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David Cameron: Speech to the CBI

Speaking at the CBI, David Cameron said:

"In March, I gave a speech about the Conservative strategy to deal with the deteriorating financial situation.

The immediate backdrop was the credit crunch and the crisis in the city.

The credit crunch has now spread - from the City and into every home and business in Britain.

Hundreds of thousands of families have the threat of negative equity hanging over them - and their future security.

Businesses are cutting back and unemployment creeping up.

And people are desperately trying to make ends meet because of the rising cost of living.

I hear it in the conversations I have, the emails I read, the letters I get.

At first, they were angry - angry with a Government that seemed to be ignoring that there was a problem with the economy...

…that the cost of living was rocketing and the housing market was falling.

Recently, the tone has shifted.

Now, people are just incredibly worried - worried about their families and worried about their future.

The other week, I got this email from Janie Anderson.

She said:

"I work 40 hours a week, my husband 48. My salary doesn't quite pay the mortgage each month. It is currently costing us £70 for fuel (between us) each week to get to work. We had two cars, we now have the one because of the running costs. My husband works nights and me days so we can car share, we pass each other in the hallway in the morning and again in the evening… We have brought up our kids, we should be starting to enjoy ourselves but this is not possible because of the high living costs."

Janie's story is the real economy.

Not a place of statistics that this Government loves trotting out - but one of lived experiences.

Not a place of academic theories that so obsess Gordon Brown - but one of people's hopes and ambitions, and fear and anxieties.

Janie - and others up and down the country in her situation - don't want sympathy.

They just want to know - what are you going to do?

How are you going to turn things around?


Of course, governments can't solve every problem.

It's businesses that create jobs and people who create wealth.

And this is even more true when the state's coffers are empty.

But people have a right to know what exactly your plan is.

Faced with this, Gordon Brown is simply unwilling to give a full answer.

He repeats the mantra "it's the global economy".

And he backs it up with trips to Jeddah and the G8, pleading with the Saudi Royal Family to bust open oil production and with the world's population to stop wasting food.

Of course, the problems we face today are partly global - finance has been squeezed worldwide, food prices are rising across the globe and oil is at $140 a barrel.

But is he really saying there's nothing we can do help - nothing to mitigate the difficulties and strengthen the economy for the future?

His answer to that?

"Don't worry, we're well prepared."

Frankly, I just don't think this is good enough.

The more you look at it the more you realise, this isn't an economic strategy - it's a political strategy.

It's all about him - nothing to do with what's best for our country.

By trying to blame the world for everything, he doesn't have to admit responsibility for the economic position we're in.

And by perpetuating the myth that we're well prepared, he doesn't have to admit it was he as Chancellor who failed to prepare our economy in the first place.

It's like 42 days detention - done simply so he could look tough on terror.

It's like the 10p tax fiasco - done simply so he could get a cheap 'tax-cutter' headline.

And now, with our economy in trouble, he's busy doing all he can to save his own skin.

It was him who left us with the fourth highest budget deficit in the developed world.

It was him who allowed us slip down the world competitiveness league.

And it was him who introduced the system of bank regulation that failed to prevent the first run on a bank in one hundred and fifty years.

I believe it's time he stood up and took some responsibility.

More importantly, it's time he started taking the decisions to get our economy back on track.


That's what the Conservative Party is doing.

Two and a half years ago, we spoke about the importance of entrenching economic stability.

That's because we were worried that the stability we had enjoyed for fifteen years was under threat.

Recent events have shown we were right.

But the extent and effects of Labour's economic incompetence are now greater than we could ever have imagined.

They've taken our economy for a decade-long joyride and left it bruised, battered and in need of urgent repair.

We run the real risk of throwing away all economic gains of the 1980s and 1990s unless we act decisively.

It's increasingly clear that our economy doesn't just need stability - it needs full-scale recovery.

And today, I want to set out the first parts of the Conservative Economic Recovery Plan.

Immediate action to help employees, homeowners, savers and families.

