The Prime Minister
I.G. ParkMr. Chairman, my Lord, Ladies and Gentlemen, thank you very much for that marvellous introduction. I think now that what I ought to say is that I will now take questions on your speech. It would be easier for me, and very interesting, but I think that I ought also to say one or two things. First, I notice that when I got into office, or into significant office, you referred to me as “redoubtable” , but if I am never anything worse than that, I shall be rather pleased. I think that what that means is that one was doing something positive; something which one believed in, and was causing controversy. The day that I am not causing controversy, I shall not be doing very much.
It is now nearly a year since I accepted your kind invitation to lunch, and I must confess that I have had this great media occasion on my diary for almost as long as I have been Prime Minister. I mention that just to show how quick you were off the mark in inviting me. I was very pleased to accept, because my years in politics have taught me to value the Press Association, and its shareholders, the principal newspapers outside London. Indeed, many of your shareholders are aware of the regard in which I hold the provincial Press. Recently, we had a meeting of provincial editors, and we were bombarded with questions at number Ten. It was one of the most interesting meetings we have had. The only trouble was that everyone who came from a difficult area wanted an “enterprise zone” —and quickly. Well, at least that shows that we are really doing things; that they believe that we are doing things, which are different, and which, in fact, may invoke a completely different response, different from any we have had in the post-war period. I notice what you said about the difficulties you have had, and particularly the one about the Budget, and I did notice that you mentioned that, when I first got into the House, I did introduce a Bill, with that very pompous title, the Public Bodies (Admission of the Press to Meetings) Bill. I did it because of a feeling which I have in common, I believe, with most of the British people, and I believe it very deeply, that we could not have a survival of the continuation of democracy unless we really did have a free Press; and a genuinely free Press, a freedom which must never be hindered or restricted by anyone, anybody, or any group of people, however currently powerful they may be. (applause). That, I think, is what the ordinary, average person means when he goes into a pub and says, “Britain is a free country, isn't it?” [end p1] They do accept these things, and we know just how hard we have sometimes to fight for them.
You mentioned, Mr. Chairman, that the beginning of this Government really did represent a change. It did. When one distils the essence out of the feeling of people, I think that it amounted to two things. One, that they wanted Britain to play a more prominent part on the world stage, which I think we are doing. Some of you, in your commentaries, referred to Lord Carrington and myself as “the sweet and the sour” —in that order (laughter). That was your paper (laughter). But I do think that they make quite a good combination, and the other strong feeling is that Britain could do very much better within herself in a way which is more fundamental. It takes longer to bring about, but perhaps it is the most worthwhile thing of all, because other nations believe we can do it, and can achieve it and, because of that, they now sit up and take notice of us on the world stage.
So, Mr. Chairman, I do believe that you are right. We did, indeed, represent a great yearning for change, and change of a quite fundamental nature. What people had learned—and this will be the background to one or two things which I want to say about economics—was that, somehow or other, the conventional post-war wisdom which had operated in one way or another through all British post-war Governments, was not dealing with Britain's worsening situation. Indeed, it might have been contributing to it. If you ask me what were the characteristics of that post-war conventional wisdom, I would select two. First, that there had grown up an economic theory of the primacy of central government action, and that that was what mattered economically. There had grown up a philosophical theory of increasing equality. The combination of those two, the primacy and efficacy of central government action, and the individual philosophy towards equality, really are the two things which we have now come to reject. Because, if you take the primacy in economic terms of central government direction and control, what you find that is doing is stifling the individual initiative which is the only way in which we shall get increased prosperity. [end p2] So, you have central government subsidising more and more, and wanting more and more subsidies, but practically no individual initiative there to create the subsidies which were vital for the continuation of central government. What one found was an increasing drive towards equality which, in fact, reared a kind of envy which is thoroughly corrosive. We tend sometimes to be a little bit guilty about success, and we came to be, if I may put it this way, aware that we had completely the wrong sort of system. The only thing in which I would accept equality is that we are all important, but we are all different. You must, in fact, look for the character and the success of a country in the difference and in the variety, and in giving those talents and abilities full range, and without which, you cannot be a successful country. So post-war conventional wisdom was central government control, and people tended to look to central government for their destiny, for their prosperity, and for their future, instead of to their own merits, their own talents, and their own work. It was wrong and people knew it was wrong. It did not add to individual dignity. They did not think that it would work, but thought, “well, it will be all right for a time” . But they saw it wasn't working, and they rejected it.
Now it is that fundamental change which we have to return to; what I would call our role of government. Call it the new Conservatism if you like, but it is just reviving some of the old traditional deep-seated feelings. It is like putting a dress away in a cupboard, a wardrobe for a number of years, and then, thirty years later you take it out and miraculously, it is just perfect for the current fashion. That, in a way, is what we have done with the old values. They were still there, and as the lines were still good, the new ones are still perfect. So, in everything I say about economics, may I say that economics aren't about economics; they are about politics, and politics aren't about politics, they are about human nature; and human nature is about two things. The very good in human nature, which it is the Government's job to harness, and the worst in human nature, which we have to restrain by having a very firm rule of law.
