15th November 2007

David Cameron addresses the North East Economic Forum.

“It’s a great pleasure to be invited here to address the North East Economic Forum. Let me start by thanking Hugh Morgan-Williams for hosting this conference. Hugh isn’t just a businessman. He’s also a champion for business. And I know everyone here would like to thank him for what he has done as both an advocate and friend of North Eastern business in recent years.

And let me also say how great it is to be back in Tyneside. This really is one of the most vibrant areas of Britain. On my way over here today I passed The Sage. It’s next door - you can’t really miss it. Imposing, vibrant, confident and modern. It symbolises all that Tyneside is. So yes, let’s celebrate what a success story Tyneside has become.

But let’s also ask: ‘what next?’ How can we make sure that Tyneside makes the most of the huge opportunities of the 21st century? We need to ask that question because today your competition isn’t just with Birmingham or London…Or even the old European industrial centres such as the Ruhr, Lorraine and Wallonia…It’s the new global centres like Shanghai and Mumbai. This new global economy presents a massive challenge. And it’s one I’m determined to help you meet.

My Argument

My argument today is simple, and it’s based on my beliefs and my experience.  First, I believe that economic stability must be the top priority of Government. My time at the Treasury taught me that the control of inflation and a stable economic framework are the essential foundations for success.

Second, I believe that there are certain things Government must do less of. When I studied economics, twenty years ago, arguments raged about the most basic principles of how to run the economy. In every one of those arguments, I was unashamedly pro-market, pro-trade and pro-enterprise. I then worked for seven years in an industry – television, film and video - that was desperate to compete on a global scale but was caught up in regulation.I saw how government can kill economic dynamism with excessive regulation and taxation.

But the third thing I believe is this. While we must be aware of the limitations of Government, we should never be limited in our aspirations for Government. It is not enough for Government to get out of the way. It must get involved.

I’m an MP for one of the fastest growing towns in the country: Witney. There’s an incredible hub of science-based businesses in pharmaceuticals and technology that have the potential for further growth. Yet Witney doesn’t have a railway station and is connected to the nearest city, Oxford, by just a single-carriage road. Local businesses there don’t just need economic stability.  They don’t just need lower tax and fewer regulations.

They need the infrastructure, in the broadest sense of the word, to succeed. They need good transport links so they get their goods up and down the country and beyond. They need contacts with universities so they can continue to innovate and create. And they need good local schools which equip the next generation with the right skills.

Transport. Research and innovation. Education and skills. These are things which every region needs to prosper. These don’t just happen by magic. They need government involvement. But it has to be the right kind of involvement. And I’m sorry to say that right now, I think our Government is going in the wrong direction on all three.

Their Regional Spatial Strategy does not even include a commitment to improving your transport infrastructure. They are ruling out the expansion of research parks like NetPark in Sedgefield. And too many children in the North East are leaving school without the qualifications they – and you – need.

So I want to explain what you can expect from a Conservative Government in these three vital areas. Economic stability to create the foundations for success. Low taxes and low regulation to create a climate of enterprise. And government doing the right things to create the transport, innovation and education infrastructure that will help this region compete in the world. Let me take each of these arguments in turn.

Stability

First, stability.  In the 1980s, everyday in Parliament there were arguments about whether to use interest rates to control inflation…Whether we needed monetary discipline…Indeed, whether inflation was that bad at all. What a relief those arguments are over.

But we have recently been reminded once again of the importance of economic stability. I understand that Northern Rock is a regional icon and fantastically valued, not least for its ethic of corporate social responsibility. But we have seen the first run on a bank for 140 years.
While the credit problems have been global, only in Britain have we seen people queuing to withdraw savings. The current system set up by the Prime Minister was designed to prevent exactly this type of crisis, but the risks at Northern Rock were not properly taken account of.

I believe we need to examine the operation of the tripartite arrangements between the Bank, the FSA and the Treasury for monitoring financial stability. We also need to develop a sustainable system of deposit insurance, as we now know the Bank of England was urging the Government to do. And in the longer term, as Alan Greenspan has pointed out, a decade of debt has left the UK economy more exposed than many others to instability and financial turbulence.

The run on Northern Rock was a timely reminder that we should never take economic stability for granted. That is why George Osborne and I have put economic stability at the heart of our economic policy and are determined to create a more secure framework for that stability.