And longer-term action to bring down the cost of living, sort out our public finances and spur economic growth.

If we do this, we can set ourselves on the path to unlocking the potential of our economy, get it moving and make the most of what globalisation has to offer.


First of all, we need to do all that we can - straight away - to help those most in danger from our struggling economy.

That must include employees.

Since the beginning of the year, unemployment has started rising.

And some experts warn that this could continue.

The credit crunch has meant more companies are finding it hard to get the money they need to keep their business alive.

We've given banks access to £50 billion of help them get through the credit crunch.

It's right that we did so.

Because it's in no ones interests for sound banks to go to the wall because of financing problems.

Just as we took action for banks - so too should we take the appropriate action to help all businesses in these difficult times.

We want to make sure sound companies don't go into liquidation unnecessarily.

Because we all know what liquidation normally means - closure.

This isn't good for the companies, many of which are actually fundamentally sound.

This isn't good for the banks, who lend these companies money.

And it's not good for employees - who face being laid off.

So what can we do?

I can announce today that we will consult on taking the best aspects of the American Chapter 11 system and give good companies breathing space to allow them to rescue or restructure the business in the face of the credit crunch.

This change will ensure that fewer good companies end up in liquidation - and fewer people lose their jobs through no fault of their own.

But of course, we cannot - and should not - save all companies that fail.

When that happens, we need to make sure the employees who lose their livelihoods get the support and help they need to get a job as soon as possible.

That's why I believe there are things the Government should be doing - right now - with our welfare system.

It should give every person a proper immediate assessment of their needs and capabilities when they claim for the Jobs Seekers Allowance.

If they don't quickly get a job, it should refer them to a network of private and voluntary providers who can give them, much better than the State, the tailored support they need.

This could be giving them specialised training.

It could be help with writing their CV.

Or it could be giving them confidence with interview technique.

But whatever it is, the Government should pay these providers by the results they achieve, so we can make sure those people who lose their jobs in the economic downturn get the help and support they need to get back into work.


We also need to take immediate action to help homeowners - and those who want a home but cannot get one.

Both are struggling.

The former have the threat of repossession hanging over them as they come up to re-mortgage.

That's why we support - indeed, we proposed - the Government's plan to help re-open the mortgage market with the Special Liquidity Scheme.

And the latter just cannot get the finance together to buy their first place.

The papers this week have been full of Government off-the-record briefings about what they may or may not to do to help the housing market - not least on stamp duty.

Last October, we announced a fully funded stamp duty cut taking nine out of ten first time buyers out of this tax altogether.

What's Gordon Brown waiting for?

He could - he should - do this tomorrow.

Why is he dithering when thousands of people are being locked out of meeting their dream of owning their own homes?


There's another area where this Government has got to stop the dithering and start acting.

It needs to take immediate action to protect savers - so we don't return to the scenes we saw outside Northern Rock last September.

For a start, savers need the reassurance that if another bank goes bust, their hard-earned cash is protected.

So the Government should act now - before the parliamentary recess - to protect the first £50,000 for each saver in the event of their bank collapsing.

There's nothing stopping them - they will have our full support.

They just need to do it.

What's more, last autumn, we called for a Special Resolution Scheme to rescue failing banks.

The Government is now acting.

But let's be clear.

I applaud the FSA's frank assessment of its role in the run up to Northern Rock...

…but most bank failures follow some degree of regulatory failure.

So the regulator cannot alone pull the trigger on a bank rescue.

Instead, the Bank of England must play the central role in rescuing banks.

That's the system they have in America - where the Fed saved Bear Stearns over a weekend.

We need that sort of leadership here.

Since taxpayers' money is involved, the Government will set the conditions under which a bank will be rescued.

Then the independent Bank of England can take the lead on executing individual decisions.

Taken together - securing savers' deposits and giving the Bank of England control over failing banks - these measures will give everyone the confidence they need in our banking system.


Next, we must help families with their finances and the rocketing cost of living.

