David Cameron's speech to the CBI

David Cameron has set out the Conservative approach to dealing with the recession in a speech to this morning's CBI conference.

He was especially forthright in laying the blame with the Government for the fact that Britain is facing a deeper and longer downturn than any other industrialised nation.

"To argue – as some do – that this all comes from America is nonsense. Britain enters this recession with the largest budget deficit in the developed world. This is not America’s fault – it’s because no money was ever put aside for a rainy day. Britain enters the downturn with the highest level of personal debt in the world. This is not America’s fault – it’s because the Bank of England had its historic ability to call time on the levels of debt in the economy removed. And Britain enters the downturn with one of the most unbalanced economies in the world, far too dependent on housing, now in decline, finance, now in crisis, and government spending, now at its limit. That’s not America’s fault - it is the consequence of domestic policy failures."

He described his top priority now as "monetary activism":

“What does monetary activism really mean? First it means lower interest rates. This week the Bank of England themselves said that they had considered cutting interest rates by more but – in anticipation of a fiscal stimulus in the Pre Budget Report – had decided not to. We have consistently argued that government must not do anything to make further interest rate cuts less likely.

“But simply cutting interest rates and appealing to banks to pass on the cuts is not enough... So as well as lowering interest rates, monetary action must mean radical new measures to actually get credit flowing through to businesses, measures that recognise how existing banks are still suffering from the trauma of toxic assets and massive over lending, like a new institution to issue government guarantees for new lending, with a fee to cover the risk to taxpayers. The banks would still make the loans and still carry some of the risk, but a government guarantee would allow the banks to expand their lending.

He also re-iterated the measures he would implement to help businesses through the downturn:

"We would allow small businesses to delay their VAT payments by six months. That’s a £10bn boost to help small firms with cashflow problems. We will cut the small companies tax rate to twenty pence. We would cut employers’ national insurance by one percent for the smallest firms. And we would introduce a £3 billion tax breaks for jobs scheme to reward companies who take on new staff."

He had the following to say in advance of this afternoon's Pre Budget Report:

"The real story of this PBR will be our enormous deficit and out-of-control public finances and that’s where we need to learn the long-term lessons. The gap between the tax that comes in and the spending that goes out is likely to be almost £80 billion this year. That’s a mind boggling figure – bigger than what we borrowed in the depths of the last recession and this one hasn’t even properly started yet. This will only get worse. Next year, it could be over £100 billion. That would be another £4,000 for every family in Britain.

“Let’s put these figures into some perspective. We’re already paying more on debt interest than we do on schools and transport budgets and after this PBR, Gordon Brown will have borrowed more than all previous governments – combined. Let’s be clear about what this really means for us. They might be talking about tax giveaways but everyone knows that they’re throwing money at us now to take it away at a later date. That’s the thing about debt – you’ve got to pay it back sooner or later. And to pay back all this money would mean an eight per cent rise in income tax, or a six per cent rise in VAT, or a corporation tax rate of seventy-one percent.

And he summarised the three long-term lessons to be learned as:

• Never, ever again enter a downturn with such a massive budget deficit.
• Never again allow personal and public debt to spiral out of
• Never again let our economy become so dependent on such a small number of industries and markets like finance and housing.

Comments

[Deborah]

Eric Pickles put it very well on Any Questions last Friday:
"You can't live on tick 'cos sooner or later the tally man always comes round".

[Ian Bennett]

David - I'm sorry you will have to do FAR FAR better than that!

6/10 at best before an audience who want to be receptive!

[Malcolm Dunn]

David Cameron is right in his analysis of the situation. However rightly or wrongly business and the general public are looking for government to take the lead in providing solutions. Is what we are proposing enough to make a difference? Or is it possible for any government to propose solutions to bolster an ailing economy. At the moment and looking at the experience of Japan I rather doubt it.

[GB£.com]

"Never, ever again enter a downturn with such a massive budget deficit.
Never again allow personal and public debt to spiral out of
Never again let our economy become so dependent on such a small number of industries and markets like finance and housing."

"How?, How?, How?" we call replied.

[Watt]

The trouble we are in is the fault of the ruling political class. Parties need voters. They will do anything to attract and keep voters. Voters come sacond only to self regard and personal advancement, nothing else matters. Labour has spent the country's wealth on establishing the largest possible client state with a huge public sector full of unnecessary jobs, and a huge population of benefits recipients as well as unlimited immigration, with one purpose in mind, the unending rule of socialism. The ruling elite all have the same objective and their three parties are insulated from the public in the certain knowledge that the voters are contemptable idiots, easily led, fooled and defrauded of their wealth. They find it simple to take the people's money and use it to buy their client's votes.
The present economic problems are due to one simple cause. Governments in the West (The "Democracies") have all run their treasurie's printing presses until they are white hot. They have debauched the currencies as they always do when buying votes of the underclasses. Remember that the average IQ is average and that the majority of voters are, as their MPs realize quite stupid. Why else would they vote for the very gang renowned for eleven years of lies, fraud and dishonesty on a scale never before seen in this country. Could one of the other parties be better? No, they are all drawn from the same matrix.

[Joe James B]

Good. Some beef.

We need David Cameron to appear more.

What I would like to see is an emergency loan fund to get credit to small businesses. The government's plans look too timid to me.

This has to be a priority - perfectly healthy firms are being demanded outrageous terms and they will fail unless something is done very soon.