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George Osborne: Small business can't afford another five years of Gordon Brown

We come together today at a critical moment for British enterprise. And a pivotal juncture for the economy as a whole.

We are just 50 days away from the most important election for a generation. And the decision we all going to have to make is this: which way are we going to go?

What direction are we going to take?

Are we going to settle for the path of national economic decline on which Britain under its current economic policies is currently embarked?

Or are we going to look to the future with a new energy, and build a new economic model, and create new jobs, with successful British enterprise at its heart?

I'm here today, because I believe we've been heading in the wrong direction for too long.

For too long, our economy has been built on a foundation of unsustainable debts.

For too long, we have been too reliant on unaffordable government debt, unsustainable consumer debt, and unstable banking debt.

And for too long, we have made life ever more difficult - too difficult - for Britain's small businesses and entrepreneurs.


The consequence of these failures is now self-evident.

In England and Wales, 50 businesses are going bust every single day.

For the first time in our modern history, national income per person is lower at the end of a Parliament than it was at the beginning.

Unfortunately, Scotland has been hit hard too.

North of the border, GDP growth has fallen faster during the recession than in Britain as a whole.


As you'd expect, this desperately weak economic data is having a negative impact on the labour market.

Looking ahead, it's clear that the difficulties are not over yet.

Because the bottom line is that Britain's economic recovery is simply not as strong as it should be.

In fact, it's one of the weakest in the developed world.

It's no different for Scotland.

One of Scotland's leading economic think tanks has said that the "recovery will be weak", while Brian Ashcroft, a Professor of Economics at the University of Strathclyde also says that: "A weak recovery for the Scottish economy is in prospect."


This is the price we pay for a Government that over 13 years took one of the strongest and healthiest economies in Europe and has made it one of the weakest.

This is the price of a Prime Minister who borrowed and borrowed, spent and spent, and never fixed the roof when the sun was shining.

So what are we going to do about it? Settle for this? I don't think we should.

A Conservative Government is going to do what it takes to boost the recovery and get Britain working again.

Yes that means action on debt.

Over the last two weeks a broad consensus has begun to emerge in the business community that Gordon Brown's failure to deal decisively with the debt is putting the recovery at risk.

What do you and other leading businesses of Britain have in common? You actually know how to create jobs.

You know that the current uncertainty is hugely damaging to confidence and stability.

What business will invest for the future if they fear out of control public finances will lead to even higher businesses taxes?

What international investor will commit to come to the UK whilst our country's credit rating is at risk?

What family will spend with confidence if they are anxious that faster rising debts will mean faster rising interest rates and mortgage rates?

What company in Britain, large or small, faced with a debt crisis, would not start dealing with it?

The Government's plan is simply not credible.

Peter Mandelson let the cat out of the bag yesterday.

He confirmed what every small business fears most - that taxes could rise even further if Labour are re-elected, even beyond their huge  increase in National Insurance, which is going to hit jobs and families and businesses, large and small. .

Only last week the Chief Secretary appeared to rule out tax rises.

So we have complete confusion on tax at the heart of government less than a week before the Budget, all at a time when the international markets are waiting and watching to see if the Government has a credible plan.

That is not the way to restore confidence in our economy.

And with the strengthening grip of Charlie Whelan's Unite union on Downing Street the spectre of an old fashioned anti-business agenda at the heart of Government is growing.

And we know where it will lead.

More tax, more red tape, a roadblock on public sector reform.

We can't afford another five years heading in the wrong direction.


That is the overwhelming view of small businesses.

That is the view of other  businesses organisations such as the CBI and IoD.

That is the view of Britain's business leaders - from Stuart Rose, to Martin Sorrell, to Richard Branson.

And it is the overwhelming view of the City.

Dealing with our debts will need leadership, and here in Scotland it will need cooperation between the British and Scottish governments.

Sir Kenneth Calman is right that there must be a relationship of "mutual respect".

We need to improve the relationship between our parliaments and our governments. For Gordon Brown and Alex Salmond not to meet for nearly a year as the recession began to take hold is a disgrace.
 

Let me tell you what we Conservatives mean by mutual respect.  It means that if David Cameron  becomes prime minister, he will appear before MSPs once a year to answer questions and he will come to Scotland to meet with the First Minister within a week of taking office.

It means that I would ensure, as Chancellor, that the finance committee of the Scottish Parliament was fully briefed on the devolved consequences of the pre-Budget report and Budget - something the current Chancellor has failed to do.

It means that I am happy today, or any day, to sit down and talk to Alex Salmond about the budget issues affecting Scotland.  He has written to me and I am ready to talk to him.

That is mutual respect.

For while we in this room and outside it are not responsible for creating these debts.  Gordon Brown must take responsibility for that.  We are all responsible for finding a solution. We are all in this together.

