Full Text Of George Osborne's Speech To CBI Conference 2006

Thank you, John, for that introduction and let me straight away apologise that David Cameron could not be here today.

He has this morning arrived in Basra, to assess for himself the current situation in Iraq and speak directly to the ommanders on the ground both in Basra and Baghdad.

He felt, and I am sure you agree, that it was important to do that before the Baker-Hamilton Commission publishes its Report in the US. For that report will shape the future of our involvement in that troubled country.

Mind you, believe some of the press reports and you'd think that the CBI Conference is almost as dangerous a place to be for the Conservative Party leader.

It is a paradox that at the very moment when we have caught the political imagination of the country, and are engaging with individual businesses as never before, some claim that we do not understand the importance of
business.

Let me confront this head on.

We understand how important you are.

We understand that without successful businesses there is no prosperity, no jobs, no funding for public services, no rising living standards or general well-being.

We understand today, as the Conservative Party has always instinctively understood, that without a strong free economy little else can be achieved.

But in return, understand us.

When we put on to the centre of the political agenda issues like the environment or social responsibility or flexible working that is not because we are somehow 'anti-business'.

It is precisely because we do understand the way that modern businesses operate. It is because we recognise the new challenges that you face.

I don't think it is a coincidence that the most successful businesses I have met, in the eighteen months I have been doing this job, are also the ones that have taken these issues to their hearts.

When BP and Shell invest in renewable energy that is not anti-business.

When Tesco reduces its energy use and Kingfisher promotes forest stewardship in fight against climate change that is not anti-business either.

It is not anti-business to champion flexible working.

I've sat with Andy Bond, the Chief Executive of Asda who is speaking at this Conference later, and the ASDA Board in Leeds. They told me that flexible, family-friendly employment practices are not a burden but a boost to the productivity and performance of their business.

Richard Lambert, your thoughtful new Director, was not being anti-business when he promoted social responsibility in the Lambert Challenge.

David Cameron and I went to the most recent meeting of Business in the Community and listened to the country's leading Chief Executives explain why corporate social responsibility is now a way of life for them.

For too long my Party abandoned issues like the environment, flexible working, and social responsibility to our opponents on the left.

And the result was that there was no coherent political voice there to say: Can't we work with business, get you involved, harness your experience and talent, so that we have actually got a chance of achieving something?

So I make absolutely no apology that we have been talking about the new business agenda.

We are not just engaged in this debate - I believe we are helping to lead it.

I want to work with you as we answer the big challenges this country faces in the next decade.
Those challenges do not come bigger than globalisation. I congratulate you on the range of overseas speakers you have at this Conference. It is a powerful symbol of how open Britain is to doing business with the world.

I think it is one of the remarkable things about this country that we are almost the only advanced western economy where you will not hear the siren calls of protectionism.

Neither of the main political parties in Britain now even flirt with the idea that we might block foreign take-overs, shelter national champions or prevent outsourcing.

That is, sadly, not something Hank Paulson could say of American politics or Jean-Louis Beffa could say of France.

The greatest threat to the progress of our global economy comes not from the developing world but from the developed - from those who, faced with the flight of manufacturing jobs to China or services to India, believe we
can pull up the shutters.

We have seen it in this country with the European Union quotas on textiles and shoes. - a narrow short-sighted gesture that hit Britain consumers and British retailers.

So we all have a responsibility to make the case for a globalisation as a force for good.

A force that will lift two billion people - one third of the world's population - out of grinding poverty in the next decade.

These people will make the things we buy and, we hope, buy the things that we sell.

It is a great opportunity for us. Eighty million Chinese people bought a mobile phone last year - imagine how many will want to buy a phone next year? Think how many will want reliable, transparent banking or sophisticated pharmaceuticals.

We should be doing much to increase our exports to these fast growing economies, yet in China and India I have heard the same complaint again and again: we do not see enough of Britain here. Our exports to China and India
make up just 2.5% of our total. Globalisation is an opportunity, but it is also a huge challenge - for you
in business, and us in politics.

How are we going to compete against countries with low wages and high ambitions?

I think there are quite a lot of lazy assumptions out there that we need to confront. There's the assumption that we'll do the clever stuff, we'll move up the value chain, and leave the Chinese and Indians to do cheap things.

Let me tell you - no one has told them that.

I was in India with David Cameron in September. We saw internet start-up companies in Delhi to rival the start-ups I saw in Cambridge a couple of weeks ago.

We met with Ratan Tata in Mumbai, whose companies are setting up engineering research facilities in Coventry and a call centre in Northern Ireland. We had lunch with Anand Mahindra, who you have just listened to, and talked
to him about his plans to launch a Mahindra hybid car into the UK market. And we pressed the Indian Prime Minister to further open up his economy to, among others, British retailers.

There is an ambition, an appetite for hard-work, a drive to succeed in countries like India which I have to say I think is lacking in too much of this country.

The second lazy assumption is that because our Government talks about China and India, about the need to meet the big challenges, that that amounts to doing something about it. I suspect you will hear a lot about tough choices and big challenges from my political opponents when they speak to this Conference.

But remember this: for a decade they have been talking about education, but we have one of the weakest skill bases in the OECD and our exam standards are declining. Despite talking about an "integrated transport strategy" your figures show that congestion is costing British business £20 billion every year.

