My Lord Mayor, my late Lord Mayor, Your grace Your Excellencies, my Lords, Ladies and Gentlemen.
Every speaker in this place is conscious of the sense of history and the feeling of continuity which find their expression in the Guildhall and in this event this evening. I congratulate you, my Lord Mayor, on your speech, and on reminding us of your distinguished predecessors.
Prominent among those is of course Sir Christopher Leaver, and I too congratulate him warmly on a year of many achievements and dedicated service. [end p1]
We have come a long way since the other predecessor you mentioned. In the days of Sir Richard Whittington, anyone who, to use your phrase, “happened to disagree with Her Majesty's Ministers” , was likely to come to a sticky end.
Dick Whittington thought nothing of collecting a posse of city militia to arrest one of the notable dissidents of the time, the Duke of Gloucester, on the King's behalf. [end p2]
And only twenty years earlier a fourteenth century militant, Wat Tyler, was slain by another of your predecessors, Sir William Walworth.
Have we gone a bit soft on “those who happen to disagree” with us now? Most of them are regarded as harmless eccentrics, for whom a place can generally be found on one of the Opposition front benches.
But it's nice to know where I could turn if I decided to pursue more radical policies. [end p3]
I applaud you too on your choice of “The best of Britain” as your mayoral theme. The world of commerce, and industry represented here tonight, and the world of Government, which I represent, must share responsibility for seeing that we do get the best out of Britain.
We shall play our different roles. You must take the commercial risks. We must take the political risks. If I may put it this way—you may lose your shirts; but my colleagues lose their trousers. [end p4]
My Lord Mayor, when we look back to the 1970s we see that many people lived in a world of illusion:- —the illusion that rising prosperity was somehow guaranteed. —the illusion that, if this prosperity did not come about through our own efforts, then someone else would provide it. —the illusion that we could defend our vital interests but could cut defence expenditure. —the illusion that Soviet ambitions could be contained by wishful thinking about detente. [end p5]
Many countries thought that, by printing and spending money, they could make “a dash for growth” . So Finance Ministers trained for the sprint, instead of for the long haul—or, in your own words, my Lord Mayor—for the marathon.
Politicians were long on rhetoric but sometimes short on sense: —all deplored the growth of unemployment; but many ignored the link between pay and jobs. —they made vigorous speeches at NATO meetings; but were reluctant to find the men and materials to meet their commitments. —they preached the European ideal; but shelved the practical problems. —they praised the U.N. but refused to see that it lacked the power to stop aggression. [end p6]
People cling to illusions; but they rarely wholly believe them. Such comfort as they bring is often accompanied by doubt.
The 1970s were racked by doubt. Few thought that the qualities which made this nation great still lived in its people today. Our convictions and beliefs were sapped by an army of professional belittlers. They denigrated our past, undermined our present and had no faith in our future. [end p7]
My Lord Mayor, those years are over. There is a healthy new realism across the country. We have learnt not to run away from difficult choices.
There is a growing recognition that inflation can and must be defeated, and defeated for good.
Politicians have learned that if they are to be able to say Yes, and keep their word, there are times when they must have the courage to say No and stick to that, too. [end p8]
Doubt whether we shall solve our problems is giving way to knowledge that we can and to resolve that we will.
A Task Force showed the way last spring.
My Lord Mayor, it is customary on this occasion to refer to foreign affairs. I shall come later to the strategy which I believe the West should adopt in the years ahead. [end p9]
THE DOMESTIC BASE
But strategy begins at home. It is Government's duty to provide:- —an equitable and enforceable system of law and justice so the citizen knows where he stands. —a fair and clear system of taxation so that the producer is not harried by arbitrary and incomprehensible tax demands. —and a stable and honest currency and banking system so that the saver knows his money is secure. [end p10]
Of course these things alone will not guarantee prosperity or everlasting growth. Material progress depends on the genius, flair and application of our people in industry, trade and commerce. How products are designed and how their production is organised is a matter for management. It cannot be done by Governments.
The task of Government is to provide the right framework in which industry and commerce can operate. Then and only then will enterprise be able to flourish. [end p11]
I have been criticised for talking about the principles of financial management of a nation as if they were like those of a family budget. Some say that I preach merely the homilies of housekeeping or the parables of the parlour. But I do not repent: those parables would have saved many a financier from failure and many a country from crisis. [end p12]
INTERNATIONAL FINANCIAL PROBLEMS
Over the last ten years, these principles have been flouted; many governments in the world have incurred huge deficits year after year. They borrowed where they could. Some by selling government securities to their own people and some by borrowing from foreigners, as did many countries in Eastern Europe, Latin America and elsewhere in the Third World.
