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<p> 27 August 2010 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, to the Inverness Chamber of Commerce </h1> <p> <strong>Check against delivery</strong> </p> <h2> Introduction </h2> <p> Thank you. </p> <p> It was pointed out to me that I am the first Cabinet Minister from the Highlands since Baron Irvine was Lord Chancellor back in 2003. </p> <p> Yet this is where I felt the similarities between us end. </p> <p> As he is probably best remembered for spending nearly &#163;60,000 of public funds on hand-printed wallpaper. While the only person likely to decorate my walls is my daughter &#8211; Isabel &#8211; and her rates tend to be far more reasonable.&#160; </p> <p> And this is an excellent place to start, for much of what I will be looking to achieve in the run up to November will focus on the elimination of unnecessary expenditure, while prioritising funds on the areas that matter most to the UK. </p> <p> So it's a great pleasure to be in Inverness today, for my first major speech as Chief Secretary.&#160;And to be able to set out the steps we, as a Government, are taking to control public spending and restore confidence in our economy. </p> <p> For the decisions we have made since the election - and the actions we will take over the ensuing months - are essential to returning our economy to a sustainable path. </p> <p> We have steadied the ship, but if we wish to remain on course we must deliver on the plans we have set out. </p> <h2> Defence of the Governments position </h2> <p> It is impossible to exaggerate the seriousness of the situation we inherited, or the risks to Britain - and to the Highlands - if we had continued on the same course. </p> <p> With an economy that was limping out of the longest recession since official records began. </p> <p> With almost 2.5 million people unemployed. </p> <p> Historically low levels of private investment. </p> <p> And a Budget deficit that was due to peak at &#163;166.5bn - the largest in the G20. </p> <p> With no clear plan for getting it under control. </p> <p> A legacy that had the UK spending four pounds for every three it raises in taxation. </p> <p> Yet there are those in Opposition who deny the need to take action and clean up the mess they left behind. </p> <p> Who pretend that we could wait years before dealing with the deficit. </p> <p> This could not be further from the truth. </p> <p> There is nothing credible about denying that the deficit is a problem. There is nothing responsible about pretending it can be solved without making difficult, and sometimes painful, choices. </p> <p> For those who deny the need to reduce borrowing &#8211; unable to kick the destructive habit &#8211; would put our economy at far greater risk of recession. </p> <p> Yes it was right to take action to stop the banks collapsing. The stability of our economy depended on it. </p> <p> But economic stability now depends on having a credible plan to restore the public finances to a sustainable footing. </p> <p> We only need to look at the Euro area &#8211; and the recent turbulence in sovereign debt markets - to understand the cost of delaying difficult decisions - endangering jobs, growth, investment and control of your economy. </p> <p> This is why we now have a credible plan to deal with the record deficit.&#160;And why we will stick to it. </p> <p> To tighten the public finances by a total of &#163;113bn by 2014-15. </p> <ul> <li>With around &#163;30bn coming from tax measures. </li> <li>&#163;11bn from the welfare reforms announced at the Budget. </li> <li>&#163;61bn from departmental expenditure. </li> <li>And another &#163;10bn from lower debt-interest. </li> </ul> <p> The necessary steps to ensure that we live within our means in the future. </p> <p> Mervyn King agrees that <em>"it is essential to take measures this fiscal year to demonstrate the genuine commitment and determination of the new Government."</em> </p> <p> The OECD have praised our Budget, saying it provided <em>"the necessary degree of fiscal consolidation over the coming years to restore public finances to a sustainable path, while still supporting the recovery."</em> </p> <p> And the head of the CBI has said <em>"The Chancellor has achieved his twin objectives of setting out a credible plan for the public finances and producing a convincing growth strategy for the longer-term."</em> </p> <p> So I am determined to see this through, to deliver on our commitments. </p> <p> Fixing the nation's finances is not just the right course of action, it is the only course. </p> <p> It is unavoidable, it is necessary, and it is fair.&#160; And we will stick to that principle of fairness in our spending decisions. </p> <p> But always remember that there is nothing fair about having an ever growing burden of debt for our children to inherit. That is the least fair, the least progressive option of all. </p> <p> And the Spending Review is the next crucial step in this process. </p> <p> We need to cut public spending, but that is not an end in itself. It is an essential step on the path towards long-term, sustainable, and more balanced growth. </p> <h2> Growth and Fairness </h2> <p> We are seeing some very early signs that the economy appears to be heading in the right direction. </p> <p> The private sector is growing. </p> <p> Employment is on the rise. </p> <p> And exports are recovering in response to improving global demand. </p> <p> But we must remain cautious. </p> <p> I agree with Mervyn King when he says that we are likely to face a choppy recovery. </p> <p> To expect an easy ride after the biggest economic crisis of our lifetimes &#8211; and with the debt problems this Government has inherited &#8211; would be asking too much. </p> <p> And I know well how difficult things are for many local businesses here in the Highlands. I have held 28 surgeries in the last 2 weeks in communities right across this area, and at almost every one a local business came to discuss issues they were facing. Most often - but not always - access to finance from the bank. </p> <p> There are also some fantastic examples of innovation here in the local economy. Only today, I opened Fujitsu's new office in Inverness, part of a substantial investment to deliver services and cut costs for the Highland Council. And I looked round the world class exhibition of housing innovation at the Expo. </p> <p> So it is crucial that our choices are driven by clear principles and objectives, led by the need to promote a more sustainable model for economic growth and prosperity. </p> <p> At the Budget, we took some significant steps to support the private sector, to lead the economic recovery. </p> <ul> <li>Setting out our ambition to create the most competitive corporation tax regime in the G20. </li> <li>Minimising burdens on businesses through a &#8216;one-in, one-out' system of regulation. </li> <li>And starting the process of banking reform, with improving access to finance. We know more is needed on that issue, which is why we're making it a priority. </li> </ul> <p> The Spending Review will have a strong focus on lasting economic growth. </p> <p> So as we scrutinise every pound of Government spending, we will identify those areas that do the most to promote sustainable growth and prosperity. </p> <p> We will also work with the private sector &#8211; with businesses and entrepreneurs ,such as yourselves &#8211; to identify the drivers of growth. Broadband access, transport infrastructure, the green economy being three that I know matter a great deal here. </p> <p> And we shall address the social barriers that inhibit individual progress, as this is the surest way to maximise national success.&#160;&#160;&#160;&#160; </p> <p> For as the Deputy Prime Minister set out last week, our determination to tackle the deficit and support economic recovery is matched by our determination to create a more socially mobile society. </p> <p> Getting people back to work, promoting fairness of opportunity, and ensuring that all parts of the UK are able to prosper. </p> <p> With this approach, the Spending Review will promote a fairer and more sustainable model for growth. By working in partnership with the devolved administrations to create an economy that is better balanced &#8211; where the benefits are more evenly spread across all people and regions of the UK. </p> <p> But while one key driver behind spending decisions will be investing in the recovery, another will be public sector reform. </p> <h2> Empowering People </h2> <p> As part of the Spending Review, I am overseeing a complete re-evaluation of the Government's role in providing public services. </p> <p> We are doing this because the Spending Review is not just about reducing spending, it must also be about fundamental reform. </p> <p> Reform driven by very simple ideals &#8211; to give more power to people, to communities, and to those working on the front-line. </p> <p> Reform to get 'more for less', by harnessing the skills capacity and abilities of our public servants.&#160; </p> <p> Reform to ensure that budget reductions don't just result in a salami slicing of public services. </p> <p> There is no hiding from the fact that there are difficult choices ahead.&#160; Public sector workers are understandably worried about their jobs, their future pay and their pensions.&#160; </p> <p> We have already announced a 2-year pay freeze - with modest rises for those earning under 21k.&#160; </p> <p> This cost reduction will help to protect jobs. </p> <p> And is exactly the sort of thing that has been happening in the private sector over the last 2 years. </p> <p> But I also believe that our reforms &#8211; where individuals will have more freedom and greater responsibility &#8211; will make the public sector a more attractive, as well as a more efficient place to work. </p> <p> This is crucial - because the experience, the dedication and the commitment of people working in the public sector is critical to delivering the improvements we need.&#160; </p> <p> The previous Government took a top-down approach - they believed that Whitehall (or Holyrood) should micromanage every action from Ipswich to Inverness &#8211; this has stifled innovation and created excessive bureaucracy. </p> <p> We have already started to sweep away this centralised approach, ending the complex system of Public Service Agreements.&#160; </p> <p> Freeing professionals from top-down targets and unnecessary interference. </p> <p> And we will continue to devolve power away from Whitehall and put it into the hands of local people and communities. </p> <p> Enabling public sector professionals to deliver a service that is tailored to the specific needs of their area, and where the users &#8211; the public &#8211; have the ability to shape the services they receive. </p> <p> So in October, I will set out a completely new approach to public sector performance and accountability &#8211; a new Public Services Transparency Framework. </p> <p> Where the guiding principle is not accountability through a centrally designed system of targets and processes.&#160; But accountability to people. </p> <p> A system that gives professionals more freedom to decide how best to run their own services, in partnership with their local communities and other sectors. </p> <p> One where Departments will be responsible for publishing information to allow taxpayers to judge for themselves if we're delivering on our commitments.&#160; And enable the public to hold Departments and Local Authorities to account. </p> <p> Providing democratic, rather than bureaucratic, accountability. </p> <p> It may seem obvious, but this is a radical shift from the failed, restrictive and centralised system of the last decade. Cutting public spending must not be an excuse for greater centralisation, but a spur to decentralise, to empower, to engage. </p> <p> It will empower local communities and those working on the frontline.&#160;As I have no doubt that people in the Highlands or elsewhere are far better placed to say what is needed in their local area than the faceless man from Whitehall. </p> <p> That is why the public consultation we have been running on the Spending Review has been one of widest ever undertaken by government and has already generated over 100,000 contributions. </p> <p> From frontline workers in Stornoway to policy experts in London, we have been seeking suggestions about where&#160; savings can be made. </p> <p> It is great to see the excellent Highland Council working hard to listen to people as it makes tough spending decisions too. </p> <h2> Conclusion </h2> <p> There is little doubt that, in the months ahead, we will all face some tough choices. </p> <p> I didn't come into politics to cut public spending. But, like most people in the Highlands, I know it has to be done. </p> <p> As a politician, you don't choose the time when you have the opportunity to govern. But you do decide how you respond to the challenges of your times. </p> <p> The question is not what we have to do - we have made our judgement as a Coalition as to the scale of change that is needed - but how we do it. </p> <p> So the spending decisions for which I am responsible will be guided by clear principles: </p> <ul> <li>To support private sector growth that lasts, that is more balanced across the people and places of the UK. </li> <li>To promote fairness and opportunity. </li> <li>And to devolve power away from Whitehall &#8211; empowering communities and front-line workers, giving them more responsibility and control for delivering their public services. </li> </ul> <p> The Spending Review is not just about next year, or the year after that. It will pave the way for the long-term success of the UK, our economy, and our people. </p> <p> There is no hiding from the fact that we'll have to make some difficult choices. </p> <p> But the action we will take in October will put us back on a secure footing and allow us to plan for a better future. </p> <p> We are all in this together. </p> <p> And the Spending Review we will produce in two months time will show that this is the case. </p> <p> Not only during the testing times, that we have all been through. </p> <p> But for good times as well, once the recovery is secured. </p> <p> <strong>ENDS</strong> </p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_270810.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, to the Inverness Chamber of Commerce 2010-08-27 HM Treasury Inverness Chamber of Commerce