Of course, many of the problems families face come from abroad.

A global food crunch is hitting people at the checkouts.

And the rising cost of oil and gas is hitting people at the pumps and whenever they pay their electricity bills.

But let's also remember this.

One of the biggest demands on people's money doesn't come from some far-flung offenders - it comes from government.

It comes from the never-ending demand for taxation - from council tax to income tax, VAT to road tax, tax on booze to tax on petrol.

So I'm not going to stand here and say I can wave a magic wand to bring food prices and gas prices down.

But what I can say is that a Conservative Government will not make the cost of living worse.

That's why we have campaigned so hard - and will continue to campaign so hard - to get this Government to reverse their decision to impose a retrospective tax on cars bought seven years ago.

It's why we will give people the power to stop excessive council tax rises through local referendums.

And it's why we are consulting on a fair fuel stabiliser.

When oil prices rise, instead of the Government increasing tax - as they do now - we would offset around half of the rise with a cut in duty.

Of course, when oil prices fall, the tax would go back up.

The fair fuel stabiliser won't just stabilise the public finances - although it will.

At the moment, tax revenues rise and fall with the oil price.

The increase in revenues from the North Sea more than offset any dampening impact high oil prices will have on tax receipts from the wider economy.

That's what all the independent estimates show.

It won't just be good for the environment - by sending a clear signal to car designers to get innovating and creating clean cars.

But the fair fuel stabiliser will also help family finances.

The situation today simply isn't fair.

Oil goes up, the tax goes up, people feel all the pain - and the Government gets all the gain.

A fair fuel stabiliser will end that.

With us, the Government will share the pain.


But the only sustainable way to reduce the demand for taxation and cut the cost of living is to bring down the cost of government.

And that's the next part of our economic recovery plan.

After immediate action to help employees, homeowners, savers and families…

…we need to take long-term action to repair the damage that this Government has made of our public finances and bring back basic good housekeeping.

This won't be easy.

In the decades ahead, there will be pressure to spend more on the essentials.

But the taxpayer cannot take any more pain - indeed, they need relief.

And our public finances are already strained from massive borrowing.

So how can we square this circle?

As I said in May, a Conservative Government will make sure Britain starts "living within our means."

This is what households up and down the country do.

When people get a pay rise, they don't go and spend it all at once and then go to the bank manager asking for more money.

They spend some - and put some aside in the kitty.

We should expect the same from government.

That's why we have said we will share the proceeds of growth.

Backed by our pledge of independently audited fiscal rules, we will make sure, over the economic cycle, that we grow government more slowly than the economy.

That's what living within our means actually means.

Not spending more than we have.

Not even spending everything we have.

But ensuring that, over time, the economy grows faster than the state, so spending falls as a share of national income and we can reduce borrowing and taxes on hard pressed families.

After the splurge of recent years, the new spending totals for the years 2008-09 to 2010-11 show public spending growing by 2 per cent in real terms, below the 2.75 per cent trend growth rate of the economy.

This is why we are sticking to Labour's spending totals.

Taken alone, these are tight.

With rising inflation and unemployment creeping upwards, they will become tighter still.

But if overall the way we will live within our means is by sharing the proceeds of growth…

…then the real beef comes from attacking the causes of a bigger state and rising public spending.

So we will cut the cost of social failure, by being as in radical in social reform as Margaret Thatcher was in economic reform.

As George Osborne will set out later today, it's family breakdown, crime, substance abuse and worklessness that rack up the biggest demands on the state.

So we've got to get them down.

We will also address the problem - and cost - of unreformed hospitals and schools.

Massive top-down state monopolies cost more and deliver less - so we need to improve the running of public services through more choice, competition and non-state collective provision.

And we will cut the cost of bureaucracy, waste and inefficiency.

It makes me so angry when I see Labour Ministers preaching about wastefulness, and then, in turn, spend £20 billion - yes, £20 billion - on an NHS computer that doesn't work properly and £2.3 billion on refurbishing the offices of MOD civil servants.

