Mr. President, members of the CBI, fellow guests … .
I need hardly say that I enormously enjoyed your speech, and especially the kind remarks at the end. And if I may say so, you seemed no more daunted by the prospect of speaking before eight Cabinet Ministers and twelve Permanent Secretaries than I am.
Let me say first of all that I am sure that they, and all your other guests here tonight, will want to join with me in wishing you a very happy birthday. And what better birthday wish could you make than the one you have just expressed: more jobs, greater prosperity, and a sound base for our economy.
Mr. President, you have risen to the top in a highly technological business on the basis of training as a historian. [end p1]
You are a living example of the need to adapt to succeed. Your career reflects both your many business abilities and your widely recognised qualities of leadership and determination. British industry is fortunate to have you.
You have been kind enough to refer to my background as an industrial chemist and a barrister. The thought did just occur to me that had the outcome of that interview at Billingham been different, it might have been my task to propose the toast tonight instead of responding to it: and the CBI might have beaten the Cabinet in the race to become the first of our national institutions to be presided over by a member of my sex.
Mr. President, I am often asked for my views on how the country stands as this Government approaches the middle of its term of office. Of course, mid-term, as far as I am concerned, will not be at least until 1984 … [end p2]
By which time the proprietors of the Whitehall Theatre will be running out of audiences, I fear. But no doubt we can expect “Anyone Else for Denis” or even “Denis Strikes Back” .
But we are approaching the mid-term of the present Parliament, so I do want this evening to take stock of our position. [end p3]
Two Years On
It was not so long ago, Mr. President, that subtle hints were being dropped, some of them even on the doorstep of 10 Downing Street, about certain changes the CBI would like to see.
Inflation was too high. It's been halved. In fact, Lord Sieff told me the other day that food in Marks and Spencer's stores had gone up by only 4 per cent last year, and clothing by only 1 per cent. That's private sector performance for you.
You said interest rates should come down by 4 per cent. They have.
Income tax, when we came into office, was seriously damaging incentives and risk-taking. We have made a start at changing all that.
And we have taken some first steps to correct the imbalance between trade unions and employers. [end p4]
But I am under no illusion that the last two years have been, for many of your members, among the most difficult they have experienced in their working lives. A combination of world recession, exchange rate problems, and honest money policies have induced the sharpest economic change for a generation.
Consequently it has been a time of drastic adjustment, an adjustment rendered infinitely more painful for having been so long, and so frequently, deferred. But an adjustment which could not have been avoided. [end p5]
For all of a generation our national performance had been allowed to slip. And not just when rated against the newcomers to sophisticated trading competition like the Japanese. We slipped further and further behind our neighbours on the continent as well. Our ships, our steel, our cars, our machine tools took longer than theirs to make, and took far more people in the making. While the productivity of our competitors leapt ahead, ours crawled. We who had once been able to command a premium for quality and craftsmanship across the markets of the world, had earned instead a reputation for late delivery and poor finish.
So we had a lot of ground to make up.
Mr. President, you are rising to the challenge. Industry has begun to respond. [end p6]
Productivity is improving. By January of this year according to the National Institute, output per man hour in manufacturing industry reached an all time high. I congratulate you on that achievement.
You referred, Mr. President, to our export performance. I believe you did not give your membership quite all the credit it is due. Last year, notwithstanding the fierceness of the pressures exerted by a rapidly appreciating exchange rate, the volume of our exports of finished manufactures did not just hold its own: it rose by well over 4 per cent. [end p7]
I accept that some of your members were hanging on to markets at a loss. But that is not the whole story. Many of you have managed to carry through reforms and cut costs in a way you never thought possible. You had to do that to survive. As an American visitor said to me last week: “it's my competitors that have made me efficient” . There are many of you here tonight who have found it possible to beat your overseas competitors, and make a profit, by cutting costs to the bone and raising performance.
But I know there is another side to this story, and a sad side. Sometimes a business has gone under that had done nothing to deserve that fate. Men and women, who had done everything management required of them, have been deprived of the chance to make their contribution to the nation's wealth, and of the dignity which goes hand in hand with that opportunity. [end p8] I know the resentment and shock they feel when then factory is closed because its output can be accommodated in others. It is little consolation to them that the decision had to be taken in order to keep a company in being and fit to face a competitive future. And those of us in work have to help them through this difficult period.
Our young people leaving school have been affected perhaps worst of all. To them we have a special responsibility. We are expanding our programmes of training and work experience in the belief that it is far better for them to be occupied than idle and that we shall need their skills in the future. I warmly welcome the CBI's initiative in forming a Special Programmes Unit to help give our young people a chance. [end p9]
I need hardly tell you that, had there been some magic formula for avoiding this rising unemployment, we would have jumped at it. But in truth, by the time we took office, the old attempts at buying jobs by more public spending and printing money had been thoroughly discredited.
