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George Osborne: Making the banks work for the people

With just a week to go to the general election, you will hear us politicians today set out our stall - and you will hear us tell you what the next government should do to sustain this fragile recovery in the coming months.

But don't forget that there is a much larger question that looms over the British economy at the moment.

Put most simply it is this: where are the growth and the jobs going to come from?

Two thirds of all the new jobs created in the last decade, during the boom, were connected in some way to more government spending.  Much of the rest came from finance.

The source of job creation for the last decade cannot be the source of job creation for the next.

We need a private sector recovery.  We need businesses growing and creating new employment.

Above all, we need to move to a new model of economic growth.

We cannot go on relying on debt - government debt, consumer debt, banking debt - as the unstable foundation of prosperity.

Were we the only country in the world to borrow too much?

No we were not.

But did we have the most indebted households, the most leveraged banks, the highest government borrowing requirement?

Yes we did.

We need a completely new approach.

A new model of growth, where Britain saves and invests and exports.

Where the share of the economy taken by the private sector grows.

That cannot be achieved by government alone.

We need your ideas, your enterprise, your ingenuity, your drive, your energy, your hard work to make it happen.

And the job of government is to support you every step of the way.

Let's get down to brass tacks and tell you exactly how the next Conservative Government will do that.

Within 50 days, we will hold an emergency budget.

It will have two overriding purposes.

The first will be to start dealing now with the budget deficit and showing the world that the British government can live within its means.

Now there are some in this election who argue that to do anything on the deficit this year would be a mistake.

They say that whoever is elected next Thursday should wait almost a whole year, until April 2011, before doing anything about the fact we are borrowing more as a percentage of our economy than any major economy in the world.

I think that argument has been comprehensively demolished, not by me or David Cameron or the Conservatives - but by the businesses of Britain.

For we have seen an unprecedented intervention - by more than 100 of the country's leading employers and by more than 1000 smaller businesses - who tell us that starting now to cut wasteful government spending will not undermine the recovery; it's introducing a new jobs tax that will undermine the recovery.

That is why we have set out our plans to make £6 billion of net savings from government this year.

We will freeze large IT contracts, take out discretionary spend, not fill posts that become available in the back office, renegotiate contracts, rationalise property - do what you have all had to do.

£6 billion.  £1 for every £100 that the government spends.

You show me a business in Britain in the last couple of years that has not looked at its costs and saved £1 in every £100 it spends.  You show me a family that has not looked at its outgoings and saved £1 in every £100 it spends.

It is pathetic to claim that government cannot do the same.

It is ludicrous to claim that wasting money is essential to economic recovery. 

And by saving the £6 billion this year, we can avoid the most damaging part of the increase in national insurance next year.

But I don't want to pretend to you that is all we are going to have to do.

You know that the next government is going to have to do a great deal more if we are to deal with the deficit.

Let me be very straight with you.

I have set out some very specific examples of the savings in government expenditure we will have to make, on top of reducing the size of Whitehall and the quangos.

I have said we need to freeze public sector pay for one year for all but the lowest paid million people.

I have said we need to stop paying tax credits to families with incomes over £50,000 and stop handing out baby bonds to better off families.

I have said we need to get much tougher with welfare abuse, and cut incapacity benefit for those who are assessed as fit for work.

I have said that we need to bring forward the moment when the state pension age rises to 66.

And I have said we will lead by example by cutting the number of MPs by 10% and cutting the pay of Ministers by 5%.

Have we ever pretended to you that these are all the things we will need to do.  No.

We will have to do more.

Anyone elected next Thursday will have to do more.

But no opposition in history has said more than we have.

We were the first to warn of the debt problem.

The first to say spending had to be cut.

To first to set out specific examples.

And if you think this has been easy, just consider this.

There is no government spending review we can work off - this government cancelled that.

There is no accurate set of national accounts - this government made sure of that.

There is not even a political consensus that difficult decisions need to be taken.

Every single measure we have announced to reduce spending has been bitterly opposed by the Prime Minister. 

On Sunday he attacked our efficiency plans.  On Monday, before the nursing conference, he attacked our pay freeze.  Yesterday he attacked our plans on baby bonds.  He's even attacked our plans to cut the cost of politics.

Gordon Brown has created an economic climate where the budget deficit is the biggest threat to our economy.

He has created a fiscal climate where nobody except the Treasury has the information required to set out the full extent of the spending choices ahead.

He has created a political climate where anyone talking honestly and sensibly about what needs to be done is falsely accused of making deep cuts to vital services.

But be in no doubt.

We will deal with the deficit to get the British economy moving again.