That is all by the way, and I am very sorry because the Press hasn't got any of it and it is quite the most interesting thing I shall say (laughter). [end p3]
But now, if you don't mind, I will come back to the script. That is all the background, and that is absolutely vital. If you try to analyse what we are doing you will see, like a picture, a certain scheme to it. Or, like any design, you will see that is the detail which one puts underneath. What I have said here is that for the past twenty years or more, as government has arrogated more and more power and tasks to itself, people have come to feel less and less significant, and less and less self-confident. Of course they have; they begin to say “Do I matter?” ; and the moment any government begins to run a thing in which [people?] feel that they don't matter, you will never get things right. I think that that was accompanied by a more or less continuous decline in our economic fortunes; and therefore, we have set out to convince every individual of two things; namely, that the country can only make progress through his or her individual effort, and that no-one—but no-one—can opt out, whether it is the skilled, the unskilled, the manager, the trade unionist, the proprietor. No-one can opt out for the country makes progress only through individual effort. That progress is possible, and it will benefit everyone.
When you turn to apply that to some of the economic things, you will find that this country depends for its health and strength upon those who produce wealth, raw materials, and services, and goods, and this means that although we can idle, strike, or obstruct our way down, we can only work our way up.
That is the message which I have to give. Over the last twenty years, as government has taken more and more upon itself, and as we knew that wouldn't work it seemed to me that we have peddled one patent medicine after another, and they have no more performed a cure than the patter of any travelling quack. Refer to some of the devices, Mr. Chairman; guiding lights, dashes for growth, pay pauses, incomes policies, prices and incomes policies, dividend controls, social contracts. You name it, we've tried it. And the results? If one looks at the trend over the past thirty years, there has been a steadily rising trend of inflation. You know, as you said, Mr. Chairman, in Macmillan 's time we used to think of five or six per cent inflation as terrible. [end p4]
Now we have tried to get back to single digit inflation because the result has been that as you poured just a little bit of extra money—and it was always ‘just a little bit’—what, in fact, you get is accelerating inflation. There isn't any magic cure for these ills; only the obvious traditional need to produce goods and services of the right design, quality and price, punctually delivered and backed by adequate after sales service. If we can do that, then we can pay our way in the world; we can reverse our economic decline, and in trying do that, the Government is bucking the trend of the last twenty years.
Now it is not that we are trying to adopt new dogmas or formulae. It is not that we have some new fancy things which will act as a cure. It is not that monetary control or cash limits are new things. They are merely the new terms for something very old-fashioned indeed. That is, ultimately, living within our means, and nobody has been able to escape that need indefinitely. Let me just have a word about monetarism and monetary control first. We all know full well that if you produce too much of something, its value will fall. That's elementary. It doesn't matter whether it's apples or plums, or whether you flood the market with brown mackintoshes and you have to sell them off cheap. The value of it will fall, and it is just the same with money. If you print too much of it, its value will fall unless that extra printed money is backed by extra goods or services which are produced by the economy. So, monetary control merely means bringing down the growth in the supply of money steadily closer to the supply of goods or services. That is not a new fangled thing; it is as fundamental as the law of gravity, and you cannot avoid it. If you want to tackle inflation you have to do it; you have to do it if you want to keep inflation and price increases in check. In this way we aim to squeeze inflation out of the economy; but it will take time.
Now, cash limits. We used not to have such things as cash limits when I first came into politics; it was not a phrase known to man. But what was meant was certainly known to woman. It meant that cash is limited (laughter). It meant that there is just so much money, and no more, available for a particular purpose and that is something—a concept—which any housewife understands readily because she knows her weekly cash limit. [end p5]
It is always remarkable to me that Ministers, Treasury knights, and civil servants can never understand budgeting by cash. They can't. You do, because you are in business but they budget by volume control and are then really rather surprised when the time comes and you have to pay for the volume of what you have ordered. It is something which every woman knows, and the Government is not, therefore, under petticoat control nor introduced some weird and wonderful new doctrine. It has returned to the basics of sound money and good housekeeping. It has rejected devices which, however promising in the short term, have time and again made things worse.
Monetary growth has to come down; and let everyone who is involved in setting prices and in negotiating pay understand that we will do whatever is necessary to ensure that it does. Now you all get on to me about interest rates; or you will if you are a normal business audience. Now they have been one of the weapons which we have used in getting the money supply down; to make it more expensive, obviously, and since we acted last November, monetary growth has come down from its previous excessive rate. The latest banking figures, published yesterday, may on the face of it look disappointing. I was disappointed with them, but they do follow several months of very low figures and the important thing is the underlying trend. We will be able to reduce interest rates—and will do so—when we are confident that this will be consistent with the money supply staying on target. Unless I was to give you any different message, you would be throwing away the achievements of having got the money supply down in the previous few months. Don't lets throw away what we have achieved. Let's build on it, and when we do bring interest rates down, let's be certain that we are responding to the market and really are on the right trend for them steadily to come down.
