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

Duncan Smith: Failing public services will lead to a failing economy

Address to the Institute of Directors

In yesterday's Queen's Speech the Government once again said that its priority for the year ahead would be to improve Britain's public services.

Well, we all want to see better public services.

But the way this Government is going about it is fundamentally wrong.

Labour are pouring vast amounts of money into old, unreformed public services in the hope that things will get better.

If we are going to reach the standards enjoyed by our nearest European neighbours, there needs to be a fundamental change in the way we run our schools, hospitals and transport.

But this is more than just a debate about the future of our public services, it is also about the future shape of our economy.

My message tonight is that failing public services will lead to a failing economy.

If people don't have the skills you need; if they spend too long plagued by illness; or if they have to spend hours everyday commuting across congested towns and cities - business simply cannot succeed.

And of course the opposite is true. Strong businesses at the heart of a strong economy generate the wealth which pays for strong public services.

This Government is committed to huge increases in public sector spending over the next few years. To meet their commitments they are totally reliant upon a buoyant economy and a thriving business sector.

Yet their heavy-handed approach to regulation has placed a crushing burden on British Business.

They just don't understand how business works.

A competitive economy attracts business and encourages enterprise, creating the jobs and generating the wealth that raises living standards for all. A strong economy helps those in work and those looking for work.

And it's only a strong economy that can support strong public services.

This Government's anti-business policies are undermining that strength.

This Government seems incapable of understanding that successful businesses are vital to their entire project, and that their own anti-business policies will in time contribute to the failure of that project.

Today, the margin between profitability and bankruptcy is slimmer than ever, particularly for small businesses and the self-employed. In the first six months of this year, 22,000 businesses failed - an increase of 8 per cent on the corresponding period of last year.

This Chancellor's policies are striking at the heart of our enterprise economy.

The IoD's own surveys show that as many as 93% of businesses believe that the burden of red tape relating to employment law has got heavier in the past five years.

And now the CBI has just released figures that show Labour have added £47 billion of extra taxes onto business since they came to power. Add the cost of red tape, and the bill to enterprise from this Government now stands at £15 billion a year.

It's a far cry from Gordon Brown promise in Labour's Business Manifesto in 1997 that 'We will not impose burdensome regulations on business, because we understand that successful businesses must keep costs down'.

That pledge sounds very hollow today.

Ministers have simply not understood that the business-friendly conditions they inherited did not come about by chance. They were the product of 18 years of often-painful reform, reforms that Labour are finding it all too easy to reverse.

Just look at their decision to increase National Insurance contributions from next April.

This will cost £4 billion a year in higher employers' contributions alone and another £4 billion in extra employee's contributions which they will seek to win back in higher pay claims. According to the CBI only France of our top five trading partners now has a larger burden of business taxation.

This is a Government that seems to think it knows how to run business better than you do.

Well, let's look at their record.

Half a million manufacturing jobs lost over 5 years.

Manufacturing investment at its lowest level for seven years.

Business investment at its lowest for four years.

Annual productivity growth has more than halved over the last five years.

And this Government's response?

Last month Patricia Hewitt blamed the quality of British management for the growing productivity gap between the UK and the United States and Europe.

Notice it is not the fault of the DTI or the Treasury or the fact that this Government has introduced one new regulation every 26 minutes of every working day. Apparently it's all your fault.

But the 'Government knows best' approach doesn't stop there. In the tax and benefits system, Labour's social-engineering has led to a massive expansion of means testing, distorting incentives to work and to save.

The Chancellor's panoply of tax credits are now so complicated that millions who are entitled to them cannot even be bothered to take them up.

And those that do are penalised.

Nearly two and half million people on low incomes now face effective marginal tax rates of 40% and up, a million more than just four years ago. Nearly two million face a marginal rate of 60%.

Far from making work pay, this Government has reduced incentives to work.

And it has reduced incentives to save.

By next October three out of every five pensioner households will be entitled to income related benefits.

Tessa's and Pep's were excellent savings products. They were needlessly replaced by ISAs. This created more complexity and confusion for savers, sapping people's confidence in the pensions and savings industry.

