When a Conservative government is returned to power, it always has one urgent, immediate and inescapable task.
That is to clear up the mess that the socialists have left.
It was true as far back as 1951, when Sir Winston Churchill formed his first peace-time Government.
It was true in 1970 when Mr Heath came to power, and it will be true when the electorate chooses the Conservatives once more. [end p1]
Indeed after the next election, when we next come back into power, it is going to be truer than ever before.
The socialists have not been in power for long.
It just seems like an age.
But it will need a tremendous effort just to repair the damage that they have inflicted in so many directions in these past eighteen months. [end p2]
A plague of locusts could not have done more damage than Mr Wilson and his colleagues have inflicted on this country.
They lied and they cheated in order to win the October 1974 election. Do you remember Mr Healey 's claim that inflation was only 8.4 per cent?
Where is Mr 8.4 per cent now? Still Chancellor of the Exchequer. [end p3]
They turned a serious inflationary situation into a disastrous one, and then waited almost to the eleventh hour before even trying to check it.
They have rammed a mass of disastrous, spiteful and ill-digested legislation through Parliament.
And all along they have been spending more and more money—your money. [end p4]
The vast bureaucratic machine of socialism is racing along quite out of control, taking money out of the pockets of ordinary people and pumping it out in the form of wasteful public expenditure.
In order to pay for this, taxes have gone up. Yet in spite of all the extra taxes they have levied they are spending the money faster than they can get it in.
In the first six months of the present financial year, public spending rose by no less than 47 per cent, but the revenue from taxes went up in the same time by only 31 per cent. [end p5]
All the rest of the money has had to be borrowed.
It does not take a financial genius to know that this is a recipe for disaster.
Every housewife, every household in the country knows that.
No wonder the value of the pound continues to fall so sharply, and that our inflation is so much worse than that of our Common Market partners. [end p6]
Nor is that the end of the story. They are not even getting value for the money they have borrowed.
While the health service is suffering, as any doctor can tell you, they are pouring money down the drain, in nationalisation schemes—shipbuilding, aircraft—the list is endless.
The Community Land Bill which has just become law, will alone cost a million pounds a week to administer.
Much of the money is going in hiring more and more officials—bureaucracy is the only growth industry under the socialists. [end p7]
Immediately we take office we will be faced with the tremendous task of repairing the damage, and of re-uniting a nation divided as never before by the malice and envy of socialist doctrine.
There will be a great deal to do. But however busy we are simply stopping the rot, we must not lose hope of our longer-term hopes and needs.
It is not enough simply to stop doing the wrong things. We must start doing the right ones. [end p8]
In particular we have to provide a framework in which industry has the opportunity to prosper, because the prosperity of every single one of us depends on that.
Every pension, every welfare payment, every penny the Government spends depends in the last resort on the wealth-creating capacity of industry.
It is industry that pays the wages and provides the money that Government spend. [end p9]
No one can claim that British industry is in a happy condition at the present time.
It has been starved of cash, squeezed by price controls, bullied and hectored by Ministers and then accused of not doing its job properly.
We must not pretend that things can be put right overnight—it is only the socialists who think they have instant remedies to all the nation's ills. [end p10]
In particular, we have to recognise that even before inflation rose to the level of 25 per cent a year, even before this Government started spending money like water industry and indeed the economy as a whole were facing important long-term problems.
Socialism indeed is a quack treatment for a long-standing condition, the sort of treatment that makes the patient worse.
But there is a British sickness, and if we reject the socialists remedy, we must provide a better one of our own. [end p11]
For years now commentators have talked about the British sickness abd argued as to what its cause might be.
Some of them believe the root of our problems to be that we were the very first great industrial nation, the very first to have an industrial revolution.
Others point to the sacrifices and the losses caused by two world wars. [end p12]
What is important however is not the historical reason, whatever it may be, for our industrial problems, but how they can be cured.
This is not, as I have said, a question of overnight solutions, of devising some instant remedy which is expected to transform the situation.
Industry had enough of that kind of treatment from Mr Wedgwood Benn enough to last it a lifetime. [end p13]
We reject the notion that a day spent at Chequers is enough to cure all industrial ills—this is instant Government at its worst.
We have had more than enough grand declarations of intent to last us a lifetime.
It will be a question of seeking to ensure a slow, steady, long-term improvement in the climate in which industry operated. [end p14]
A change like this will not happen by itself. Our policies have to make it possible, which is why we must start now to work towards the changes we intend to see.
What we need is something like a five-point programme to provide the basis for a prosperous industrial future.
