Mr. President, I thank you for your welcome.
It is a very great pleasure for me once again to attend the Annual Dinner of the CBI. Last time I did so, we were approaching the mid-term of this Parliament. Today, as you mentioned, Mr. President, some people are talking about its end. A little prematurely I think. It reminds me of the old song “Maggie May” . Some say Maggie may, Others say Maggie may not. I can only say that when the time comes, I shall decide. [end p1] But right now, Mr. President, I am more concerned with the job in hand.
THE SITUATION IN JUNE 1981
As you, Mr. President, have pointed out, when I was last your guest, two years ago, we were all deeply concerned about the state of the British economy, and of course we still are, especially about unemployment.
In June 1981 production and national income were falling, and it seemed as if we had not reached the low point of the economic cycle.
Indeed, we had just read an open letter which predicted doom and gloom indefinitely unless we changed [end p2] our policies. It was signed by no fewer than 364 economists—enough Mr. President, to provide me with bad advice for every day of the year except All Fools Day.
But, even as they wrote, important changes were taking place: the Spring of 1981 is now widely regarded as marking the end of the worst part of the recession in the United Kingdom. Total output, which had been falling since the second half of 1979 began to edge upwards.
It is worth recalling that time to show how much has been achieved since then on those matters on which [end p3] your members have been most concerned.
TAX
On tax. The first fruit of Geoffrey Howethe Chancellor's courageous Budget in 1981 has been the reduction of the burden of tax on business. Thus, while the last Government introduced, and then increased, National Insurance Surcharge, we have reduced it thus putting back into private sector companies £2,000 million a year. As the Chancellor said, we are now well on the way to abolishing that tax on jobs. Equally important—because industry consists of people—we have reduced personal tax, tax on those [end p4] who work in industry and commerce—an achievement all to often forgotten.
THE INFLATION TAX
Those are the taxes you can see. But don't forget the tax you don't see—inflation. Yes, inflation is a tax, and a savage and capricious one which Governments impose without seeking or securing Parliamentary sanction. It is a tax imposed at such a penal level that a family who put £100 by in 1963, against a rainy day, finds that it's value has fallen to only £16.50 now. [end p5] Inflation plunders savings. And I need hardly tell this audience its effect on industry.
We have brought inflation down sharply; and we shall not relax our efforts. [end p6]
INTEREST AND EXCHANGE RATES
Interest rates are now 7 percentage points below their peak. That, too, saves industry about £2,000 million a year.
Finally, the exchange rate A low exchange rate causes as many problems as a high one, albeit to different businesses. But if a sterling rate of $2.45 was closing doors for some of your members in 1981, by the same token today's rates are opening up new opportunities, both at home and abroad. [end p7]
RECOVERY
All these things are much better than in 1981—but you really want to know what I think about the prospects for recovery. MT addition in margin: “Slow” .
Mr. President, all economic recoveries are patchy. They are bound to be. Some companies, some sectors will go ahead and prosper before others. Some may not prosper at all because their products or methods are overtaken. The present recovery will be no exception. But there are signs that we may be entering a period of more general and more sustained recovery. [end p8] — Industrial output is 3 per cent above its level in Spring 1981; — A substantial and growing number of your members expect output to rise; — Total housing starts in the three months to February were up 33 per cent compared with the preceding three months; — In the first quarter of this year sales of new cars reached an all time record. But Britain won't get the business by going on strike; — Retail sales are running strongly; 4½ per cent up on a year ago—so the demand is there. [end p9]
Mr. President, there are more hopeful signs but it is no good just waiting for the upturn to come.
The industrial revolution did not wait until someone came along with orders for steam engines or spinning jennies. It came because men of vision and inventiveness had ideas, turned the ideas into goods and the goods into sales, and the sales into big new thriving industries. [end p10]
If I may say so, they did not wait for a boost: they were the boost.
I accept—all of us would accept—that our economic performance has been disappointing over the last ten years. But that has little to do with lack of boosts from the Government: indeed there were two large boosts during that time.
In may view it has more to do with the fact that in the five years up to 1979, our costs and pay soared while manufacturing productivity rose by less than 1%; per year. [end p11] Our competitors did much better. That is why they took the Oscars. But now we are getting a few. [end p12]
THE LONGER-TERM PERSPECTIVE
But Mr. President, I would like to raise our eyes for a moment, to look at the longer perspective.
The West has progressed more rapidly in the years since the end of the Second World War than in any period in recorded history. In the halcyon days of the early 1960s, of seemingly perpetual progress, a rapid increase in the standard of living was taken for granted.
Today no-one in the West takes growth for granted. [end p13]
There has been a marked contrast between the growing prosperity of the fifties and early sixties and the uncertainties and contradictions of the seventies. There has been a decline in the rate of economic progress not only here, but throughout the Western world.
That vast wealth-producing engine of the West began to splutter, to hesitate and occasionally to backfire. It still kept running forward but at a much reduced pace. All of us must wonder whether this slow-down is permanent. [end p14] Whether the golden years of the fifties and sixties were merely a temporary post-war boom, before we return once more to the slower pace we had previously known? Or alternatively whether the recent deceleration is a temporary setback which will soon be behind us?
Mr. President, we do not yet know. Certainly — The slow growth in the seventies can be explained — first by the worst inflation in modern times — second by the severe disruptions of the oil prices increases [end p15] — and third by the greater burdens and restrictions that increasingly have been imposed on the industries which produce our wealth.
