Tuesday 9th October 2012
CONSERVATIVE PARTY CONFERENCE, BIRMINGHAM
SPEECH BY THE RT HON DR LIAM FOX MP TO THE CARLTON CLUB POLITICAL COMMITTEE FRINGE EVENT
a PRESCRIPTION FOR VICTORY
[as delivered]
I was seventeen years on the Front Bench and was always a great believer in collective responsibility; so I will begin by saying that I am an un-reconstructed, free market, liberal, Eurosceptic, Unionist, Atlanticist and if that offends any of you, I might suggest that you would want to leave at this particular time so as not to be offended as the evening goes on.
I was speaking at a meeting earlier today, I was doing an interview rather, and one of the press said to me that isn’t it terrible that you come in here and you have to face such electoral unpopularity. I said: “You don’t know what unpopularity is.” In the 1980s, if we had been having this Conference, there would be a thin blue line of policemen holding back the baying mob asking for our blood, but today we are confronted with a wall of cynicism and apathy and that is one of the biggest problems that we face in our politics today. There’s the “you can’t do anything about it tendency” out there and we in this room must immediately dispel that, because if anybody knows that you can make a difference, it is us - Because we made a difference.
Back in 1979, and many of you in the audience are - it seems an increasing number in every street are - too young to remember what the feeling was like, but back in 1979, we came to office having had 28% inflation - Almost unimaginable today. Unemployment had trebled in the year before that General Election, we lived in the shadow of the fear of the Soviet Union and the Cold War; we were terrorised by the Trade Union barons who told us when we could, and could not, have access to our public services; we were strung with all sorts of public state-owned industries which were so massively uncompetitive that they were sucking the life blood out of our economy; and we turned it around. Not around for our own country, we turned it around with a model that was replicated across the free world. That is what it is possible to do if you believe.
And what we must do as a Party is believe in ourselves; what we stand for; believe in our people; and believe in our values and I want to turn to all of those.
As a doctor, when confronted with a patient with a problem; the logical sequence was to come to an appropriate diagnosis; determine the appropriate treatment; and then persuade the patient that this was the best treatment to have - however much they didn’t want to have it. And politics is pretty much the same, or at least it should be.
I think we need to be very frank about the diagnosis, and be very frank with the patient about what the prognosis will be if we don’t take the right treatment and I think we should begin with the economy.
Now, we are regularly told that the problems we face are because of problems in the global economy but the global economy was worth $30 trillion in the year 2000. The global economy today is worth $69 trillion. So why, you might reasonably ask, have we not seen more of that growth in the UK or in Europe or in the West and the answer is very simple. We owe too much money; our debt is too high; we are over-regulated and we are over taxed. Because there is plenty of growth going on in Asia Pacific where none of those things actually apply - So we need to be very frank about the economic situation. Yes, we inherited it, but people don’t want to hear that all the time from us, however true it is.
We have a major problem in that our electorate expect to have a living standard, which is way beyond the income that we have as a nation for the foreseeable future. This is why we have to be very frank, and say we are not, at the moment, in a cyclical correction which is what we have seen mostly in past decades in our economy.
We are in a structural correction in terms of a very changing global dynamic that we need to take account of and that is not going to be a three year problem. It is going to be a ten or fifteen year problem. So there is no point in pretending that our answers will be short term. Short term-ism is Labour’s way and partly why we got into this problem in the first place. We need to take a longer term view.
We inherited the worst peacetime deficit in our history. It is going to peak at something like 80% debt to GDP ratio and we need to recognise what that means in the short term and in the longer term. We have to get our debt down.
The Chancellor this week, very correctly made what I thought was an extremely good exposé of the problems of the British economy in a very stark way when it was tempting to be a populist. He set out an uncompromising picture of the problems we face, why we have to get further reductions in public spending and why that largely has to come from our bloated welfare budget. All of those things were right and courageous for him to say and he should be applauded for doing so.
But we also need to get a growth agenda and for a growth agenda we have to ask ourselves the question. Where will growth come from in our current economy?
It is not going to come from individual consumers because individual consumers are quite rightly paying down the debt in the way that we asked them to do and in the long term that will be for the better health of our economy. It is not going to come from government expenditure because there isn’t any money - but even if there was money, it would still be the wrong thing to do, because the last thing we require now is for the growth consuming bit of our economy to grow and to crowd out the wealth creating bit of our economy. We have had too much of that in recent years and the public sector in relation to the private sector is too large, so I think we are only going to get growth by what I would call unfreezing the icecaps of our own economy - Money that is locked up in regulation and taxation.
We are looking at businesses in Britain who are sitting on a great deal of cash but not spending it. And they’re not spending it because the conditions are not right to do so. Because they believe that regulation is too tight and taxation is too high. You talk to any small business in this country and they will say we could take on more employees, we could take on some young people, but if we take them on and they’re the wrong people, we will never be able to get rid of them. Last year our small businesses spent nearly £2 billion in industrial tribunals because, even if they have the wrong people and they are not at fault, do you know what happens? The lawyers say “just settle” and that is an enormous burden to small business and it is now becoming a barrier on the way to better employment.