In terms of monetary policy, by enhancing the independence of the Monetary Policy Committee. And in fiscal policy, by giving control over monitoring of the fiscal rules to an independent body. These measures will strengthen monetary policy, and ensure that fiscal policy supports rather than undermines it.

Climate of Enterprise

So if the first priority is economic stability, the next step is to create a climate of enterprise.
And frankly, that does mean government doing less. Politicians need to understand the realities of life for the entrepreneur and wealth creator and ask some simple questions.

As Prime Minister, these are the questions I‘d be asking my Chancellor and my Secretary of State for Business, Enterprise and Regulatory Reform every year. Are we making it easier, or harder, to set up a business? Are we making it easier, or harder, to employ people? Is the overall burden of tax, public spending and borrowing going up or down?

In all these areas I think it is clear that this Labour Government is moving in the wrong direction. Our economy is labouring under the longest tax code in the world, more than double the length that Labour inherited in 1997. In his last budget as Chancellor, Gordon Brown increased small business corporation tax from 19p to 22p in the pound.  Only last month, Alistair Darling announced a capital gains tax rise that will cause major problems for business and enterprise across Britain.

Coming, in his own words, at a time of “increased international economic uncertainty”, this tax increase is exactly the wrong measure for Britain’s economy. And don’t just take my word for it. Richard Lambert, Director-General of the CBI, said that this tax hike will “risk the medium term health of our economy”. That’s why George Osborne and my party in parliament will oppose this tax hike every step of the way.

We will also reverse the small business tax rise introduced in the last Budget. And with the help of PricewaterhouseCoopers, we are developing a detailed plan to reduce the headline rate of corporation tax by simplifying the tax system and sweeping away complex reliefs and allowances.

So when it comes to economic policy, while there is certainly greater political consensus than twenty years ago – and that is something that I know the business community will welcome. There are real differences between the Conservative Party and Labour.

Where they always look at ways of putting taxes up, we always look at bringing them down.
But it’s not just about tax. New regulations cost our businesses more than £50 billion a year. How can we honestly expect them to continue creating jobs, wealth and opportunity when they are faced by never-ending demands from Whitehall? We’ve got to be crazy in this country to put such burdens on our wealth-creators and still somehow think we can compete in the global economy. France, Germany and Spain are all busy liberalising. We’re going in the opposite direction. It has got to end.

That’s why shortly, George Osborne will be launching our New Enterprise Council. A non-partisan organisation, it will bring together some of the most dynamic entrepreneurs from retail, new media, transport, finance and fashion. It will advise us on improving the climate for enterprise and investment in our country, including issues like capital gains tax. Taken together with the PricewaterhouseCooper’s report on business tax simplification, the goal of the Conservative Party is simple… To help make Britain the best place in the world to start and run a business.

Regional Development

But success is not just about economic stability. It’s not just about creating a climate for enterprise by government taxing and regulating less and getting out of the way. It’s also about government creating the right infrastructure, particularly in those vital areas of transport, innovation and education. That is why I want to make the argument today for those areas where I believe the government should be doing more.

Transport

First, take transport. The impact that transport decisions can have on regional development has been demonstrated just this week. Because of the new international railway terminal at St. Pancras, much of Kent, previously an hour from London, will now be just 20 minutes away – a change which will have a massive positive impact.

But look at the situation in the North East. The A1 remains over-congested despite promises of expansion. Ruth Kelly has just announced that a proposal for upgrading the Western Bypass will not be produced until 2009, with completion not until 2015 at the earliest. And the expansion of the Metro system is still in development phase.

All in all, since 2000, the Government has spent just £577 per head on transport in the North East, compared to £1637 in London. That isn’t fair and it isn’t good enough. Of course, it would not be responsible for me to make specific spending commitments now. But what I can say is this. As our economic competitiveness policy group stressed, if we are to get Britain’s economy’s firing we must get Britain moving. That’s why I am committed to increasing our rail capacity and improving rail efficiency, so areas like the North East don’t become gridlocked and isolated pockets of activity…But genuine hubs of enterprise linked to the rest of the country and beyond.

Research and Innovation

The second area where I believe Government can make a positive contribution is in research and innovation. Businesses of the future depend on ideas and knowledge more than metal and muscle. As Bill Clinton famously said, in the new global economy, ‘what you earn is based on what you learn’. You only have to visit the Institute for Nanoscale Science and Technology at Newcastle University to see what a solid foundation this region has.

