In the Conservative Party we are proud of our reputation for straight talk and for facing the facts. Where else would you find so many ladies publicly celebrating a fiftieth birthday?
It's two years since your last conference and they've been two productive years. The Committee has prepared evidence for Royal Commissions, published reports on young offenders and tax law and held a special conference on caring for children. Since we last met six women have been elected as Conservative Members of the European Parliament. —And there was something else.
A general election.
A new perspective.
The election meant more than a change of party; more than a switch of political emphasis. It marked a fundamental change in the country's approach to its problems,—a new perspective. [end p1]
Under Labour we endured five years of short term solutions and tinkering with detail. It was easier to plan fifteen bad budgets than five good ones, easier to give away subsidies than create the climate for enterprise.
Perhaps it's human nature to wake up in the morning and feel you can't face the big job today. It was easier to give a subsidy of £68 million to the Polish ships (79%; of the contract price) than face up to the problems of the ship building industry.
What Britain couldn't afford was a government that felt like that every morning.
The more difficult the tasks, the more the long term ones were simply ignored.
Take just one problem,—industrial performance. Industry had no climate of encouragement. Instead there was constant interference. Price controls were first toughened, then relaxed. Subsidies moved up and down. Managers would take a decision on one basis only to find everything changed. [end p2]
And don't let anyone imagine that what happens to industry affects only businessmen shareholders and employees. Obviously it affects them—their pay their savings and their jobs;—but it affects everyone, mothers and children, pensioners, the lot. If industry can't compete effectively it won't create the wealth on which we can base better pensions, schools and hospitals.
It was the same in all spheres. So many of our problems today result from Labour shirking the main tasks and taking refuge in expediency.
The election changed that.
We don't shrink from tackling the main tasks or indeed any tasks however hard, nor do we forget the long term. We know that it's the business of government to take responsibility for what people cannot do; responsibility for the currency, for the level of taxation for sound laws, and their enforcement for the structure of the social services, for public order and credible defences. [end p3]
We also know that government must withdraw from those areas where people can best look after themselves e.g. More owner occupiers, fewer council tenants. That's the new perspective,—a common sense view of what government should do and what people can best do for themselves.
The Right Kind of Government
When government does its job properly people are free to do theirs.
The right kind of government ensures that people keep more of what they earn. That's why we've cut income tax at all levels. You spend your own money more wisely than governments. And people are more likely to take an interest in what they do and in the future of their company if they can share in its rewards [end p4]
Under the right kind of Government, people are free and willing to accept personal responsibility. That's what helps people grow and mature; it strengthens the family, it leads to a tolerant and generous society.
A generous society encourages talent and reaps the reward for doing so. Academic excellence, for example, isn't just about elites. It's about raising teaching standards in a way that benefits every child. Business success isn't just a selfish aim. Profits spread beyond those who make them and bring jobs and prosperity. [end p5]
Britain must stop being the kind of country that drives success into exile. That's another reason for cutting taxes. High personal taxes squeeze out talent and hard work. What that happens we are all diminished. We should honour success in all fields; in science, in commerce, in the arts, in sport. We must encourage it and help people to profit from it. Why begrudge them? We can be proud of their success. It enriches the lives of all our people.
I said that government must take responsibility where the people cannot. [end p6]
One of its main tasks is to safeguard the currency.
A number of factors affect the latest inflation figures. Oil prices have doubled in a year. And this alone has added five percentage points to the RPI. The RPI figures also still include the once and for all VAT increase of last summer, which will disappear from the year on year increases in July. The pre-election bonanza of promises on pay and spending is now hitting us hard. That's why the index is so high at the moment. [end p7]
But there is an underlying rate of inflation caused by paying out more than is earned. Wages in the public sector are still higher than the country can afford and public spending is still uncomfortably high. That's why earnings will have to rise much more slowly if we are to avoid still more unemployment and if we are to get inflation down. It is too often forgotten that during the last two years there has been considerable increase in average living standards. What we produce has been growing much more slowly.
We have to get our production and our earnings into balance. There's no easy popularity in what we are proposing but it is fundamentally sound. Yet I believe people accept there's no real alternative. [end p8]
And Government must set an example. We cannot and will not let public sector pay to become the pacemaker for inflation.
Inflation, like heavy taxation, reduces freedom. It denies people the dignity of planning their own lives. How can you provide for the future when you don't know what your savings or your occupational pension will be worth next year, let alone in five years time? Planning, whether for a young family, a home of your own or for retirement, becomes difficult. And when people cannot plan for themselves they are forced to look to the state.
What will the level of state benefits be next year, or the year after? Prospects depend not on personal effort but on the doubtful patronage of the state. The demand for more spending—but really for more inflation—gets built into the system. [end p9]
Income becomes something to vote for, or to strike for not to work for. That's the vicious circle we must break.
Inflation hurts, too, even those who seem to be protected. A powerful union or an index-linked pension is not the answer. Both contribute to inflationary pressures and to paying out more than we earn. Both involve patronage; the patronage of a power group or pressure group that secures special treatment. So people become dependent. They can't afford to fall out with their union or change their job. For them too and for their families the future depends less on work and production than on membership of the group and on the power of their patron. For them, too, money becomes a matter for political pressure rather than personal endeavour.