<p> 09 December 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, at the Scottish Council for Development and Industry </h1> <p> <strong>Check against delivery</strong> </p> <p> It&#8217;s a pleasure to be here. </p> <p> It&#8217;s only two months since I last spoke to the SCDI. But it&#8217;s fair to say that even in that short time, much has changed for the Scottish, the UK and the global economy. </p> <p> Today I want to talk about the implications of the Eurozone crisis for the debate about Scotland&#8217;s economy in the future, and in particular the currency question. </p> <p> But first some brief points on the current situation. </p> <p> Last week, we delivered an Autumn Statement which set out the tough decisions the Coalition Government is taking to protect the UK economy now, and build prosperity for the future. </p> <p> And of course, it came with a sombre outlook from the Office for Budget Responsibility (OBR). </p> <p> Growth won&#8217;t be as strong as it had forecast. A sharp rise in global commodity prices, and the ongoing uncertainty in the Eurozone continue to act as a drag on our own economy. </p> <p> More than that, the OBR presented new evidence demonstrating that the boom that preceded the crisis was in fact greater and more unsustainable than first realised. </p> <p> It means the bust was even deeper than we thought, and the impact on our economy even greater and longer lasting than we hoped. </p> <p> We remain on course to meet our deficit reduction and debt targets. But it&#8217;s a difficult path because of the underlying damage done to our economy and the strong global headwinds we face. </p> <p> But one thing is clear. We here in Scotland are in a much stronger position to weather those headwinds because of the tough decisions the UK Coalition Government has taken to repair our country&#8217;s financial position. </p> <p> Let&#8217;s not forget that when we came into Government, we inherited the country&#8217;s largest ever peacetime deficit, borrowing one pound for every four we spent, and S&amp;P had the UK&#8217;s triple AAA rating on negative outlook. </p> <p> Eighteen months later and we are the only major Western country which has seen its credit rating outlook improve. </p> <p> That means record low bond yields, which feed through into low and stable market interest rates, which help businesses and families right across Scotland. </p> <p> Even a one percent rise in our lending rates would add &#163;10bn to mortgage bills every year&#8230; </p> <p> It would increase the cost of business loans by &#163;7bn&#8230; </p> <p> So, in the face of ongoing Eurozone turmoil it is even more important that we remain resolute, and we will. It is the only way to protect our economy from the economic storm. </p> <p> That stability is the vital pre-condition for recovery. </p> <p> It&#8216;s the essential platform for sustainable growth, driven by private sector investment, enterprise and export. </p> <p> And we are doing all we can to promote that recovery across Scotland and the rest of the UK&#8230; </p> <p> Creating the most competitive tax system in the G20, including by cutting corporate tax rates to 23% by 2014. </p> <p> Making the UK the best place to start and grow a business by cutting red tape, extending broadband, and ensuring access to finance through credit easing measures of up to &#163;21bn. </p> <p> And investing &#163;250bn in our infrastructure and long term competitiveness&#8230;including an extra &#163;5bn of public investment in this Parliament and up to &#163;20bn of pension fund investment. </p> <p> Stability. Competitiveness. Investment. </p> <p> These are commitments that benefit businesses all over Scotland. </p> <p> Businesses and investors need confidence if they are to take decisions with a long term horizon. </p> <p> Earlier this week, Mario Draghi, the new President of the European Central Bank said, &#8220;Confidence works backwards: if there is an anchor in the long term, it is easier to maintain trust in the short term.&#8221; </p> <p> We have provided that long term anchor through the collective strength of the UK economy, supported by our collective willingness to see through the necessary but difficult decisions to put us on the right track. </p> <p> And we are much stronger in that task pulling together, rather than pulling apart. </p> <p> For Scotland, being part of the United Kingdom is another long term anchor </p> <p> However, here in Scotland, we have the uncertainty caused by the Scottish Government campaign to dismantle what is the longest standing and most successful Economic and Monetary alliances in the world. </p> <p> A campaign that is creating uncertainty for businesses at the very worst time for our economy. </p> <p> Last month, Citigroup recommended, and I quote, &#8220;utilities and other investors should exercise extreme caution in committing further capital to Scotland.&#8221; </p> <p> CBI Scotland have already warned of the possible damage that could be done to Scotland by the uncertainties arising from the commitment to, and timing of, a referendum. </p> <p> And only last week, the Chairman of Scottish Financial Enterprise warned that the consequences of uncertainty over a referendum would be &#8216;profound.&#8217; </p> <p> And he is right to be concerned.&#160; </p> <p> There are profound questions that are unanswered in this debate. Today, when governments across Europe are contemplating further major integration of their economies, it is a good day to consider one of the most important. </p> <p> The currency question for Scotland is often skated over, as if there is a simple answer. </p> <p> But it is far from simple, as the eurozone crisis makes clear. </p> <p> Today, I want to try to shed some light on this issue. </p> <p> The Scottish Government say that they would continue to operate within the Sterling currency area, but there&#8217;s still the question&#8230; </p> <p> Is it an independent Scotland within the sterling monetary union? </p> <p> Is it an independent Scotland using sterling without any formal arrangements&#8230;something akin to a sterlingization mechanism? </p> <p> Or is it something else altogether? </p> <p> And even then there is the long term question for the Scottish Government&#8230;is it sterling for good? Or sterling now, Euro later? </p> <p> My remarks today are the reflections of a proud and patriotic Scot, who is intimately engaged with the British economy and the implications of the Eurozone crisis. </p> <p> I have never argued that Scotland cannot become independent. But I very firmly believe that it is not the best option for those Scots who, like me, have economic security and future prosperity as our first aspiration for Scotland. </p> <p> I will seek to demonstrate that the monetary and fiscal issues are first order questions that advocates of independence need to answer, as well as I believe being first order arguments for maintaining the UK. </p> <p> I want to take this chance to go into detail about the strengths of Scotland within the UK Fiscal and Monetary Union. </p> <p> And set out the real issues that the Scottish people have to consider if the Scottish Government ever gets round to calling a referendum on independence. </p> <p> These are difficult and technical questions.&#160; </p> <p> But they are serious questions, and deserve a serious debate. </p> <p> We only need to look at events in the Eurozone to understand that. </p> <p> As you&#8217;ll know, discussions are ongoing amongst Europe&#8217;s leaders to reach a solution to the crisis. </p> <p> We&#8217;ve consistently said that a resolution to the Eurozone crisis means that the Eurozone has to follow the remorseless logic that leads to closer fiscal integration. </p> <p> And it&#8217;s exactly the same message we&#8217;ve heard from France and Germany in the last week. </p> <p> Their proposals aim to bring a much greater degree of fiscal integration and central enforcement across all Eurozone members than was ever the case before. </p> <p> The message from the Eurozone is simple: It is extremely challenging to combine monetary union with full fiscal independence. </p> <p> As in the Eurozone, monetary union between fully fiscal independent countries can appear successful in a period of stability, but can lead to brutal readjustments in times of economic stress and uncertainty. </p> <p> Over the last 12 years, the Euro single currency served to mask significant differences in the economic fundamentals of the countries within it. </p> <p> The markets consistently underpriced the risk of debt among periphery countries, perhaps in the belief that there was an implicit guarantee from the bigger and stronger Eurozone countries. </p> <p> It&#8217;s no surprise then that periphery countries chose to borrow more and more, seemingly free from any constraint. </p> <p> And the result&#8230;public debt rising to unsustainable levels in some member countries. </p> <p> The consequences are plain to see&#8230;a brutal re-adjustment. Interest rates rising in countries considered as more risky. </p> <p> Risks of contagion to interest rates in other member states. </p> <p> Risks for the stability of the financial system across the union. </p> <p> Risks born from monetary union without fiscal union. </p> <p> Of course, theoretically there are ways around those risks. </p> <p> Explicit &#8220;no bail out&#8221; clauses. </p> <p> Mutual rules to promote fiscal discipline, and sanctions where they are breached. </p> <p> But design is one thing, execution another. </p> <p> Fiscal rules are complex to design and difficult to enforce among independent countries. </p> <p> And it can be hard to convince markets that the &#8220;no bail out&#8221; clause will hold in a crisis, especially when it can have serious consequences for the stability of financial institutions across the Union. </p> <p> As the architect of the Euro, Jacques Delors, has said this week the currency suffered from the start from &#8220;a fault in execution.&#8221; </p> <p> Even if in the future, Scotland chose adopting the Euro&#8230; either by joining the Euro or dollarizing with it&#8230;the risks are similar to those I&#8217;ve already just discussed. </p> <p> We can learn directly from the experiences of those countries that are already in the Euro, where the risks aren&#8217;t hypothetical but an everyday reality with huge ramifications for us all. </p> <p> But we have to also ask what might be the consequences for Scotland of forfeiting the benefits of monetary and fiscal union by choosing independence and continuing to use sterling. </p> <p> That is, continuing to use sterling either within the monetary union, or through a &#8216;sterlingization&#8217; mechanism&#8230;using sterling but not formally a part of the monetary union. </p> <p> In either case it is assumed that Scotland would have fully independent fiscal policy, just like Member States within the Eurozone, only instead of the ECB it would be tied to the monetary decisions taken by the Bank of England. </p> <p> Firstly, and stating the obvious, independent from the rest of the UK, Scotland would have access to massively less fiscal firepower. </p> <p> Scotland would be completely reliant on its own fiscal means to withstand an asymmetric shock to its economy. </p> <p> At the same time, reduced access to the UK&#8217;s fiscal firepower would have implications for Scotland&#8217;s celebrated role as a home to some of the UK&#8217;s largest financial institutions. As we know, the resources needed to recapitalise both RBS and HBOS in 2008 and 2009 dwarfed the entire Scottish budget. </p> <p> If an independent Scotland had to undertake such huge recapitalisations itself, there is a high risk that the very solvency of the country, let alone its banks, would come under market attack. </p> <p> It&#8217;s not a hypothetical consideration&#8230;just look at what happened to Iceland and Ireland. They were two key parts of the &#8216;arc of prosperity&#8217; after all, though mysteriously airbrushed from the latest propaganda. </p> <p> A smaller economy and a smaller fiscal base, mean that Scotland has access to much less fiscal firepower than if it decides to remain in the UK. </p> <p> More than that, it would also be more constrained in its capacity to use deficit funded fiscal policy, since high levels of Government borrowing would increase the risk of default. Exactly as we have seen in some of the smaller and weaker economies in Europe. </p> <p> As such, a Scottish fiscal base, as opposed to a UK wide base, may be too small to provide an effective buffer against large adverse shocks. </p> <p> And that raises serious questions for the UK to consider. What would be the knock on effect for our economy, our interest rates, our financial stability? </p> <p> As we see in the Eurozone, a common currency and a common monetary policy without fiscal integration runs the risk of shocks easily exacerbating, escalating and extending to other economies. </p> <p> In contrast, the United Kingdom fiscal union provides both Scotland and the rest of the UK with mutual insurance against adverse shocks affecting one member of the alliance. </p> <p> By being part of a larger fiscal base, by pooling fiscal resources, and by sharing fiscal risks, revenues can be transferred from one area to another, or one country to another, to help cope with the impact of a country specific shock. </p> <p> And just as Scotland would be unable to share the risks with the rest of the UK, Scotland wouldn&#8217;t be able to share the wins too.&#160; Sharing is a good value that Scots celebrate &#8211; we are always prepared to take the rough with the smooth with our neighbours. </p> <p> Fiscal and monetary union, provides us all with deeper and more liquid markets which facilitate access to capital markets for governments, and indeed businesses, which helps to reduce borrowing costs, and makes it cheaper to finance production and investment. </p> <p> Those are huge and vital fiscal benefits that come from being a full part of the United Kingdom. </p> <p> The value of that fiscal integration is precisely the lesson that EU countries are starting to learn right now. </p> <p> The United Kingdom monetary and fiscal union underpins the stability that is vital to a prosperous Scottish future. </p> <p> The Scottish Government has to think carefully before sacrificing that stability through independence. </p> <p> And not only stability. There are many other benefits that come from being part of one of longest lasting fiscal and monetary unions in the world. </p> <p> Benefits that are vital to creating a competitive and attractive environment for private sector growth. </p> <p> Firstly, a single currency over an appropriate area lowers transaction costs in trade. </p> <p> It improves price comparability but more importantly, eliminates the exchange rate risk and the need to hedge against it. </p> <p> Secondly, it helps to impose discipline over inflation by limiting the ability to use exchange rate devaluation to compensate for high domestic inflation. </p> <p> And thirdly, it provides the exchange rate stability that many smaller, open countries yearn for. </p> <p> If we look across Europe, a number of countries have either a formal or informal link to the Euro. </p> <p> Denmark and Latvia are members of the Exchange Rate Mechanism, pegged to the euro; Bulgaria maintains a peg. </p> <p> Even Switzerland is actively managing its bilateral exchange rate against the euro. </p> <p> Of course the price is the loss of independent monetary policy.&#160; But it&#8217;s already the case that the Scottish economy is taken into account in to the Bank of England&#8217;s monetary policy decision. </p> <p> And if Scotland chose to use sterling whilst being not part of the monetary union, the sterlingization route, then its influence on Bank of England monetary policy would be zero. </p> <p> In many ways monetary policy set by the Bank of England is already suited to Scotland given that the United Kingdom and the pound exhibit many of the characteristics of a so-called &#8216;optimum currency area&#8217;.&#160; </p> <p> For one, Scotland and the rest of the UK are very similar in their industrial structure, business cycle and price volatility. </p> <p> For as long as that high degree of integration continues, it&#8217;s likely therefore that monetary policy chosen to accommodate the UK as a whole would also be well adapted to suit Scotland. </p> <p> For instance, in the third quarter of 2011, the employment rate was 70.2% for the UK on average, and 71.2% in Scotland&#8230;a figure closer to the UK average than that of any other region or devolved country.<br> Furthermore, Scotland and the rest of the UK are highly integrated in terms of labour and product markets, and capital flows. </p> <p> Each year 50,000 people migrate from the rest of UK to Scotland, and as nearly as many people move in the opposite direction. </p> <p> About two thirds of Scottish exports go to the rest of the UK compared to around one third to the rest of the world. </p> <p> And firms registered in Scotland but owned by the rest of the UK employed 20 per cent of all Scottish workers, and contributed to around 25 per cent of total turnover in 2010. </p> <p> These are strong ties that have been forged over centuries through a common language, geographical proximity, and historical links. </p> <p> Bonds reinforced through centuries of common and shared fiscal and monetary policy. </p> <p> And in contrast, unlike Scotland with the rest of the United Kingdom, Scotland and the Euro area have some important differences in their industrial structure, business cycles and price volatility. </p> <p> Scottish monetary policy as set by the European Central Bank may not always be well adapted to Scotland&#8217;s needs as policy set by the Bank of England. </p> <p> So let me summarise, if Scotland wants to wants to keep the pound, and if Scotland wants to secure, in full, the benefits of keeping the pound, it can only do so by remaining part of the United Kingdom monetary and fiscal union. </p> <p> To do anything else would put those benefits at risk. </p> <p> Scotland within the monetary union but fiscally independent, creates similar risks to those we see in the Eurozone. </p> <p> If that crisis tells us anything, it is that strong control of fiscal policy and borrowing would have to be exercised centrally </p> <p> Scotland using the pound through a sterlingization mechanism, but fiscally independent creates similar risks. </p> <p> However in that scenario, it would have no say over its own monetary policy as set by the Bank of England. And in a Scottish crisis, the Bank of England would not be obliged to step in for Scotland. </p> <p> These are the questions that need answers&#8230; </p> <p> Using sterling outside the monetary union, who would act as the Scottish Lender of Last Resort? </p> <p> Outside the monetary union, would Scotland have the fiscal power to support its financial system? </p> <p> With independent fiscal control, would Scotland have the power to respond to shocks to its economy without racking up unsustainable debt? </p> <p> Or as a part of the Euro, will Scotland accept greater European fiscal integration and control on its fiscal power? </p> <p> But nor are these matters that can simply be determined by the Scottish government. </p> <p> In the event of Scotland seeking independence, the monetary and fiscal arrangements will have a direct effect on the rest of the UK, and so of course would have to be agreed. </p> <p> It is those risks and those complex considerations that mean the question of currency has to be at the centre of any debate and any referendum on independence. </p> <p> It&#8217;s a question that goes to the very heart of Scotland&#8217;s monetary, fiscal and indeed political future.