And if anyone doubts the dangers that face our country if we do not, they should look at what is happening today in Greece and in Portugal.
There could be no better illustration of the urgency of the challenge that we face.

And let me say one other thing about what is happening in Greece - thank god we are not in the Euro.

For if we had been in the Euro over the last decade our boom would have been bigger, our bust would have been deeper, and we would now be bailing out Greece

The two other main parties in this election are committed to Britain joining the single currency.

We are not.

A Conservative Government will never take this country into the Euro.

But let me tell you what we will do.

Within days of the election we will create an independent Office for Budget Responsibility that produces an honest set of national accounts.

In our budget we will set out a credible plan to eliminate the bulk of structural deficit over the parliament - something the budget in March should have done, but didn't.

We will focus our efforts on restraining spending, rather than new taxes.

And we will make sure that the burden is shared fairly and we do not balance the budget on the backs of the poorest and most vulnerable.

For we are all in this together.

But I said at the beginning that our Budget would have two objectives.

If the first is dealing with the deficit, the second is to unleash the pent-up entrepreneurial forces of British business.

I grew up with a family manufacturing business.  Its successes and failures were the rhythms of my childhood.

And yesterday I was in Coventry visiting another small family manufacturing business that makes vehicle components.

It employs 24 people.  Two years ago it employed almost twice that.

That business faces rising tax bills, higher energy costs, more regulation and growing competition from abroad.

Everything I do will be aimed at helping businesses like that succeed and grow and create new jobs.

So in that first Budget, we will reduce the headline rate of corporation tax from 28 pence to 25 pence.

To pay for it in this constrained times, we will simplify the tax code and reduce complex reliefs - but I set the next Government this bold ambition that within five years we give Britain the most competitive corporate tax system in the entire G20.

For smaller businesses, we will cut the small companies rate to 20% with simpler allowances, and introduce automatic rate relief.

And for new businesses, created in the first two years of our government, we offer this deal: you will pay no national insurance for a year on the first ten people you employ.

Our whole purpose will be to erect a new sign over the British economy that says loud and clear: Britain is open for business.

Of course, there is so much more to do.

If I had more time today, I would tell you more about our plans to bear down on government regulation and red tape;

our plans to help private industry build a new superfast broadband network and high speed rail link;

our plans to transform further education and support apprenticeships.

And I also want a more balanced British economy.

Financial services are a crucial industry for this country.

I want us to be the home of successful and competitive wholesale finance - and all the other sectors associated with it, from insurance to legal services and accountancy.

But we need a banking system that supports the British economy, not enslaves it.

Today we're setting out detailed plans to reform our banking system.

Within weeks of coming to office we will begin to replace Gordon Brown's discredited system of regulation.

We are committing ourselves to supporting new credit to struggling small businesses through a national loan guarantee scheme.

We will implement a bank levy.

And for the first time we are spelling out how we will create a new Economic Crime Agency - a single, powerful fraud buster to replace the confused alphabet soup of existing law enforcement agencies.

Our objective is very clear: a successful and competitive banking industry that works for the people instead of being bailed out by the people.

So dealing with our debts, reforming our banking sector, creating a more competitive tax system, building tomorrow's infrastructure: this is our plan for the British economy.

This is what we start delivering on from next Friday.

It is easy, when confronted with the stark facts about the British economy, to be gloomy about our country's future.

I don't think we have to be gloomy.

Like Martin Sorrell just said, I believe Britain has at its feet a spectacular opportunity.

So let me end by giving you reasons to be cheerful.

Every day around the world, in places like China and India and Brazil and Indonesia, people leave the grinding poverty that has trapped their families for thousands of years and become part of our global economy.

They go to work for low wages in factories - and I know what a huge challenge that presents to businesses here in Britain.

These countries like China are nations of manufacturers, as we were in our industrial revolution.

But in time, as they become richer, like us they will become nations of consumers.

And they will want to buy things.

And when they want their branded goods, I want them to buy them from British companies.

And when they want pensions and insurance, I want them to turn to British financial firms.

When they or their health services want to buy modern medicines, I want them to look to British pharmaceuticals.

And when they start taking internal flights, I want them to do so powered by cleaner and greener Rolls Royce jet engines and on wings made here by Airbus.

And when they take those planes abroad, and go on their first holidays, I want them to come here to Britain and enjoy our tourism, and visit places like the Albert Hall.

There is a world out there for us to sell to, if we deal with our problems and get it right for the future.

Britain needs a change of direction.

Britain needs decisive government. 

Next week I believe we will get that.

Then we can seize that spectacular opportunity and be profoundly optimistic about this great country's future.

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