Such profligacy has got to stop.

But it's not enough just to identify quangos and extravagance from the comfort Opposition and pledge to slash them.

We need to entrench the culture of spending money more wisely too.

And right now, we're doing the groundwork to make that happen.

We're looking at everything you would expect from a modern professional business-like operation - from procurement to staffing, staffing to structures - to find ways to save taxpayers' money and improve service delivery.

Living within our means is the only long-term sustainable way to get taxation down and give more families more of their own money…

…to make sure our public services get the investment they need and our quality of life increases…

…and to sort out our public finances and get them back in order.


The final part of our recovery plan is for the long-term too: we need to set ourselves on the path to economic growth.

Right now, businesses and entrepreneurs - those who create wealth and opportunity - are suffocating.

In 1997 the UK had the 4th lowest corporate tax rate in the EU; now it is only the 19th lowest.

And the British Chambers of Commerce now estimate that the total cost of regulations introduced since 1998 to business has risen to £65 billion.

Is it really any wonder that firms like Shire Pharamceuticals and United Business Media are fleeing our shores looking for a better place to do business?

To give them reason to stay - to show Britain is serious about enterprise - we will cut the corporation tax rate to 25p and will reverse the increase in small business taxes.

Both of these will be funded by reducing complex reliefs and allowances.

But more important than anything else, to lay the foundations of economic growth, we need to diversify our economy.

We've become far too dependent on a small number of sectors - financial services, housing, and public sector - for expansion.

When these were booming - fine.

But now they're not - and we've been caught cold.

We can't turn to a strong manufacturing base - like countries in Europe - to get our exports up and our economy going forward, because it has shrunk by more than a million jobs over the past decade.

And we can't put our faith in the high-tech service sector - like in America - to drive growth, because we haven't let it develop over the past decade.

Instead, we're exposed to what the global economic winds decide to throw at us.

We can control our destiny and make our economy more resilient.

We just have to make sure strong and successful financial and housing sectors…

…are part of a broader economic base which includes more science, engineering and manufacturing and draws upon a much wider range of industries and markets.

How will that happen?

Of course, our manufacturing and high-tech industries need a government that taxes and regulates less.

So we will.

Right now Alan Duncan and his team are going through line by line what can be done to free up our businesses to compete.

But businesses also need the infrastructure to succeed.

And I mean infrastructure in the broadest sense of the word.

Transport. Education. Skills.

That's what our businesses - and economy - need: to attract the best people from around the world, to innovate…

…and turn that innovation into commercial application.

That's why we've embedded members of our policy team with Rolls Royce - both in the UK and internationally.

We want to understand, in detail, the factors that contribute to successful science, technology, engineering and manufacturing in the twenty-first century - and what government can do to help put those factors in place for British industry as a whole.

Because if we get that right, we can diversify our economy.

And if we can diversify our economy, there's nothing that globalization can throw at us which we can't handle.


This, then, are the first parts of the Conservative economic recovery plan to deal with our struggling economy and prepare us for the long-term future.

Action immediately to help employees, homeowners, savers and families.

And action in the long-term to bring down the cost of living and sort out the public finances…

…and unlock the potential of our business - and get Britain back to creating wealth and opportunity.

Taken together, these elements don't just show that we have a clear alternative to this bankrupt Government who are bankrupting our economy.

They show that it's the Conservative Party that has the ideas for sustainable growth long into the future."

Notes to editors:

• Please see the employment plan document attached.

• Below is an extract from George Osborne's speech to the CPS this evening:

Helping businesses cope with the downturn: Reforming Britain's insolvency system

"In the face of the credit crunch, we face the prospect of rising unemployment.

Over the past five months, the UK unemployment claimant count has risen by 24,400.

Analysis by the OECD suggests that unemployment could rise by 100,000 by the end of the year, while Capital Economics forecast that as many as 700,000 more people could find themselves out of work by 2009.

