Gordon Brown’s Mansion House speech
The Guardian, by Gordon Brown
My Lord Mayor, Mr Governor, My Lords, Aldermen, Mr Recorder, Sheriffs, ladies and gentlemen.
Let me start by saying what a privilege it is to address this famous and historic dinner, where business, bankers and ministers come together to celebrate London’s strengths and achievements.
But before I begin let us remember that almost a year ago London was targeted by terrorism. Let us never forget but always remember those who lost their lives and suffered injuries. And let us thank all those from police, security and armed forces, to emergency services who ensure we are safe and secure.
London’s quiet bravery and calm resolve reverberated round the world and people now know London as a city where bombs may destroy buses, trains and buildings, but terrorism will never destroy the spirit, courage and resilience of the people.
And let me also congratulate the Lord Mayor and his staff and companies here and their staff for the contribution they have made to securing London’s position of global pre-eminence not only as the international financial centre of the world, but of global pre-eminence: London the 2012 Olympic city.
Mr Lord Mayor, tonight we have more companies represented here from more countries of the world than ever before – and I welcome you all – and we can report that even in the most challenging of times – high and volatile oil prices, rising commodity prices and global political tension – London has enjoyed one of its most successful years ever, for which I congratulate all of you here on your leadership skills and entrepreneurship.
Financial services are now 7 per cent of our economy. Financial and business services as much as 10 per cent. A larger share of our economy than they are in any other major economy, contributing £19 billion of net exports to our balance of payments, a success all the more remarkable because while New York and Tokyo rely for business on their large domestic base, London’s international ranking is founded on a large and expanding global market.
London now the home and natural location for 20 per cent of all cross border lending: 30 per cent of world foreign exchange turnover, 40 per cent of over-the-counter derivatives trades, 70 per cent of the global secondary bond market.
London is the favoured location of choice for more international business than ever before, the world’s leading banking centre with more foreign banks than in any other city, the location for 200 foreign law firms – including home for six of the worlds largest ten, and last year new foreign listings not only from China, India and Russia, but also the USA itself.
Five years ago some said that if we did not join the euro the city would fall behind Frankfurt and Paris.
Now although the New York Stock Exchange has slightly more foreign companies than the London Stock Exchange, the weight of world trading activity favours London – with, today, 50 per cent more foreign equity trading than New York.
And London’s aim is the world’s leading market for smaller quoted companies.
People talk of China as the future manufacturing workshop of the world, they call India the future office of the world – I believe that London, like New York, is already the capital marketplace of the world.
And I do not believe this has happened by accident.
The message London’s success sends out to the whole British economy is that we will succeed if like London we think globally. Move forward if we are not closed but open to competition and to new ideas. Progress if we invest in and nurture the skills of the future, advance with light touch regulation, a competitive tax environment and flexibility. Grow even stronger if this is founded on a strong domestic market built on the foundation of stability.
And whether it be in advanced high value added manufacturing, our creative industries, pharmaceuticals, digital electronics, in fast-growing education exports, I believe, just as you have done in financial services, we can demonstrate that just as in the 19th century industrialisation was made for Britain, in the twenty first century globalisation is made for Britain too.
Mr Lord Mayor, we will not forget that the first and foremost duty of government – as the governor has reminded us – is to maintain and indeed to strengthen the monetary and fiscal stability that has enabled us, successively, to grow and remain free of recession over the last decade, even when facing the Asia crisis, the American downturn and now the rapidly rising oil and commodity prices of the last 3 years.
I can assure you that through the vigilance of the Bank and our determination to ensure future public sector pay settlements are founded on our 2 per cent inflation target, we will maintain our anti-inflation discipline.
And even at a time of global uncertainty, government debt in Britain is lower than France, Germany, Italy, America and Japan and growth in Britain is strengthening – growth expected to be stronger this year than last, and stronger next year than this.
What I said when I made the Bank of England independent remains even more true today, I said that our new monetary and fiscal regime was founded on stability first, foremost and always, stability yesterday, today and tomorrow.
And I mean not just stability by securing low inflation but stability in our industrial relations, stability through a stable and competitive tax regime, and stability through a predictable and light touch regulatory environment – a stability founded on our strength to make the right long term decisions, the same strength of national purpose we will demonstrate in protecting our security in this Parliament and the long-term – strong in defence in fighting terrorism, upholding NATO, supporting our armed forces at home and abroad, and retaining our independent nuclear deterrent.
