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Duncan Smith: Higher taxes are failing to produce better public services

Speech to the Leeds Chamber of Commerce

Thank you for inviting me here this evening.

It's a privilege to be among you - and a great pleasure to be in Leeds.

It's a sort of a homecoming - I cut my political teeth just around the corner in Bradford.

So you'll understand why -- when I think of Leeds --

I think of hard work, and plain speaking.

Frankly, I was hoping to avoid the hard work this evening.

But as always, there will be plain speaking -

and I don't intend to depart from that tonight.

Coming here tonight has been valuable experience for me.

While the reputation of this city as a model of economic rejuvenation, is known throughout Europe,

I have needed to know more.

This visit has provided a welcome opportunity to find out.

By way of preparing for tonight, I spent some time mugging up on the recent economic history of Leeds.

And I now appreciate more fully why this city represents what has been most progressive about economic change in Britain over the past 30 years.

Clearly, Leeds had coped well with the industrial dislocation that overtook the North in the Seventies and Eighties.

But just how well was brought home to me when I learned that, whereas 40 years ago, 60% of labour in Leeds was employed in the old production industries -

printing and paper, textiles and glass, brewing and pharmaceuticals -

today that has fallen to only 15%, while public services, the financial sector, and the retail trade have come rushing into the employment gap.

By the Nineties you had become a focal point for economic regeneration -

And Leeds, the regional powerhouse, had become a national - indeed, a global - player.

So far in the 21st century your only mistake -

and I say this as a committed Tottenham fan -

has been to sell Robbie Keane to us for 7 million quid!

Otherwise, your president is quite right:

Leeds is one of the premier business communities -

of the United Kingdom, and also of Europe.

And as with most things in life, it's been a story of considerable pain - and now considerable gain.

These gains, these successes, are to a very great degree the product of your efforts - the business community of Leeds.

But now, unhappily, there is some pain again.

On the train up here this evening, I was looking over the results of your Chamber's most recent economic survey.

And while services may be doing better than manufacturing, most of you -- whatever your sector -- are expecting lower turnovers, lower profits, flat exports to your main markets.

For Leeds this means some uncertainty and nervousness -

as it does for all Britain…

Economic signals have been mixed and confused for more than a year…

Questions about Iraq add to the uncertainty.

And now, business - particularly small business -

is facing an immediate double whammy -

· · On the one hand, the downturn in sales.

· · On the other, higher National Insurance contributions -

· · which are nothing but a jobs tax, equivalent to 3p in the pound on income tax,

and will put further pressure on your ability to do business in a particularly tough climate.

And of course, there is always more to be done.

You will know, far better than I, what it means to have, for example - alongside the magnificent commercial and residential achievements of Aire Canal Basin - a district like East End Park, only half a mile away but still blighted by typically inner-city disadvantages - poor housing, and social services.

East End Park is one of many places -- too many -- in inner-city Britain, which have fallen too far behind.

You will solve these things - you always do.

So will Britain - that is our island story.

But as a soldier, the first principle I learned was - we will not leave our people behind.

And we'll have to make a few important changes to be sure that we don't.

Now, I can tell you precisely where I would start! …

But let me begin with what I hear from people as I travel around the country - namely that - the quality of our lives is simply not as good as it used to be… or should be.

Time was, not so long ago, when we claimed to have a National Health Service which provided the finest health care in the world.

We had some of the world's finest universities, which educated our best and our brightest to an excellent, indeed incomparable, standard.

Our police made sure our homes were secure and our streets were safe.

And we had justice and welfare systems, which, aside from their innately British generosity, nonetheless presumed that -- in the main -- individuals should accept and assume responsibility for their own behaviour and progress.

These things made us proud to be British.

And we are still proud to be British.

But we are no longer proud of our health care, our education, our police and justice systems.

We no longer pretend that things here are better than anywhere else.

Last summer, an opinion poll was published which found that 50 per cent of Britons would prefer to live abroad -- in Europe, or Australia, or the United States.