&#160; </p> <p> Part of Sterling, and fiscally locked to UK? </p> <p> Part of the Euro, and fiscally locked to the EU? </p> <p> Or standing alone, independent of both, and open to the turmoil that undermines all our economies? </p> <p> If Scotland does choose the separatist route, the currency question is a major issue. </p> <p> There are no easy options &#8211; all are fraught with economic dangers. </p> <p> All are less optimal for Scotland than the current arrangements. </p> <p> I firmly believe that it is in Scotland&#8217;s interests to stay a part of one of the most successful, complete and stable fiscal and monetary unions in the world. </p> <p> We cannot afford to recklessly discard the bonds that tie our two economies so closely together. </p> <p> But it&#8217;s right that we adapt in the modern age to ensure that we have a system that delivers for all its citizens, both north and south of the border. </p> <p> It was right that the UK devolved powers in 1997. And it&#8217;s right that we take further major steps towards Home Rule through the current Scotland Bill &#8211; steps that bring major new powers to Scotland without jeopardising the success and stability of the United Kingdom. </p> <p> That&#8217;s why the Scotland Bill grants greater flexibility and control of taxation policy, and for the first time, gives Scottish Ministers powers to borrow, within strict limits, for capital infrastructure projects. </p> <p> And following representations by the Scottish Parliament we have also amended the Bill to allow the power to issue bonds to be introduced in the future without primary legislation. </p> <p> We will begin full consultation on Scottish bond issuance in the coming months. </p> <p> Together these reforms are the most fundamental shift of financial responsibility within the United Kingdom for 300 years. </p> <p> But they are reforms that strike the right balance to ensure that we both continue to benefit from risk pooling, economies of scale, and economic efficiencies within the UK monetary and fiscal union, whilst also ensuring that Scotland benefits from greater powers and financial accountability. </p> <p> It cements the sharing of risk across the UK as well as sharing the wins. </p> <p> That said, it is vital that the Scottish Government uses the powers it already has to boost the recovery in Scotland. </p> <p> The priority has to be to support a private sector recovery, ensure sustainable growth, and capitalise on the opportunities for growth that come from working together in a United Kingdom. </p> <p> We face unprecedented economic challenges at the moment, and it is vital that we focus on working together at Holyrood and at Westminster to restore growth across the UK. </p> <p> Uncertainty over Scotland&#8217;s political, economic and monetary future can only hold our economy back until they are resolved. </p> <p> The sooner they are resolved the better for Scotland. </p> <p> But as it stands, these economic and monetary issues are matters on which the Scottish Government has been uncharacteristically silent. </p> <p> Yet it is one of the most central issues that need to be understood and debated. That silience is not only deafening, but deeply damaging. </p> <p> Uncertainty on this subject is heightened by even the most basic questions not being answered. </p> <p> I&#8217;ve set out the key questions to which all Scots are entitled to hear the answers from the advocates of independence. </p> <p> The need to address these issues is heightened by the crisis in the Eurozone, where we see countries in a common currency trying to resolve a crisis caused by their independent fiscal policies. </p> <p> What is happening in the European Union profoundly affects the debate about the future of our Union. </p> <p> As the Eurozone seeks rightly to tighten its economic and fiscal bonds in response to the crisis, Scots should ask very searching questions of those who seek to weaken those bonds on our island. </p> <p> It&#8217;s a case that I and the Coalition Government will continue to make, but we also need to hear the voice of business. </p> <p> All of you here are critical to providing the jobs that Scottish families need through these tough times. </p> <p> It is up to you to make your voices heard in the Scottish debate, in Scottish media, among Scottish people, to spell out how you see it. </p> <p> This isn&#8217;t just politics&#8230;it&#8217;s a great deal more important than that. </p> <p> Having the voice of business, the facts as you see them, will be particularly important. </p> <p> Politicians on both sides of this argument should welcome all contributions from business, and ensure an atmosphere of debate that you feel comfortable in. </p> <p> So let me be clear, the UK Government will respect business voices that support Independence, and we will not personalise our response to such voices. </p> <p> There will be no adverse consequences &#8211; public or private &#8211; for business people who speak out on that side of the debate. </p> <p> I look forward to working with you in the weeks and years to come to secure our recovery, and secure the prosperity for Scotland that lasts and as part of a stable and secure United Kingdom </p> <p> Thank you </p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_091211.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, at the Scottish Council for Development and Industry 2011-12-09 HM Treasury Scottish Council for Development and Industry
<p> 07 December 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, at the Council for Industry and Higher Education </h1> <p> <strong>Check against delivery</strong> </p> <p> Good afternoon, and thank you for inviting me to deliver the annual lecture. It&#8217;s a pleasure to speak with representatives from so many of our leading businesses and universities. </p> <p> Many of you here are spearheading the university, business and Government collaborations that are driving groundbreaking research and innovation right across the UK. </p> <p> And it&#8217;s something I care about deeply because I&#8217;ve seen first-hand the huge difference it has made in my own constituency in the Scottish Highlands. </p> <p> Across Scotland, thousands of people have benefited from the pioneering partnerships forged by the University of the Highlands and Islands. </p> <p> An initiative that brings together 13 colleges and research institutions, and an even bigger network of over 50 learning centres to provide education for over 8000 students, drive groundbreaking research, and boost growth across Scotland. </p> <p> It&#8217;s the kind of innovation and collaboration we have to foster across the UK to lead our economic recovery. </p> <h2> Economic conditions </h2> <p> As you&#8217;re all aware, we face an extremely tough economic environment. The ongoing crisis in the Eurozone continues to undermine confidence in the global economy, acting as a drag on all our economies, the UK included. </p> <p> After all the EU is our largest trading partner, and a resolution to the crisis would provide a huge boost to the UK economy. </p> <p> But more than that, the Office for Budget responsibility concluded last week that the sharp and unexpected rise in global commodity prices in the last year had severely hampered the economy. </p> <p> Furthermore they presented new evidence demonstrating that in fact the pre-crisis boom and post-crisis bust were much bigger and deeper than previously thought. </p> <p> In sum it means we face a considerably greater challenge to restore growth than we previously expected. </p> <p> But there is still much that we as a Government can and are doing to support a recovery. </p> <p> To encourage sustainable growth through private sector investment, enterprise, and of course innovation and invention. </p> <h2> Innovation and Growth </h2> <p> Both, innovation and invention have been key drivers of British economic success over several centuries. </p> <p> It&#8217;s a natural human instinct to be curious&#8230;we are forever compelled to experiment and discover. Every success offers us a glimpse to better future and a world of new opportunities. </p> <p> And Britain has played a critical part in that journey. </p> <p> Through the Industrial Revolution with the Spinning Jenny and James Watt&#8217;s steam engine&#8230; </p> <p> To the world-wide-web, the brainchild of the British scientist Sir Tim Berners Lee. </p> <p> And today, we have huge research strengths which allow us to continue that journey&#8230; </p> <p> 4 of the top 20 universities in the world, and 32 of the top 200 are based here in the UK. </p> <p> Companies like RollsRoyce and GSK continue to build on long established and highly successful with universities across the UK. </p> <p> And the benefits reach right around the UK. </p> <p> A cluster of research and innovation excellence around Cambridge University&#8230; </p> <p> The prospect of a Maritime Centre of Excellence at the University of Southampton&#8230; </p> <p> And the knowledge exchange hubs led by Dundee, Lancaster, Queen Mary and the University of the West of England partnering with the likes of Microsoft, IBM and the BBC. </p> <h2> Competitiveness Challenge </h2> <p> But despite those strengths, some measures also suggest that the UK needs to do more to keep up &#8211; and overtake &#8211; the most innovative in the world. </p> <p> For instance, just over 40% of UK manufacturing firms are involved in technological innovation, lower than Sweden and Finland at 50%, and Germany at over 70%. </p> <p> And the barriers to research and innovation can be significant in the UK, in particular in health research. </p> <p> For instance, complex regulatory arrangements are a major reason why it takes an average of 621 days from a decision to support studies to the first patient entering a trial, compared to a 30 to 60 day process in Canada. </p> <p> And of course, there is always the risk that in uncertain times, businesses turn to the short term, sacrificing the long term investment and R&amp;D critical to long term competitiveness. </p> <p> The Higher Education Business and Community Interaction Survey has served to highlight those risks </p> <p> It revealed that the growth in research and business interaction slowed in 2009/10, and that the income Higher Education Institutions earned from&#160; large businesses fell. </p> <p> But it&#8217;s not just research and innovation that risks falling behind. </p> <p> Across the board, UK competitiveness has slipped over the last decade. </p> <p> The World Bank ranks the UK 17th for ease of starting a business compared to 2nd for Australia and 9th for the US. </p> <p> According to the World Economic Forum, on a composite measure of global competitiveness, the UK was ranked 4th in 1998, but 12th in 2010&#8230; </p> <p> And worse than France, Germany and Spain for the quality of our infrastructure. </p> <p> We are committed to restoring our competitiveness, and the decisions we have taken in the last year have already seen us rise to 10th in the 2011 competitiveness league table. </p> <p> Those decisions include investing &#163;250bn to update and renew the UK&#8217;s infrastructure over the next decade and beyond. </p> <p> And as announced last week, that includes an extra &#163;5bn of Government investment, along with up to another &#163;20bn from UK pension funds over the next decade. </p> <p> But we also want to make the UK one of the best places in Europe to start, finance and grow a business. To support the innovators and the entrepreneurs that will create new jobs across the economy. </p> <p> That means&#8230; cutting unnecessary regulation through the Red Tape Challenge, and stemming the flow of new rules through the One-in-One-out system. </p> <p> Fundamentally reforming our planning system to embed a presumption in favour of sustainable development. </p> <p> Ensuring businesses have access to finance, including through the new credit easing schemes announced last week. </p> <p> And of course, protecting spending on science and research programmes as the foundation of an innovative and knowledge based economy. </p> <h2> Government Investment in R&amp;D </h2> <p> Despite the pressure on public spending, our Spending Review last year protected resource funding for Science and Research programmes in cash terms at &#163;4.6bn per annum over four years. </p> <p> An explicit recognition that the UK research base is a vital national asset, and critical to long term growth. </p> <p> And despite even greater pressure on capital spending, we were able to find the funding for key research infrastructure projects&#8230; </p> <p> &#163;220m for the Francis Crick Medical Research Institute </p> <p> And &#163;69m for the Diamond Synchrotron facility in Oxfordshire. </p> <p> But we have gone even further in the last year. </p> <p> At Budget in March this year we provided an additional &#163;100m to support projects across the country including at Daresbury, Norwich, and the International Space Innovation Centre. </p> <p> In October we announced &#163;50m of investment in the development of a Graphene Global Research and Technology Hub to build on the UK&#8217;s research lead in the area following its ground breaking discovery at Manchester University. </p> <p> And in the same month we also announced &#163;145m of investment in High Performance Computing to provide scientists and businesses access to the most sophisticated supercomputers to keep them at the cutting edge of research and development. </p> <h2> Autumn Statement and further announcements </h2> <p> Only last week, in our Autumn Statement we announced a further &#163;200m of investment in science and innovation infrastructure. </p> <p> We are also provided funding to support the UK&#8217;s life sciences strategy as announced by the Prime Minister on Monday. </p> <p> A &#163;180m catalyst fund targeted at new British ideas in life sciences and support a sector that accounts for 165,000 jobs, turns over &#163;50bn every year, and makes a difference to all our lives. </p> <p> We&#8217;re already seeing how the sector is making a huge difference to millions of lives. Through our approach to tele-health we are getting technologies into patients&#8217; homes so they can be monitored remotely.