Speeches recovered from the Conservative party’s online archive More…

George Osborne: Speech to BCC Annual Conference

Addressing the annual conference of the British Chambers of Commerce in Liverpool, Shadow Chancellor, George Osborne said:

It is a real pleasure to once again address your annual conference and to do so in the great city of Liverpool. Liverpool has contributed so much to our history and our world. I just think of my recent visits here - to the restored Palm House in Sefton Park to speak to local business leaders; to Crosby beach with my children to see the remarkable installation of iron men; to Birkenhead to see big telescopes being made that will see the stars from China; to the Albert Docks to hear Paul McCartney sing about Penny Lane; and to the local Chamber of Commerce to talk to Kegang Wu about his China link programme, in a city with the oldest Chinatown in Europe.

Liverpool was founded on trade and commerce and the ingenuity of its people. And the businesses represented here today from across the country succeed because of their ingenuity and commerce and trade. And what I want to talk to you to about today is about your relationship with government and how that relationship should be one you welcome not one you dismay of.

New Labour's failure to deliver social justice and economic efficiency

My argument today is this. New Labour came to power promising to deliver both social justice and economic efficiency. Old Labour, they said, had delivered social justice at the expense of economic efficiency. Old Tories, they said, delivered economic efficiency, but without social justice. New Labour would deliver both.

But over the past decade, we have found that they have failed to deliver either. With severe poverty up since 1997, the incomes of the poorest falling, and with their tax raid on the low paid passing through Parliament later today, Labour's claims to social justice are broken. And with our national competitiveness in decline, our budget deficit the highest in the developed world, and our economy badly prepared for the tough times that we face, Labour have failed to deliver economic efficiency either. But it is not enough for us Conservatives just to criticise our political opponents.

One of the prices we pay for the progress we have made is that people are now asking: what would a Conservative Government be like? What would you do? And they ask me: what would you do to fix our economy?

Setting out the Conservative alternative

The BCC's new poll, released today, shows that business has more faith in us to deliver a competitive business environment than it does in Labour. But the poll also shows that business is sceptical that any Government can really deliver what business needs. I understand that scepticism. You have had too many politicians standing on this platform promising a new relationship with business not to be sceptical.

So you're entitled to judge us by our actions not our words - by our firm commitments as well as our rhetoric.Today I want to set out the Conservative alternative. I want to make specific pledges of what we would do, in the short term, the medium term, and the long term, to boost Britain's competitiveness and to set Britain on a path to being the best place in the world to do business.

The challenges facing the UK economy

Let me set out the challenge we will face. Our world is undergoing profound economic change. When the history of our time is written, the credit crunch that preoccupies us today may well be seen as part of a much more profound and broader story of the shift of economic power to the east.

The rise of China - or, as this city knows better than most, the re-rise of a China that was the world's largest economic power in eighteen of the last twenty centuries - should be a cause of great optimism. It represents a triumph of freedom and free markets that many of us fought for. With the emergence of India too, it is lifting billions of people out of grinding poverty across Asia. It is producing remarkable products we can buy, and creating huge markets into which we can sell.

Britain more than any other country, and Liverpool more than any other city, powered the first great globalisation two hundred years ago; now this city and our country can enjoy the fruits of the second great globalisation now taking place. But only if we are well prepared. For in a world where business and capital and talented people can increasingly locate anywhere, Britain has no god-given right to economic success. We have to earn our place as a destination on the new trade routes of the world.

So when the Government raises taxes or imposes new regulation or fails to educate our children or leaves our transport system to decay we pay a double price - a price at home as these failures are felt, and a price abroad as these failures are noticed.

Businesses are leaving Britain

It is no accident that an increasing number of international businesses are leaving Britain for foreign shores - or never coming here in the first place. Last year, Shell chose Holland for its headquarters, not Britain. New global giants like Google and Experian have chosen Ireland, not Britain, for their European base.

Last month's decision by Shire Pharmaceuticals to move abroad specifically because of the hostile, complex and volatile tax regime sent alarm bells through the UK business community. Businesses are voting with their feet. Their concerns have been echoed today by your survey, which shows that tax is the number one issue facing businesses.

And they are echoed by new work from lawyers Slaughter and May, which claims that "In the last six years the tax environment in the UK has taken a significant turn for the worse". The attitude to moving abroad for many British multinationals has gone from 'no' to "not yet". You would think that faced with this evidence a Government would pause and think.

Not the current Government. At the beginning of this month they increased capital gains tax by £500 million. They pushed ahead with tax rises on small businesses of more than 10%. They started to tax empty properties in a property market already struggling. And they increased income tax on the low paid.

They are the only Government in the world whose response to the downturn is to put up taxes. Why? Because instead of using the fifteen years of global growth to build up a surplus, or substantially reduce the deficit, as other countries have done, they put nothing aside for a rainy day. They didn't fix the roof when the sun was shining.

Cut the small companies tax rate

So what can we do? The room for manoeuvre in the short term is limited. And I will not make promises I cannot keep. I want to under-promise and over-deliver. But even given the constraints, there are some things I would do immediately. First, I would stop the rise in small companies taxation to 22p. As the Chambers know well, small businesses are the engine of a dynamic economy. They are finding things tough at the moment. If the rises go ahead, I promise you that the next Conservative Government will reverse it. The small companies tax rate will be 20p - that's 10% lower.