But there is still so much more that can be done. And our taskforce on Science, Technology, Engineering & Mathematics has set out an ambitious agenda for promoting science and innovation……including proposals to promote more scientific research in our universities, and make it easier for innovative start-up businesses to win government contracts.

I want to see the great universities of the North East reach out to students from India, China and Malaysia, inviting them here to study. With your rich history, sense of community, and excellence in sport and culture, you are uniquely endowed with attributes that will attract the best and the brightest from around the world. And I want to see you make the most of it.

Education & Skills

The third area where I think government has a vital role to play is education and skills. Making sure the next generation have the right skills to succeed in the world is absolutely essential for the prosperity of every region in this country. But at the moment, we are failing the next generation. The number of pupils getting five good G.C.S.E.s in the North East is below the national average. And in Gateshead alone, over 18,000 people of working age have no qualifications. Why is it like this?

The reasons are partly ideological- for example, outdated teaching methods. And they are partly political – for example, not giving our heads the power to impose discipline. But I believe that the underlying problem with our education system is structural. Put simply, there are not enough good school places.

Because of our centralised system, where the supply of education is tightly controlled by central government, there is no freedom for schools to do things differently, with their success acting as inspiration for others. If we’re serious about getting our education system right, we need a genuine schools revolution. Next week, we will be announcing a radical plan to make opportunity more equal by raising standards and increasing the number of good school places.

Manufacturing

Action on transport. Action on innovation. Action on education and skills. That’s what government should have been doing in the North East. And that’s what the next Conservative Government will do. And I just want to end by highlighting what I believe could be the main beneficiary of such concerted action. An industry that is facing the fiercest global competition. An industry that depends on a wide skills base. And one that demands the quick and easy movement of goods, raw materials and capital. I mean of course, the manufacturing industry.

Now, there is a myth about manufacturing. That in this new world economy, countries like Britain – and regions like the North East – can just forget about manufacturing. Sorry. I don’t think so.

Of course, highly commoditised, low cost, low-value added, mass produced goods manufacturing will migrate to where the wages are low. But I am absolutely certain that high end, high value added industries which depend on high levels of productivity growth, product development and specialisms, have the capacity to continue to thrive in developed economies.  And by putting an even higher premium on excellence, raising productivity and skills throughout the supply chain and translating technology into innovation, we can make sure that manufacturing in this country can compete with China and India.

There are so many good reasons to care about manufacturing. It has the potential to provide well-paid employment and drive regional economies forward. By following different economic cycles to service industries, it provides a more diversified and stable economy. And many of the manufacturing industries where we still have world beating companies based in Britain – such as pharmaceuticals and aerospace – have real strategic value.

Let me make it clear: I am not making a call for an old-fashioned industrial policy. I don’t think Governments should treat one sector of the economy differently. But if we can get economic stability right, if we can get the climate of enterprise right, and if we can get the infrastructure right – in transport, innovation and education - then it will be manufacturing that benefits the most. And there is still more that government can and should do to help.

Boosting Exports

We need better international business support. Our export performance must be improved.
UKTI has been around for only four years and in that time has had three different strategies.   Their latest five year strategy has some more welcome proposals, but there remains a lot to be done.

For a start, its budget must be spent effectively. The UKTI’s Tradeshow Access Programme actually ran out of money halfway through the year. The losers were all those companies who could not go to trade fairs around the world.  It must also allow exporters to play a bigger role in setting its direction. And it must not put all its eggs into one basket.

For years this Government failed to establish the necessary links with India and China. Indeed, Gordon Brown was Chancellor for ten years before he even visited India. Now he’s busy playing catch up.

But what’s the plan for the emerging markets in Brazil and South Africa? What British manufacturers are crying out for is a more coherent approach executed by a Government that really acts as its champion and fights its corner. In 2005, President Chirac took 1000 businessmen out to China to develop links.  Why aren’t we doing the same? It’s no use the Government sitting on its hands. Other countries aren’t. It should work day and night for British industry.

Conclusion

Unashamedly pro-market. Putting stability first. Cutting tax and regulation. With me, you know you have someone who will get out of the way and let you get on with what you do best. But developing the transport system you need. An unreserved commitment to science and innovation. Raising standards in schools. And being an advocate and champion of manufacturing. With me, you know you have someone who will roll their sleeves up and get involved. The North East already has so much going for it. Together, we can make sure it has even more.”