My Lord Mayor, My late Lord Mayor, Your Grace, Your Excellencies, My Lords, Ladies and Gentlemen,
May I start by thanking you My Lord Mayor for your toast to Her Majesty's Ministers and by complimenting you on your excellent speech.
May I also congratulate you on your election to this most distinguished office.
And may I thank you for congratulating me on mine.
In my case, many words were spoken during the election but there was no change at the top.
In your case, by time-honoured tradition, there was a change at the top but it took place without a word being spoken.
In your case, My Lord Mayor, silence is golden.
In mine, it's a case of a word in time's worth nine—nine years of good Conservative government.
In your own speech you referred to one of my great predecessors, William Pitt the Younger.
Brevity in speeches is indeed a virtue and I will see what I can do [pause] next year.
Talking of William Pitt, you will have noticed that there have been some comments recently about my style of Cabinet government.
I would just remind you of how Pitt went about it.
He was, apparently, not a believer in putting too many things to his Cabinet. On one occasion at least he wrote the minutes himself before the meeting.
And he was a very good Prime Minister.
I've often wondered how you choose the date for this Banquet.
This year it looks as if Norman St. John Stevas had a hand in it since today is, of course, St. Margaret 's day.
I am greatly honoured, even though I have no expectation of becoming blessed.
But today is also the anniversary of the birth of the Emperor Tiberius , and perhaps that was more in your mind in choosing the date.
A successful city operator at a young age, strong on the financial side, much given to driving around in fast chariots—clearly the first Yuppie, although I suppose the City would claim Dick Whittington as the first genuinely homegrown one.
Press release begins
The Financial Markets
But my Lord Mayor, the state of the financial markets is no doubt uppermost in your mind, as in the minds of many of those present here tonight.
There is a 17th century proverb:
“he that cannot abide a bad market deserves not a good one.”
In its steadfastness over the BP share sale the City showed that it could abide a bad market.
And in doing so the City enhanced its reputation, built up over so many years.
Some have suggested that the speed of the recent fall was due to lack of experience of difficult markets.
Others have put the blame on computers and the swiftness of global communications.
Let us remember that it took sixteen days for news of Trafalgar to reach this country—although by the time of Waterloo, Rothschilds were able to make a stock market coup by using pigeons.
Worldwide innovation—and maybe inexperience too—have played a part.
After all, decisions are easier when markets rise year after year.
But history and commonsense tell us that this does not happen indefinitely.
The onrush of new financial techniques may have run ahead of the judgement needed to keep risk taking within acceptable bounds.
But while these things may have contributed to the speed with which the markets fell, we must look elsewhere for an underlying cause:
— to the uncertainties stemming from the continuing budget and trade deficits of the United States;
— to the persistent trade surpluses of Japan and Germany;
— to the resulting fear of protectionism; and
— to the fear of returning inflation.
In the face of these, My Lord Mayor, it is time for all countries to go back to fundamentals.
Sound policies are sound for all times.
As we in this country know, they enable us to withstand the storms.
The first fundamental, sound money and low inflation.
In the short term it was right to provide liquidity for the markets.
But in the longer term you cannot buy sustained growth with higher inflation.
Second, prudent finance and living within your means, maxims easy to state but which require perseverance to apply.
And I may say in passing, those maxims apply not only to the finance of individual countries but to the budget of the European Community as well.
Third, removing the obstacles to enterprise—a major task in this country, with the excellent results we are now seeing.
Last week's unemployment figures—showing a drop of over 400,000 since last I spoke to you—were very good news.
Fourth, the principle of free trade, so vital to avoid recession, must be fairly applied.
Current account surpluses can't be achieved by all countries simultaneously. Moreover no country should seek to run its economy and society in such a way as to entrench a massive and permanent trade balance in its favour.
For that could only be at the expense of others.
That is one reason why the current situation cannot be laid only at America's door.
Indeed, we all have reason to be grateful for President Reagan 's strong and determined opposition to the protectionist measures which are currently before Congress.