We will pay for it by scrapping the complex Annual Investment Allowance introduced by the last Chancellor. I think you are better at deciding where your money should be spent than he is.

Cut corporation tax rate

Second, I would cut the main rate of corporation tax to 25p. Ten years ago we had the fourth lowest rate of corporation tax in the EU. Now we have the nineteenth lowest. These days the headline rate of corporation tax is like an advertisement for a country. Ireland has shown us the powerful impact of a low corporation tax rate.

The next Conservative Government will pay for this lower corporation tax rate by removing some complex reliefs, and reducing capital allowances to bring them closer to the depreciation rate used in your company accounts. This is part of a long term Conservative programme of corporation tax reform that will deliver a simpler and more competitive tax system. We are continuing to work with PWC on the details, and I welcome input from business.

The original idea came from the independent Tax Reform Commission which I established more than two years ago because I could see then that Britain would need a simpler, fairer and more competitive tax code. Your Director General, David Frost, sat on that Commission - you can see I was telling the truth when I said it was independent!

Taxation of foreign profits

The Commission also identified a looming problem with the taxation of foreign profits - the specific issue that drove Shire to Ireland, and which is now worrying businesses up and down the country. They recommended a participation exemption - effectively taking foreign profits out of tax and encouraging the repatriation of profit to the UK.

There is a powerful case for such a change, which we are looking very closely at. It could deliver a simpler and more competitive tax system fit for the global economy. But the Government's current approach risks making this area of tax even more complex not less, and could even lead to yet another stealth tax on business.

Shire's decision should act as a warning shot. Reforming the tax system and cutting business tax rates is one way to help British businesses succeed. Another is to reduce regulation.I know every politician since the time of the Roman Republic has promised to cut red tape.

Cut Red Tape

We're now doing the hard work in opposition with organisations like the Chambers and people like David Arculus to make sure that unlike most politicians we can deliver on that promise. That means forcing Whitehall departments to fix annual regulation budgets of the total cost of the red tape they impose, and then squeezing those budgets.

It means, as Alan Duncan our Shadow Business Secretary is now doing, looking at a whole new relationship with the businesses being regulated - a relationship of mutual trust not mutual hostility. For example, the responsibility deal could be that if your business shows that it abides by the rules, then in return you don't get intrusive inspections.

We will also withdraw Britain from the Social Chapter of the European Union because we recognise that you cannot talk about reducing the regulatory burdens on business unless you're prepared to tackle all the sources of these burdens.

A New Economic Dynamism

But it's a mistake to think that the only role of government is to get out of the way. To regulate less and to tax less and to assume there's nothing else a government should do. This is laissez-faire economics and by itself it is not enough. Because government can't help but be involved in the economy. It consumes national income. It is responsible for educating the workforce, policing our streets and business premises, providing the transport links, creating the right competition laws, negotiating the international trade and intellectual property rights agreements.

As David Cameron said in an important speech last month, "even a free-marketeer understands that economic liberalism alone is not enough. While we must be aware of the limitations of Government, we should never be limited in our aspirations for Government. It is not enough for Government to get out of the way. It must get involved. We need a new economic dynamism to attract the best and most productive firms to Britain and keep them here. Not the old bureaucratic interventionism, but a new economic dynamism. Not old-fashioned subsidies for hand picked favourites, but modern support for enterprise and wealth creation." That means a network of roads and rail links and ports that can move your products around easily.

That means an education system that responds to the needs of local businesses and chambers of commerce, that produces people with the skills that you say you need - not the skills that the FE college thinks you might need. That means a welfare system that doesn't make the rest of us pay for five million people to languish on out-of-work benefits, squandering their talents and acting like a drag anchor on the whole British economy - and Chris Grayling, our welfare spokesmen and shadow minister for this City, has set out convincing and far-reaching plans to make the tough changes that need to happen.

Labour intervenes in the wrong way

It is ironic that this Government has got its involvement in the economy completely the wrong way round. When they should be getting out of the way they regulate and tax too much and when they should be providing vital support services they manage to combine complexity with inaction.

As a result our economy has become too unbalanced - too dependent on the welcome growth and success of financial services and property, and not helped enough by the growth of high value manufacturing and high tech industry. That leaves us more vulnerable than any other to shocks in the global money markets and the boom and bust of the credit cycle.

I want that to change. I want all parts of the economy and all parts of the country to share in future economic success. I want a change of attitude. For too long, the Government has seen businesses as something to burden. If you want to expand, the Government gets in the way with the sclerotic and bureaucratic planning system. If you need skilled employees, the Government training is poorly targeted at the wrong skills.When you want to grow, the Government burdens you with more regulations.

Government should be a service not a burden

We want a change of attitude, that says that Government should be a service to business, not a burden.

Need to navigate the planning system? Here's how. Need to open an office overseas? How can we help? Want trained employees? Let's work together on that. Finding it tough to compete with businesses across the world? I'll cut your tax rates and simplify your tax code. With your help we can do these things. I want to go on working with you and listening to you as we make our preparations for government. Because I don't just want victory for my Party at an election. I want my Party to know what to do with that victory.

Keyboard shortcuts

j previous speech k next speech