In the United States, unemployment has risen by 49,000 in May 2008. The half-point rise to 5.5 per cent was the biggest monthly increase in 22 years.

"We all hope that this rise in UK unemployment does not materialise. But in case it does, Conservatives are today setting out for consultation steps to protect people from becoming unnecessarily unemployed. We are proposing to reform the insolvency system to ensure that good companies have the breathing space they need to stay afloat during times of economic difficulty.

After all, it is in no-one's interests - not the banks, the companies involved, nor the wider economy - for good companies to go to the wall during an economic downturn.

The current insolvency system

According to independent experts, if the current credit market conditions continue, it is likely that more companies will be unable to obtain new finance, creating difficulties and potentially forcing companies into administration or liquidation.

Both processes involve the appointment of an insolvency practitioner and often the only option is for the business to be closed down, destroying livelihoods and giving rise to significant job losses. Many people believe that the existing insolvency procedures are ill-suited to the rescue of a company and its business as a going concern.

In order to avoid formal insolvency procedures, informal restructurings frequently take place outside the statutory process, by way of unofficial deals with creditors.

These are difficult and inefficient, as there are no established rules and procedures. It needs to proceed via consensus, which means that generally all creditors and shareholders have a veto over any restructuring agreement.

Some stakeholders may use their veto to hold the company (and other stakeholders) to ransom, knowing that the only alternative to the concessions which they are demanding will be the administration or liquidation of the company.

Fundamentally sound companies therefore risk being dismantled. That would be bad for the economy, bad for the company and its shareholders, and bad for employees.

Reforming the insolvency system

The Conservative Party proposes to create a new fast-track judicial process for distressed companies, as an alternative to administration, based on the best aspects of the American "Chapter 11" system.

This will create a breathing space to allow company directors to formulate a plan to rescue or restructure the company. This process will be aimed at companies which are fundamentally good businesses, but whose capital structures no longer work in the current economic climate.

There are three key elements to this proposed reform.

Automatic stay of enforcement

We will introduce an automatic stay of enforcement of debt by financial creditors against the company while the management stays in place and attempts to negotiate a restructuring. Non-financial creditors, i.e. suppliers and customers, will continue to be paid as the debts fall due, although they will be barred from terminating the contract solely on the grounds that the stay of enforcement is in place. This will allow the restructuring to go ahead without the threat either of insolvency proceedings, or of panicked customers and suppliers terminating their contracts. The directors or creditors of the company will petition the courts for the stay, and the court would grant it in circumstances where the company was not in a position to meet its obligations to financial creditors, but there was a real prospect of the company being able to negotiate a restructuring. Creditors and shareholders would be able to submit reasoned objections.

The stay would be granted on a short term basis only (a few months), with the possibility of renewal. Where directors or managers had acted fraudulently or incompetently, creditors could require them to be replaced. The court would appoint an agent who would supervise the process and prevent improper use of the stay, and who would report back to the court on the progress of the restructuring. However, the court's agent would not be able to control or direct the company.

Priority funding for distressed companies.

We will provide a priority status for any financier willing to provide ongoing funding for the company post-petition. Unlike in the UK, firms in Chapter 11 in the US are able to raise finance even after they have petitioned for bankruptcy. Lenders will lend them money in exchange for "super-priority" over other unsecured creditors. In fact, there is a whole market for this type of "rescue" funding in the US, which does not exist in the UK.

Preventing unscrupulous creditors from vetoing desirable restructurings.

Once a company has proposed a restructuring plan, it will be required to submit it to the court, along with any supporting evidence. Any creditor group who disputes the plan will also be able to submit evidence. But once the court and a certain majority of creditors have approved the plan, it will bind all creditors and shareholders.

Taken together, these reforms may provide the right framework to allow good companies to continue to trade during an economic downturn.

We will continue to consult on these insolvency proposals in the months ahead, so that we are ready to introduce reforms in government, and ensure that Britain is better placed to weather future economic downturns."

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