Margaret Thatcher Lecture 2016 - Rt Hon George Osborne MP

CPS Margaret Thatcher Lecture


I am honoured to be asked to speak tonight, under the auspices of the great free-market, free-thinking Centre for Policy Studies.

When I was invited I held one of the great offices of state; now I come to address, I do so from the position of a backbench Member of Parliament.

But while the red boxes have gone, the important duties of Parliament remain.  Tonight, in a few hours time, all MPs will be asked to vote on the future of our independent nuclear deterrent.

The renewal of the Trident weapon system, that Margaret Thatcher commissioned over 30 years ago, will be through its life the most expensive single project ever undertaken by the British government.

It wouldn’t be affordable if we had not together built a strong economy; but it wouldn’t be desirable if we didn’t conceive of Britain as a major global power, ready to shoulder its responsibilities not just to defend itself – but to uphold the western values that our democracy perhaps more than any other helped to create.

So tonight, and in the future, Theresa May and the new team she has assembled will have my support.

She has the strength and the integrity to do the job, as she faces up to the great challenge that lies ahead.

As you all know, I fought hard – as hard as I could – for a different outcome to the referendum we have just held on our membership of the EU.

I didn’t do it by half-measures; I couldn’t on an issue like that. I put everything on the line, and don’t regret for a moment that I did.

But while I don’t resile from any of the concerns that I expressed in advance of that vote; nor do I intend to re-run the arguments now the vote has passed.

I count myself fortunate to have been Chancellor of the Exchequer for six years, Shadow Chancellor for five years before that, and part of David Cameron’s team that turned around the fortunes first of our party, and then of our country.

And I feel privileged to be a Member of the greatest Parliament on earth, representing a beautiful Cheshire constituency – and with much more to contribute to our nation’s discussions in the years ahead.

So, I look to the future with confidence.

Confidence that, however great the political challenge, we have a robust democracy that is capable of taking great decisions about our national life in its stride.

Confidence that, however great the economic challenge, we have an economy that is in about as strong a position as it could be to cope with what lies ahead.

I don’t propose tonight to go into detail about how we should approach the next few years; that’s rightly for my colleagues in the new team in government to set out.

Instead, what I thought I’d do is point to some of the Conservative insights we should draw our inspiration from – insights that helped guide me over the last eleven years.

For we have made conscious choices – choices that other governments and oppositions would not have made; choices that other Conservatives would not have made.

I want to point to three in particular.

The first, is about the economy.

Conservatives understand that without a strong economy, little else is possible.

Aspiration, opportunity, improving life chances are the right goals, but they are difficult to achieve if the reality for our citizens are the twin spectres of unemployment and financial crisis.

And Conservatives also understand without strong private business, there is no economic strength.

That is why, back in 2010, when Britain was on the economic brink, we took a conscious decision.

We were not going to spend ever-increasing sums of borrowed public money trying to support the economy. We were going to create the conditions for a private sector recovery.

And the first condition for that is fiscal stability: business can’t invest or hire people or grow, if they think that the country will not be able to pay its way in the world.

So we Conservatives made another conscious decision.

We would follow the route laid out by Margaret Thatcher rather than Ronald Reagan.

Some of you might be surprised that there is a distinction; but back in the early 1980s there certainly was.

Ronald Reagan embarked on a series of massive, deficit-funded tax cuts.

Margaret Thatcher and her Chancellor Geoffrey Howe raised taxes.

Indeed, the famous 1981 Budget that caused division in the Cabinet and attracted the protests of 364 economist, was one of the biggest tax raising budgets in our history.

That’s because, unlike President Reagan, Prime Minister Thatcher did not enjoy the luxury of the world’s reserve currency and a near inexhaustible appetite from the world’s investors to lend.

In her words, she said she was “not prepared ever to go on with tax reductions if it meant unsound finance”.

That first Thatcher Government battled to restore sound finances – and as a result laid the foundations for the economic success that was to follow.

We followed that same doctrine of fiscal conservatism in office, when we inherited a budget deficit of 11% of national income.

My first budget raised taxes, notably VAT; and we cut spending.

Yet at the same time, we funded major reductions in business tax, taking the corporation tax rate down to the lowest of any major advanced economy in the world.

We also funded the major science and transport investments that would provide a long term foundation for private investment.

Indeed, in my first week in office I rejected the Treasury’s proposal that we shouldn’t go ahead with the Crossrail project, the new Crick science Institute or the Tate Modern extension.  No country thrives if it doesn’t build for the future.

But we did make major reductions in day to day, current spending. The share of national income taken by the state fell from over 45% in 2010 to below 40% today – the most sustained reduction in the size of government we’ve ever seen.

Of course, at the time, we were warned that the private sector would never fill the gap left by the shrinking public sector.

That the many hundreds of thousands of jobs lost in government could never be matched by new jobs created by business.

Instead, those jobs were matched many times over.  There are half a million fewer people working for the state today than when we came to office; but there are two million more jobs – and one million new businesses.

The course we set was clear but we were always flexible – and the rules allowed for that.  When the economy slowed, we slowed the pace of deficit reduction and let the automatic stabilisers operate.  True to Conservatism, we were practical not doctrinaire.

But our guiding lights through the storms were the economic stability of sound public finances and a full-throated backing of British business.

And I had something else invaluable: the full backing of my next door neighbour, the Prime Minister.

