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Con SP: "A benefit, not a burden for business" at Confederation of British Industry

Samuel Gallagher

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 Chancellor of the Exchequer Sarah Hastings spoke at a lunch event hosted by the Confederation of British Industry discussing government as a benefit, not a burden for British business.

Thank you, Richard, for your kind welcome. It is a pleasure to be here this afternoon. The Confederation of British Industry has a proud history of advocating for British business. In times like these, those efforts are more important than ever.

Many of you, rightfully, are watching financial markets with understandable expressions of concern. These are difficult times.

Of course, many of you are also watching the political debate in Westminster with understandable concern. We have, in the Opposition, a Labour Party committed to an agenda that will devastate the British economy.

I usually try not to speak in such terms. While I disagreed with many of the policies of the previous government, I did not believe them to be intentionally reckless. Gordon Brown’s action to remove politics from monetary policy is one that I can look back on and praise wholeheartedly. However, I have never been confronted by a party with an official policy of debasing the currency and causing a run on the pound.

I imagine many of you have not either. I know I don’t need to tell you the consequences of a run on the pound. Inflation would soar. Interest rates would soar to counteract it. Businesses across the country would find it harder to secure funding. The current credit crunch would be exacerbated. The consequences, in short, would be severe.

The fact that the leaders of a major political party do not understand this is beyond concerning.

However, it is my pledge to you and to the people of this country that this government will work diligently, every day, to ensure the stability of our economy, our financial system, and our currency - all while working with the Bank of England as an independent partner.

Of course, I shouldn’t have to tell you that the government will work to ensure economic stability. That should be understood. That is part of the basic bargain. Instead, we should be focusing solely on the turbulence in financial markets and its impact on British business. And that is what I will turn to now.

On the topic of turbulence in financial markets, I have a simple message for you: the government has your back. For British business and industry, we are intent on building financial stability today, ensuring prosperity tomorrow, and securing Britain’s long term future growth.

The core of building stability today is our effort to promote privately-led recapitalisation of the financial sector.

Banks across the country are seeking to improve their capital position. However, turbulence in financial markets has, understandably, spooked some institutional investors. Pension funds, endowments, and the like - who would typically invest in these institutions - are being more cautious. And to them, we are saying that we have confidence in British banks. We have such confidence that we will help protect such investment.

That is the right thing to do. It is the right thing to do because we know that the private sector recapitalisation is essential for strengthening capital markets. It is critical for increasing the value of investments, not crowding them out. It is the right thing to do because we do have confidence in the financial sector. And we have confidence that boosting capital will ensure its long term stability. 

I’ve spoken at length with my European and American colleagues on this matter. We are in agreement that recapitalisation, privately-led, is key to strengthening the resilience of the banks and improving liquidity.

And liquidity, as you all know, is critical to our economy. It ensures that credit continues to flow. It allows businesses, large and small, from Ipswich to Inverness and Boston to Bristol, to grow. It is, fundamentally, essential.

That is why we are taking decisive action, today, to boost capital in the financial system. Our capitalisation guarantee will leverage private capital to build a more resilient, more stable financial system today. It is our intention that, with this guarantee, British banks have the capital necessary to weather any turbulence in financial markets.

To improve liquidity and lending, we are not just working to improve banks' balance sheets. We are working to get them lending again.

That is why I announced a £4 billion initiative to guarantee loans to businesses in the United Kingdom. There is still an obligation to ensure that firms are commercially viable before extending credit - there is still risk for the financial sector. I still have a responsibility to the taxpayer.

However, this programme represents £4 billion in credit that the government is working to inject into the economy. For many businesses across the country, this access to credit will unlock essential investments and ensure that they can continue operating. That is what support looks like for British industry.

If necessary, we will do more. I will ensure that lending is available for British industry. That is my commitment to you.

Our commitment to economic stability and stabilising the financial system, however, serves a larger purpose: ensuring prosperity for British industry tomorrow.

In challenging times, we believe in the importance of giving industry a hand up - to help them unlock the investment that we need to get the British economy moving again.

We are achieving that by dramatically expanding capital allowances for the next two years, introducing full expensing to the British economy for the first time.

That means that every business that invests in our economy will get a tax break.

What does this look like? For every manufacturer that wants new machinery - you will get a tax cut for investing. For every publisher that wants a new printing press - you will get a tax cut for investing. For construction companies that need new equipment and tools - you will get a tax cut for investing.

This is a dramatic shift. One with the potential to be transformative for our economy. It will be transformative if businesses seize this moment.

For the past ten years, government has been content to accept rapid growth in the financial sector while other sectors of the economy stagnated. That time is over. This government is committed to building a robust, strong, diversified economy.

