Good morning – thank you so very much for asking me to come and speak today at your Annual Conference.
This has been a quite extraordinary week in Parliament. No doubt many of you will have been following what has been happening on your television screens. Two weeks ago: Britiain’s biggest selling newspaper – the News of the World existed – now it doesn’t; News International, one of the most powerful media organisations in the world was seeking to fully acquire our leading satellite broadcaster, it has since withdrawn its bid; and, Rupert Murdoch, the man leading that media conglomerate, has been listed three times in Time magazine’s annual list of the 100 most influential people in the world in recent years – some would argue he may not feature at all in it next time.
These events follow the dreadful revelations of the activities of News International journalists, in the face of which, on the part of the people, Parliament has said up with this we will not put. A free and fair press is essential to the proper functioning of our democracy but it must be responsible too – that is what we are all now working towards.
However, notwithstanding the dominance of this news affair, the bigger story for people up and down the country is the economy.
In that context I want to start by thanking you for what you do because all of you gathered here today are part of the lifeblood of the economy of this nation. I lead for Her Majesty’s Opposition on Small Business & Enterprise – many of you are small and medium sized businesses and, if not, many of your customers are. As such, as businesses, you are responsible for six out of ten private sector jobs and almost half of private sector turnover in Britain today.
I know bigger businesses are here too. Collectively, you are the motor which drives our economy. As legislators, get policy on business wrong and you’re in trouble; get it right and you’re on the right track.
And it is far from clear that our economy is on the right track.
In the last quarter of last year, GDP decreased by 0.5%; in the first quarter of this year it increased by just 0.5%. So the economy flatlined. Second quarter figures for 2011 are due on 26 July and we will be studying them closely. Those figures would have to show 0.8 per cent growth for the economy to be back on track to meet the forecasts of the Office for Budget Responsibility, but other forecasts are much more pessimistic.
The retail sector in particular has suffered as consumer confidence has fallen and demand for the goods that you provide has dropped. 12,000 shops closed their doors on UK high streets last year. In the last month Jane Norman went into administration, Carpetright shut 75 stores and Habitat put 30 premises outside London into administration. Retailers like HomeForm, All Saints, HMV, Comet, Mothercare, JJB Sports and Thorntons have all been hit.
Local independent shops – particularly relevant to you – are struggling too with high street voids on the rise again – approximately 50,000 units are now not currently open to business on our high streets, showing just how challenging the situation is on the ground.
You will say – tell me what I don’t know? What would you do about all this. First, we agree that we need to pay down the country’s debts and reduce the deficit which built up as a result of the recession triggered by the global financial crisis brought about in the financial services sector. However, we believe that the deficit reduction programme of t he government goes too far and too fast.
Last week the former US President, Bill Clinton – under whose Presidency more than 23 million jobs were created, (more than under both Presidents Bush and Reagan put together) – said of the position adopted by our government that you have got to allow the recovery to settle in otherwise you risk choking it off.
He said that because of the incredibly hasty deficit reduction programme being implemented “there’s a good chance economic activity will go down so much that tax revenues will be reduced even more than spending is cut and [the] deficit will increase”
If the economy is not allowed to recover, we will have more people claiming benefit, less people paying income tax and less people buying your goods.
That is why we would be cutting the deficit in a tough but balanced way, halving the deficit over four years – instead of looking to completely eliminate it. You would see a fair balance between promoting growth and jobs, some fair tax rises and some tough spending cuts under a Labour government.
Second, looking at the specifics, I know VAT is a great cause of concern to you for many reasons, not least because of the impact of rising fuel prices on your businesses.
Independent research by the British Retail Consortium in May last year found that increasing VAT this year to 20% would cost 163,000 jobs over 4 years and reduce consumer spending by £3.6 billion over the same period. Earlier this year four fifths of retailers said the VAT increase would undermine sales and a third of Federation of Small Businesses members said they would lose customers as a result.
In government in our November 2008 Pre-Budget Report, we enacted a temporary cut in VAT from 17.5% to 15% – this reduced the tax liability for both businesses and households by around £11bn and increased GDP by 0.5 per cent. According to the Centre for Economics and Business Research, it boosted sales by between £8 and £9 billion.
This is why we are now arguing for a temporary cut in the VAT rate now from 20% to 17.5% to help you and your business. The government’s January VAT hike is costing the average family £450 a year – temporarily cutting it in this way would increase consumer confidence, put more money back in their pockets and boost the High Street and your businesses.
Finally, we would reintroduce a bankers bonus tax and do all we can to ensure banks lend to healthy, responsible businesses like your own to assist with cash flow and help you expand. I know the banks have been causing many of you a lot of stress and upset, given the difficulties you have faced borrowing from them of late.
We would use the proceeds from the bonus tax to:
create 90,000 good jobs, getting young people into work to make sure we don’t repeat the mistakes of past recessions when hundreds of thousands of young people were left unemployed for years;
build 25,000 homes to support small business generating more than 20,000 jobs and several times more in the supply chain; and,
increase by £200m the money available to support companies that want to start projects that will create jobs meaning more help for small businesses to grow in all the regions of the country.
All of this will create jobs and custom for your businesses and assist with completing the recovery.
With regard to bank lending, we would have given the agreement – Project Merlin – reached between the banks and the government more teeth. We would also have ensure the different funds that exist to assist business – like the government’s regional growth fund and the business growth fund established by the banking sector – do not exclude smaller businesses, as is the case at moment.
In conclusion, let me be clear that the reason we adopt this position is because the job of government is not to stand by whilst the economy flatlines but to be relentless and single minded in creating the conditions for private sector growth.
Everyone is this room – you work hard, play by the rules, provide local employment for people and recognise the role you play in the community in which you do business. I am incredibly ambitious for you – nothing gives me more pleasure than to visit a business see it thrive and, where you want it to see it grow.
We might disagree with the government on the deficit but we do agree that growth in this country will be private sector driven. We are asking one hell of a lot from you. The least we can do, is help you meet the challenge.