<br> The trial has been a huge success and we&#8217;re rolling it out nationwide to provide dignity, convenience and independence for millions of people. </p> <p> And tomorrow Vince Cable and David Willets will be launching the Government&#8217;s Innovation and Research Strategy for Growth setting out details of new investment from the Autumn Statement that will provide additional support for SMEs. </p> <p> A strategy that will include announcements on R&amp;D programmes for SMEs, the Small Business Research Initiative to open Government procurement to innovative technology based SMEs, and additional support for emerging and growing clusters such as Tech City in the East End of London. </p> <h2> Higher Education Innovation Funding </h2> <p> Because, it is those organic clusters and networks that provide the vital springboard for innovation and enterprise </p> <p> We are working hard to foster greater cooperation and interaction between universities and research centres&#8230; but also working hard to ensure that our universities and researchers have the opportunity and capacity to work with business&#8230; to help take their discoveries and innovations to market here in the UK. </p> <p> That&#8217;s why we decided to maintain the Higher Education Innovation Funding at &#163;150m a year. </p> <p> A fund to strengthen the connections between universities and businesses to help the commercialisation of knowledge, research and technology. </p> <h2> Technology Strategy Board </h2> <p> And it&#8217;s why we have also provided &#163;1.3bn to support the work of the Technology Strategy Board, to help accelerate economic growth by stimulating and supporting business led innovation. </p> <p> And the TSB has done a huge amount of work to help develop the new Technology and Innovation Centres across the UK. </p> <p> The &#163;200m programme will help create a critical mass for business and research innovation, driving commercial innovation in specific technologies where there is potential for UK global leadership. </p> <p> The first TIC in Advanced Manufacturing went live in October, and we are working hard to launch the cell therapy and offshore renewable TICs next year. </p> <p> Of course, the TSB not only bridges the gap between universities and businesses, but brings businesses together themselves. </p> <p> In fact I spoke at a TSB event in October, hosted by Inmarsat, and saw first hand just how useful those occasions are for creating new networks and collaborations. </p> <p> The TSB has already worked with over 4,000 companies in the UK, helping to network over 35,000 business men and women to facilitate knowledge transfer and create new collaborative R&amp;D projects. </p> <p> The Gross Value Added generated by these collaborative R&amp;D projects is estimated to be almost &#163;7 per &#163;1 of Government funding. </p> <p> A huge return to investment, and I hope many of you use today to build those networks and spark new ideas. </p> <p> But it&#8217;s not only the growth potential that is so exciting about R&amp;D investment, it&#8217;s also the potential to fundamentally transform public sector ways of working. </p> <p> The Small Business Research Initiative in particular plays a vital role in providing business opportunities for innovative companies through public procurement. And we&#8217;re already seeing the results&#8230; </p> <p> Cutting edge 3D medical imaging devices </p> <p> Technology to cut ventilation associated infections in hospitals&#8230;saving lives and millions of pounds. </p> <p> And intelligent algorithmic systems proven to deliver real time and life saving predictive assessments of patients&#8217; health. </p> <h2> Skills and research investment </h2> <p> Of course, our ability to realise these benefits depends on our ability to stay at the very forefront of world leading research. </p> <p> The Higher Education Funding Council for England has a vital role in that task, investing over &#163;1.7bn per year in research in English Higher Education Institutions. </p> <p> And the devolved Higher Education funding bodies are providing a further &#163;370m for research in institutions across the rest of the UK. </p> <p> In addition, the UK Research Councils invest around &#163;3bn per year in world leading research through universities, independent research organisations and through their own research institutes. </p> <p> In fact, UK Research Councils currently fund around 25 per cent of all PhD graduates in the UK, and of the 4,500 Research Council funded Doctoral graduates each year, over half move out of higher education. </p> <p> Taking their skills outside the world of research&#8230;to the benefit of business, and to the benefit of our wider economy. </p> <h2> International Collaboration </h2> <p> But at the same time, we cannot simply look inwards to stimulate research and innovation. </p> <p> The challenges that face society today and economies that have globalised over recent decades mean that research and development has to be driven by international collaboration. </p> <p> Britain is already in a strong position to lead that collaboration. </p> <p> The high quality of UK research already makes us an attractive destination for inward investment from global industry and business&#8230;both through collaborations with researchers, and through businesses establishing enterprises here to take advantage of our research base. </p> <p> But we want to build even stronger international ties. </p> <p> The UK Research Council has already established teams in China, India, the US and Europe&#8230;leading collaborations that have profound economic and societal impacts. </p> <p> For example the RCUK Energy and Digital Economy programmes, and the Department of Science and Technology in India have together developed a &#163;12m programme, Bridging the rural-urban divide&#8230;looking at ways to make rural living an economically, socially and technologically sustainable option in both the UK and India. </p> <p> The economic rise of the likes of India, China and Brazil is not a threat to the British economy, but instead an unparalleled opportunity. </p> <p> A chance to change the fact that we export more to Ireland than we do those three emerging economies combined. </p> <p> And a chance to establish a UK presence early to ensure that our companies and our researchers can seize the huge opportunities in new and expanding markets&#8230; and ensure that we can continue to attract the best and the brightest to the UK. </p> <p> Our reforms to student immigration balance that need. Tackling abuse of the system, whilst keeping the door to high quality students. </p> <p> We will continue to welcome the brightest and best to our world-class academic institutions. </p> <h2> Conclusion </h2> <p> International collaboration, research collaboration, and business collaboration are all critical to maintaining the UK&#8217;s world leading research and development base. </p> <p> And at a time where money is tight, when we have to ruthlessly prioritise those areas of spending that are most likely to support economic growth, our research base and the skills of our citizens come top of the list. </p> <p> And more than that we are committed to helping our researchers take those groundbreaking discoveries and those new innovations to market right here in the UK. </p> <p> Our plan for growth is driven by an ambition to see things.. </p> <p> &#8220;Designed in Britain&#8221;<br> &#8220;Created in Britain&#8221;<br> &#8220;Invented in Britain&#8221;<br> &#8220;Made in Britain&#8221; </p> <p> The Council for Industry and Higher Education has always led that cause from the very front&#8230;to secure the growth, the jobs, and the support that families need through our recovery. </p> <p> I am eager to ensure that the Government does its bit to realise that ambition, and I look forward to working with you in the years to come. </p> <p> Thank you </p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_071211.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, at the Council for Industry and Higher Education 2011-12-07 HM Treasury Council for Industry and Higher Education
<p> 24 October 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, at the British American Business 10th Annual Conference </h1> <p> Ladies and Gentlemen, welcome to Lancaster House. I am delighted to host this reception in honour of the 10th anniversary of the British American Business Council. </p> <p> We are here tonight to celebrate the ties between Britain and the US, ties that go back generations to the very birth of America itself. </p> <p> It was British investment of people, capital and ideas that allowed the first North American colonies to emerge. </p> <p> From their outset they shared with Britain a commitment to trade and free enterprise, underpinned by the rule of law; a commitment that distinguished them from other New World colonies. </p> <p> A commitment that propelled London to become the world&#8217;s trading capital, and which laid the roots for the great American cities&#8230;Boston, Philadelphia, New York, Charlestown&#8230;all vital ports for the Atlantic trade. </p> <p> A trading relationship that remains just as important today in the face of the most severe financial and economic crisis in almost a century.&#160;&#160; </p> <p> Because this is a time of real international uncertainty and instability&#8230;and the UK is not immune to what is going on its biggest export markets. </p> <p> That instability acts as a powerful drag on what was already a difficult recovery&#8230;recovery from the deepest debt fuelled recession in living memory. </p> <p> Here in the UK, we came to Government inheriting the largest peace time deficit the country had ever seen. Tackling that deficit was a vital precondition to achieving sustainable growth. </p> <p> Large and growing deficits merely lead to higher inflation, higher taxes, and higher interest rates. </p> <p> Instead, because we have taken the difficult decisions on spending, to balance the books over the course of the parliament, UK gilt yields have fallen over the last year. </p> <p> And by getting ahead of the curve, by announcing consolidation on our own terms, we have avoided the uncertainty and instability that has prevailed in other countries. </p> <p> But our recovery will remain choppy, and by historical standards, subdued. Weak global confidence and nervous financial markets mean that we cannot be complacent. </p> <p> We are redoubling our efforts to promote a recovery based on private sector enterprise, innovation and of course, export. It is vital that we capitalise on and grow the trading relationships with our key international partners. </p> <p> Britain and the US continue to gain tremendous strength from one another, and it&#8217;s in both our interests to build on those foundations. </p> <p> The facts speak for themselves. Britain and America are the largest investors in each other&#8217;s economies; enjoying the largest Foreign Direct Investment relationship in the world. We are each other&#8217;s top partners in science, research and higher education. </p> <p> UK companies provide employment for around one million people in the US, as do American companies in Britain. And the US is our second largest export market after the EU; with one pound in every six created from exports coming from our trade with the US. </p> <p> But our relationship holds even greater potential and we want to do more. </p> <p> That is why wehave recently enhanced our UK Trade and Investment resources in the US; adding a presence in Atlanta and strengthening the team in Houston; bolstering what is already the UK&#8217;s largest UKTI presence in the world. </p> <p> And in the forthcoming year we will be showcasing to America and to the whole world what Britain has to offer. We aim to seize the opportunity of hosting the 2012 Olympics to show the world what we&#8217;re made of.&#160; </p> <p> The Government&#8217;s &#8216;GREAT Campaign&#8217; will be key to this; demonstrating to the world that the UK isone of the best places in the world to live, work, visit, invest and do business. </p> <p> We thank the British American Business Council for the support you have already given to the campaign; working with organisations such as yours will be essential to getting our message across. </p> <p> You are the &#8216;must-join&#8217; organisation for any company with a serious interest in transatlantic business. </p> <p> Your achievements over the last 10 years are impressive: a membership that grows year on year, the recent establishment of a women&#8217;s network and more than 100 events every year which bring together business leaders from both countries. </p> <p> We look forward to working more with you; helping to improve our reach into US cities and helping us to better understand the views and concerns of US and UK business, just as we have valued your input on migration policy and the Bribery Act over the last year. </p> <p> The work you do is important because the relationship between our two countries helps our companies grow the strength to compete globally. </p> <p> Our relationship is so productive because we enjoy an unparalleled depth of trust and co-operation. </p> <p> A relationship underpinned by a common belief in liberal, responsible capitalism throughout the world. And there a number of areas in which we need to work together to confront problems which affect our own prosperity and the health of the global economy. </p> <p> For example building an international consensus on the acceptable rules and norms in cyberspace is important. The London Cyber Conference in one week time will be a critical opportunity to promote a safe and secure cyberspace that is open to all and we look forward to working with our American colleagues on this. </p> <p> The prosperity of our countries also hinges on our access to secure energy supplies. We have all seen and felt the impact of volatile oil prices. Real and lasting growth in the global economy will only be achieved if it is done sustainably. Together we can promote greater resource efficiency and cleaner solutions. </p> <p> It is in our interests. A transition to a low carbon economy can create employment and opportunities for businesses.&#160; </p> <p> Figures show that the UK&#8217;s low-carbon and environmental goods and services market is already the sixth-largest in the world, worth &#163;116 billion last year and employing over 900,000 people. The US market in low-carbon and environmental goods and services is even more significant valued at &#163;629 billion. </p> <p> And we need to redouble our commitment to the cause of free and fair trade. </p> <p> I recognise that at times of economic distress, sustaining the case for free trade can be difficult. However from Bretton Woods to the present day, Britain and America make this argument most effectively when working together. </p> <p> We need to keep stating the economic case over and again; demonstrating to countries around the world how free trade drives innovation and investment, how it gives rise to the industries of the future and how it keeps economies dynamic and adaptive. </p> <p> There are many ways to do this; removing tariff barriers is one, but so too is tackling regulatory blockages. There is much we can do to work together to jointly design the regulatory structures of the future, for emerging industries, so that from the outset we are building a deeper transatlantic market.&#160; </p> <p> It is good that this is the focus of the EU-US Transatlantic Economic Council. In the EU, Britain is the leading advocate of Free Trade and will remain so under this Government. </p> <p> The endeavours I have spoken of are about our capacity to provide leadership and vision for a better future. Those two qualities have exemplified Anglo-American policies for two centuries and are found in many British and American businesspeople, entrepreneurs, academics, artists and writers; those at the heart of our relationship. </p> <p> In the end, the commitment to free trade is at the heart of what made the States United and Britain Great.&#160; That's what we should be fighting for. In foreign policy, security, defence and commerce the United States is and will remain our indispensable ally and partner. </p> <p> Thank you. </p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_241011.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, at the British American Business 10th Annual Conference 2011-10-24 HM Treasury British American Business 10th Annual Conference