Countries which borrowed primarily from their own people reduced the real value of their repayments by the great inflation of the 1970s thus ruining many a saver's nest egg and reducing many a non-indexed linked pensioner to penury. [end p13]
The same ruin went on, to a greater or less extent, throughout virtually all the countries of the West. Savings were systematically plundered by inflation.
And yet people continued to save and the funds continued to flow onto the world's credit markets. With the two oil price increases, the tide of savings became a veritable flood as the OPEC nations deposited their massive financial surpluses with the banks of the Western world. [end p14]
The last decade or so has been a borrower's bonanza—for individuals and for countries. But gradually the flood subsided. By this year the net OPEC surplus will have disappeared. But even when interest rates rose steeply the thirst for credit was not quenched. Borrowers were hooked. Now we peer apprehensively at this great and growing mountain of international debt and its consequences for world trade. How do we deal with it?
There is only one way.
Countries which have overspent and overborrowed must reduce their spending and reduce their borrowing. This is precisely the programme which the IMF is urging on chronic debtor nations. [end p15]
The required decisions are not easy for those countries. Expectations nurtured by years of promising and procrastinating must be painfully revised.
But it can be done. Over and over again we have seen that countries which resolutely do the right thing become credit-worthy, and regain their position as fully paid-up members of the international financial community.
Meanwhile the world has a difficult financial time ahead. The maintenance of confidence in the banking system is the responsibility of governments and central banks. [end p16]
In Britain here in the City we are fortunate in having one of the soundest banking systems in the West. The prudence and propriety of British banks, so ably supervised by the Bank of England, have ensured safety and solvency. In some other countries there are pressing banking problems which can be cured only over a long period and at a high cost.
These are the agonies of coming to terms with the reality of false hopes and profligate finance. This reality must be recognised if an honest financial system is to be restored in the world. [end p17]
Here at home, we have felt keenly the chill winds of world recession, a recession which darkens the whole globe. We can't overcome that by ourselves but we can and indeed we have established a climate of greater financial stability in our own country through our own endeavour. I refer to two matters in particular; our sustained record in checking inflation and our determination to contain public expenditure. Those who have seen what inflation can do to undermine a whole society—not only its currency and its economy, but its self-confidence and its moral standards—know just how valuable the achievement of this Government is. When inflation runs riot, it is not simply cash that is carried away in suitcases, it is trust and honesty as well. [end p18]
We honoured the post-dated cheques we were left with. We have paid off a great proportion of the foreign debts we inherited. And we have restored soundness to our currency.
Since the dinner given on this occasion a year ago, inflation has fallen from 12%; to 6.8%;; Base rates from 15%; to 9%;; the Financial Times gilt index has risen from 63 to 85; and the FT 30-share index has risen from 518 to 632. Plainly our stock market, in its present encouragingly optimistic frame of mind, is not paying undue heed to Mark Twain 's cautionary words: “November. This is one of the peculiarly dangerous months to speculate in stocks in. [end p19] the others are July, January, September, April, October, May, March, June, December, August and February.”
The course of public spending reviews tends to run about as smoothly as the course of true love.
But for the first time since 1977 (which followed the intervention of the IMF), Her Majesty's Government has managed to stop its spending targets from rising with each annual review.
Sir Geoffrey HoweThe Chancellor is singing the same song in November as he sang in March. And that shows a constancy rarely found in Chancellors. [end p20]
My Lord Mayor, you spoke eloquently and movingly about unemployment which now casts a shadow over all western countries. It is the great unsolved problem of our time.
I do not need to tell you that I and every Minister in this Government are desperately concerned to see the growth in industry and commerce which will create work for those without jobs. And we have shown this concern by our actions.
The fresh ideas and original schemes which we have initiated to minimise the impact of unemployment are as great as the effort devoted by any Government to any single social problem in this century. [end p21]
There are some who see in each difficult piece of news fresh occasion for despair. But then there always were people like that. My way of looking at things is a little different.
I look back at what we had to face when we came to power three and a half years ago at the accumulation of problems that had been pushed aside because they were too difficult to tackle. I see how we faced them and what we have achieved. And I look at the present and I see how much we have to do and I know we can do it. [end p22]
There is no greater contribution we could make to solving the problems of Europe and the world than that. [end p23]
WORLD POLITICAL SITUATION
The political landscape in Europe is changing. There are new governments in Germany, Denmark, the Netherlands, Sweden and Spain. And with the death of President Brezhnev East/West relations enter a new period of uncertainty.
At such a moment, others look to Britain as a source of stability and continuity. Our proud imperial history has bequeathed to us a vision of the world and international experience rare among nations. We therefore have a special contribution to make to the policy of the West in the years ahead. [end p24]
Just as each country must put its own house in order, so the various groups must sort out their problems.