First we have to act to restore the confidence of industry—confidence in its own ability, confidence in a stable and settled future. [end p15]
Only the other day the managing director of Vickers, one of our great engineering companies, wrote that we were now playing like a losing team, without confidence in our ability to win.
“We require,” he said, “to reverse this situation and so to win and to walk tall again” .
In order to give industry that confidence again we must stop pretending that the man in Whitehall knows so much better how to run a business than the people actually in charge of it. [end p16]
We must stop chopping and changing every five minutes so that no one knows from year to year what the system of company taxation is going to be.
We must free industry from constant pettifogging intervention.
And we must provide a background of economic stability instead of constant sudden lurches, changes of gear, starts and stops. [end p17]
Second, we must make it worthwhile for people to work hard.
It does not make sense to have a tax system which actively discourages hard work.
We want a system that leaves rewards in the pocket proportional to the effort by the person.
This is not just a question of directors, managers or executives—though talent is not so plentiful nowadays that we can afford to see some of our ablest people lured or driven overseas by confiscatory taxes. [end p18]
Or to have companies complaining that there is no way in which their overseas executives can afford to return to take up posts in this country.
No, when we say we wish to reward effort, this applies to everybody, whether their job is unskilled, skilled, professional or managerial.
We believe that far more is lost by discouraging people from work than is ever gained by squeezing taxation to the limit. [end p19]
Industry is not just, or mainly machines.
First and foremost, industry is the people who work in it, and they need incentives and rewards.
One has only to look at the rates of tax in our Common Market partners to see how much more harshly the burden of tax on income bears down on British shoulders. [end p20]
The £5000 a year man is more than £500 a year better off in France than in Britain, while a man earning £15000 a year is nearly £1200 better off in Germany; if he lives in France, he is left with £3000 more to spend, or better still to save, than in this country.
If we take the case of the new Managing Director of British Leyland, a man on whose shoulders rests the heaviest responsibilities, he would be more than 100 per cent better off on the same salary he gets here if he lived in France or Italy, and more than 50 per cent better off in Germany. [end p21]
But our harsh tax rates bite at all levels, as any worker earning overtime well knows.
The reduction of personal taxation is an essential step in improving the working climate and the industrial performance of Britain.
Third, we have to recognise the role of profit in the economic system. [end p22]
This is a message I have been concerned to spell out to various audiences in recent months, and already those who have done the most to damage profitability are beginning to pretend it is a cliche.
It is nothing of the sort.
It is the most vitally important single message for Conservatives to put across today. [end p23]
Never in history have so many different forces joined together to squeeze industry's rate of profitability.
It has been eroded by inflation, cut into by taxation, and damaged by a harsh and unimaginative prices code.
No less a person than the Governor of the Bank of England has declared that, allowing for inflation, the rate of profit earned by companies has been halved since the early sixties. [end p24]
Some foolish people think that the more profits are reduced the better, but over the past year we have had ample opportunity of seeing what happens when profitability falters.
British Leyland has been forced into the arms of the state, not through making too much profit over the years, but through making much too little.
Lacking the necessary profit, it could neither save, nor in the end borrow. [end p25]
The net result is that the taxpayer is being asked—except that ask is not the right word, the taxpayer has no choice—to put up at least £1,400 millions over the next few years.
And if for whatever reason Leyland does not even then make an adequate profit, then, make no mistake about it, the public will be required to pay still higher taxes and put up still more cash.
Let us therefore not be the slightest bit squeamish or apologetic in proclaiming the vital necessity of profit-earning. [end p26]
It is profit, honestly earned, that is the measure of a firm's success.
It is adequate profitability that is the best guarantee of jobs—and of pensions too. Too many workers have learned the hard way in recent months that when profits go, so does the security of their jobs.
State handouts, as the history of some recent workers' co-operatives have shown, are certainly no substitute. [end p27]
There is a further reason for insisting on the vital importance of creating the conditions for industry to operate profitably.
Out of profit comes much of the money which industry needs to invest in new plant and new machinery, so that it can produce the goods that people want at prices that they are able to pay.
Deprived of profit, industry has no option but to turn to the lender of last resort, which in this case is the state. [end p28]
The people of this country do not want nationalisation—that is clear enough.
But without adequate profitability there will hardly be a firm in the country that is not controlled by the state.
We know how far profitability and value for money go hand in hand, as the magnificent example of Marks and Spencer shows.
What is less often realised is that profit goes hand in hand with freedom. [end p29]
This leads me to the fourth point in our five point programme—the need to encourage investment.
