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Ken Clarke: Listening to business

Ladies and Gentlemen, thank you for your participation so far.  Thank you to the Institute of Civil Engineers.  It's a very suitable setting and goes back to grand days of when Britain became great from the industrial Revolution.  

I enjoy great discussion.  Political debate is ridiculously dumbed down.  I do wish our political opponents would give us the political space to talk candidly about what we face.  I'm used to the dialogue of politics but a certain lack of candour has slipped into some statements recently.  

I've been supporting the Government in part-privatisation of the Royal Mail.  I'd like to believe the Government's reasons for leaving it in limbo but market conditions did not change in four days, it was a political calculation.  

I've been expecting a report into the failure of MG Rover.  I'd like to believe the reasons for the report that I was given for it not being published straight away, but I don't think it's taken over four years for someone to think the SFO should look at it.  I trust the SFO will pass it back.  

Most importantly, I do not believe the arguments given for suspending the Comprehensive Spending Review.  It's refusal to allow discussion on a key subject is absurd.  We urgently need a public spending review.  Mandelson became the most significant minister so far to describe the problem in totally different words to the Prime Minister and Ed Balls.  He spoke about spending constraint yesterday.  

We're preparing for Government and we're trying to soak in ideas for policy on subjects.  I'm glad to say that all of which we've touched upon this morning, we're already working on.  We're trying to promulgate the kind of situation we will be working within should we get into government.    

I personally am one of those taking a cautious view, I'm not sure we have yet seen the end of the recession.  I hope the worst is behind us.  When recovery starts, it's likely to be long and torturous.  There is still far too much debt out there, household and corporate and consumer demand will be affected by the rising unemployment which is going to go on through to the end of this year.  The unemployment figures out this morning showed the highest quarterly rise in unemployment.  What began as a banking crisis and the failure of banking regulation, has now turned into personal tragedy for many families.  

The next Government, which I hope will be ours, will be elected against a backdrop of feeble recovery.  Lives will be dominated by the mercies of economic recovery.  Unemployment levels will probably be the major issue in the political debate.  It could take more than a parliament to get us over the worst financial crisis any of us have probably ever seen and probably the worst recession anybody has seen since the war. 

Obviously the first thing the next Government is going to have to do is tackle the fiscal problem.  The Government's got to come up with a credible programme to get back to a sustainable level of debt in the medium term, until then our lives will be determined by gilt level.  It's a tall, tall order.  

The actual delivery is more important than the constant production of policy, rhetoric and documents - we must focus on the effectiveness of what we're actually delivering and that involves streamlining.  

The tax environment is extremely important.  A Conservative Government will seek to avoid tax rises through proper controls on public spending and borrowing.  Tax for business matters a great deal.  Simplifying the system we have is an important aim. 

National Insurance - there are increases already in employers' and employees' levels of National Insurance.  I see that as highly undesirable, we must seek to avoid implementing them if we possibly can.  NI is politically unpopular.  It's a tax on jobs and job creation and should be avoided.  It's a nonsense to suggest it automatically benefits the public good; it goes straight to the general pot of government expenditure.  I did lower the employers' contribution although my colleagues weren't pleased because we got absolutely no political credit, no votes for it.  It's very important though to get job creation on the way and I had to convince my colleagues that National Insurance is extremely important when trying to promote economic recovery.

What is the role of the modern business department in seeking to support what business is doing?  Deregulation comes up more frequently than any other subject, it was probably the most mentioned subject this morning.  We've had a policy in this country of deregulation for almost twenty years, or better regulation as Civil Servants prefer to call it.  Blair was keen on it but never had the time to deliver it.  It was even in the title of the department until about three weeks ago when they decided to take it out.  I've attached enormous importance to John Penrose's work and to the report David Arculus gave us recently.  We do think reducing the regulatory burden is key. 

There's not a single regulation in this country that wasn't introduced without the best possible reasons.  You do have to explain to the public that we're not going to kill them or expose them to risk but there are more sensible ways to achieve public security than the way in which we do it at the moment.  At the moment it's a growth of confusing bureaucracy.  If we don't start with an idea of the processes we're going to put into place then we will continue to fail to deliver to business the reduction in burden and costs which if we could achieve then we would give the UK a competitive edge.  Regulatory budgeting is a good idea, must make the regulations credible.  One has to look at the costs to businesses of implementing [regulations] and ask 'is it worth it?'  

[But] there's more to it than that.  The public sector must achieve value for money.  UKTI, we've touched upon.  it has many overlapping responsibilities with the FCO for example.  It's open to a lot of improvement.  Myself and Geoffrey Clifton-Brown look at the UKTI because it's never going to be more important to strengthen the support we give to UK exporters and also in attracting inward investment.  The business climate we create here is going to be more important than anything else.  The competitiveness of the British economy and [addressing] skills shortages, and I have heard people complain about skills shortages.  The system is the problem.  

Go back to the '70s to realise picking winners is usually a disaster.  How do we channel the support we give?  How do we make sure the UK will be a winner in new markets?  How do we turn what is achieved in universities into exploitation by companies which are actually based in this country?  Do we have the right sort of capital, the right links between universities and research councils and business venture capital organisations?

Britain has got to be open for business under a new Government.

And it will be a different type of capitalism that we're in if we have a better regulated banking system.  

Financial services is key, as a nation we have to save more and borrow less, consume less and invest more, we have to export more and import less than we have been doing and the banks in the economy have to cease to ignore not just manufacturing but other areas - the creative industry and the service industry of the modern kind have got to be there if we are to go back to a successful economy.  

Having been brought up in a country which was an industrial and an economic joke, left behind by Germans and the Japanese and other people who understood how to earn their living, when we finally had the benefits of the supply side reforms of the '80s and globalisation coming together, we turned into one of the most successful, fastest moving and innovative economies in the western world that achieved whole new heights of living standards and success that one wouldn't have dreamt possible if they remembered the UK economy of the 1950s and 1960s.  

The challenge is there and in the right climate we have shown we can unleash it.  But we have done a great deal of damage to it in recent years and we have to start all over again to get relations going to make Government make its contribution to what I hope we can deliver to our population at large.  Britain has got to be open for business under a new Conservative Government.

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