In the European Community we must reform the budget. And that means looking at agricultural expenditure. Together we must meet the challenge of the new technologies. We must work energetically to promote free trade. [end p25]
But because we value free trade we must demand of others that they apply the same principles too.
Those countries who pay lip-service to the ideal but who by one strategem or another protect their own markets must realise that we are under pressure to retaliate.
I have no doubt that it would be better for world trade and for world prosperity and therefore for all of us, that their barriers should come down rather than that Europe should put up more. [end p26]
But the Community is more than a trading organisation. It is a large and stable area of freedom and democracy in a world which has need of both. We must work to preserve, perpetuate and extend that freedom. That is why we welcome the accession of countries which share our democratic ideals.
Relations between Europe and the United States have recently been under strain. The headlines have been dominated by differences over the Siberian pipeline, steel and agricultural exports and we have had our own disagreement with America over the UN Vote on the Falklands. [end p27]
There is no point in disguising these differences but we must see them in perspective. Unlike the Warsaw pact, the Western Alliance works by free debate. So differences are not surprising. Through free discussion we reached agreement on steel and only this weekend (we reached) substantial accord on the Siberian pipeline and a strategy for East/West economic relations. As so often before the Alliance has risen to the needs of the times. The future historians of our time will put more emphasis on america's role in regenerating Europe after the war, and in defending it since, than on passing problems. Far more important than these is the underlying strength of the Alliance, born of commitment [end p28] to the same fundamental values and a common determination to defend them. The problems pass but the Alliance endures.
Today in Moscow the Soviet people and international representatives have paid their respects to a Leonid Brezhnevformer leader. This is an important moment not only for the people of the Soviet Union but for the future of East/West relations. [end p29]
In the weeks and months ahead we shall watch the new Soviet leadership earnestly for solid evidence of a willingness to work for genuine multilateral disarmament.
Any such evidence will be met with a ready welcome and quick response from us.
We shall also be looking for signs of a greater respect for human rights and international law than we have seen in recent years. And we shall be equally ready to respond to that. [end p30]
But I cannot forget that over the past years, where the Soviet Union has advanced, it has done so, not by the force of ideas, but by force pure and simple.
I cannot forget that in Afghanistan and Cambodia Soviet Communism is engaged not in wars of liberation but wars of conquest.
I cannot forget that in Poland an alien creed was imposed on a people from outside. But the spirit of resistance in that brave people is such that not even martial law, inspired and sustained from Moscow, can weaken their pride or extinguish their hopes. [end p31]
We welcome the release of that brave Polish patriot, Mr. Lech Walesa. But we must wait to see whether it will be accompanied by other measures to meet the aspirations of the Polish people.
I cannot forget the Berlin Wall:- — a grim monument to a cruel and desolate creed; —concrete evidence that the Communists know that when people are free to choose, they choose to be free. [end p32]
Nor can we forget the remorseless increase in Soviet military strength. In this year alone they have installed a further 132 SS20 nuclear warheads.
The North Atlantic Organisation remains the essential guarantee of the security of the West.
Whatever problems may arise elsewhere in the world, it is still the strategic balance that assures peace in Europe and our principal contribution to peace must continue to lie in our contribution to that balance. [end p33]
Nothing is more likely to endanger peace than evidence of any weakening of Western resolve. That is why the policy of unilateral disarmers, however well-intentioned they may be would, if implemented, increase not reduce the risk of war. So far as their case rests on the hatred of nuclear weapons—and we all hate them—surely it is better to secure a reduction on both sides rather than on one side only? That would make the world a safer place.
We must maintain our defences. They guarantee our freedom. And our resolve to defend our way of life is a sign of hope to the oppressed, that one day they too may be free. [end p34]
THE WAY AHEAD
My Lord Mayor, one year ago, indeed one momentous year ago, I talked to you about the need for all of us to work for one free world.
The common threads that bind us in one strong united West transcend all national interests. For if political freedom, economic efficiency, and individual vitality were lost, then humanity would enter its darkest age. There would be no escape to some remaining oasis of freedom. [end p35] I am sometimes asked what does the future hold? I cannot tell you for sure this year any more than last year. But of this I am sure. [end p36] —If we are strong in defence —If we are sound in finance —If we stand by our friends and allies —If we uphold liberty under the law —If we encourage the habit of enterprise —If we cultivate a sense of personal responsibility —If we have faith in ourselves
Then we can be confident that we shall surmount whatever problems lie ahead. Confident that we shall have, in Emerson's words, “Strength still equal to the time, still … swift to execute the policy which the mind and heart of mankind require at the present hour.” [end p37]
We shall face the challenge of the 'eighties and the 'nineties not with illusions, not with doubts, but with realism and determination, with —the will to take risks —the will to overcome the obstacles —and the will to succeed.