This does not mean that we believe that the whole of Britain's industrial problems can be put down as more investment.
Wise investment is at least as important as more investment.
Nor, unlike our opponents, are we so stupid as to claim that industry, starved of cash, bedevilled by bureaucracy and in the middle of a recession, is somehow “failing” the nation if it doesn't invest cash that it hasn't got. [end p30]
But it is true that both Germany and Japan, perhaps our two most formidable competitors, have been prepared to consume less today in order to invest more, to save in order to secure the future for themselves and their children.
There is no way in which investment can be financed except out of savings. [end p31]
We therefore have to be prepared, as the Governments of other countries have been, to encourage saving and to encourage investment.
Industry itself has been overtaxed in the past: because companies don't have votes, Chancellors of the Exchequer may have felt that they were that much easier to tax than individuals. [end p32]
We have to offer industry not only tax relief but a stable system of taxation, so that industrialists can know where they stand and plan ahead. [end p33]
At the same time we have to encourage savings to provide the finance that industry needs.
If you want people to save it is no good clobbering the income from savings.
Above all, it is a fallacy to think that dividends and interest payments from companies go simply to the rich. [end p34]
If anyone doubts this, they have only to turn to the pages of the Diamond Commission, appointed by this Government to report on the distribution of Income and Wealth.
This shows that out of 2.1 million private shareholders in 1972–73—the last year for which we have statistics—there were one million with total incomes from all sources of less than £2,000 a year—less than £40 a week. [end p35]
Equally, the investment income surcharge bears down particularly hard upon retired people and pensioners.
The same report showed that 45.9 per cent of all dividends and taxed interest went to pensioners. [end p36]
It is not, however, enough to encourage investment by industry and saving by the people.
Something more is required.
Only so much saving is possible and if the Government pre-empts most of the funds available, the private industry must inevitably be starved of cash. [end p37]
That is another reason why the issue of government spending is central to our economic prospects.
Already there are serious fears that as recovery comes to the economy and industry starts to increase its investment, not enough cash will be available because of the amount the Government itself needs to borrow to finance its spending.
When there is not enough to go round, the Government must stand back. [end p38]
Fifth, if industry is to prosper, there has to be a determined attempt to reduce overmanning.
It is no good introducing new machines that work more efficiently if the new machine is always manned by the old number of people.
Increasingly in Britain we are failing to get the most out of our new investment because employers are unable to employ new plant at its maximum efficiency. [end p39]
This benefits nobody in the long-term.
It keeps prices up, and it means that instead of aiming at the high-wage, high-productivity economy to which the Government now at last begins to pay lip service, we are tending to settle for low productivity and relatively low wages. [end p40]
We have to make it easier for people to change their jobs.
There is no greater economic fallacy than to believe that high productivity adds to unemployment.
On the contrary, efficient production creates new prosperity, new demand and new jobs.
We have got to get out of the trench warfare mentality, clinging to old jobs that no longer really exist, instead of creating new ones that are wanted. [end p41]
These, then, are our five points, none of them easy, none of them instant in their effects, but all of them essential if this country is to get itself out of the slough of despond and create a prosperous industrial future for itself. [end p42]
I believe that this country is ready for a change of course.
People are tired of seeing Britain year by year slipping further behind, every year getting a little shabbier and a little more discontented.
The British people will never for long be content with the second best, or to have their hopes and aspirations frustrated by slow growth and mediocre industrial performance. [end p43]
They know that to improve the quality of life, both personal and national, we need efficient, prosperous industry.
To have well-being and welfare first made necessary. [end p44]
People want a change, and yet strangely enough almost the main obstacle to making the changes we want, is the feeling that change isn't after all possible, that it can't be done, that it won't work.
People have been disappointed so often, they have seen so many socialist plans go sadly astray that they are wary of being disappointed yet once again. [end p45]
The first thing we have to tell them is that this is still, in spite of everything, the same British nation that ever it was.
The British are still a wonderfully inventive, wonderfully ingenious people.
The story of our industrial progress has been one of innovation.
It was true at the time of the steam engine and it is true today.
One has only to open the newspaper to read of such new inventions as E.M.I.'S computer-aided X-ray brain-scanning machines for which orders are coming in from all over the world. [end p46]
The British people have beyond the shadow of a doubt the ability to prosper.
Most people long to be free of the extremists whom they see dragging industry down.
They are fed up to the hind teeth with the wreckers and the pessimists.
If they don't act, it is because they don't quite see how.
Our task therefore is to convince them that it can be done, and to show them how.