<p> 13 October 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, to the Arab-British Chamber Commerce, Saudi Finance Forum: &#8220;Growth &amp; Stability&#8221; </h1> <p> [English]: </p> <p> Your Excellency Dr Al-Assaf, let me warmly welcome you to Britain. I am delighted that you are here, and I hope that we can continue to strengthen the links between our two countries. </p> <p> [Transliteration of Arabic]: </p> <p> Ma&#8217;aali Al-Doktur Al-Assaf.<br> Marhaban beka fi-Britania<br> Yasorroni annak Huna fi-Britania,<br> Wa atmanna an-nastamer fi-ta&#8217;zeez al-rawabet bayna baladayna&#160;&#160; </p> <p> It&#8217;s not often I get to practice my Arabic skills, and I hope I haven&#8217;t done the language a disservice. </p> <p> Your Excellency Dr Al-Assaf, Your Royal Highness Prince Mohammed, it&#8217;s a pleasure to be here, and I&#8217;d also like to say thank you to Dr Al-Shuaiby and the ABCC for organising today&#8217;s events. A vital forum to promote and build on the ties between the UK and the Arab world. </p> <p> I&#8217;ve always keenly followed the Middle East. I&#8217;ve done my best to learn the language. But now, working at the heart of UK Government in the Treasury&#8230;I realise more than ever how important the economic ties to the Middle East are for our country. </p> <p> And of course, Saudi Arabia is the largest economy in the Arab world, and its leading economic engine. </p> <p> And it remains amongst the most dynamic even through a challenging international economy environment&#8230; </p> <p> Home to a quarter of the world&#8217;s petroleum reserves, and the largest free market in the Middle East and North Africa region. </p> <p> An envious record of growth in recent years, reaching over 6% this year alone. </p> <p> And one of the world&#8217;s fastest growing countries on a per capita income basis. </p> <p> Such growth can only benefit what is already a strong trade relationship between our two countries. </p> <p> Saudi Arabia&#8217;s is already the UK&#8217;s largest Middle East trading partner. Last year, UK exports of visible goods to Saudi Arabia increased 16% to just over &#163;3bn, whilst Saudi exports to the UK increased almost 40% to just under &#163;1bn. </p> <p> On top of that, the UK is the second largest foreign investor in Saudi Arabia, after the United States, and there are currently around 200 UK/Saudi joint ventures with a total investment estimated at around $17.5bn </p> <p> Such strength is testament to the Kingdom&#8217;s economic reforms, liberalising trade and opening its economy to foreign investment, diversifying the economy and stimulating the private sector. Changes that now rank Saudi Arabia 11th in the World Bank&#8217;s Ease of Doing Business report. </p> <p> As you&#8217;re all aware, we are living through an extremely difficult economic period. A period of extreme global economic turmoil.&#160; What was once a crisis of private and banking sector debt has transformed into a sovereign debt crisis. </p> <p> And the Eurozone is at the epicentre. Doubts over some of the Eurozone&#8217;s biggest countries have rumbled on all summer, undermining stock markets worldwide. </p> <p> We welcome the positive steps that have been taken more recently to restore market confidence, and we continue to urge Eurozone members to deal with the problems that affect us all. </p> <p> But the UK is in a strong position to weather the storm. </p> <p> Firstly, our banks are much better capitalised and hold more liquid assets than they did even a year ago. In the words of the IMF: &#8220;the Core Tier 1 ratios of all the major UK banks are in double-digit territory, which compares well with most European peers&#8221;. </p> <p> Recently Moody&#8217;s downgraded 12 UK banks but they said explicitly that this did not reflect a deterioration in the financial strength of the banking system or the Government. </p> <p> Instead, it was a recognition of the Government&#8217;s success in reforming the banking sector, removing the tax payer guarantee for banks deemed too big to fail. </p> <p> Secondly, we have taken the necessary action to get a grip on our debt. Setting out plans to eliminate the structural current budget deficit. Plans which have established real confidence in this coalition Government&#8217;s credibility to restore the health of our public finances. </p> <p> And the markets have backed our plan with gilt yields falling to record lows in recent weeks. Despite having inherited a deficit larger than Portugal, we have market rates close to Germany&#8217;s. </p> <p> And that makes a real difference to businesses securing or re-financing loans, and to households paying their mortgages. </p> <p> But in such an uncertain environment we cannot be complacent. We are sheltered but we are not immune from the ongoing turbulence in the Eurozone. </p> <p> We have to do everything we can to stimulate an economic recovery. </p> <p> But we cannot simply return to growth on the back of private and public sector debt. We know all too well that the debt fuelled growth of the last decade or so was unsustainable. </p> <p> Instead, we are rebalancing our economy to one based on private sector enterprise, innovation, and export. </p> <p> That means supporting high growth industries in the digital and technology sectors, but also capitalising on our strengths in sectors such construction, and of course financial services. </p> <p> The UK is consistently recognised as a world leader in the financial services sector, and the sector will continue to play a critical role in our economic recovery. </p> <p> Whilst we are driving through reforms to embed greater stability in or financial sector, these reforms cannot undermine the innovation and adaptation that has brought the UK so much success. </p> <p> And as an example of that innovation and success, the UK is already the leading Western centre for Islamic finance.<br> There are more banks and financial institutions offering Islamic Finance products in London than any other Western jurisdiction. </p> <p> We will continue to support this growth, maintaining the UK as a global gateway for international Islamic finance. We have already made a number of tax changes to level the playing field between conventional and Islamic finance products&#8230;like for instance, establishing the UK tax treatment for Corporate Sukuk such that there are now 31 listed on the LSE with a value of $19bn. </p> <p> But we are keen to learn from our Saudi counterparts to bring this market to maturity. </p> <p> After all total asset growth in the Saudi Arabian banking sector continues to out-strip Gulf Cooperation Council counterparts, growing to almost $350bn. </p> <p> And only two years ago the Saudi Arabia Financial Services Group was established between City UK, UK Trade &amp; Investment and the Saudi British Joint Business Council. </p> <p> This gives us a strong base from which to capitalise on the huge opportunity for further growth between our two countries, </p> <p> For one, the Saudi insurance sector is set for explosive growth in the coming years and UK firms are willing and able to play a part in strengthening and supporting the consolidation of this high growth sector. </p> <p> In the housing sector, should the newly drafted mortgage law be passed, it will be a key driver for affordable housing in the Kingdom, and one where there is scope for sharing UK expertise with our Saudi counterparts. </p> <p> And as Saudi Arabia embarks on over $400bn of infrastructure investment, we would welcome greater UK involvement in those plans. </p> <p> In particular, with growing interest in Public Private Partnerships in Saudi Arabia, the UK is well placed thanks to our expertise in the area to assist in developing PPPs to deliver infrastructure. </p> <p> Indeed in June this year Lord Sassoon, the Commercial Secretary at the Treasury, hosted a delegation from the Saudi Binladin Group to discuss the UK&#8217;s PPP experience. </p> <p> We are following up on this through a PPP mission to Saudi Arabia this December led by British Expertise. We look forward to engaging with the Saudi Ministry of Finance on this in the coming months. </p> <p> But the Infrastructure opportunities flow in the opposite direction as well. </p> <p> Just as the Saudi Government is investing in its nation&#8217;s infrastructure, we have set out plans for &#163;200bn of investment in the UK&#8217;s infrastructure through our National Infrastructure Plan. </p> <p> Plans which include a vast increase in transport and energy investment, and also an increase in private sector participation. </p> <p> And that means making it easier for domestic and international investors to seize these opportunities.&#160; We know that what investors need is certainty and transparency. </p> <p> The National Infrastructure Plan is part of our answer, but in addition to that we are producing National Policy Statements for each of our major infrastructure sectors. And on top of that, every quarter, we will produce a rolling two year programme of projects where public sector funding has been agreed. </p> <p> And all the time we are working with international investors and the infrastructure industry to ensure we can deliver these plans and attract investment. </p> <p> And we already have strong interest from the Gulf in UK opportunities with the Abu Dhabi Investment Authority taking a stake in Gatwick Airport, DP World&#8217;s ownership of UK port facilities, and Qatari Diar&#8217;s purchase of London&#8217;s 2012 legacy assets. </p> <p> We would welcome Saudi interest and investment in some of our major investment projects&#8230;offshore wind generation and transmission assets, High Speed 2 rail from London to Scotland, and our next generation of nuclear power plants.&#160; </p> <p> At a time of widespread market anxiety, when returns on most types of investment are extremely volatile and uncertain, investors the world over are looking to de-risk and secure long dated income producing assets.<br><br> Infrastructure investment has the potential to offer those secure, sustainable and strong returns that investors are looking for. </p> <p> Later this year we will be publishing a complete list of the 40 or so major projects that we are prioritising, and we would welcome discussions with Saudi investors interested in participating these projects.&#160; </p> <p> I encourage prospective investors to make contact with UK Trade &amp; Investment, and work with us to build new partnerships and support both Kingdoms&#8217; infrastructure ambitions. </p> <p> Working together we can seize on the opportunities for mutual growth. Help support each other&#8217;s businesses right across the economy. </p> <p> Earlier this year, the both Kingdoms signed a Memorandum of Understanding to secure long term cooperation in the medical sector. The Saudi Arabian healthcare market is the largest in the region, and represents a huge opportunity for UK business. </p> <p> It is in both our interests to strengthen those commercial and clinical links, to maximise the benefits of partnership and shared expertise in construction projects, e-health and training.&#160; </p> <p> Similarly we are keen to work with Saudi authorities to share our experience around delivery of employment and welfare to work services. </p> <p> In the UK we are fundamentally reforming our welfare system to embed the biggest single payment by results employment programme&#8230;helping around 2.4m people over seven years to get off welfare and back into work. </p> <p> But more than that, we both have to ensure that our labour forces have the requisite skills to prosper in and drive a new economy. In the UK we are investing &#163;1.4bn over the next two years in apprenticeships, the largest ever investment in the UK. </p> <p> And that&#8217;s on top of 100,000 work experience placements, and our University Technical College programme which brings together employers and colleges, to ensure young people gain the technical skills that employers need. </p> <p> And our British schools, colleges and universities are already active across the Gulf, delivering degrees, developing training, and designing curriculums. </p> <p> All are eager to support the Kingdom&#8217;s develop and implement modernised vocational and training systems as you expands your educational system. </p> <p> Facing the international challenges that we face today, we have to do everything we can to build on our talents, our business strengths, and our trade relations with key partners such as Saudi Arabia. </p> <p> Later this month, my colleague at the Treasury Lord Sassoon will be making his second visit to the Kingdom since we came to Government. Both visits emphasising the importance that we place on the relationship between our two Kingdoms.&#160; </p> <p> I look forward to working with you all to build and strengthen these links in the years to come. </p> <p> Thank you<br></p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_131011.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, to the Arab-British Chamber Commerce, Saudi Finance Forum: “Growth & Stability” 2011-10-13 HM Treasury Arab-British Chamber Commerce, Saudi Finance Forum: “Growth & Stability”
<p> 30 September 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, to the Institute of Chartered Accountants of Scotland </h1> <p> <b>[Please check against delivery&#160;- 2,832 words]</b> </p> <div> <b>Introduction</b> </div> <div> &#160; </div> <div> Thank you very much for inviting me to speak here this morning, and thank you Iain for the kind introduction. </div> <p> By some twist of fate I&#8217;ve been scheduled to make quite a few speeches over the last two weeks&#8230;at Conference, and across Scotland&#8230;.at what is a very precarious time for the country. </p> <p> It&#8217;s been an incredibly volatile few weeks, even by the standards of an especially difficult few years. We&#8217;ve seen confidence rise as quickly as it&#8217;s crashed. </p> <p> And we all know just how much is at stake for the country. </p> <p> But events have been clouded by a mist of commentary, analysis and speculation. </p> <p> Ultimately it all comes down to our ability to take a firm grip of the malaise. </p> <p> It all comes down to tomorrow. The Quarter Finals depend on it and the World Cup is on the line. </p> <p> We have to beat England in Auckland, and I have every confidence that we will. </p> <p> <b>Economy</b> </p> <p> If only, however, that were the biggest risk on the horizon. You don&#8217;t need me to tell you that we are confronting an extremely difficult economic environment. </p> <p> World markets have exhibited a degree of volatility and uncertainty that we haven&#8217;t seen since 2008. </p> <p> Over the summer, stock markets around the world have fallen by as much as 30%, with the banks leading the charge dropping by as much as 40%. </p> <p> And last week, the pace increased as S&amp;P downgraded Italy&#8217;s credit rating and the IMF warned that we are entering a &#8220;dangerous new phase&#8221; for the world economy. </p> <p> The Eurozone has been at the epicentre of this crisis. </p> <p> And as the President of the European Commission, Jose Manuel Barroso said in his state of the union speech on Wednesday, the EU faces the &#8220;biggest challenge in its history.&#8221; </p> <p> The UK is of course directly impacted by this ongoing turbulence. After all, the EU is our largest trading partner. </p> <p> And we have been urging the EU to take the decisive action that is needed to restore confidence in the Eurozone, to calm the nerves, and follow the remorseless logic of monetary union towards closer fiscal integration. </p> <p> But these aren&#8217;t problems that have emerged out of the blue. They have been a long time brewing. </p> <p> At their core are concerns about the size of sovereign debt, and the pace of economic growth. Concerns fuelled by the inability of politicians across the world to take decisive action that the markets demand. </p> <p> <b>Fiscal consolidation</b> </p> <p> Our coalition on the other hand didn&#8217;t waver on inheriting the largest peace time deficit this country has ever seen. We didn&#8217;t waste any time on setting about taking the drastic action needed to balance the books. </p> <p> Through the toughest Spending Review in decades, we took the difficult and often unpopular decisions to eliminate the structural current budget deficit by the end of this parliament. </p> <p> These were not decisions taken on a whim, they were decisions vital to restoring our economic credibility in world markets. Because as well as the record deficit, we also inherited a negative watch on the UK&#8217;s AAA rating from Standard &amp; Poors. </p> <p> But only 4 months after our Spending Review, S&amp;P put the UK back to a stable outlook, reaffirming our AAA status, crediting the Coalition&#8217;s &#8216;cohesion&#8217; in putting the UK&#8217;s finances back on a sustainable footing. </p> <p> And the markets have agreed with that judgement, and continue to back UK government bonds. In recent weeks, UK gilt yields have fallen to record lows. Despite inheriting a deficit larger than Portugal&#8217;s, we have interest rates close to Germany. </p> <p> This is a huge vote of confidence that vindicates the Government&#8217;s decision to get ahead of the curve and deal with the deficit. </p> <p> It sets us apart from countries in the Eurozone that are scrambling to consolidate at the behest of the market. </p> <p> And it is a vital precondition for growth. Those low interest rates have real benefits &#8211; keeping people in their homes and helping businesses refinance debts and secure loans. </p> <p> As a result, since March last year the economy has created almost 600,000 new private sector jobs. The Bank of England, the Office for Budget Responsibility, and the IMF all forecast continued growth this year and next. </p> <p> And the Chancellor, our coalition colleagues, and I have all reiterated that we are sticking to the plan. </p> <p> This is absolutely not the time to be complacent on the debt challenge this country faces. As Christine Lagarde, Managing Director of the IMF, said recently on her visit to the UK: &#8220;risk levels are rising&#8221;, and in that environment, &#8220;the UK policy stance remains appropriate.