So yes, a Conservative Government will take action on our economy, because doing nothing is the path to disaster.

Yes we will heed the advice of British business, because each one of you know more about creating jobs than the whole Labour Cabinet put together. 

But we need to do more than just deal with our debts.

We need to back enterprise.

If we are going to see new jobs created in the years ahead, there's no doubt that most of them will be generated by small businesses.

For  it's only by supporting the creativity, ingenuity and innovation of Britain's entrepreneurs that we can generate the growth and jobs we so desperately need.

Our Benchmarks for Britain, which we published last month, provide a clear roadmap to achieving this vision.

To move Britain from an economy built on debt to an economy where we save and invest in our future.

These benchmarks - from creating a more balanced economy, to a more competitive tax system, to a higher share of the economy taken by the private sector - will help you hold us accountable.

And they will help point our economy in the right direction.

But let me boil everything down to one simple sentence, that I think demonstrates the depth and breadth of our ambition. 

I have set the next Conservative government this ambitious goal:

We must make Britain the best place in the world to start and run a small business.

Because if we're going to succeed as a nation - we need your businesses to succeed.

Let me explain precisely how a Conservative government will help you do this.
First things first, we need to get the regulatory framework right.
Like the FSB, the Conservative Party has been fighting the tide of new business regulations for over a decade.
Because we know full well that it's small businesses that are hit disproportionately hard by red tape.
Unfortunately, this  Government has not paid heed to our arguments, or to yours.
Since 1997, more than 14 new regulations have been introduced every single working day.
As a result, the average small company now has to spend seven hours of every week complying with red tape and paperwork.
That's seven hours that should be spent winning new business and growing the company - not filling out forms.
Incredibly, things are on course to get worse, not better.
The Labour Government's Forward Regulatory Programme shows that the cost to business of red tape will increase by £28 billion over the next three years.
So what will we do about it?
The Conservatives in Scotland have already pointed the way forward.
Earlier this month, they forced the SNP to allow businesses to "road test" regulations before they can pass into law.
I know the FSB played a key role in developing this policy, which will help to improve the quality of new rules and regulations.
A Conservative government in Westminster will take a similarly tough approach.
For starters, we will impose strict new regulatory budgets.
That means that departments will be required to produce 5% cuts in their regulatory burden whenever they propose new regulations.

And in case you're wondering whether we'll stick to that promise, let me tell you that this system will be overseen by Ken Clarke, who will chair a powerful new cabinet committee on cutting regulation.

Trust me, our Conservative Business Secretary can't wait to unleash hell on red tape.

We'll also get rid of  the red tape that makes it too hard to even start a business.

According to the World Bank, it takes 13 days to start a business in the UK.

That's twice as long as it takes in the US, Denmark or Hong Kong.

We will introduce a one-click process so it's as quick and easy as possible to start trading.

And we'll take action to ban the social housing tenancy agreements that prevent some of the poorest people in the country from starting a business from their home.


Taken together, our policies will ease the burden for Britain's small businesses. 

And they will make a lasting difference for every single company in the country.

Getting the tax system and the regulatory framework right will make a huge difference to entrepreneurs everywhere.

But if we're to achieve our ambition of making Britain the best place in the world to start and run a small business, we will have to go still further.

So the second step we will take is to make sure every arm of government activity is  supporting enterprise, instead of holding it back.

Let me explain what I mean by this.

Take government procurement.

Across the whole public sector spends well over £100 billion a year purchasing goods and services - making it easily the biggest customer in the country.

But even though over 99% of UK businesses are SMEs, they win just 16% of government contracts.

That's an incredible wasted opportunity.

So a Conservative government will open up the UK Government's procurement system to small businesses.

Our broader  aim is that at least 25% of all public sector procurement contracts go to SMEs.

If we meet this goal, it will mean an additional £15 billion going to SMEs across the UK.


And because the culture of secrecy surrounding government spending allows bureaucrats to stick to the biggest suppliers, we will introduce the most radical spending transparency agenda ever proposed by a national government.

Across Britain, every single central government contract worth over £25,000 will be published in full. That means every clause, every performance indicator and every penalty trigger.

That is a huge victory, not just for us but for you.

I am absolutely delighted that the Conservatives here in Scotland have, as part of our constructive budget negotiations, ensured this open transparency is going to happen here in Scotland first.

Just think about what this will mean in practice.

Small businesses will be able to approach government bodies and say: 'We could have done that more cheaply - and without the need for that gratuitous performance bonus.'

Our transparency agenda will turn government procurement on its head.

And it will ensure that smaller businesses get a bigger piece of the pie.

This whole government approach to enterprise will make a difference on access to credit too.

