FULL SPEECH BY NICK CLEGG MP TO THE CBI ANNUAL CONFERENCE 2007

It’s a striking fact that the Liberal Democrats have had, for many years now, low poll ratings on the cornerstone issue of the economy.

I don’t believe this is justified. Having a highly respected, world class economist, Vince Cable, as our shadow Chancellor, and now acting leader, seems not to be enough.

Perhaps we have struggled because we have allowed ourselves to be seen as uninterested in business.

And we have been portrayed by our opponents as the high tax party, as if we advocate taxes for the sake of more taxation.

Under my leadership, both our low poll ratings on the economy and unfounded caricatures of our tax policies would come to an end.

Liberals, let’s remember, are the natural friends of entrepreneurialism. The only party that has always stood for free and fair trade. The party of Cobden and Bright, Cabdury and Rowntree.

And I, personally, have a longstanding commitment to business and economics.

I began my career winning a Financial Times prize for writing about economic reforms in eastern Europe – a prize awarded to me 15 years ago by the then editor of the FT, now your Director General.

I managed economic development projects in Central Asia.

I was an international trade negotiator – leading the EU team on China and Russia’s accession to the World Trade Organisation.

I was Trade and Industry Spokesman in the European Parliament, where I pushed through new Single Market legislation in record time, opening telephone markets across Europe to competition.

And I did some vital early work on liberalising energy markets. Breaking down damaging monopolies has been a centrepiece of my work – and my political philosophy.
I believe this government has let business down.

In Westminster, I was at the forefront of the campaign against the extradition of the Nat West Three.

I called the first parliamentary emergency debate in over four years, and continue to make representations to the government on the issue.

From the massive, irresponsible credit expansion to issues like the Nat West three - this Government is simply getting it wrong.

The Brown-Darling partnership is now putting economic stability at risk and the conditions for long-term business success in danger.

They have arguably overintervened where they didn’t need to, and failed to intervene where they should. Government intervention in the economy should be light but effective. But Governments do need to intervene when markets fail. This includes intervention to stop monopoly behaviour, to protect consumers from price fixing and irresponsible lending, and to limit externalities like pollution.

The Northern Rock crisis has exposed some systemic regulatory failings.

At this stage the absolute top priority is to make sure we retrieve the £25bn of taxpayers money that has been invested, whilst safeguarding the significant contribution of Northern Rock to the economy of the North East.

Any private sector offer must be balanced against the alternative of bringing the bank into interim national ownership so it can be sold on.

But in the longer term, we need to look again at tripartite banking regulation to ensure we don’t find ourselves in this position again.

We need an independent inquiry, and where necessary an overhaul of the tripartite system.

Whatever happens, the Bank of England needs – at a senior level – to secure greater expertise in relation to the workings of the financial markets.

While the Bank’s macroeconomic competence is hugely respected, in the area of markets it still seems too much like a gentleman in a world of players.

The government, for its part, has to deal with the fundamentals of economic success. I believe Government must be an enabling state, laying the foundations for economic success - a skilled workforce, strong competition policies, a tax system that is fair and regulation that is effective and proportionate. But then stepping back to let business get on with the job of creating wealth.

Globalisation is one of the greatest forces of our time. But it has down sides as well as up sides.

Both business and government have a role in recognising that, and mitigating the helplessness that people feel in the face of untrammelled globalisation.

I believe multilateralism must be at the heart our response.

Britain wouldn’t have anything like the international leverage we have without our role in the European Union.

The EU has transformed itself into one of the most sophisticated responses to globalisation there is.

And it is leading the way in market-led responses to climate change, with carbon emissions trading.

And yet the Government does its best to pretend the EU doesn’t exist, while the Conservatives are flirting with an agenda that will lead us out of Europe and into isolation and decline.

Of course Europe needs reform – it must become more transparent, and it must return some powers to focus on what it does best.

But our increasingly unserious engagement with Europe is a betrayal of our business interests.

For starters, I want to see the UK play a fuller leadership role in the EU and the WTO to bring the ongoing WTO Doha Development Trade Round to a successful conclusion. Business groups have, if we’re frank, not been forceful enough in explaining the importance that the WTO talks should succeed. I was present at the inception of those talks in Doha. I am in no doubt that their failure would lead to a rash of trade unilateralism and protectionism which would be disastrous for British business.

Globalisation is also bringing increased numbers of migrant workers to our country.

Our economy has grown enormously on the back of migrant labour in the last 10 years, and will need migrant workers in the future.

Yet a mood of protectionism is starting to take root. Gordon Brown’s farcical pledge to deliver “British jobs for British workers” was, I fear, part of a growing trend.

We need to plan better for the effects of inward migration. We need to focus on integration as well as immigration.

But the fantasy that Britain can – or should – somehow turn off the flow of migrant labour like a tap is not only wrong, it is dangerous.

At the same time, large flows of skilled migrant labour have made it easier for us to ignore an unskilled underclass in Britain itself. We face a huge skills deficit in this country.

It is a national disgrace that as many as a quarter of our young people can’t read and write properly.

I’ve promised to put £2.5bn into boosting education funding for the poorest children. And to help tackle the skills gap for adults, I’ve pledged to change the way we charge for work permits to raise extra money to train domestic workers.

In a world of increasing mobility – of finance, trade and investment, as well as people, governments must compete to create the right conditions.

On too many measures Britain is struggling to compete against both traditional competitors in Western Europe and the United States but also emerging economies like India, China and Brazil.

Tax is central to our competitive edge.

The overall tax burden has gone far enough.

Liberal Democrats have always been ahead of the curve on the tax debate.

We called for an extra penny on income tax for education when the share of GDP taken by public spending was at a post-war low.

Now it’s at a post-war high. So we have moved to a tax neutral position overall, and are proposing to reduce the basic rate of income tax just 16p – and increase it on polluting activities instead.

For business tax, we should go back to the old principle of lower rates, and fewer breaks.

Including for Capital Gains Tax. The CBI was right to be up in arms about the way reforms have been brought forward.

But I’m afraid I’m no fan of taper relief. Taxation should be simple.

I don’t often agree with Nigel Lawson, but on this, I do.

I see no reason why income and capital gains should be taxed differently. And that’s what we’ve proposed - a fair, progressive and simple system with no perverse incentives.

I do want to look at retirement relief, so entrepreneurs who sell their business to pay for their pension don’t lose out. Britain needs to encourage, not undermine entrepreneurship.

There is a difference between people who sell a business they’ve devoted their lives to and a private equity billionaire.

But my ambition on tax is this: instead of a system of mind-numbing complexity, of benefit only to tax accountants, I want a simple, competitive system we can all understand.

Conclusion

Too many politicians take wealth generation for granted.

You are the people who create the revenues which allow Government to deliver public services.

You are the people whose work allows politicians to try and build a fairer society, where everyone has the opportunity to fulfill their potential.

Politicians should never be in the pockets of business, just as much as business should never be in the pockets of politicians. As a liberal, I abhor all forms of cosy corporatism.

Instead, the relationship should be one of mutual respect, underpinned by a a clear understanding of the privileges and responsibilities of both politics, and business.

26 November, 2007