In an insecure world we must and will always have the strength totake all necessary long term decisions for stability and security.
But if our greatest economic challenge in 1997 was stability, today a new challenge is globalisation.
And we have to recognise that just as the pace of globalisation has quickened since we met a year ago, just as the rise of Asia and globalisation’s overall scale and scope has intensified, so too has the backlash.
People talk today less of globalisation and its benefits, more of globalisation and its discontents.
With, in just one year, almost one million manufacturing jobs lost to Asia from America, Europe and Japan, one quarter of a million service jobs offshored, and oil and commodity prices rising because of Asian demand, and inflation returning, we are seeing, in response, the return of protectionism not just in Asia and in Latin America, but in Europe and America.
Just think how in the last few months we have seen the European single market undermined – with for example pressure in France to block Italian utilities take-overs, in Italy to question Netherlands banking acquisitions, in Spain to stall German energy bids, in Poland to resist Italian financial service mergers.
And this month in Europe we are seeing calls for new tariffs against Asian shoes, jeans and furniture.
Instead of striving for a greater and greater share of the growing global market, many countries are settling for sheltering a smaller protected national market.
And of course in America we have seen rising protectionist pressures not least with the blocking of the Dubai ports deal. And we have seen the world trade talks stalled.
So while globalisation is cutting the prices of basic goods from electronics to clothes, putting what were luxury goods into the hands of ordinary households, sadly even the winners from globalisation – families enjoying low consumer prices, low interest rates from the low inflation created and rising living standards – often think of themselves as globalisation’s losers, globalisation’s beneficiaries often seeing themselves as globalisation’s victims.
And it is not just nations who lose, it is global businesses, who stand to lose most – the very size of our global market diminished by restrictions on cross border flows of investment, and on takeovers and mergers and by barriers to competition and commerce generally.
Last year I persuaded Alan Greenspan to deliver the annual Adam Smith lecture in the town of Kirkcaldy, where Adam Smith was born and wrote The Wealth of Nations. This year The Governor will deliver the lecture. Kirkcaldy – as I was able to show Dr Greenspan – has a sea front stretching for a mile looking out to Europe.
At the time Adam Smith wrote hundreds of trading ships came in and out from all parts of Europe, and Adam Smith, son of the local customs officer, could see with his own eyes how trade was the engine of wealth creation and that an increasingly specialised division of labour would drive nations to seek their comparative advantage through innovation and trade.
He saw that competition from new countries and new companies creates the spur for greater innovation, productivity and then prosperity and employment.
It was this pro-globalisation insight founded on our fundamental beliefs in freedom liberty and internationalism that led us as a trading nation to end mercantilism, then to repeal the corn laws, then to reject imperial protection and to lay the foundations for an open not closed international monetary system.
It said that whenever the choice has been between protectionism and the open seas, Britain has chosen the open seas.
Indeed at every critical point in our history we, the British people, have chosen to see the channel not as a moat but as a highway to the rest of the world, in other words to be global rather than insular, to be outward looking and internationalist rather than parochial and protectionist.
And as the City of London is already demonstrating, for our generation, it is time for us once again to proclaim how advanced industrial economies in the throes of global restructuring and change and developing countries too will benefit from open not closed economies and to demonstrate the new policies we will have to pursue to achieve this.
Of course the all too easy but fundamentally wrong temptation for political parties is to cling to the past or to sidestep difficult long-term choices ahead.
But in my view no advanced industrial economy facing global competition can either shelter their old industries or services, nor can they neglect the big, serious and long term challenges that arise from this new phase of globalisation: The challenge of resisting all forms of protectionism and instead breaking down the barriers to an open trading global economy, The challenge of moving Europe from its days as a trade bloc – inward looking and unreformed – to global Europe, outward looking, competitive, reforming and with a modern social dimension, The challenge with world oil demand rising, of ensuring a secure energy supply compatible with a sustainable environment.
And while seeking a low tax economy the challenge for every modern advanced industrial economy facing global competition of ensuring both the flexibility and the long-term investment necessary in infrastructure skills and services needed for a globalisation that works and is seen as inclusive.
