the Government’s commitment to industry is right at the heart of our policies. To demonstrate that not just by words, but by decisions. Decisions to give priority to industry in the Government’s spending plans and in our tax policies.
Support for industry is not – indeed could not be – our only priority. I believe that people right across the country share my view that the poorest and neediest members of society must be protected. So we honoured all our commitments to uprate pensions and other benefits, in spite of the heavy financial cost.
But this does mean we have to look for some sacrifice by those in work. We cannot turn our back on our responsibilities to those who are not. That is why we have decided to restrict pay settlements in the public sector to a maximum of 1.5 per cent next year. I know that is tough for some. I do not like doing it but I believe it is necessary. I am asking for sacrifices by those in work to help get others back into work. And I believe there is an instinct for fairness in the British character that will understand that and accept it.
Ministers and MPs should make their contribution too. There will be no increase at all in Ministers’ pay next year and we shall introduce a Resolution in the Commons to provide for no increase in Members’ pay either.
Salaries in the private sector are for the private sector to determine. But it would be wrong of me not to use this gathering tonight to say very frankly that costs must be controlled everywhere, not just on the shop floor but in the boardroom too. We have set a lead in the public sector. I hope we will see that mirrored throughout the private sector.
In his Autumn Statement, the Chancellor announced a wide range of measures to help business. We listened to what industry was saying. Industry can only succeed if it is able to adapt to changing circumstances. And Government must be ready to do so too.
So, for example, Norman Lamont announced huge changes to the rules on private finance for capital projects, giving new encouragement to joint ventures between the public and the private sector. Joint ventures that should help to bring forward infrastructure projects in Scotland, in the Midlands, in the South East, in London, and indeed right across the United Kingdom. Lord Mayor, I welcome your theme of “the City and industry in partnership”. But we should go further: my theme is “the City, industry and the Government in partnership”.
It was essential that, in settling public expenditure, the Government did not spend more than could be afforded. Industry would not have thanked us for that, if the result had been higher taxes. So it was vital to stick to the remit set down by Cabinet in July. The Autumn Statement did just that.
It required some tough decisions. But we had to give priority to capital spending and to the needs of industry. So we have provided for the Jubilee Line extension to go ahead, and for British Rail to invest £1 billion next year. We have protected the roads programme – and lower tender prices should permit nearly twice as many new roads projects to be started next year. And there will be record capital spending in the health service.
Norman Lamont also announced extra help for the housing market and the construction industry. £750 million to buy up empty properties that are overhanging the housing market. And a relaxation of the rules on local authorities’ receipts, to stimulate an extra £1.75 billion of capital spending.
He also increased ECGD cover for exporters by £700 million, to ensure that they really can take advantage of the competitive opportunities now open to them.
On the tax side, he announced an increase in first year allowances for investment by industry. And the complete abolition of the car tax. These are measures that industry had been seeking. Measures that will help generate confidence and underpin the economy.
Lord Mayor, we need to build up our manufacturing base to meet the demands of today’s markets. I do not regard manufacturing industry as a marginal add-on optional extra – it is fundamental to our future prosperity. That does not mean supporting industries whose markets have been irretrievably lost – lost because developing countries now manufacture for themselves what they once imported from us.
What it does mean is to provide the sort of environment that encourages modern, well-equipped British industry to compete with the best in the world. Our supply side reforms continue to transform industrial relations and strip away many of the inefficiencies that had dogged British industry. We now have an industry that can compete with the best – and beat it.
My Lord Mayor, I do not have too many prejudices. But let me share with you one that I do have. I am sick and tired of hearing people talk down our country and play down our achievements.
Modesty may be an attractive quality. But as a nation we carry it too far. Too often we slip from healthy self-deprecation into an unhealthy, self-denigration. I know of no country more tolerant, more free, more open. Too often the Britain I read about is not the Britain I see when I travel around the country. Too often the views and opinions I hear quoted are not the views and opinions I hear direct from the lips of ordinary Britons.
So let us have confidence in our skills, our design, our ingenuity and – yes, our achievements.
– With low inflation;
– With the lowest interest rates in the European Community;
– With a very competitive exchange rate;
– With the Single Market on our doorstep;
– With a GATT deal tantalisingly close,
There is a great opportunity for British business.
The Government has listened to what industry has been saying. It has introduced the policies and the measures that industry has been seeking. So let us capitalise on our assets. Throughout this country there is a deep sense of national pride. An overwhelming desire to pull together and work together. We have done it often enough before in our history. Now, in order to recreate confidence and lift us back into growth and recovery we must do it again, in a true partnership for prosperity.