Despite calling for "dignity in retirement", our pension system, which was once one of the strongest in the developed world, is now one of the weakest. Pension fund shortfalls have been a major drag on business
investment and expansion.

Despite the machismo on energy security and nuclear power, not a single nuclear power station has been built in ten years. Last winter you paid the price for a lack of action on gas liberalisation in Europe. Our development of renewable sources lags far behind some of our competitors. In the Mansion House speech earlier this year, Gordon Brown even had the audacity to say that "progress" demanded a "competitive tax environment".

But as Richard Lambert has said today, our economy is becoming less and less competitive.

70% of business leaders in the CBI survey published today believe that the UK is a poorer international business location than it was five years ago. Three quarters of you say that the corporate tax regime has got worse. Our business tax rates have gone from being some of the lowest in the developed world to some of the highest.

And our tax code has become far too complicated - it has doubled in size in a decade. You have to spend £5 billion just working out what tax you have to pay.

Add to that the problems we face with poor skills, a declining science base and a creaking transport system and there real grounds for concern.

The rise in unemployment - the largest of any major economy in the world over the last year - may be a portent of things to come. We hope not.

It is time for a new direction.

And it is my Party that is providing that new direction.

To put it bluntly, we are more likely to form the next government than has been the case for the last decade.

What can you expect from us? What can you expect from me?

Well you may have heard me say this already - but stability comes first. You tell me that low interest rates and low inflation are your number one priority - and they are mine too. We have published proposals to further entrench the independence of the Bank of England and make the appointments to the MPC more transparent. Properly independent national statistics are also important - so that we know the true liabilities of government and the full consequences of the deficit in the public finances.

But stability is not enough by itself to succeed in the global economy. We need to be more competitive.

That is why I would like to reduce taxes The example of Ireland shows what a low corporation tax rate can do. I could promise up-front tax cuts at the next election to win some cheap applause. But even the Chancellor predicts we will be borrowing £24 billion by then and so those tax cuts would not be sustainable. Sound money matters.

I would rather offer you a long term approach to lower taxes.

As the economy grows, and money comes into the Treasury, we want to share the proceeds of that growth between the spending on public services like education which our country needs and lower taxes which our economy demands. Those lower taxes must include lower business taxes.

I would also like to simplify radically the business tax regime.

That is a central recommendation of the independent Tax Reform Commission which I established last year, and which the Chairman of the CBI in Scotland - Melfort Campbell - served on with real distinction.

There is a challenge for you, however. Real simplification means removing complex business tax reliefs and then using the money for a substantial cut in business tax rates. Are you ready for that?

I have asked one of the country's leading accountancy firms to provide a detailed and technical plan for how it can be done. I would like to begin that radical simplification in our very first budget. The Stern Report lays to rest the argument that there is a trade-off between tackling climate change and having a strong economy.

Of course, international agreement is essential for really meaningful action on climate change - and we would like to see a global carbon trading regime. But Britain must also lead by example.

That is difficult to do when our carbon emissions have risen over the last ten years and continue to rise.

I note in today's CBI Survey that you feel that taxes on labour and profits are the most damaging, and that taxes on environmental pollution are the least damaging. That makes it even more surprising that the Chancellor decided to increase National Insurance and at the same time reduce the proportion of taxes collected by green taxes.

We want to go in the opposite direction. We want to shift the tax burden away from income and investment and onto pollution. Pay as you burn not pay as you earn. We are today publishing our first detailed consultation paper on green taxation - our plans for a new Carbon Levy.

This would replace the Climate Change Levy, which the Royal Commission on Environmental Pollution calls a 'blunt instrument' because it is based on energy use not carbon emissions.

I would like your thoughts and input into the exact design of the Carbon Levy - but let me stress, any additional revenues that it raises will be off-set by reductions in other business taxes. That is a guarantee.

So far I have talked about our approach to taxation. Let me tell you about spending.

Of course, we need properly funded public services. Our country's low skill levels and poor school standards are one of our great handicaps. Yet, at a time when our competitors are reducing the size of their governments, we are increasing the size of ours - and often with precious little to show for it.

I do not think that is sustainable. We would reduce the share of national income spent by government over an economic cycle. We would make sure our economy is growing faster than our government. We are also developing a series of reforms that would liberalise our economy and raise its rather dismal productivity growth rate.

Representing a constituency in the North West of England I am convinced that the best regional policy you could have is providing the country with a modern road and rail network. We will shortly publish proposals to do just that.

We are working on plans to force government departments into annual reductions in the regulatory burden they impose and our DTI team have just fought a fierce and Parliamentary battle on your behalf over the Companies
Bill.

We are also working on how we can get science back into our classrooms and help our universities get better access to venture capital.

Stability. Lower business taxes. A much simpler tax code. Spending control. A more competitive and dynamic economy.

There is still much more work for us to do.

We want to work with you to build our new direction.

You know better than most what British business wants.

But do not wait until the general election is called before you publish your manifesto for business - by then, for us, it is too late. Our own manifesto is already at the printers.

Instead engage with us now; work with us; help us develop our policy; tell
us and we will listen.

Yes we have an ambitious agenda - but, ladies and gentlemen, we live in an
ambitious age.