These four principles practised in each major country are the key to further sustained growth in the world economy.
No international agreement can ever be a substitute for them.
In truth, no international agreement can be effective without them.
The events of the last few weeks don't call for changes to these principles, they call for their firm and steady application.
But, some of you may wonder: haven't we applied those very principles consistently in this country?
And ought we not therefore to have escaped the worst of the stock market storm?
In today's world economy it simply is not possible for any country to keep dry while the rest get wet.
And I'm not using “wet” and “dry” in the political sense.
Markets are global.
Trade is global.
So every major country must be prepared to take the necessary action to secure a sounder balance in the world economy.
Ronald Reagan The President and Congress of the United States are still negotiating to secure further cuts in the budget deficit.
The overriding need is that those cuts should be sufficient to restore confidence, clearly and decisively.
Those in the United States with responsibility for these decisions, who are receiving contradictory advice from their own economists, should heed the lessons of our own experience.
In the difficult days of 1981 we made a substantial cut in our own deficit.
That prompted 364 economists to issue a statement arguing there was no basis in economic theory for it to work and that it would deepen the recession.
They were wrong.
That budget was the starting point for more than six years of economic growth and we have continued to cut borrowing.
This year we have a growth rate of 4 per cent and very nearly a balanced budget.
Mr Lord Mayor, other countries must take action too if the risks of recession are to be avoided.
But it must be action which fits their circumstances.
Those countries with a large trade surplus have a special responsibility.
Germany and Japan have, I believe, scope to expand their domestic economies without the risk of higher inflation.
Japan and some newly industrialised countries like South Korea and Taiwan, both of which have considerable surpluses, could and should take further action to open their markets.
We in Britain stand ready to do our part, together with the other major industrialised countries, to help restore stability to financial markets and to maintain the conditions for continued growth.
Trade and Agriculture
To do that, my Lord Mayor, we must tackle other fundamental problems as well, in particular the barriers to world trade.
Britain has already given a lead in getting rid of Europe's trade barriers, although there is a lot still to do.
We want to see trade in services freed just as much as trade in goods—and this is of particular interest to the City.
I hope our industries will also respond to one of the most exciting projects of the century—the Channel Tunnel.
I warmly welcome today's news that the equity for the Channel Tunnel has been successfully under-written.
The City's bold decision shows that enterprise is alive and well in Britain and the City of London is giving a lead in restoring confidence and in building for the future.
Or should I say digging for the future.
My Lord Mayor, tonight's splendid dinner must have made a welcome dent in Europe's food mountains.
Even so, agriculture is another area where there are damaging distortions in world trade, caused by countries competing with one another to give bigger and bigger subsidies.
Some of the consequences are absurd—out of all proportion.
For example, in Japan farmers are being paid eight times the world price to grow rice.
Or take an example reported from across the Atlantic: in the State of Iowa alone, farmers this year will receive more loans and other aid from Washington than all the nations of Africa get from the World Bank.
And in Europe, believe it or not, the subsidy for every cow is greater than the personal income of half the people in the world.
My Lord Mayor, that remarkable man, Abba Eban once said:
“history teaches us that men and nations behave wisely once they have exhausted all other alternatives” .
With agriculture, My Lord Mayor, we have surely exhausted all other alternatives.
It cannot be a no-go area for common-sense, where the laws of supply and demand cease to apply.
It is the responsibility of the seven Economic Summit countries, the EEC and other major agricultural producers to work together to reduce the level of subsidies, at a rate which allows farmers to adjust and plan for the future.
The Third Term
My Lord Mayor, I have spent some time on the financial markets and the action which is needed.
But let us not be diverted into an excessive preoccupation with the events of a few weeks.
Our third term as a Government began less than six months ago.
We were elected to carry through a massive programme of reform.