As I look back over past decades I see that public spending as a proportion of total output has risen inexorably. And so has unemployment.
One of my predecessors, said this:- “Of all vulgar arts of Government, that of solving every difficulty which might arise by thrusting his hand into the public purse is the most delusory and contemptible.” That was Sir Robert Peel, 150 years ago. [end p10]
No, Mr. President. The only true path to more jobs and more prosperity is through the ability to compete.
Other countries are on that path already.
They have in their grasp what we scarcely have in our sights. Lower taxation—better housing—larger pensions—and above all, more jobs. In short, greater prosperity.
And they won't stand still. German and Japanese companies are improving their productivity all the time. So we must out-perform them if we are to catch up.
The battle to be competitive will be won in your companies. Not in Ministerial offices but in negotiating rooms, drawing offices, at production managers' tables and of course on the shop floor. And that battle will be won, not by management alone, but by managers as leaders, involving their employees in decisions that affect them. [end p11]
Inflation
We for our part, as you reminded us in your splendid speech, Mr. President, must continue to give the highest priority to getting inflation down.
The present rate of inflation, of around 12 per cent, is nothing like low enough.
At 12 per cent, prices double every 6 years.
At 12 per cent, as you reminded us, we lose 7 per cent of competitiveness to Germany each year.
So our aim is nothing less than to bring inflation permanently down to low single figures.
Now that we have a lower exchange rate it may be harder. So we have to redouble our efforts. For if we don't jobs will go elsewhere; and I want them here. For us, that means keeping a discipline on the budget deficit; for you, as you have indicated, it means keeping down wage costs. [end p12]
Mr. President, I am sure that the experience of your company, in finding that you lost far more through excessive pay increases than through any other factor, can be multiplied many times in industry.
So I was glad to hear your call for a decade in which pay increases have to be earned through higher productivity and related to what we can afford.
It is hardly surprising that manufacturing profits have reached an all-time low when, with hardly any increase in production, personal living standards have risen 17 per cent in just three years. Beginning of section checked against BBC Radio News Report 0000 17 June 1981:
The fact is, company profits have been drained into wage increases and there just isn't the money there for investment now. Mr President, profits have to be rebuilt, or we'll never get the new investment or the new jobs. There has to be a period in which pay, except where earned by extra productivity, does not match inflation. Because that is the only road leading to higher employment. End of section checked against BBC Radio News Report 0000 17 June 1981. [end p13]
I think you all now recognise the Government's determination not to provide more than can be afforded for pay rises in the public services. If necessary, we are prepared to live with the short term consequences of that, as employees adjust to the new reality. After all, yours have had to adjust, and ours must too.
Who can deny that the effect of all the bitter and long drawn out disputes over pay in our past history has been that British workers are worse off than in most other developed countries, and more likely to lose their jobs. [end p14]
Nationalised Industries
I've not so far referred to our nationalised industries. I am glad to see that they are represented here tonight. For their performance can make or break the efforts of everyone else.
Take electricity. Over the past year, there has been a growing chorus of complaint from large bulk users that they are having to pay higher tariffs than their competitors overseas. But 70%; of our electricity comes from coal. If our coal is expensive, so is our electricity, as the Monopolies Commission has just pointed out.
Earlier today the Government announced an increase in the external financing limit of the National Coal Board for this year from £886 million to £1117 million. That is an enormous figure—equal to more than 1p on our income tax. And that is just for coal. [end p15] So they really do have the resources to make their industry truly efficient. I hope they understand the extent to which other people's jobs depend on their doing just that.
There are some who say we should spend even more on the nationalised industries, especially on investment. But we must never forget that for decades the British economy has not been suffering from inadequate investment, so much as from investment yielding a quite inadequate return. We spent billions to expand the steel industry; now we are spending billions to contract it. All this is being paid for by profitable business and employment—through high taxation and dear money. [end p16]
So, when it is now said that nationalised industries have viable investments waiting to be financed, we must look at their credentials carefully. The rosy-tinted prospectus must be set against the reality of past performance.
In the coming years my purpose is to see that private enterprise can start to earn the returns that it needs. You are making yourselves competitive. You are poised for success in the new tough world we face. Nothing must be done to imperil your chances. This is why the Government must keep public spending down. It is up to us to see that you in the private sector are not starved of the resources you need to build again your profits and to create new jobs.
Now it's the private sector's turn. We owe it to the unemployed. [end p17]
Peroration
Mr. President, I know that you, and my wider audience tonight, will be looking for a simple message which encapsulates what I have been saying about the progress we have made, and about the battle for competitiveness that we must fight anew each day.
I can do no better than repeat words spoken by US Captain Lloyd Williams, when he arrived in Northern France in June 1918, a time when victory was almost within grasp after years of struggle, but a hard fight clearly still lay ahead. He said in the graphic language of a soldier: Last words of text checked against BBC Radio News Report 0000 17 June 1981:
“Retreat? Hell, no! We only just got here!”