And the £5 billion a year raid on pension funds has cost each member of a private pension scheme an average of £400 per year.

It is little wonder then that the proportion of national income put aside by people in savings is now set to be the lowest since records began nearly 40 years ago.

All of this might matter less if Labour's 'big government' approach was yielding the required improvements to our public services.

Sadly it is not.

The Chancellor's target-setting culture is having dramatic effects on the state of public service delivery, but not in right the way.

Rather than offering better value for money, these targets have created a culture of deceit around the true performance of our public services.

If a target is missed, the Government now simply rolls it over, waters it down, or scraps it.

But in the meantime huge pressure is brought to bear on doctors, nurses and teachers to achieve political objectives at the expense of the public they serve.

Just last week Ian Bogle of the British Medical Association summed up the problem when he appeared in front of the House of Commons Public Administration Committee:

He talked of ambulances diverted to lower priority cases, hidden waiting lists and trolleys being redesignated as beds on wheels, all because Health Service professionals are under such pressure to meet Government targets.

No wonder the Government's own statistics show that productivity in the NHS has fallen sharply in recent years.

In fact at every turn the Government has made it harder for managers to manage in both the public and the private sectors.

As a result there is a new mood of union militancy in the air. We have already lost more days to strikes this year than we did in the whole of last year.

The current firefighters' strike is a case in point.

Last month I urged the Prime Minister to give military personnel the necessary training so that they could use the most modern fire fighting equipment available. He said that would take 12 weeks, the Retained Firefighters Union said it would in fact take two weeks.

That was three weeks ago.

The Prime Minister also said that to give the military access to this fire fighting equipment would inflame the situation with the FBU.

Well the situation is now inflamed, the FBU are on strike and the British public are being denied protection from the best fire fighting equipment available. Equipment that they have paid for.

The Prime Minister needs to make absolutely clear that he will not put the sanctity of a picket line before public safety.

He must give the firefighting equipment to the military and give them the training to use it, and he must do so now.

When people say there is little difference between political parties these days, I tell them that they are just plain wrong.

I believe that it is not the job of governments to run each and every public service.

I believe that it is not the job of governments to run your businesses.

And it is certainly not the job of governments to run people's lives.

We must allow firms to create the national wealth upon which our public services depend, and we must give public service professionals the responsibility and the freedom to achieve results.

Until we do this, we will never see the improvements in our public services that this country needs and deserves.

Gordon Brown thinks otherwise. His answer is to spend a massive amount of money on unreformed public services - raising spending by over 20% over the next three years alone.

Well, we simply cannot keep spending faster than the country earns. The sclerosis in our public services is spreading, as the arteries of the country are clogged by the cholesterol of tax and borrowing.

If Doctor Brown carries on with this treatment, we are heading for an Economic Coronary.

We must put public services first.

That is why our approach must be to break the link between state finance and state provision, both at the macro level with education and health, and at the micro level with voluntary community groups.

That is why we will trust people not politicians in our public services.

And that is why we will not waste our time playing games with the euro - because the entire project reflects the priorities of politicians and not people.

It simply detracts from the real problems facing the country. We must not give away the most powerful tool we have for delivering a stable economy: the ability to set our own interest rates to suit the needs of our own country.

It would be singularly unwise to expose the UK to the frailties of the Growth and Stability Pact which requires countries in recession to raise taxes and cut spending.

It would actually undermine our economic stability, costing jobs and hitting prosperity.

That is why a Conservative Government would never take Britain into the euro.

And the Prime Minister should also make his position clear. He has tried to make a virtue out of indecision. The longer he pursues his two-faced approach the longer British business has to live with the instability it causes.

Tonight I will be blunt rather than quiet.

Whether you agree with me or not, you know exactly where I stand.

Any future Conservative Government will need you to generate the national wealth to deliver the public services we all want to see.

In return, you will expect us to deliver a better environment for business.

The two things are not just compatible; they are absolutely inseparable.

Keyboard shortcuts

j previous speech k next speech