For, in the post-war years increasing rigidities have appeared in the economies of the West. Governments have been the main cause of this growing arterio-sclerosis of the economic system. Moreover, Governments began increasingly to protect yesterday's industries, yesterday's processes and yesterday's products, so that firms were shielded from the consequences of their own actions. So we lost both the spur and the capacity to respond quickly to change. [end p16]
If these were the main causes of the slow-down in the West, then I believe we are at least half-way towards the remedy. First, inflation has been reduced. Second, oil. Short of some disaster in the Middle East, I doubt if we shall experience another oil price increase of the magnitude of those of 1973 and 1979. Under the stimulus of high oil prices, oil users, whether industrial or domestic, have economised. Oil consumption has gone down steadily in the last four years. [end p17] And producers have found a lot more oil.
Third, restrictions. We have appreciated that industry flourishes when it is not plagued by planning agreements, inhibited by incomes policies or constrained by controls. Industry needs two things above all—Freedom to adapt and stability in Government policies. This Government believes in both.
Governments do have a role to play. But it is not to defend vested interests or the status quo. Governments must not stand in the way of progress, although they can help to ease the pains of transition. [end p18]
THE NICS
We are, then part-way to dealing with the problems of the 1970s, and that in itself offers hope. But we have also to face a new problem—the radical impact on the Western economies of the newly industrialised countries.
Their challenge, not only in textiles and shoes but in electronics, steel and shipbuilding, has obliged us to shift resources into the high technology industries and the service sector. [end p19] This adjustment alone would have been difficult. But the problems have been intensified by the nature of the new technological revolution.
Let me just say a word about this because it has enormous implications for jobs.
From the late 19th Century the Western world witnessed the great age of mechanisation when the machine and the production line replaced the skilled tradesmen and his hand tools. What was hitherto the job of a skilled craftsman was transformed into a few simple tasks which could be performed more accurately and more [end p20] efficiently by machines manned by unskilled workers. This age of mechanisation saw the growth of industry and the employment of large numbers of unskilled, but increasingly prosperous, workers.
Now the age of mechanisation recedes. The age of automation is upon us. The machine itself carries out the tasks once undertaken by unskilled labour.
As all of you in this room will know, the new technologies with their robots and automatic control systems have a very small demand for unskilled labour and a much larger requirement for skilled and sophisticated employees. [end p21]
It is not surprising, therefore, that today in the West we find shortages of technically-skilled manpower co-existing with large numbers of unemployed who are unskilled. It is a consequence of those momentous changes that have occurred in world development and in new technologies. [end p22]
NEW PRODUCTS, NEW JOBS
How to find new products, how to find new jobs—the two questions are locked together.
You in industry are the prime movers of economic growth. The essential contribution of free enterprise has been to translate the discoveries of science into the new products of the market place, and into the homes, work and leisure of our people.
The history of technology suggests that even the greatest inventors could not anticipate the market potential which was opened up by their inventions. [end p23]
We are told that Edison envisaged that sound reproduction would be used mainly for recording the deathbed wishes of elderly gentlemen.
Radio was seen only as a device where the use of wires was impossible, for example at sea.
Oil was used originally only for lighting purposes—no thought of it as a chemical feedstock.
Prediction has not become any easier. The first microprocessor was regarded as just a small and inferior computer, not as a means of extending the scope of a vast range of household, office and industrial equipment. [end p24]
But the lesson is clear—the new technologies have opened up a wealth of new products, new industries, new jobs and will do so again.
We did not lack ideas in the past. We do not lack them now.
But some of them will pass us by unless we have that spirit of enterprise, that ambition for success and that sheer professional and technical skill necessary if the seed of an idea is to germinate into a thriving business.
I know that you and we have long been worried that so many of our young people are neither educated nor trained for [end p25] career in industry and commerce. Yet that should be the first goal for the majority. We must therefore equip them with the skills and incentives equal to the task. Then, out of this period of recession can come the birth of new industries as significant and flourishing as those which first brought us a standard of living undreamed of by our parents and grandparents.
Many of the new opportunities will require higher level skills, better technical training and more of both than we have had in the past. Already, some of our new “sunrise” companies are reporting skill shortages. [end p26]
This is why the Youth Training Scheme is so important and why I am so pleased that the CBI played a leading role, first in helping to design the Scheme and now in providing places.
I congratulate you, Mr. President, and so many of your members represented in this room tonight on the contribution you are making to this vital endeavour. We need some 460,000 places and we are well on the way to finding them. [end p27]
But the public sector is also playing its part, and I can tell you tonight that I am looking forward to taking a YTS trainee into the office at No. 10 I hope that he or she will receive a good grounding during the year with us. Perhaps one day—who knows?—the training in No. 10 will be of use in applying for my job—but not too soon I hope.
Skills are the basis of a nation's economy. [end p28] They will provide young people with employment and self-respect. They will ensure a prolonged recovery.
PERORATION
In your speech of welcome, Mr. President, you gracefully quoted Walter Bagehot. Bagehot 's analysis of how a nation changes, of how its people are galvanised into action, is penetrating and profound. He wrote:
“Changes do not at first act equally on all people [end p29] in the nation. On many, for a very long time they do not act at all. But they bring out new qualities, and advertise the effects of new habits. A change of climate, say from a depressing to an invigorating one, so acts. Everybody feels it a little, but the most active feel it exceedingly. They labour and prosper, and their prosperity invites imitation.”
Mr. President, in the last four years there has been a remarkable change of climate in Britain. The comfortable illusions which grew up in the [end p30] easier climate of the 1960s and 1970s are being dispelled. Our nation is waking up to the reality that its prosperity is not guaranteed, but needs to be earned, every day.
We must never again let bureaucracy replace enterprise; let state monopoly replace competition; or let collectivism strangle individual endeavour.
We must remain true to our shared ideals; to create — a nation strong in its defences, its industry, and its standards; [end p31] — a nation whose climate will animate and invigorate the inventive and commercial genius of the British people; — a nation that can compete with the best—and prevail. And what is new is that we have regained the self-respect and confidence to do it.