What, then, does all this add up to for the individual? What is required of him, given that only he is the engine of the country's recovery. I think that we are beginning to recognise what is needed. The British people do recognise that inflation is far too high and must—and can—be brought down. [end p6]
I think something else. I think that as they are coming up to the brink, they are beginning to recognise that more inflation means more unemployment, and that, in fact, if they take so much for themselves that they price themselves out of the market, they are putting their own future in jeopardy. You are in an industry which has restrictive practices. You know about them, and you know about over-manning, and it is interesting as one looks about the world, to see that it is those countries which dealt with restrictive practices and over-manning long ago that have high productivity and high wages and prosperity, and they have our business and our jobs. That, indeed, is the recipe which we must follow. The more our prices increase in relation to our competitors, the less the world will buy from us; and we must remember that we earn a third of our keep by exports. Let's just wave the flag a little bit. This country still exports nearly a third of its national income, and that is a great deal more than the United States—which is only eight per cent—and what is much, much more surprising, it is a great deal more than Japan, which exports only thirteen per cent.
So, on the whole, we don't do half badly even now with some of our exports and when you think that the exchange rate has been high for nearly a year, and interest rates have been uncomfortably high, the export performance of many of our industries which are world beaters, is absolutely astonishing and we should congratulate them upon it. When you hear about silicon chips, and microchips and all sorts of other chips, just let us remember that in this last year some of our great increases in exports were in micro-electronics. Last year, the increase in electrical exports from this country was 34 per cent over the year before. That is where some of our new entrepreneurs are coming in.
Let me just give you another figure about exports. You know that we had a little contretemps with the Common Market, in which they came off worst and we came off best. Well, let me point out the tremendous adaptation which British industry is undertaking to export into the Common Market. When we first went in, only 29 per cent of our exports went into the Common Market. Now, 44 per cent goes there; and who is our biggest export market? That superb competitive country, West Germany. [end p7] We export more into West Germany than anywhere else and every other country in the Common Market is in the league of top ten for us to export into (I am sorry about the grammar, but I couldn't turn it round quickly enough). I think that we are doing some things supremely well, and I will tell you what our task is. It is to get the worst up to the level of the average, and the average up to the level of the best.
It can be done, because some of the world beaters are showing us how to do it. The British people know in their hearts—we are back on the script again—that wage increases not fully offset by increases in efficiency or productivity simply add to costs and prices and, therefore, to unemployment. To take something for nothing in the short run may mean that there is nothing left at all in the long run. That is what some people are learning very, very painfully. This appreciation of what is needed has different implications for different people. I believe that Ministers must set out the facts and indicate the general philosophy and belief which holds everything together. That is what I am always trying to do. I think we have to tell the people the truth, however unkind it can be. That is what Ministers will do increasingly. There are no easy options left. We have to go the stony path, and if we tread it we shall come through to much brighter visions at the end of it. What we are really trying to do is to return to those very ideas and ideals which made the western free world prosperous in the first place.
Sometimes I talk to people in, for example, Singapore, and ask “How did you manage that miracle?” And do you know what they say? It is, they say, by practising everything which you in Britain left after you had taught it to us. It really is practising the doctrine of free enterprise, with a government setting the law and the regulations, because the essence of capitalism is that it has brought to the many the goods and services which previously had been the prerogative of the few. That is what capitalism has done. What belonged to the few has become commonplace in the homes and houses of the many. That is why the west prospers so very much more than countries under Communism, which is total central control. Well, we shall try to put this across during the coming months. Indeed, I think it was perhaps because we put it across before the election that we were, in fact, returned. [end p8]
Employers have a responsibility to explain their Company's performance and requirements to their own employees. You are with them eight hours a day. They ought to know the facts. Everyone who negotiates ought to know the facts of the finance of his Company and to be brought absolutely face to face with them.
Trade union leaders have to decide whether to work with economic forces for the benefit of their members, or whether to use their industrial muscle to secure a short term gain at the cost of making things worse for those they represent in the long run. Too many trade unionists seem to expect that prices can be kept down everywhere—except when it means moderating their own pay claims. The sooner we decide to take a positive view of the benefits of profits—because there is no future without them—of investment, the adoption of new technology—and the use of new technology to the fullest extent to which it is inherently possible—efficiency, high productivity and continuity of production and delivery, the sooner we can transform our country.
So, Mr. Chairman, there is no magic about it. Just the need for understanding, for resolve, and for application. With these, I have no doubt that we can win through. It does not need the eye of faith to see this; there are facts to prove it. No great goal was ever easily achieved. It is because this Government, and those who support it in Parliament and in the country—it is because we believe passionately in the future of our country—that we are going this way. Decline would be easy, if you didn't care. If you do care, you will be determined to climb up hill again until you are able to see the view from the top.
I know that some of you might think that the first year has been a little breathless. I understand that some of my staff are a little breathless, but I still have a lot of puff left. (laughter). I want to tell you that my colleagues and I will not be deflected. There will be no U-turns along this road. Please be very sure of that. We have a goal in sight, and we mean to achieve it (applause).
Can I just say to the working Press who are here—not the listeners—that I did not stick to the script, but it has been put out as a Press release, and I will stand by every word of it.