And to move beyond the old short-termism and make the big, serious and long term decisions to meet the global challenges I identify, Britain will need a stronger sense of national purpose, clear long term national direction and a sense of our destiny that will enable us to move beyond the old short termism that held us back in the past.
So just as you are transforming your companies to meet the global challenge so too our role as government has to reform – not one of exhortation but in practical ways to help open up new markets, help entry into them and make our skills and infrastructure equipped for this new world.
The most immediate acid test and the most powerful pro globalisation signal we can send is to make possible the 50 per cent increase in world trade that an ambitious WTO settlement would bring.
And world leaders meeting at the G8 in St Petersburg on 15-17 July should examine how by Europe and America moving on agriculture, and Brazil and India moving on industrial access and services, the Doha round can be successfully completed.
But together we can do so much more. If Europe and America, the world’s two largest trading areas, agreed to break down the tariff and non tariff barriers including in regulatory cooperation between our two continents, European GDP could rise by 3 per cent and one million jobs be created. So I hope you will support us in advancing the transatlantic business dialogue in pushing for stronger EU-NAFTA cooperation, and in building an open transatlantic trading area.
Twice last year I visited Beijing and Shanghai, and saw for myself how London is already establishing itself as the gateway through which Asia accesses its financial services. A few months ago I also visited Saudi Arabia, and indeed last week, I addressed the Islamic Finance and Trade Conference here in London, and saw how the City is becoming the investment location of choice for the Middle East and Muslim countries all over the world.
So it is right to give strengthened focus to our growing trade with these areas, and I can inform you that next month Margaret Beckett and Alistair Darling will launch a new remit for UK Trade and Investment and that priority will be given to a focus on China and India, the Gulf states, and Eastern Europe.
I am grateful to many of you here tonight, including the Lord Mayor, who has agreed to serve on the new City advisory group.
Ed Balls, our new City Minister, will work with you to develop publish and then promote a long term strategy for the development of London’s financial services and promoting our unique advantages and assets. We will set a clear ambition to make Britain the location of choice for headquarters and services, including R&D, for even more of the world’s leading companies.
And just as two years ago we promoted the action plan for liberalising financial services across Europe, I can tell you that the Treasury is now working with Charles McCreevy and with you to ensure that the forthcoming European financial services white paper signals a new wave of liberalisation.
Some present the issue of Europe as in or out, empty chair or total subjugation. I see it differently: Europe accounts for more than 50 per cent of British imports and exports.
The British people and British business look to us not to disengage, amidst a new round of ideological disputation but to stand up for British interests.
Our detailed euro assessment rightly concluded it was wrong at this stage to enter the euro. The same in depth assessments tell us it is to the benefit of Britain and for Europe to work hard to complete the single market in utilities, energy, telecommunications and services generally, and in particular financial services.
So instead of exploiting Europe’s past slowness to reform as a justification for a doctrinaire isolationist stance, let us work to fashion what is in Britain’s and Europe’s interest: a stronger shared determination to make the practical changes to be competitive, job creating, outward looking and focused on growth.
Your dynamism allied to the City’s openness has led London to innovate: the most modern instruments of finance, an ability to compete that depends upon an open competition policy which rewards and is a stimulus to innovation and which does not restrict new entry and so helps new companies, new products and new services to come into the marketplace.
So just as our monetary reforms, which brought Bank of England independence, made decision making independent of short term political and partisan considerations, so too do our competition reforms, which have for the first time made our competition authorities independent of government.
What we have achieved with independence here in Britain we wish to extend to the European Union, where a more independent competition policy would mean investigations here in Britain where unfair competition is being sheltered. We will continue to remove all the barriers to investment -government accepting its responsibilities to science, not least supporting investors in the face of animal rights extremists.
Mr Lord Mayor ten years ago there were nine separate regulatory bodies for financial services.
To meet the challenge of global markets we created a single unified FSA.
In 2003, just at the time of a previous Mansion House speech, the Worldcom accounting scandal broke. And I will be honest with you, many who advised me including not a few newspapers, favoured a regulatory crackdown.
I believe that we were right not to go down that road which in the United States led to Sarbannes-Oxley, and we were right to build upon our light touch system through the leadership of Sir Callum McCarthy – fair, proportionate, predictable and increasingly risk based. I know Sir Callum is committed to reducing regulatory administrative burdens and the National Audit Office will now look at the efficiency and value for money of our system.
