Mr. President, Deputy Mayor, My Lord Mayour, My Lord Bishop, it is a great honour to be your guest here in Birmingham tonight.
May I most warmly congratulate you on your speech. I greatly appreciate what you said, especially the forceful way you demonstrated your confidence and the confidence of this Chamber in the future.
This is the first major gathering of business people I have addressed since becoming Prime Minister. It is right that it should be here in the West Midlands, the industrial heartland of Britain. A region where over 2 million people are employed—nearly half of them in manufacturing. A City whose leaders have had a powerful influence on British national life for generations. Birmingham has been the pacemaker of British industry. And all this long before Government created a Ministry of Industry.
When it has prospered, so has Britain.
When it has faltered, so has the national economy. [end p1]
In short, what goes for Birmingham usually goes for Britain.
Many companies with world-wide reputations have grown up in the enterprising climate of the West Midlands. Only today, we have heard that seven local companies have received The Queen's Award for their export achievement.
We are greatly encouraged by your efforts through Birmingham Venture to stimulate the growth of new companies locally.
Tonight, you will want to know how we, the Government, see Britain's problems;
how we view the Government's role in tackling them;
and what we think can best be done by industry itself. [end p2]
Industry's Problems
Many of our companies are world beaters—and we salute their achievement.
But British industry as a whole has not kept up with its competitors.
Some 25 years ago our productivity was the highest in Western Europe—it is now one of the lowest.
There are three basic factors in our relative decline.
First of all, too much government.
British governments have
—spent too much;
—taxed too much;
—and borrowed too much.
Consequently they have absorbed too much of the nation's resources at the expense of industry. In addition, governments have added control on to control, thereby undermining industry's ability to compete in a harshly competitive world. [end p3]
At the same time, governments have constantly shielded unsuccessful industries and businesses from their own failures.
So they weakened the incentive to succeed from both ends; there was less to gain from success; less to lose from failure.
The second cause of our decline has been the attitudes of many employees.
They have been too resistant to change;
too prone to restrictive practices;
too ready to demand wage increases they haven't earned;
too ready to strike when their demands are not met;
too ready to go on doing things the old way. [end p4]
There was a time when Britain was the workshop of the world. The British worker was proud of it, proud of his firm, and proud of any innovation that kept Britain ahead.
Perhaps this spirit still survives, but in some places it seems to have gone underground.
A generation of workers has grown up in the belief that conflict, rule books, and government intervention will make them better off, or see them through.
The consequences are well known: overmanning, rising costs, out-dated industry, loss of market share and falling profits.
As wages have taken a bigger and bigger slice of company income, there has been less and less for investment. And where companies have invested labour practices have too often denied them a proper return.
So industrial performance and job prospects have suffered. [end p5]
Changes in the law by the last Government greatly increased the power of trade unions to inflict damage on employers and the rest of the community, and made a bad situation even worse.
It is remarkable that, in spite of all this, Britain still sells one-third of her national output abroad in fiercely competitive markets. How many people realise that this is a much higher share than the Germans or the Japanese?
Thirdly, management has been pretty patchy.
You will know of managements which have been to weak, shown too little drive, and too little foresight.
Moreover, let's face it, too many have found it convenient to be regulated by government and saved by subsidies. [end p6]
But enough of the problems—what of the solutions?
A factory I toured on Friday had a notice in every workshop saying:
“Don't find fault, find the remedy” .
What is this Government Doing?
What is this Government doing to find the remedy?
The Government will do what we said it would do, and we have made a start.
(1) We said Government spent too much.
So we have cut billions off previous spending plans.
We are starting to apply to public spending the cash disciplines which you take for granted in the private sector. You have to, you have no choice.
Total spending will fall over the next four years. This will be the first time since the war that a Government has planned for a steady reduction in public spending. [end p7] We look to you to take up the slack by a steady expansion in industry and trade.
(2) Government borrowing is coming down.
We've made that a priority because we believe and hope that, if we hold to it, interest rates will begin to fall.
(3) We are printing less money. The only way to stop inflation is to stop the supply of money and credit from growing faster than the supply of goods and services.
Today, some people have labelled this “monetarism” —it used to be called “sound money” . Whatever you call it, it is as fundamental to financial policy as the law of gravity is to physics. [end p8]
(4) For the first time in 40 years, you can decide what to pay your employees, what to charge for your goods, what dividend to pay on capital and what to invest overseas.
I said: for the first time for 40 years. At various times you have had one or more of these freedoms.
Now you have them all together.
You alone can decide how to use them to best advantage. [end p9]
(5) Competition serves the consumer better than price control or monopoly.
Our new Competition Act provides the means to root out the abuse of monopoly practices in the public sector, as well as in the private.
This is a long, overdue reform.
You will recently have seen the Report of the Monopolies and Mergers Commission on the London Post.
It highlighted eight kinds of restrictive practices, all serving to reduce efficiency and increase costs.
Because it is a monopoly, the cost-plus principle operated and the public and business have had to pay.
(6) We are reducing the Government's holding in state industries Government's job is to govern, not to try to run business. Bills are already passing through the House of Commons to clear the way for introducing private sector disciplines to British Airways, British Aerospace and the National Freight Corporation. [end p10] In the next Parliamentary session we shall tackle the British National Oil Corporation.