&#8221; </p> <p> <b>Growth</b> </p> <p> But of course, the recovery will be choppy. We are recovering from the worst financial crisis in over a century, and we are living under the shadow of a huge debt overhang. </p> <p> Households are paying down their debt, banks are shrinking their balance sheets, and companies are postponing investment. </p> <p> And it&#8217;s a story that is replicated across the world. The imbalances that were built up in the global economy over the last decade still have a long way to go to be resolved. And of course the UK will be impacted by those structural adjustments. </p> <p> Bringing down the deficit is necessary for growth, but it is not sufficient.&#160; </p> <p> That is why we are redoubling our efforts to support the recovery and build a new model of balance growth powered by investment, exports and enterprise. </p> <p> <b>Plan for growth</b> </p> <p> Across Scotland we have a number of strengths to capitalise on&#8230;a strong financial sector, a strong manufacturing sector and a strong energy sector with huge potential for growth. </p> <p> We cannot rely on ever more debt funded public and private spending as the route to growth. </p> <p> Instead, through reform and judicious use of the resources we do have, we have to create the conditions that will galvanise a private sector recovery, build a more balanced and sustainable economy, and create the jobs for our future. </p> <p> Earlier this year the Coalition published its Plan for Growth which set out the many elements of our efforts to realise this ambition. </p> <p> <b>Tax</b> </p> <p> On tax we are reversing the steady decline in our competitiveness that has marred the last decade and a half. </p> <p> First and foremost we are cutting corporation tax to 26% this year, and 23% by 2014, making it the lowest rate in the G7, the fifth lowest in the G20. And we&#8217;ve singled out corporation tax because we know it is the most growth inhibiting tax that there is. </p> <p> Businesses benefit from the lower rates, but so do the employees through higher wages, shareholders through stronger dividends, and consumers through lower prices. </p> <p> Increasing VAT however is not an easy choice, but it&#8217;s the right one. It&#8217;s the least growth inhibiting option there is and in the words of the Director General of the CBI: &#8220;A VAT cut is not affordable.&#8221; </p> <p> But tax competitiveness is about more than rates and thresholds, it&#8217;s also about ensuring simplicity and stability. </p> <p> Through the Office of Tax Simplification we are cutting out the layers of unnecessary exemptions and reliefs in the tax code. </p> <p> <b>Regulation</b> </p> <p> In similar spirit we are lifting the regulatory and planning burden on businesses. We cannot let layers of bureaucracy suffocate the innovation, investment and enterprise needed to grow the economy. </p> <p> We have already exempt micro and start up businesses from new domestic regulation for three years, we have already scrapped plans for regulations that would have costs &#163;350m a year, and we continue to slim the regulatory rule book through our Red Tape Challenge. </p> <p> <b>Planning</b> </p> <p> Likewise on planning, we are making radical changes to the system to support job creation and embed a presumption in favour of sustainable development. </p> <p> Under the current system, planning costs imposed on business are nearly ten times larger in the West End of London than in Brussels, and more than double those in Paris. In total, the system costs the UK as much as &#163;3bn a year. </p> <p> The new National Planning Policy Framework will deliver sustainable economic growth whilst also protecting our social and environmental priorities. </p> <p> <b>Scottish Spending Review</b> </p> <p> In all these reforms we have committed to greater engagement and consultation with businesses and consumer and interest groups than any previous Government. </p> <p> A huge step change in policy making. And one that provides certainty and stability to business. </p> <p> In stark contrast, businesses are confused and concerned by the Scottish Government&#8217;s spending review. In particular, businesses are rightly worried about the projection of a vast increase in the yield on non-domestic rates. </p> <p> The Scottish Government is always talking about the taxes they would cut if only they had the powers. Yet they have the power over business rates and they are increasing them by &#163;850m by 2015. </p> <p> Undermining the support we are providing businesses through our cuts in corporation tax. </p> <p> A potential &#160;referendum on independence is already causing real uncertainty for many forms. The perception of rising business rates makes matters worse. </p> <p> These two together are harming Scotland&#8217;s reputation as a good place to do business at a time when we need to be supporting the private sector. </p> <p> <b>Lending</b> </p> <p> As well as a competitive playing field, the Coalition is also ensuring that our businesses have the vital access to lending that they need to grow. </p> <p> Earlier this year we reached agreement with the biggest banks in the UK to commit to lend &#163;190bn of new credit to all businesses in 2011. </p> <p> A total which includes &#163;76bn specifically ear marked for SMEs - &#163;10bn more than was lent last year. And whilst the latest figures are promising, we have been clear that the Government will use every tool available to ensure that the banks live up to their promises - in full. </p> <p> <b>Skills</b> </p> <p> We also have to ensure that we have the skills base to capitalise on the new opportunities that the recovery holds. </p> <p> The UK wide Technology and Strategy Board recently announced a wave of technology and innovation centres to open in October, including one at the University of Strathclyde&#8230;part of our ambition to place the UK at the heart of emerging high-tech manufacturing industries. </p> <p> And in England, we are delivering 250,000 apprenticeships over the next four years, and investing &#163;7.6bn in 2011-12 in education and training for 16 to 19 year olds. </p> <p> In Scotland these are matters for the Scottish Government to pursue and I&#8217;m encouraged by the announcement in the plans to provide 125,000 Modern Apprenticeships for young people in Scotland. </p> <p> &#160;It is vital that the younger generation do not bear the brunt of these tough economic conditions and are not left to fend for themselves. </p> <p> <b>Infrastructure</b> </p> <p> Finally we have laid out plans through our National Infrastructure Plan for &#163;200bn of investment over the course of the parliament in the UK&#8217;s key infrastructure priorities. </p> <p> We know that infrastructure investment is amongst the most growth kind of investment. It is vital to spurring new growth in well established sectors such as construction, but can lay the foundations for new high growth industries in the digital and online sectors. </p> <p> Such is our commitment that only two weeks ago the Deputy Prime Minister announced that the Coalition would be handpicking around 40 of the biggest infrastructure projects in the UK, the ones most important to growth, and giving them a new special priority status to ensure they are delivered on time and on budget.&#160; </p> <p> Where we can help unblock barriers of regulation, funding, procurement, planning, we will. </p> <p> And through our plans, we are almost doubling the investment in our energy sector and actively promoting a green recovery. </p> <p> That means &#163;3bn to capitalise the Green Investment Bank, developing the UK&#8217;s first Carbon Capture and Storage project, and investing &#163;200m in the development of low carbon technologies. </p> <p> And on transport, investment will also be higher in real terms by 2015/16 compared to 2005/6. </p> <p> Investment to improve the rail network such as Cross Rail&#8230; of the world&#8217;s biggest urban transport schemes currently under construction. And investment to target pinch points on the key motorways and trunk roads where it is choking the local economy. </p> <p> Both energy and transport investment are equally vital to Scotland. </p> <p> Green industries offer huge potential to realise growth across Scotland&#8230;through wave and tide in the West coast, through offshore wind in the Moray Firth, and earlier this week I spoke in Caithness, where I saw first hand the potential for tide-power in the Pentland Firth. </p> <p> Indeed the Pentland Firth along with Orkney are the first regions in the world to be granted commercial leases for two years to develop marine technology on the Crown Estate. </p> <p> Ten sites capable of generating enough electricity to meet the needs of up to 750,000 homes. Boosting Scotland&#8217;s renewable sector is a shared priority for the UK and Scottish Governments, </p> <p> And on transport, as a Highland MP, I understand the difference that focused, targeted investment in transport infrastructure can make to the more remote regions across Scotland. </p> <p> To make journey times shorter and safer, unblock Scotland&#8217;s choking transport arteries, and support businesses working across the entire country. </p> <p> Earlier this week the Scottish Government announced the outcome of its spending review. </p> <p> The decision to commit &#163;2.5bn to major transport infrastructure projects is welcome, but the great bulk of that money is accounted for by two Central Belt projects alone &#8211; the second Forth road crossing and Edinburgh to Glasgow rail improvements.&#160; </p> <p> The Scottish Infrastructure Plan to be published this Autumn, has to set out in detail the Government&#8217;s investment plans for each of its key infrastructure sectors. </p> <p> <b>Scotland Bill</b> </p> <p> The Scottish Government has to deliver on the infrastructure promises it has made. </p> <p> And we are providing the Scottish Government with further tools and powers through the Scotland Bill to do just that. </p> <p> We believe it is right to provide the Scottish Government with capital borrowing powers, and more flexibility and control of taxation policy. It is the most fundamental shift of financial responsibility within the United Kingdom for 300 years. </p> <p> Earlier this week I attended the first Joint Exchequer Committee, to discuss the implementation of powers already granted by the Scotland Bill. </p> <p> And whilst we are happy to discuss their request on Corporation Tax, there remain a huge number of unanswered questions, questions which the Exchequer Secretary David Gauke has put to the Scottish Government&#8230; </p> <ul> <li>On the costs and benefits of the current regime </li> <li>On how the Scottish Government proposes to minimise the&#160; burden on businesses and simplify the administration of the system </li> <li>On how the Scottish Government would approach taxation of foreign profits </li> <li>And on what consideration had been made on the State aid implications </li> </ul> <p> That said, where we can work with the Scottish government to deliver realistic ambitions on a clear timetable, we will do&#8230; </p> <p> Indeed, one of the key demands made by the Scottish Parliament is for an increase in the amount of capital borrowing permitted by the Bill. We have already agreed to conduct a review of the impact of extending Scotland&#8217;s borrowing powers. </p> <p> And following representations by the Scottish Parliament we have also amended the Bill to allow the power to issue bonds to be introduced in the future without primary legislation. </p> <p> I can tell you today that later this year we will begin a final public consultation on Scottish bond issuance. This is a complex area, with a range of impacts to be considered, but one where it is right to take forward the debate. </p> <p> <b>Conslusion</b> </p> <p> We all have to ensure that the Scottish Government will use its powers to prioritise spending that boosts a private sector recovery and ensures sustainable growth&#8230; The Scottish Government has the opportunity and the tools to deliver on investment and growth for the whole of Scotland. </p> <p> Exactly as we are doing from Westminster. </p> <p> Because, this coalition is as much a government for Scotland as Holyrood is, and I encourage you to engage with us as we embark on the second stage of our Growth Review with a focus on infrastructure, education, logistics, medium sized businesses, open data and the rural economy&#8230;all vital sectors to the Scottish economy.<br><br> We know that there is a long and difficult path to tread towards recovery. We have made substantial progress over the last year to put the country on a stable financial footing, but there is no easy way out of the challenges we all face. </p> <p> The businesses present over this conference will be critical to the Scottish recovery, as well as the wider UK. I am eager to learn what more it is that Government can do &#8211; or stop doing - to support you. </p> <p> And I look forward to working with you in the weeks and years to come, and I hope you enjoy the rest of this conference. </p> <p> Thank you </p> <p> <strong>Ends</strong> </p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_300911.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, to the Institute of Chartered Accountants of Scotland 2011-09-30 HM Treasury Institute of Chartered Accountants of Scotland
<p> 01 September 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP at the CBI Scotland Annual Dinner </h1> <p> <strong>Check against delivery</strong> </p> <p> I spoke to the CBI dinner in Inverness in March, shortly after the Budget. Much has changed since then, both for the economy and for Scotland, and I welcome the opportunity to reflect on both with you tonight. </p> <p> It has been a turbulent Summer for world markets. Equity markets across America, France, Japan, Germany and even China exhibited a degree of volatility not seen since 2008, and of course the UK is not immune to these events. </p> <p> Concern about both sovereign debt and economic growth is at the heart of these problems, fuelled by uncertainty about the ability of political leaders across the globe to take the decisive action needed. </p> <p> Since we came into office, the Coalition Government has shown itself willing to take the difficult, and often unpopular, decisions necessary to deal with the country&#8217;s enormous economic problems. </p> <p> Indeed, returning our country to lasting prosperity is the founding purpose of this government &#8211; the overwhelming national interest that motivated two very different political parties to take responsibility together for a full 5 years. </p> <p> Taking responsibility does not just mean dealing with the enormous budget deficit. It also means leaving behind the failed model of debt fuelled growth of our predecessors and replacing it with prosperity that is more balanced, sustainable and lasting because it is built on firmer foundations. </p> <p> The first of those foundations is financial discipline. As a consequence of our resolve, even amid turbulence, the market continues to back UK government bonds. UK gilt yields have fallen to near record lows in recent weeks, with the spread to bunds falling by over half a percentage point since May last year. </p> <p> This is a vote of confidence that vindicates the Government&#8217;s decision to get ahead of the curve and deal with the deficit we inherited. Despite having a deficit larger than Portugal we have interest rates close to Germany&#8217;s. </p> <p> It sets us apart from countries in the Eurozone that have struggled to establish the credibility of their deficit reduction plans. It sets us apart from the US, where political deadlock has brought a historic downgrade of the country&#8217;s credit rating. And it sets us apart from those who dug a record peacetime deficit and want to keep digging. </p> <p> Those low interest rates have real benefits &#8211; keeping people in their homes and helping businesses &#8211; that those who oppose our plans seem willing to sacrifice. I am not. </p> <p> Financial discipline is not ideological &#8211; it is a necessary condition for effective government. So let me be clear &#8211; we are sticking to our plans. </p> <p> We might also want to ask ourselves how Scotland alone would be faring through these difficult times. </p> <p> Let me give you some facts. Calculations by the Treasury show that, on the basis of share of the population, in 2009/10 Scotland&#8217;s share of the national debt would have been around &#163;65bn. And that does not include the cost of recapitalising RBS and HBOS, which dwarfed the entire Scottish budget. </p> <p> As the experience of other small countries with large banking sectors, like Iceland and Ireland, have shown these would have been a catastrophic problem for Scotland to deal with had we decided to go it alone. </p> <p> And our underlying fiscal position in Scotland would not help. According to