So I want to see a change in our tax culture and the one thing I would like the Chancellor to do in December is to say we are taking Capital Gains Tax down to zero for a period of three years and then returning it to 10 per cent. Because if we do, we will bring forward transactions already in the economic pipeline and both business consolidation and in the housing market we will create activity today that we need not in the future and we will send a big sign, especially over the City and London, that says ‘Britain is Open for Business’.
If I am sitting on a multi-billion fund in Asia Pacific and I have the choice between investing my money in a country with zero capital gains tax or one with 28% capital gains tax, it doesn’t take rocket science to work out which one I would invest in.
I put it this way - No risk, no growth. No growth, no re-election.
I find that formula normally concentrates politicians’ minds in a rather wonderful way.
So we do need to get some real change.
We have done wonderfully well in beginning a deficit reduction programme and we have to give credit to the Liberal Democrats for going along with us on that and welfare reform. But, much as I was flattered by Mr Clegg setting out in his Party Conference speech myself as the only named Conservative he took a pop at, he is seemingly regarding deregulation as just Thatcherite ideological economics. It is not ideology, it is history.
We did it in the 1980s and we got people back to work, we got our economy growing and we got our country moving. It worked then and it will work again. Supply side economic reform is what our economy is crying out for - including labour market liberalisation - and if we do it, we will avoid the economic and social catastrophe that has faced some parts of Europe. Countries like Spain, with 48 per cent of their young people out of work.
It cannot be morally acceptable to believe that you should keep that generation out of work in order to pay for the social privileges already in place and I think that that is the challenge that we should throw down to our Coalition partners.
That brings me on to the second big issue that I think we have to be very frank about in the run up to the next election and that is Europe. Now, I get told “don’t talk about Europe... why do the Tories obsess about Europe? ...why don’t you talk about the economy?”
Well, actually, it is one and the same thing. Over the last ten years, we have imported into British business costs from EU regulations of - wait for it - £124 billion worth of consolidated cost. Add on top of that, the cost that we are paying of £6.9 billion to the European budget and you arrive at a very big number. We - if we were able to manage to get that down - would be able to create a Britain which was much more competitive in a global context. We have to start to tell our country that nobody owes us a living and we are part of a very competitive global economy which, as I say, has been growing over the past decade but we have been unable to take advantage of it because of these restrictions that we have in cost, and regulation, and tax structure, and so on. So we do need to talk about the European Union and what relationship we want to have with it and that will be forced on us by the situation in the Eurozone at the present time.
Now, how wise John Major looks in retrospect, having said “Why would we join anything -- why would we go into anything that doesn’t have an exit? And today, as we look at the experience across the Eurozone, we can see just how wise he was to do it. The Euro was flawed from the outset because a number of countries were allowed to join the Euro who never met the configuration of criteria that was set out for them in the convergence criteria themselves.
Then worse, having allowed the wrong countries to join the Euro, the problem was exacerbated by the fact that they were allowed to follow fiscal policies which caused further divergence. That is still happening today because you have Germany - which in April this year clocked up its twenty year unemployment low with falling youth unemployment against the trend in the rest of Europe with a trillion Euros of exports last year - and Greece which is still diverging away with still too many holidays, too little tax being collected, and an economic culture which says “let’s have more time off and let’s retire earlier”.
One of the reasons why there is a problem in the Eurozone is because European leaders continue to make a flawed analysis of the problem because they believe they are dealing with a fiscal crisis and what they are actually dealing with are the fiscal symptoms of an economic and cultural crisis where European economies are still diverging. You can throw as much European public money - as much taxpayers’ money - as you like at the problem and you are never going to make Thessalonica in to Dusseldorf any day soon and that is going to be the continuing problem.
Now I think the reaction of the Eurocrats, whose lifelong work - whose career prospects and remuneration - depend entirely on furthering the European project, will first of all be to do nothing and hope it goes away because that is generally what they have done in the past. That is not going to work.
Part two will be let’s throw European taxpayers’ money at it, or borrow more money and throw it into the hole and hope that we can cover it up until we can get the next Euro summit. And why not?
If you are not responsible for raising the money, why would you care how it is spent? And that lies at the heart of one of the problems in the democratic deficit in Europe. My real worry is that when neither of these work, they are going to take - in my opinion - the worst possible option which is try to manage a Greek default. And we know, from our own experience – hands up, remember that day in the ERM – it’s a one way bet for markets if one country is forced by the markets out of the Euro, they will be preparing their Hedge Funds to deal with the next country and the country after that and the country after that, and we can all see where that will lead.
The best way, if they want to maintain the Euro - and God knows why they want to - but if they do want to do that as part of their ever closer project, they have to have a managed exit of a number of countries with consolidation into a smaller zone and that changes the political dynamic for this Party because if our European partners say we want ever closer union - possibly economic and even political union - we are perfectly within our rights to say; then you are fundamentally changing the Europe that we joined. You are creating something very different to that which the British people gave their assent. And if the answer to your problem is more Europe, then the answer to our problem is less Europe.