I assure you, My Lord Mayor, the recent financial disturbances have not blunted the edge of our determination or our enthusiasm:
— our enthusiasm for enlarging opportunities in housing and education, and for reform of local authority finance, all of special help to the inner cities;
— and our enthusiasm for home and wider share ownership, helped by a continued programme of privatisation.
Our future should be determined not by those who only find difficulties for every solution but by those who rise to the challenge of the future.
My Lord Mayor, that challenge is also very much in our minds as we look forward to the meeting between the leaders of the United States and the Soviet Union in Washington in just over three weeks time.
But, with our passionate belief in freedom, we need also to have in mind Lord Salisbury 's advice: trust not for your security to the rightness of your cause but only to a sure defence.
The NATO Alliance remains the cornerstone of that defence.
Over the next few months sadly it will lose two of its most distinguished leaders; Lord Carrington , outstanding as NATO's Secretary General, to whom we pay a warm tribute; and Cap Weinberger , the United States Secretary for Defence, who has been as true and staunch a friend to Britain—particularly in the Falklands War—as I hope we shall always be to the United States.
The debt which free peoples owe to the United States is beyond measure.
When President Reagan and Mr. Gorbachev meet in Washington they will sign a Treaty which, for the first time ever, will reduce nuclear weapons.
That agreement will be the reward for years of constancy in defence and firmness in negotiation.
It has Britain's full support.
It is good for our security and it is an important step towards a more peaceful and stable world.
I hope that, by the time I speak here next year, it will be followed by further agreements to reduce American and Soviet strategic nuclear weapons by fifty per cent, and to eliminate chemical weapons in which the Soviet Union has such a massive superiority.
We can take encouragement, too, from the bold changes which Mr. Gorbachev is introducing in the Soviet Union.
Soviet leaders now recognise that only greater open-ness, greater enterprise, more personal responsibility will bring the higher standards of living that the Soviet people want.
It takes time to see the results of major changes in policy.
The problems are quick to emerge.
The benefits take longer.
The Soviet Union is no more immune than the rest of us from life's J curve.
Mr. Gorbachev is sure to encounter many obstacles—indeed it is clear that he is already doing so.
But he is a man of great courage and I believe that he will persist.
Every enlargement of choice and of human liberty enhances mankind.
The prize is great and the attempt historic.
We support and applaud it.
We can't predict now what the end result will be in the Soviet Union; and it has to be said that so far there has been little change in Soviet foreign policy.
We mustn't fall into the trap of thinking that an agreement on medium range nuclear weapons will by itself make the world safe for democracy.
We shall always have to maintain our defences in order to guard our freedom.
That means that we shall continue to rely on the deterrence provided by nuclear weapons.
They have helped keep the peace in Europe for over forty years, and continue to offer the best guarantee for the future.
The new John Galvin Supreme Allied Commander in Europe put it very well when he said recently: “it's not a nuclear-free Europe we want, it's a war-free Europe” .
We shall also need all our strength and determination in dealing with terrorism.
After the savagery of the bomb at Enniskillen on Remembrance Day, and the discovery of the massive shipment of arms for the IRA, surely every European country will take all possible steps to see that terrorists are denied a safe haven.
There can be no compromise with terrorism.
Treating with terrorists can only lead to more bombings, more violence, more people murdered.
The best defence against terrorism is to make clear that you will never give in.
Yet My Lord Mayor, out of tragedy there often comes hope.
The brave and noble reaction of the bereaved people of Enniskillen has had a profound effect on all who witnessed it.
They had no room for hate.
Instead by word and deed they reminded us of the boundless charity of the human spirit.
There could be no greater inspiration, no greater hope.
My Lord Mayor, this Government's policies recognise and build on the strengths of the British character.
We did not instil enterprise and initiative.
Those qualities were always there.
We released them.
It's not the character of the British people that has changed over the last eight years.
It is their perception of what they can achieve with a Government which is on their side.
They always wanted to succeed.
Now they expect to succeed.
And they do succeed.
That, My Lord Mayor, is the heart of the matter and the measure of Britain's achievement.