the Scottish government&#8217;s own figures, even with the most flattering account of oil revenues,&#160; there was a gap between what Scotland raised in tax and what it spent of &#163;14bn in 2009/10 &#8211; Scotland&#8217;s deficit would have been one of the largest in Europe. </p> <p> Heroic assumptions about oil revenues don't actually help much &#8211; with revenues forecast to fall steadily, a further structural problem for Scotland would be just around the corner. </p> <p> As an important part of the United Kingdom, responsibility for dealing with these problems is shared, and Scotland benefits from the low interest rates and significant fiscal credibility that we have. That is just one small part of the benefit to Scotland of being part of the longest standing and most successful fiscal, monetary and economic alliance in world history. </p> <p> United we stand. United we have the capacity to resists the pressures that have overpowered some of our neighbours' economies, united we can build a model for growth that is sustainable. </p> <p> Our Emergency Budget last year, followed by the most difficult Spending Review in decades, has put the UK back on a path to fiscal sustainability. And the very same rating agency that downgraded the US, took Britain off the negative watch and reaffirmed our AAA status. </p> <p> Tackling the deficit is the number one priority for this Government because it is a vital precondition of growth. The difficult decisions that we have made have kept interest rates low, have kept families in their homes, and have stirred an economic recovery creating 500,000 new private sector jobs over the last year. And both the Bank of England and Office for Budget Responsibility forecast continued growth over the coming year. </p> <p> But the UK suffers from a huge debt overhang following the financial crisis, and recovery from this sort of debt driven recession is bound to be prolonged and difficult. Households are paying down their debt, companies are postponing investment, and banks are reducing the size of their balance sheets. </p> <p> These are powerful drags on a recovery. And it&#8217;s a story that is replicated across the world. The imbalances that were built up in the global economy over the last decade still have a long way to go to be resolved. As the Governor of the Bank of England said in the last Inflation Report, the UK recovery is not immune to the harsh winds of these structural adjustments. </p> <p> That is why we are redoubling our efforts to build a new model of balanced growth powered by investment, exports and enterprise. </p> <p> We cannot revert to the unsustainable debt-fuelled consumption of the past. </p> <p> Instead, we must build a recovery based on growth in the private sector, growth across different sectors, and growth across all part of the UK. </p> <p> In Scotland we have strengths to capitalise on &#8230;a strong financial sector, a strong manufacturing sector and a strong energy sector with huge potential for growth. Our high quality universities provide a large and ready pool of talented, ambitious and skilled young graduates to invigorate businesses across the country. </p> <p> But at the same time, there are some entrenched weaknesses which are by no means unique to Scotland, but are obstacles to be overcome. Scotland has a smaller private sector than that of the UK as a whole, and though a strong and vibrant financial sector is essential to economic recovery, after London, Scotland has the second largest exposure to the financial industry. </p> <p> We cannot rely on ever more debt funded public and private spending as the route to growth. Instead, through reform and judicious use of the resources we do have, we have to create the conditions that will galvanise a private sector recovery, build a more balanced and sustainable economy, and create the jobs for our future. </p> <p> There are many elements to the Coalition&#8217;s efforts to do just that. </p> <p> First, investing in precious transport infrastructure. Even with resources constrained as they are now, the UK government has found the money to increase investment in transport over the next 4 years as compared to the last four. </p> <p> If I may be permitted an observation as a Highland MP, that is what Scotland needs too </p> <p> As Scottish ministers review their own spending plans &#8211; and I know how difficult the choices they face will be &#8211; I hope they will find the courage to set more money aside for transport, unblocking the choking arteries of the Scottish economy especially in the North. </p> <p> Through Infrastructure UK we have brought an unprecedented level of focus on the UK&#8217;s long term infrastructure needs, to identify our key priorities, and attract private sector interest and investment to support the &#163;200bn of infrastructure investment needed by 2015. </p> <p> Because infrastructure investment is vital to stimulating new growth in established sectors such as construction, but also the future high growth industries in the digital, online and of course, the green technology sectors. The coalition and the Scottish government both have huge ambitions for the renewables industry in Scotland &#8211; by working together, with the Green Investment Bank, we can deliver on those ambitions and support a green economic recovery. </p> <p> And the Coastal Communities Fund that I announced in July will give Scottish communities a substantial and direct benefit as the marine renewables sector grows. </p> <p> Second, trade. The United Kingdom has always been a trading nation and more often than not, led by an outward looking and entrepreneurial Scotland. But in recent years, too little priority was given to trade and manufacturing as politicians were beguiled by the illusion of debt-fuelled financial sector growth. We are redoubling our efforts to support British businesses seeking to export, using both UKTI and our embassy network around the world. And in Europe we are pushing hard to extend the single market to boost growth. </p> <p> On tax, we are reversing the steady decline in the UK&#8217;s competitiveness that has marred the last decade and a half. In 1997, the UK had the tenth lowest main rate of corporation tax in the EU. By the time we came to office, we&#8217;d slipped to 20th. </p> <p> Last year we announced that we would be cutting the main rate of corporation tax, and the Budget this year announced a further one per cent reduction on top of that. By 2014, the rate will be reduced to 23%...a total reduction of 5%, the lowest in the G7, and the fifth lowest in the G20. And by making our first priority income tax cuts for low and middle earners, we are supporting working families in these tough times. </p> <p> And while I know some of you did not support our decision to increase taxation on North Sea oil extraction &#8211; necessary to help reduce the burden of high oil prices on families and businesses &#8211; I hope you will also recognise the efforts we have made to work with the industry to fulfil the commitment we made then to listen to and act on proposals to relieve specific difficulties caused. </p> <p> The changes we announced to the Ring Fence Expenditure Supplement in July have already had a positive impact, most notably in the case of Statoil&#8217;s multi-billion pound Mariner and Bressay heavy oil fields.&#160; We continue to engage on field allowances, and look forward to receiving further proposals from the industry later this month. </p> <p> We are working to make Britain the best place to start and grow a business. Most importantly, that means ensuring access to finance. This includes a bank-led &#163;2.5bn Business Growth Fund, and of course, earlier this year we reached agreement with the biggest banks in the UK to commit to lend &#163;190bn of new credit to all businesses in 2011. A total which includes &#163;76bn specifically ear marked for SMEs - &#163;10bn more than was lent last year. And whilst the latest figures are promising, we have been clear that the Government will use every tool available to ensure that the banks live up to their promises - in full. </p> <p> We have also announced the location of 22 Enterprise Zones across England to accelerate local growth, and create thousands of jobs by 2015. These Zones will attract hundreds of new start up firms, with simplified planning rules, super-fast broadband and over &#163;150m in tax breaks for new businesses. Of course, whether Scotland chooses to establish its own Enterprise Zones or not is a matter for the Scottish Parliament, but we said when we launched the policy in March that we wanted to hear about and help with Scottish government proposals to do likewise here. That offer is still open, and we are ready to work with the Scottish government to take forward any ideas it wants to discuss. </p> <p> Finally, we must ensure that we have a workforce equipped with the skills that businesses need. We are delivering 250,000 apprenticeships over the next four years, and investing &#163;7.6bn in 2011-12 in education and training for 16 to 19 year olds. In Scotland these are matters for the Scottish Government to pursue. It is vital that the younger generation do not bear the brunt of these tough economic conditions and are not left to fend for themselves. </p> <p> To improve our labour market, we also have to reform the welfare system &#8211; one of the greatest failures of our predecessors. Our plans for a Universal Credit will simplify the complex system of benefits and tax credits, and will improve the incentives to get a job. </p> <p> Most importantly, our work programme is the biggest single payment by results employment programme that Great Britain has ever seen. I saw earlier today what a difference this is already making to people here in Glasgow when I visited one of our providers, Working Links. This new system will help over half a million people a year, will pay providers for positive outcomes only, and will get people off welfare and back in to work. </p> <p> That is our plan for growth. Of course, in many of these areas responsibility lies with the Scottish Government. You will need to judge whether their approach is supporting growth &#8211; and, if my experience is anything to go by, you will be vocal when you judge they are not. </p> <p> We have put forward radical plans to strengthen the responsibility and accountability of the Scottish Parliament.&#160; We believe it is right to provide the Scottish Government with capital borrowing powers, and more flexibility and control of taxation policy. It is the most fundamental shift of financial responsibility within the United Kingdom for 300 years and it is being taken through Parliament brilliantly by Michael Moore as we speak. </p> <p> Of course the Scottish Parliament already has hugely significant powers over big areas of the Scottish economy. As the new government works on its spending review, we hope that the Scottish Government will, like the UK Government, prioritise spending that boosts a private sector recovery, ensures sustainable growth&#8230;<br> &#8230;and capitalise on the unparalleled economic, financial, fiscal and social ties that bind the UK economy together. </p> <p> Because Scotland, within the UK, is a success. In fact Scotland exports nearly two thirds of its total exports to the UK and benefits from large inwards capital flows from the rest of the UK. In 2010, firms owned by the rest of the UK employed 20% of all Scottish workers and contributed to around 25% of total turnover.<br> &#160;<br> Among the nations and regions of Britain, only London and the south east have a higher Gross Value Added per head than Scotland and Scotland&#8217;s employment rate is higher than the UK average. </p> <p> The ties between Scotland and the rest of the UK are an essential cornerstone of our economic recovery.&#160; Scotland&#8217;s road to recovery is intimately tied to recovery of the rest of the UK, and we must work together, politicians and businesses, to capitalise on every opportunity to support recovery. We are stronger together &#8211; and we are stronger when Scotland&#8217;s two governments work together, pulling in the same direction for the people of this country. </p> <p> We cannot allow the current constitutional uncertainty to distract or undermine this economic goal - Scotland is too important to the UK and the UK too important to Scotland for that. I hope that your voices &#8211; the voices of Scotland&#8217;s economic future &#8211; will be heard as that debate develops. </p> <p> We need to hear your voices too as we come to the next stage of the Government&#8217;s Growth Review with a focus on infrastructure, education, logistics, medium sized businesses, open data and the rural economy. These are all critical areas of the Scottish economy. </p> <p> Some of the levers that affect these sectors are devolved, but UK policy will still have a big impact on Scottish businesses. I know there may be a few wry smiles when I say that I am from the Treasury and I am here to help, but I want to engage with you over the next few months to develop the ideas and the policy that will help promote growth in these areas. </p> <p> The coalition is as much a government for Scotland as Holyrood is, so I hope very much that you will engage positively with us. </p> <p> We have come a long way in the last year to put the nation&#8217;s finances on a sustainable path. But we know that there is a long and difficult path to tread towards recovery. There is no easy way out of the challenges we all face. </p> <p> The businesses present today will be critical to this recovery. It is vital that we learn what more it is that Government can do &#8211; or stop doing - to support you. What is it that the Government can do for business, growth and employment in Scotland? </p> <p> I encourage you all to pro-actively engage with the Treasury as we embark on the next stage of the Growth Review, and I look forward to working with many of you in the months and years to come. </p> <p> Thank you<br></p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_010911.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP at the CBI Scotland Annual Dinner 2011-09-01 HM Treasury CBI Scotland Annual Dinner