The patronage state
We were coming perilously close to the patronage state; to a society where what you earn and therefore your standard of living is the result not of prudence or effort but what pressure groups press for or the state bestows. [end p10]
The patronage state is an arrogant state. It assumes it can spend your money better than you do. Yet it expects you to work for it in the first place.
The patronage state is an impoverished state. Instead of concentrating on wealth creation and enterprise it concentrates on politics. Governments, trade unions and industrial leaders spend their time arguing how to allocate resources rather than creating them. People find that manipulating the system pays better than honest work. It leads to paying out more but producing less. And when state spending outstrips production the result is a lower standard of living.
The patronage state deprives people of dignity. Spending and inflation destroy what people achieve for themselves. It denies rewards and responsibility to the majority who want to work hard and look after their families. There's no morality in taxing away a man's ability to save and offering him instead a state handout. If you take away the right to responsibility you actually undermine the [end p11] family instead of supporting it.
But the real tragedy of the patronage state is that it lacks the means to be compassionate. It cannot look after those most in need. It cannot create the wealth to give a decent standard of living to those who really cannot look after themselves.
The road to socialism
There are those on the left, of course, whom the patronage state suits very well; socialists who believe that all aspects of life are a matter for government. That the state knows best how to house us, employ us and provide for our old age. That if we won't embrace socialism willingly then inflation will force us to. [end p12]
But the drift towards the patronage state also stemmed from misplaced compassion. —It was easier to demand state aid for a need than to face the problems that gave rise to it. —It was easier to prop up yesterday's industries, rather than encourage the creation of tomorrow's. —It was easier to spend a little more to tax a little more, print a little more money always a little more, than to create the wealth that was lacking.—It was easier to demonstrate and call for the spending of other people's money than to accept responsibility ourselves.
But there's now a new sense of reality, of economic honesty, We're more willing to face the facts. It's widely agreed that Britain's problem is one of fast inflation and relatively slow industrial growth. The only way to solve it is to create conditions which encourage industry; to generate real wealth. [end p13]
That means that trade unions mustn't just demand wage rises, they must help to pay for them. In other words the shop floor must press for greater efficiency, demand the best machinery and then use it properly. It must work towards ending restrictive practices and overmanning. Productivity doesn't destroy jobs, it creates them. It generates profits and higher wages and that feeds back as more demand and more jobs.
Government is playing its part. We have cut capital taxes to help small businesses. We are getting rid of bureaucracy and controls. But years of dependence and self-doubt can't be cured overnight. That's why we announced a four year strategy to reduce spending but within the total to keep our priorities right. We must stick to that programme or we betray all those who want to work to save for themselves and their families. [end p14]
What's the alternative? To go on as we were before? All that leads to is higher spending. And that means more taxes, more borrowing, higher interest rates more inflation, more unemployment. The Opposition knows that. It knows that industry must generate wealth before anyone can spend it and that what is spent by government comes out of the pockets of the people. Yet all they contribute is the campaign against the cuts.
The campaign against the cuts.
It is a campaign of misinformation.
Those who seriously discuss economies or argue about priorities are drowned by the rhetoric of protest. [end p15]
Good budgeting is scorned. Any new proposal that can't be afforded is described as a “cut” . It doesn't matter that it was only dreamed up yesterday and never budgeted for. It's “a victim of the cuts.” .
Never mind that our government has concentrated in allocating the resources we can afford, on health and that we plan a growth in this programme in real terms, year by year. It, too, is a “victim of the cuts” . And, where welfare is less than we would like, it's not the result of years of relative impoverishment, or the problem of priorities but the fault of the “cuts” .
Everything is described as “diabolical” , “divisive” and “a return to the thirties” . [end p16]
But that's absurd and most people know it. May 14th proved that. It showed that most people simply want to get on with the job.
We know there's a limit to what we can spend in each area. There always must be. If, within the limit, we spend more on one programme, then savings must be made on another. We know that if wages exceed the budget something else must suffer, like equipment and buildings. The money must come from somewhere.
If the bills are met by borrowing or printing money it feeds through as inflation. We all pay in the end.
The cuts are not divisive.
Too much state spending is divisive. It divides the honest saver from the profligate spender. It favours those who live for the day rather than those who provide for the morrow. [end p17]
Then, take local authorities. The rates go up to pay for over-elaborate services for an overlarge wage claim or too many staff. Business is driven out of the area. Private sector jobs are sacrificed to pay for public sector ones.
In the same way, every good cause that government is asked to fund is paid for with money that could be going into production. When government spends more than the country earns it just concentrates resources on the most favoured groups and impoverishes the rest.
The role of government
That's not how I see the role of government. Government exists to hold the ring; to make sure that powerful monopolies—whether of industry or labour—don't hold the rest to ransom; to create [end p18] the conditions for firms and families, unions and individuals to pursue prosperity without damage to others.
There'll never be a perfectly balanced economy. There's no such thing as total security. No job, no business can be guaranteed for ever. No government can free the people from material worries. But government can make people poor. It can waste what people create. Or it can provide the conditions which favour those private efforts and endeavours that bring prosperity.
That's the more difficult task; the long term duty; the hope for the future.