Let me say I see no case for a European single regulator and will continue to reject such a proposal, just as we will resist the new and unnecessary proposals to harmonisation corporate taxation in Europe.
It was to recognise risk, reward effort and encourage innovation that we cut the long term rate of capital gains tax for business assets from 40p to 10p and cut by 3 per cent and 4 per cent the rate of mainstream and small business corporation tax. And I will continue to look not only at the competitiveness of our tax system but I have also asked HMRC to ensure the administration of the tax system – its consistency, openness and responsiveness – is founded on strengthened consultation with you and a better dialogue.
Finally, if we are to meet the serious long-term challenges of globalisation, no government can afford to postpone or avoid necessary investments in our future.
Last month we published our white paper on pensions reform and have sought to build a long-term national consensus for pension reform. In the next year we will also make the difficult choices – and seek to build a national consensus on – the long term reforms necessary in infrastructure, transport, planning, energy and welfare to ensure that we, Britain, combine the flexibility we must have for global success with the sustained investment we need in our future.
In all these areas, over the next few years as we, the British people, equip ourselves for our global future the economic and public sector reform agenda will be stepped up and will broaden deepen and intensify.
We will shortly publish the Barker review to make our planning system quicker more flexible and more responsive. For too long Britain and London’s infrastructure has not been fit for purpose. And following the infrastructure review headed by Sir Rod Eddington we will work with you to agree long term transport and infrastructure reforms both for London and the whole of the United Kingdom and bring public and private sectors together to deliver them.
And we will not shirk difficult long-term decisions on energy. Our energy review – to be published next month – will set out a balanced long term policy which takes account of guaranteed supply, including investment in renewables, clean coal and nuclear.
Most of all Britain will show it will meet and master the long term challenges of globalisation by showing that London and Britain will train, attract and hold the best skills and talents.
With growing competition from China and India not just in low tech and low skilled industries but also in the high tech and high skill, having the best educated, best-skilled and best-trained workforce in the world is not for Britain an option in a global economy, but a necessity.
So we have been thinking long term not just about more flexible labour markets but also about reform and modernisation in schools, colleges, and universities and in adult skills.
We have set new ambitions for standards in schools, made contestability, accountability and choice central to reforms in schools and further education; and initiated a new system of finance for universities. And the purpose of the Leitch report, to be published later this year, is to investigate and to demonstrate how Britain can meet the most ambitious objective of all, the need we have identified for at least 5 million more highly skilled workers by 2020 – a 40 per cent increase in our highly qualified workforce.
As you know we have worked with you and your companies to create, in 2002, the highly skilled migrants programme, in 2004, the MBA scheme and now, last year, permission for up to 50,000 international graduates to work on in the UK – all measures designed to boost our skills base. I know we must do more. I can tell you this evening that a further innovation for the highest skilled jobs we need – the points based system, to be introduced from next summer – will increase transparency, reduce complexity, and give us stronger protection against illegal abuse, and still enable us to maintain our openness to talent that brings benefits to the city and the economy as a whole.
So we know that we, Britain, will have to become a more flexible economy – more ready to change, with more local and regional pay flexibility, better equipped for the long term, with more focus on the jobs and skills of the future. In some economies energies are devoted to sheltering the last job, when the job is redundant. In the successful economies of the future like Britain, energies will be focused on helping people move into the next job.
So Mr Lord Mayor, tonight my promise is to promote a Britain that resists protectionism and is the most global and outward looking of nations;
A Britain that instead of sheltering against global competition, champions the most open competition policy in the world;
A Britain that instead of the old short termism, which neglected investment in its future, will complete the largest programme of reform and investment to promote the science, infrastructure and skills and the flexibility needed for our success in the global economy of the future;
A Britain that instead of avoiding critical energy and environmental decisions, acts to ensure secure, stable, guaranteed balanced energy supplies for the future;
A Britain where, instead of the old incoherence and isolationism on Europe, we are strong, pragmatic, and engaged in standing up for British business and commercial interests in Europe.
The city of London is showing us that Britain can succeed in an open global economy, a progressive globalisation, a Britain that is made for globalisation and a globalisation that is made for Britain.