(7) And we really did reduce income tax last year, especially for higher management.
(8) This year, we have included in the Budget some exciting new measures to encourage small businesses. They will supplement the kind of Venture Scheme which Birmingham has initiated.
This country needs more small businesses if we are to prosper.
(9) Finally, we are working to redress the balance of power in industry. By the summer, the very wide legal immunities now available for picketing and blacking will have been narrowed.
Our review of trade union immunities in general will continue, and if necessary we will legislate further. We are legislating to reduce Social Security benefits for strikers' families. These measures will make for a fairer deal for the consumer, for employers and for the individual employee. [end p11]
The guiding principle of these policies has been to move responsibility back where it belongs, and to where it can best be exercised—namely, to each firm.
We are working to restore this principle to state-owned industries as well.
Of course some nationalised industries do create wealth; but others make huge losses at the expense of the taxpayer and the private sector generally.
These loss-makers must be free to do what is needed to get rid of their losses.
That is why we refused to intervene in the steel dispute by offering more taxpayers' money.
Had we done so, we would only have put off the trouble until the next time. [end p12]
May I say in parenthesis that steel users did a wonderful job by keeping up production, despite disruption of supplies.
Ingenuity, co-operation and realism kept the wheels of business turning and kept the custom of those who would otherwise have turned to our overseas competitors.
Mr. President, these are some of the things we are doing. You have mentioned others, such as changes in regional policy to make it more effective for the regions and fairer to places like Birmingham. Your own survey shows that when Government gives the opportunities, Birmingham can be relied upon to put them to good use.
Everybody can see the clouds—you, Sir, can see the silver lining.
I know a number of you are very concerned about the big percentage increases in the public sector pay bill this year.
So am I. [end p13]
But part of the bill comes from the staging of last year's awards.
Settlements for the Civil Service this year will have to be contained within a 14 per cent increase in wage costs.
That will mean reducing the number of civil servants.
We have applied the same principle for local authorities in fixing the rate support grant. But it is up to you to watch what happens to manpower levels in each local authority. And to the rates.
Of course, there are a lot of jobs in Government which have to be done, and very important jobs they are too.
Doctors, nurses, teachers, soldiers, police—public services of all kinds.
But there is a limit to the numbers and pay we can afford, because in the end we depend on the wealth created by the market sector—by those who produce and sell goods and services. [end p14]
We can only have a higher standard of living, a higher standard of public service, if we first have a more flourishing private business sector.
More people with ambition to build a business, to expand it, and to hand it on to future generations.
They are the best guarantee of economic progress, personal independence and social stability.
I hope that more of our able young men and women will make business and commerce their first choice of a career.
We are particularly short of skills in engineering. Do you know that in 1978, our universities and polytechnics turned out more than a thousand graduates in Government and public administration? More than five hundred graduated in philosophy. These are both very worth while.
But in the same year, there were less than four hundred graduates in production engineering. [end p15]
We can make the courses available but I believe that young people will only take them up when jobs in engineering and technology command prestige and reward as high as careers in administration and finance.
Industry's response
Mr. President, it follows from what I have said that government has a crucial role in creating the climate in which industry can succeed.
But when we have got our part right, success or failure will still depend on how you perform in a competitive world.
And here, the nub is productivity.
Unless productivity improves substantially, nothing else will help—neither reduction in government expenditure, nor assistance of one sort or another, nor export credit, nor lower interest rates.
Nor even a lower exchange rate, even if we could engineer it which we cant. [end p16] Productivity is “nine points of the law” . And our wage levels must be related to it. I wonder just how many of those who work in industry fully understand this?
If not, who can bring it home to them, but you?
I cannot, from London.
Ministers cannot.
Civil servants cannot.
You can. You are in touch with the work force, day in, day out.
You share the same problems.
There are too many employees who don't know the real problems of their own companies.
I know that many of you are happier doing than talking.
But if you do not speak out, you leave a vacuum to be filled by others only too happy to exploit it. [end p17]
Mr. President, you referred to Sir Michael Edwardes. He has never been afraid to speak out.
Willingness to explain, so that each worker is aware of the consequences of his own actions, is an essential part of leadership.
And where better to set an example than here in Birmingham, the heart of the industrial West Midlands, with an enterprising and innovative Chamber of Commerce to give the lead?
We believe that our message is beginning to get across. There are many encouraging signs that workers in industry are coming to recognise the connection between industrial disruption and loss of jobs. [end p18]
But it is not easy to persuade people of the seriousness of our present economic problems without making the longer-term prospects sound depressing. Yet obviously we would not be taking unpopular measures now if we were not confident that they will lay the foundations for future recovery and prosperity.
Mr. President, I believe that realism and common sense are breaking through industrial relations.
There is a bright future for this country of ours. How could there not be, with our unmatched reserves of energy, of enterprise and skills?
It is our job—yours as well as the Government's—to liberate those reserves and give them full scope. Then everyone will benefit—pensioners, the sick, schoolchildren, as well as the working generation—from the wealth that industry creates for the nation.
I promise that the Government will do its part, by carrying on with the policies we have started. We are a long-term government. I believe you share our vision. I believe you share our resolve. Together, I am confident we shall succeed.