And it starts with spurring transformative investment.

Of course, there are cases where we need more than just tax incentives. We need government to be a partner with industry. This is true in nascent sectors like green energy manufacturing.

As we talk about a green energy transition, the government’s approach is to crowd-in investment where we can. To support the private sector in building capacity to deliver new innovations and new products in the green energy and climate change space.

That is why we are delivering £500 million in financing to grow green energy manufacturing in Britain.  £500 million in financing that will leverage an additional £1.5 billion in investment.

That is real change. That is real commitment when it comes to building our green energy future and combating climate change. And our commitment to combating climate change will mean working closely with every person in this room.

Of course, measures to help business in the short term are nothing without a long term strategy in place. A long term strategy that charts the course for Britain’s return to being a competitive economy - not an economy that has fallen from fourth place to tenth place in global competitiveness league tables, as it did under the previous government.

At the core of that strategy is a pivot: a pivot that will see government think strategically about infrastructure, skills, and innovation.

This government is doing that.

Our strategic investment in infrastructure will see urban transport improved, with Crossrail and the Leeds metro, our railways electrified, boosting capacity, and critical relief railways constructed - easing burdens on congested lines.

Our strategic investment in smart grids will revitalise our power sector and lower energy costs for businesses and households.

Our strategic investment in broadband will see every business in this country able to access high speed internet - a vital forum for commerce in the 21st century.

But there is, of course, more that needs to be done. That is why we are launching consultations on building a novel investment vehicle in the United Kingdom - a British Development Bank modeled on Germany’s highly successful KfW.

Building a British Development Bank would lead to early public sector support for key initiatives - high speed rail, further energy grid updates, green energy projects, rail electrification - that catalyses activity and delivery. British industry would be key partners in this endeavour. Key partners and key beneficiaries once the infrastructure is built.

There is an opportunity in the coming years to build an institution that will leverage private sector investment, not displace it, to transform Britain’s infrastructure and build a nation that is ready to do business. That is a central goal of this government.

Likewise, despite ten years of “education, education, education” from the previous government, skills remain a fundamental weakness in the economy. The number of sixteen to eighteen year olds not in education, employment, or training rose dramatically under Labour.

But this government is changing that. The Education Secretary, without a peep from Labour, is fundamentally reforming our school system: making sure our children get the education and skills that they need in a competitive world. To get more young people trained, we are bringing forward 30,000 new apprenticeships for them - buttressed by 5,000 new apprenticeships for older people. We are prioritising STEM in secondary schools, colleges, and universities by launching new investments in updating facilities.

These are the actions of a government committed to making sure learners have the skills that businesses need to compete globally in the 21st century.

And we will continue to push a skills driven agenda. I want to see industry at the core of that - working with government to pioneer new mechanisms of training, pioneering new opportunities to reskill workers for the jobs that are in demand today.

And, of course, adjacent to skills is developing skills that are critical for competition in an innovative economy.

I look forward to discussing this government’s plans on innovation in greater detail soon. However, for now, I will offer some examples of what we are doing.

Our Health Innovation Fund, soon to be fully detailed by the Health Secretary, will provide catalytic investment that brings together practitioners in the NHS, innovators in the sciences, and industry partners across the country to trial and, eventually, deploy novel health technology. In the process, this fund will help us improve efficiency and outcomes in the NHS, while making the United Kingdom a hub for health technology development.

That is investment in innovation that will boost a critical sector of our economy.

Likewise, I’ve had fruitful conservations with the Defence Secretary about building a new culture of innovation at the Ministry of Defence. A culture of innovation that sees the Ministry working with the private sector to deliver better solutions and technologies to support our men and women serving in the armed forces. A culture of innovation that would see the growth of innovative industries that are at the centre of confronting the most pressing national security challenges that we face.

That is investment in innovation for public purpose, for protecting our country, for protecting our soldiers.

These are just snippets of how this government is formulating a long term strategy to transform our infrastructure, improve our skills, and invest in innovation. And we’ve been in government for less than a year. Imagine what we can accomplish by the end of our term.

As I started by saying, the current environment represents a challenge for British business and industry.

However, government is acting in the immediate-, medium-, and long-term to build a stable environment in which business can strive.

We are launching long term plans to spur investment in infrastructure, skills, and innovation to ensure that Britain can, once again, be the most competitive environment for business in the world.

That is at the core of our mission: to be a government that is a benefit to business, not a burden.

Our is an agenda for achieving that. Ours is an agenda for ensuring that financial turbulence is not a cause for British decline, but an opportunity to build a new, transformed, competitive economy.

I look forward to working with you all to make it a reality.

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