Some said it was simply cheaper to live abroad.

Others, that it would offer new opportunities.

There was a general view that people in other countries enjoyed a more relaxed lifestyle, and almost half of the people surveyed agreed that health care is better abroad.

The most common reason for staying was that family or friends are here.

People stay, not because they have a great life, but because it's 'ok'.

They're making do.

And they are expected to continue making do ---

While Government extracts more and more from them in tax, and pours more and more of their money into services, all for less and less return.

While government uses more and more of your money to bash away at solutions that have already failed.

While government continues to measure its performance, not on what your money delivers, but on how much of it they can actually spend.

And boy, are they spending!

In 1997 the government took £270 billion from the taxpayer.

This year it will take £420 billion.

In 1997 you stopped working for the Chancellor on May 27.

This year you will stop working for Mr. Brown on June 15.

Since 1997 taxes have gone up on pensions, petrol, married couples, mortgages and homes, local services…

Since 1997 business itself has paid a staggering £47 billion in additional taxes over the past five years.

You are also dealing with new red tape that is costing you an additional £15 billion each year… Indeed, so heavy has this burden become that business leaders now rank government legislation as second only to the general economic climate among their most important problems.

How long can you keep this up? How much longer can we?

Not much longer.

Most fair-minded commentators agree that the economy and the business environment were in good shape when my party lost office in 1997.

Today, six years later, the UK has fallen from 9th to 16th in the World Competitiveness rankings --

And business investment has fallen to its lowest levels for 37 years.

That's how good the present government has been for business.

I fear we are reaching the point at which its taxation policies are beginning to undermine the very fabric of our enterprise economy.

Now, there are people who would argue that this might be at least partly worth it if our higher taxes produced better services for us.

But do we have the same standards of healthcare as the French?

Does our education system rival those of other European countries?

Are our streets safer than those of continental Europe? Or even New York?

No, on all counts.

Meanwhile, we have a Government that is in danger of killing the goose that lays the golden egg.

A government in danger, moreover, of cooking its own goose.

The government is telling people - ordinary citizens, business people, people on farms, and on factory floors, our students, our sick, the retired and the elderly - that they will have to continue "making do".

That's why people don't believe in politics any more.

That's why they think it makes no difference to their lives.

That's why they think politicians are fat cats and nest-featherers.

It is an attitude that has eaten its way to the heart of our politics - and cheapened it.

How has this happened?

I think principally because no government - certainly not since Harold Wilson's in 1964 -- promised as much to the electorate as this one did… and then delivered so little real improvement.

It so happened that delivering those promises was going to demand that government - any government - would have to think the unthinkable and say the unspeakable.

Delivering those promises would require radical thought, new vision…

the sort of clarity on the delivery of services in 2003 that characterised Britain's thinking on the production of wealth in the 1980s.

Instead, a new government pursued old policies rooted in a post-war consensus that has become worn out.

Instead, in their obsession with control, they set targets that were beyond their control to deliver.

And when they lost control of the targets, they tried to control people's perceptions instead.

Meanwhile, people are left behind, or left out, because they have a government that dares not think, or act, differently.

Meanwhile, other countries have begun to think differently, to do things differently, and to do better those things on which we once prided ourselves.

Other countries accept that the priority for things like health care or education has to be the standard of the service delivered.

We on the other hand, are still obsessing on who is delivering that service rather than how well it is delivered.

And this is where it begins to affect you.

Because the solutions we inevitably come up for the improvement of life in Britain, involve throwing more and more money at our problems. . .

Throwing good money after bad.

Meanwhile, voters are basically advised to 'make do'.

· · Make do with rising taxes.

· · Make do with rising inefficiency and waste.

· · Make do with more red tape - for businesses, doctors, teachers.

· · Make do with our deteriorating transport services.

· · Make do with our declining standards of health and education.

· · Make do with our unsafe streets.

· · Make do - I have to say -- with a government whose best defence, after almost six years in office, is to blame the previous administration!

Well, let me say this to you, ladies and gentlemen -

'Make do' won't do.