What I want is to see us keeping faith with the British people and I want to see us having a slogan at the next election which says “Back to a Common Market.” Back to an economic and trading relationship with Europe that parts all the political interference in the running of our economy, our workplace, our legal system, and all the other things that we don’t like.
Today only 27% of voters in Britain were eligible to vote at the Referendum of 1975 which means that 73% of our voters have never given their assent to our current relationship with Europe and I think it is time for us to trust our own people. So what I want us to do in the run up to the next election - and I believe that it would be a vote winner - is to say what sort of relationship we want for our country with the European Union and I want a customs union, and a Single Market, and no more than that.
To say, that we are giving a pre-set length of time for renegotiation and that we will hold a referendum at the end. Then our European partners will know that if they give us what we want, then we will stay in on that basis and if they refuse what we believe to be in Britain’s best interests, there will be a risk that the British people will say “Thank you very much but we have now decided that leaving the European Union is in Britain’s national interests.”
And let me warn you that if we are unwilling to say that we can never conceive of leaving, then we will be unable to negotiate because we will have denied ourselves the hand we require to get the best deal from our European partners.
And those voters who are sitting out there in the UKIP column of the opinion polls, we need to get a proportion of those back to give us an overall Conservative majority at the next general election. Much as it has been fun dealing with our Lib Dem friends, I would much rather be dealing purely with Conservatives inside the government which is what we have to aim to do and we are going to have to take on some fairly difficult issues to be able to do that.
So that is the policy side but there is also a thematic side to the Party that I finally want to touch upon.
I joined the Conservative Party in 1977 because I believed it was a genuinely meritocratic party. I believed that given the problems we faced in the late 70s, it was a party with open arms for anybody, wherever you came from, whatever your background, whoever your parents were, whatever regional accent you had, whatever type of housing you came from, whatever school you went to and that is what the Conservative Party needs to be.
Mrs Thatcher won her biggest victory in 1979. We lost our share of the vote in 1983 and 1987 but we won in 1979 because we didn’t try to shift the Party to the Right or to the Left to suit the fashion of the day. We tried to expand the range of the attraction of the Conservative Party and in history when we have been a broad coalition internally, we have avoided coalition externally.
To somebody who was born in the West of Scotland in a council house, frankly, you didn’t join the Tory Party because you were an ardent careerist. You had to do it out of a sense of belief and out of a sense that what the Tory Party promised was something better than the defective social slavery and welfare dependency that the Labour Party so loved because it kept people voting for them and under the Labour Party’s control. We liberated our country from that and we must do it again. We must find the language to do it, and I think we must talk about meritocracy and opportunity. And opportunity doesn’t just mean getting from the second top rung of the ladder on to the top; it is also about getting from the bottom rung onto the second bottom rung of the ladder.
We have to find ways of helping people improve their lot economically. We need to get back to some of the values we had of sound money; of living within your means because otherwise we simply transfer our debts and our spending of today on to the next generation which is fundamentally wrong and I think both economically and morally unsound. We have to talk about the concept of sacrificing today to save for tomorrow so that we can give the next generation a better start than we had but that is undermined today by our worship of celebrity culture and where instant gratification is so valued.
We need to get back to the long term and encouraging people to make difficult decisions today so that others can have a better chance tomorrow. I think we need to be brave and talk about our values.
I give you one simple example; the Cold War did not end. The Cold War was won and it wasn’t just won by the fact that we were militarily superior and economically superior to the Soviet Union. It was also won because we believed that our way of life and our value system was better than theirs. That the freedoms that we enjoy; our freedom to exercise our liberty in a free market; our system of government that gave everyone a say in who formed the government; our rule of law that applies equally to the governing and the governed were better than Communism.
Today we live in an era where we seem to have a constant concept of moral relativity and the value of the view that you have is determined by the strength by which you hold it, not by any reference to empiricism. We need to start to be proud of what we stand for, and whom we are, and our own philosophy, and the ideology that we brought forward over the years to improve our country and, above all else, we have to be willing to place faith in our own people and to recognise what they are capable of if we remove the dead hand of the state from their shoulder and allow them to prosper by their own creativity and entrepreneurial talents and their own natural bravery.
I think that in our society the people I have the greatest loathing for are those liberal historians who want to apologise for everything in our history, who want to make us feel guilty about our past, who don’t recognise the strength of our conventions or our traditions or the things that make us feel good about our own country. In this year, the Olympics taught us what we could actually do as a country and deliver on time and with quality. In the Diamond Jubilee year which has reminded us of so many of the good things about our own country, it is time for us to stand up and say if we have faith in our own people - if we believe in ourselves - if we believe in the values that we hold - then we can make a difference.
One final thought is this – politics, whether local government, national government or international level is a very simply thing. It’s binary, you either shape the world around you or you will be shaped by the world around you. I believe that who we are, what we stand for, what is in our history, and what is in our beliefs, is the best route map that any country can have for the future and if we believe all those things and if we express them clearly to our people, they will put back in our Party the faith that they have so often given us in the past, and return us to be the government that governs not in our own interests, but in that of our country. What greater compliment could any Party have than that?