With 40% of Scottish firms reporting that the cost of finance has increased over the past 12 months, and 50% saying that it's got harder to get trade credit, it's clear that we need to help businesses get the capital they need to survive and grow.


We want to take the National Loan Guarantee Scheme we proposed in the recession and make it work for the recovery.

But there's more we can do, especially if we harness cutting edge new technologies.

A Conservative government will use state levers to unleash private sector investment to build a superfast broadband network that is 50 times faster than the current government is proposing.

We'll do this by opening up network infrastructure, easing planning rules and boosting competition. We are prepared to use part of the BBC licence fee to extend broadband to harder to reach rural areas.

This approach has been successful in Singapore and South Korea - and it will mean that without any need for a telephone tax, Britain will be the first country in Europe to extend superfast 100 mbps broadband across most of the population.

I believe superfast broadband is to the twenty first century what canals were to the eighteenth century, railways were to the nineteenth century, and motorways to the twenty first century.


This will open up a whole new world of opportunities to small businesses. Independent estimates show that our policy could help to generate 600,000 new jobs.

The third and final point I want to make today is about the tax system.

If we're going to succeed in getting the economy back on track, we will have to make our tax system more competitive and business-friendly. 

For too long, Britain's small business have strained under the yoke of ever higher tax rates.

The small business tax rate has increased from 20% in 2007 to 21% in 2008.

And next year, Labour is planning to increase the tax rate still further, to 22%.

But it's not just the headline rate that's the problem - it's the complexity of the tax system too.

We now have the longest tax code in the world, and Tolley's tax handbook has more than doubled in length since 1997.

All of this is making it ever more difficult to run a business. 

So we will reverse this trend.

Let me make you this pledge.

The next Conservative Government will not be raising the small companies tax rate to 22p. We will be cutting it to 20p, and we will pay for this by abolishing complex allowances and reliefs.

I made that promise when i spoke at this national conference in Belfast in 2007, I make it again today and I will honour it in government.

And I  will work flat out to try and avoid Labour's National Insurance Increase on jobs and workers, and your businesses next year.

Of all Gordon Brown's planned tax rises, this is the one we most need to stop.

But we will go further.

The FSB has been a consistent advocate of the reform of the small business rate relief system.

Here in Scotland, you have worked with Annabel Goldie and her team of Conservative MSPs to cut or abolish the local rates for tens of thousands of small firms.

Thanks to Conservative action, these cuts began in April 2008, far sooner than the SNP Government had initially planned.
That was Annabel's price for supporting the Scottish Budget - cut rates for small businesses now or you won't get Conservative backing. 
That's a great example of the FSB and Conservative Party working together on behalf of Scottish enterprise. 

I want to follow your example south of the border.

After all, less than half of eligible small businesses in England do not claim rate relief.

That means they're missing out on £400 million of support.

So we will make rate relief automatic, and cut out unnecessary taxes and paperwork for thousands of small businesses.

But that's not all.

From the 1st of April, the Government's plans to abolish Furnished Holiday Lettings rules will hit over 120,000 tourism businesses - most of them small companies.

Last week, I announced that a Conservative government will undo this damage.

We will reverse the abolition, and we will do it in a way that is responsible and fiscally neutral, for example by changing the thresholds for the relief or amending the interest deductibility criteria.

I know this is something the FSB has been campaigning for. It will make a huge difference to the tourism industry here in Aberdeen, across Scotland and throughout the UK.

And our action is yet more evidence that we are listening to your calls for a tax system that supports British enterprise.

There's one more tax change that I want to talk about.

For many small businesses, the cost of taking on new employees is simply too much.

As a result, they find it too difficult to expand and create new jobs.

To coin a phrase, we can't go on like this.

Under a Conservative government, things will be different.

Any business started up to two years after the election will pay no Employer National Insurance on the first ten employees it hires during its first 12 months.

This will not only encourage a new generation of people to start a business, but it will  create up to 60,000 new jobs too.

This, then, is the  Conservatives' plan to back British enterprise - and secure a strong recovery.

We will dismantle the regulatory burdens that are holding so many small businesses back.

We will ensure that every arm of government is recast to support enterprise everywhere.  

We will reverse the Government's tax rises on small business, and build a simpler and more competitive tax system.

And we can - and will - make Britain the best place in the world to start and run and small business.

We won't achieve that overnight.

But we won't rest until we do.

Let me finish by saying this:

My father started his own business from the kitchen table of our home.

I grew up with all the joys and frustrations of running a small business.

I've seen first-hand how running a business can change your life, and help to build a better life for your family and your employees.

And I understand too that the power of enterprise transcends individual stories.

It's about the future of the economy as a whole.

A Conservative government will build a new economic model with enterprise at its heart.

We will secure the recovery and make Britain competitive again.

And we will create a nation with entrepreneurs everywhere.

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