'Make do' is simply not good enough any more.

We are going to have think differently, and do things differently.

And that will be our approach as a Conservative government.

This approach is based on a single belief…

That people live better lives when they have the freedom to run their own lives, when they take responsibility for doing so, and when they make their own choices.

As Keith Joseph said: "There are limits to the good governments can do, but there are no limits to the harm they can do."

We are, therefore, by nature a party of lower tax.

It is a natural consequence of our belief in smaller government, greater individual liberty, and greater personal responsibility.

As for how governments spend your money, we think the measure of success is not how much they spend, but how well - and how carefully - they spend it.

We also believe that low-tax economies are more efficient, and more competitive, than high-tax economies.

And because we believe in personal liberty and responsibility, we believe also that, wherever possible, people should - and can -- be trusted to do for themselves, much of what the present government insists on doing for them now.

So we intend to return them more power - especially in education, and health, and business.

It means trusting doctors and nurses to run the health service.

It means trusting head-teachers to run their own schools.

It means getting police on to the streets, and trusting them to fight crime.

It means trusting business to do what it does best, in the spirit of enlightened self-interest.

So, we won't be trying to second-guess everything you do.

We won't be over-interfering in the way you run your businesses.

We'll cut regulation. We'll cut red tape.

And we won't go gold-plating every regulation that sails over the Channel from Brussels to make it much more draconian that it need otherwise be.

Until now, this Government has got away with anti-business policies -- because the economy we left them with, was 'doing okay'.

So, for example, Gordon Brown decided - because the stock market was rising - four years ago that it was 'okay' to take another £5 billion a year by taxing pensions.

That's a very dangerous approach.

Because now, the economy isn't 'doing okay' any more. And see what has happened to pensions!

The stock market has touched a seven-year low.

For many, retirement is receding further and further into the distance.

And those already in retirement are struggling.

Looking ahead --

· · The latest Mori poll of Business Confidence says 87% of you think economic conditions will be the same or worse.

· · The consumer boom is petering out as house prices stagnate

· · And consumers are confronting a very large debt hangover.

This is precisely the time you need businesses to thrive. And for businesses to thrive, you have to get government of their backs.

A few years ago we would have understood that, but not, it seems, now.

Last year I was howled down for daring to suggest that a lower tax economy is better for the country.

Lower taxes, it seems, had gone out of fashion.

We were accused to wanting to destroy public services.

· · There was no acknowledgement of the fact that a lower tax regime makes for a healthier economy.

· · Nor was there any attempt to grasp that it is possible to have both lower taxes and better public services.

· · Nor that there are most certainly better ways of running things than we do now.

But that's the trouble with government policies that follow the dictates of fashion.

Fashions come, and fashions go.

Fashions do not leave enduring, healthy social and economic legacies.

This government sought to reinvent government financing.

Only to rediscover -

too late for you, I'm afraid, because damage has been done -

some harsh, old truths about the proper relationship between public monies and the public good.

Conservatives, on the other hand, know that policies that are based on enduring principles can leave enduring legacies.

If we are to create such a legacy for those who come after us, we shall have to end this sterile debate which says: You can either be pro-public services or pro-business, but you can't be both.

That's rubbish.

At the end of the day, it's not simply that you can be both, but that you must be both.

Because a strong economy and a strong business environment underpin the better public services we all want to see.

So, over the next couple of years, as we approach the general election, the Conservative Party will not be afraid to be on the side of business.

We want life in Britain to be better.

As the fourth largest economy in the world, we should have public services that are world-class, not failing.

We should not be lagging behind our neighbours.

But to assert that, is simply to recognise that business has to be considered a partner of government in that aim.

And if that partnership is to be healthy, then business itself must be in good health.

The present government, before it took office, made you a raft of promises that it would do that.

Instead, it has let you down comprehensively - and taken a lot more of your hard earned money in the process.

I know you will only be satisfied when once again Britain becomes a better place to do business.

We will make that our essential business, as the next Conservative government.

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