<p> 22 July 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP at the opening of the Hi-Scot Credit Union </h1> <h2> Introduction </h2> <p> I am delighted to launch the Hi-Scot Credit Union in Stornoway today. The success of the predecessor, the Western Isles Credit Union, in just five years shows just how invaluable your services are to the local community </p> <p> This performance is especially impressive given the financial and economic environment that we have all been operating under in the last few years, and demonstrates how successful you have been in providing finance and support to local people when they need it the most. Indeed, across Britain credit union membership is increasing, with almost 1 million members in the UK, and 240,000 members in Scotland alone. Credit unions offer a vital financial source to communities, and I for one want to see that growth continue. </p> <h2> Credit Unions and rebalancing the economy </h2> <p> Credit unions such as yours have an important role to play in rebalancing our economy in two key ways. </p> <p> Firstly by promoting higher rates of saving. Across the UK we are suffering from historically low household saving rates. </p> <p> As an institution embedded in the community, the links that you have forged provide the perfect channel to help develop a culture of financial responsibility, where people understand the value of saving and the importance of financial prudence. </p> <p> Indeed I congratulate you on how active you have already been with the schools in the local area to promote financial awareness amongst parents and pupils. I have started a savings account with you myself, and I am in the process of opening child saver accounts for my two daughters. And as a mainland MP, I will be doing my bit to boost your profile in your new area. </p> <p> And secondly, the Credit Unions plays a crucial role in rebalancing our economy by providing access to affordable credit at a local level for individuals by helping empower communities across the UK. </p> <h2> Coastal communities fund </h2> <p> Empowering communities is a corner stone of the Coalition&#8217;s ambition to decentralise and disperse power from the centre. We are committed to helping people and communities help themselves. The services offered through the Hi-Scot Credit Union are a vital to helping communities seeking to realise that goal and we as a Government have to support these endeavours. </p> <p> And we can also do this by ensuring that communities share in the benefit of development and growth in their area that they help spur. </p> <p> It is only right that coastal communities are given the opportunity to get something back for what they put in. And in particular, reap the broader benefits from the investment that they have made to develop business and enterprise from our marine resources. </p> <p> Indeed, it was over a year ago, following the formation of the Coalition and my subsequent move to the Treasury that I was contacted by Jim Hunter, the former Chairman of the Highlands and Islands Enterprise who suggested that I could realise a longstanding ambition of the Highlands and Islands&#8230;to capture for the residents a worthwhile share of the Crown Estate Commission&#8217;s revenues in the area. </p> <p> And of course this was a pressing issue because of the boost to the Crown Estate&#8217;s income that will come from the expansion of offshore renewable technology off the Highlands and Islands waters&#8230;offshore wind farms to start with, but wave and tidal power down the line&#8230; </p> <p> As an MP in the region, I had for some time been pressing for measures to ensure that a bigger proportion of Crown Estate revenues from the Highlands and Islands remain in our area&#8230;so I needed no great persuasion to take this on. </p> <p> It&#8217;s with great delight that I can announce today that the Government will establish a UK wide Coastal Communities Fund to support economic development in coastal communities. The Fund, which will be open for business from April 2012, will be worth 50% of the gross revenues from the Crown Estate&#8217;s marine activities, which in 2010-11 amounted to around &#163;23m. </p> <p> The amount available within each country, or part of a country, will be linked to the revenues that are raised in that area. On the basis of 2010-11 revenues that would entail almost &#163;2m for the Highland and Islands, and &#163;1.5m for the rest of Scotland. </p> <p> But of course we expect that that amount will increase in-line with the increase in revenues from the continued development of the Crown Estate&#8217;s marine activities, and the expansion of offshore renewable activities. </p> <p> It would also be possible for offshore wind farm developers themselves to make a contribution to these funds. It is already common practice for onshore wind farm developers to make a substantial &#8216;community benefit&#8217; to those in the vicinity, and I hope very much that offshore developers follow their lead. </p> <p> The Fund itself will be managed in partnership with the Big Fund, part of the Big Lottery Fund, and will support projects related to community development, charitable, benevolent or philanthropic activities, the environment, education and health. </p> <p> And the Fund will be open to a wide range of organisations&#8230;private sector companies, charities, social enterprises, local authorities, local enterprise partnerships in England, and development agencies here in Scotland. </p> <p> I am particularly keen to encourage wide participation to bring forward innovative projects that will tackle the some of the more difficult economic problems in our coastal communities.&#160; In the Highlands and Islands I particularly encourage bids that seek to boost community land ownership across the area given the track record of economic development that this brings. </p> <h2> Conclusion </h2> <p> We are committed to promoting and supporting growth across all regions and sectors of the UK. </p> <p> We have to ensure in particular that coastal communities benefit from what we hope will be substantial economic development from offshore renewable technologies in the years to come.&#160; As a Highlander, having grown up on these Islands and on the mainland, securing greater economic benefits for the people of this area is what motivated me to enter politics in the first place. </p> <p> I strongly believe that the Coastal Communities Fund supports this ambition, as of course do your own endeavours as you expand your Credit Union services. </p> <p> I wish you the best of luck as you extend your services throughout the Highlands &amp; Islands, and I&#8217;m sure that you will bring a huge array of benefits to households across the wider region.<br></p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_220711.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP at the opening of the Hi-Scot Credit Union 2011-07-22 HM Treasury opening of the Hi-Scot Credit Union
<p> 17 June 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP to the IPPR </h1> <p> The Chief Secretary's speech was published as HM Treasury press notice 61/11. </p> <p> <a href="/press_61_11.htm">PN 61/11 Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP to the IPPR</a> </p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_170611.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP to the IPPR 2011-06-17 HM Treasury IPPR
<p> 10 May 2011 </p> <h1> Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, to the Centre Forum at the Guildhall </h1> <p> Today, what I want to focus on is the role the financial sector has to play in our economy. </p> <p> Now, as a topic, this is not something new. </p> <p> Much of the economic and political debate of recent years has revolved around this issue. </p> <p> But instead of discussing the importance of tighter regulation or banking reform... </p> <p> ...what I want to concentrate on is the industry&#8217;s role in restoring trust in the financial system...&#160; </p> <p> ...and how your actions can help with the rebalancing of our economy, and its success in the future. </p> <p> And there are a number of reasons to look to the future with confidence. </p> <p> Of course the recovery is, and will be, choppy. </p> <p> But, the manufacturing sector has experienced incredibly strong growth in the last year. </p> <p> Our exports are gathering pace. </p> <p> Employment is increasing. </p> <p> Investment is picking up. </p> <p> But the fact that we can now look ahead with some confidence is only because of difficult decisions we&#8217;ve already had to take. </p> <p> Decisions that have brought about economic stability. </p> <p> Secured our international credit rating. </p> <p> And set in place a credible plan to deal with our record borrowing... a plan that has seen us avoid the sovereign debt issues that have engulfed other countries. </p> <p> These are tough decisions. It was the need to deliver these decisions that brought the Coalition together. Our commitment to that shared plan is totally unwavering. It is our core task &#8211; and we will see it through. </p> <p> At the Budget, we set out our long-term strategy for growth, with four key ambitions at its heart: </p> <ul> <li>to create the most competitive tax system in the G20; </li> <li>make the UK one of the best places in Europe to start, finance and grow a business; </li> <li>encourage investment and exports as a route to a more balanced economy; and </li> <li>create a more educated workforce that is the most flexible in Europe. </li> </ul> <p> We also took the first steps towards making these ambitions a reality. </p> <p> With cuts to corporation tax - to encourage greater enterprise. </p> <p> Support for SME finance - to increase business investment. </p> <p> Steps to ease burdens on business to create additional jobs. </p> <p> And measures to rebalance our economy - and drive higher exports. </p> <p> But as a Government, we can only do so much. </p> <p> It&#8217;s the private sector who will inevitably lead the recovery. </p> <p> And having a strong and stable financial sector is an important part of this story. </p> <p> We need a financial sector that supports consumers and businesses up and down the country. </p> <p> And is a source of wealth and prosperity in its own right - not just in the Square Mile, or in Canary Wharf, but in every town and city in the country. </p> <p> And I feel there are three things that we have to consider if we&#8217;re to realise this ambition. </p> <h2> Reconnect with the rest of the economy </h2> <p> The first of these is about reconnecting the financial sector with the rest of the economy. </p> <p> To strengthen the ties that exist between financial institutions, investors, and their customers. </p> <p> And to demonstrate your commitment to the wider business world by providing: </p> <ul> <li>the lending that viable businesses need to expand and invest; </li> <li>the advice and expertise that firms need to succeed; and </li> <li>the capital that will help stimulate enterprise across the UK. </li> </ul> <p> This is vital. </p> <p> Because if our financial sector doesn&#8217;t meet these tests, then we&#8217;ll have an economy that struggles to respond to today&#8217;s challenges; a country that doesn&#8217;t fulfil its potential; and a recovery that fails to gather momentum.&#160;&#160; </p> <p> If we take access to finance, for instance. </p> <p> This remains a key concern for many businesses in the UK. </p> <p> Yet I also know that the problem isn&#8217;t quite as straightforward as some commentators like to think. </p> <p> But we also have to look at the reality of the situation, and why lending conditions have deteriorated since the crisis. </p> <p> That the past few years have certainly thrown up some particularly large challenges for the finance industry. </p> <p> Institutions up and down the country have, quite understandably, had to retrench; weather the financial storm; and look to rebuild their balance sheets.&#160; </p> <p> And this has not been a pain free process. </p> <p> On the one hand, you&#8217;ve had people saying that we should never return to the days when cheap credit was freely available... and irresponsible lending conditions undermined overall economic stability &#8211; this is absolutely right. </p> <p> But on the other, businesses need affordable credit to help support growth, employment, and additional investment. </p> <p> So there&#8217;s a very difficult balance to strike. </p> <p> As a Government, we&#8217;ve been working with the financial sector to get credit flowing again. </p> <h2> Merlin </h2> <p> The Merlin Agreement being the most obvious example. </p> <p> Among other things, this agreement reached with the UK&#8217;s largest banks should see lending of &#163;190 billion to creditworthy businesses for this year... of which &#163;76 billion has been earmarked specifically for small businesses.&#160; </p> <p> This would mean an overall increase of almost 15 per cent on last year&#8217;s lending figures to SMEs.&#160; </p> <p> But having made this commitment, it&#8217;s vital that they see it through. </p> <p> This month we will get the first update on progress in meeting this target. </p> <p> My message to the banks is simple &#8211; this money needs to reach good businesses, no ifs, no buts, no excuses. </p> <p> As the Chancellor said in February, if it doesn&#8217;t, we reserve the right to take further action. </p> <p> Not just for the sake of the wider economy, but also for the banking sector itself. </p> <p> People want to see progress. </p> <p> To demonstrate the value that financial services have to add. </p> <p> To show everyone that the sector takes its responsibilities seriously. </p> <p> And improve the links between our banks and our businesses </p> <p> They expect it. </p> <p> And we expect it. </p> <p> Which brings me to my second point for this morning - the need for the financial sector to improve the relationships it has with its customers. </p> <h2> Relationship with customers </h2> <p> Because if we&#8217;re to improve sustainability and resilience across the economy, we need to safeguard the interests of savers and borrowers and taxpayers. </p> <p> Now despite the work of the FSA, I don&#8217;t believe that customers always get a fair deal from financial services. </p> <p> Personal banking in many ways has become, well, less personal. </p> <p> We&#8217;re committed to changing this. </p> <p> That&#8217;s why we&#8217;re setting up the new Financial Conduct Authority &#8211; or FCA for short.&#160; </p> <p> The FCA will look at the conduct of all authorised firms - whether they&#8217;re prudentially regulated or not.&#160; It will be, in effect, a champion for the consumer, with the the primary objective of &#8220;ensuring confidence in financial services&#8221;. </p> <p> And this will be to the benefit of everyone. </p> <p> Consumers will obviously benefit from the added protection that this will bring.&#160; </p> <p> But also financial institutions themselves will reap the rewards. </p> <p> Because if customers have effective and appropriate protection, they&#8217;ll also have more trust in the financial sector as a whole &#8211; and take advantage of more of the services you provide. </p> <p> But the FCA alone is not enough.&#160; </p> <p> With the industry&#8217;s support we&#8217;re also increasing consumer confidence by making financial markets more transparent. </p> <p> So that people can shop around for better rates on their ISAs and have access to financial advice through the Annual Financial Health-Check. </p> <p> This will give your customers the confidence to invest in a wider range of products, and this will feed through to the rest of the economy. </p> <p> Because a customer who buys a corporate bond is also providing the finance needed to support innovation. </p> <p> Money in a cash ISA supports lending to businesses and families.&#160; </p> <p> While money in an equity ISA or pension can help support private investment. </p> <p> Working in the interests of customers is working in the interests of the wider economy.&#160; </p> <p> The two are mutually reinforcing. </p> <p> And we are making other regulatory changes too, to learn the lessons of the financial crisis. </p> <p> The Independent Commission on Banking&#8217;s work is crucial to protecting taxpayers.&#160; Its interim report set the right direction: we look forward to the final report and to action on it. </p> <h2> Economic rebalancing </h2> <p> Which brings me to the final point of today &#8211; how the financial sector can help support the much needed rebalancing of our economy. </p> <p> As a Government, we want to see growth and prosperity spread across all regions of the UK. </p> <p> We want to help the economy develop new areas of expertise. </p> <p> But we also need to preserve our existing strengths &#8211; including in financial services. </p> <p> Rebalancing is not about trading the success of one sector for another. </p> <p> It is about extending our country&#8217;s portfolio. </p> <p> Spreading our success more evenly. </p> <p> And supporting the world class industries we already have, as well as the new ones that we&#8217;re developing. </p> <p> If we go back to the roots of the City, for example, it flourished because it supported commerce through insurance and trade finance... </p> <p> ...it found capital to invest in new enterprise and it developed new and innovative ideas that provided security and certainty for businesses. </p> <p> It was this that proved the foundation of your success. </p> <p> And it is through insurance, investment and lending that you&#8217;ll help support our transition to a more diverse economy. </p> <p> One that&#8217;s built on growing businesses, not growing deficits. </p> <p> Increased exports, not increased debts. </p> <p> And green energy, green infrastructure and green technologies. </p> <p> This is a huge opportunity for the financial sector. </p> <p> To help support our move towards a better balanced economy. </p> <p> Where growth is more sustainable. </p> <p> More broad-based. </p> <p> And more evenly spread across the many places of the UK. </p> <p> Let me conclude by saying, </p> <p> As a Government, we&#8217;ve provided the security and stability that the private sector so badly needed. </p> <p> With a credible plan to deal with our country&#8217;s debts. </p> <p> And an ambitious plan for growth. </p> <p> But as a Government, we can&#8217;t do this alone. </p> <p> We need a strong and stable financial sector to support the recovery. </p> <p> One that provides the lending essential for investment. </p> <p> Restores trust and confidence in British business. </p> <p> And helps rebalance our economy in favour more industries, more exports, and more evenly distributed success. </p> <p> That is our ambition. </p> <p> And we will work with you to make it a reality. </p> <p> Thank you. </p> <p id="backToTop"> <a href="#primaryContentFull">Back to top</a> </p> None http://www.hm-treasury.gov.uk/speech_cst_100511.htm Danny Alexander Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, to the Centre Forum at the Guildhall 2011-05-10 HM Treasury Guildhall
March 2014
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