Others will pass judgement on our record, but David and I leave office with the country close to full employment – and I believe the economy in better shape than the one we inherited.

Now there is a new Chancellor and new economic challenges.

Philip Hammond worked with me as my Shadow Chief Secretary for many years when I was Shadow Chancellor; and we worked together as close colleagues around the Cabinet table.

Not that it was my choice, but there is literally no one I would rather see in Number Eleven after me than Philip.

It’s tough job; he will make his own judgements; and he will have my full backing as he does so.

So, if the first conscious choice we made was to be a fiscally conservative, pro-business government; the second conscious choice we made was to seek to be modern, compassionate Conservatives at ease with the world.

The great Benjamin Disraeli encapsulated in one career, the two choices that Conservatives face.

Early in his career, he threw his lot in with those who wanted to resist the changes then taking place in Industrial Revolution England – and who harped back to a by-gone rural idyll that was never coming back, and probably never existed.

They had a tremendous time thundering against their own Conservative Government, led by Robert Peel, as it repealed the Corn Laws to bring lower food prices to the industrial poor.

They called themselves Young England; and they put the Conservative Party out of office, largely, for three decades.

That is what happens when Conservatives become out of touch and detached from the changes happening in society.

And it was an older Benjamin Disraeli who understood that better than anyone.

This older Disraeli made bold moves – in the face of opposition from refuseniks in his own party – to bring early social services to the new urban population; and it was Disraeli who made the dramatic move to extend vastly the franchise to working men in the Second Reform Act.

He explained his approach in a speech in Edinburgh in 1867.

He said: “In a progressive country change is constant; and the great question is not whether you should resist change which is inevitable, but whether that change should be carried out with deference to the manners, the customs, the laws and the traditions of a people; or whether it should be carried out in deference to abstract principles, and arbitrary and general doctrines”.

For me, that Disraeli quote encapsulates what successful, progressive Conservatism is all about – and what distinguishes it both from the reactionary and unsuccessful, and from the arbitrary doctrines of socialism.

Of course, Disraeli’s approach came to be known as One Nation – not a phrase he used himself, but one drawn from the way as a novelist he had written about the two nations of rich and poor living side by side.

We Conservatives are sometimes shy, almost embarrassed, about our huge contribution to social progress in Britain.

We should not be.

Almost 15 years ago, I started to research a book with a friend of mine, Daniel Finkelstein, that was going to set out how great acts of social change actually come about in our parliamentary democracy – and it was going to subtly, and incidentally, point out that the people who drove these acts of change were often Conservatives.

The book never got written because I joined the opposition front-bench and Daniel started writing in his own name.

But the thinking behind it remains core to my beliefs.

It was a Conservative, William Wilberforce, who ended the slave trade.

It was a Conservative, Edward Stanley, who then abolished slavery itself.

It was a Conservative, the Earl of Shaftesbury, who promoted the Factory Acts that limited working hours and banned the employment of young children.

It was a Conservative, Lord Salisbury, who introduced free elementary education.

It was Conservatives in government who extended the franchise to working men, and then a Conservative, Stanley Baldwin, that ensured equal votes for women.

It was a Conservative, Rab Butler, who legislated for universal state education.

It was a Conservative, Margaret Thatcher, who gave people the right to buy their council homes.

It was a Conservative, John Major, and his junior minister William Hague, who introduced the landmark Disability Discrimination Act.

And it was a Conservative, David Cameron, who introduced equal marriage.

Why aren’t we prouder of this record as a party? Why don’t we shout it from the rooftops?

It’s made our society stronger and fairer and better.

It’s been the all-too-well kept secret of our political success.

Last year, more gay people voted for the Conservative Party than any other political party – a change that was unimaginable when I joined the opposition frontbench thirteen years ago.

And every single one of those changes may seem now to be entirely sensible and self-evident.  But I can tell you, every single one was bitterly opposed and objected to, often by fellow Conservatives.

Indeed, in my research for the book I never wrote, I discovered that when a young Margaret Thatcher voted to legalise homosexuality, she was one of only a small, courageous handful of Conservative MPs to do so.

Now we face the great challenges of our age.

As Home Secretary, Theresa May has often spoken out against discrimination and I was hugely encouraged to hear her on the steps of Downing Street last week speaking about her One Nation vision for her government.

She understands that One Nation isn’t possible if parts of our country feel disconnected from its economic success and disenfranchised from a stake in our society.

The regional variation in the referendum result revealed how much more work we have to do, especially in the north and midlands.

Many of the issues I pursued in government will now be for a new set of ministers to pick up.

But I remain passionately committed to the Northern Powerhouse – and I won’t let go of that.

Two years ago, almost exactly, I spoke in the power hall of the Manchester Museum of Science and Industry about how we should address the north/south divide in our economy.

Even using the language of north and south, let alone acknowledging the problem, was a striking thing for a Conservative to do.

The slogan I coined in that speech – the ‘Northern Powerhouse’ – has gained more currency than I could have possibly imagined.

The other day I was looking at a new canal attraction in my North West constituency, and I was given a glossy booklet all about what the Northern Powerhouse could do for our inland waterways.

That’s one thing – it’s quite another to turn up in Beijing, as I did, and see the Northern Powerhouse emblazoned in Chinese characters six-foot high.

But don’t let the success of the slogan betray the seriousness of the idea behind it.

That idea is rooted in a solid economic theory that Conservatives should be very comfortable with.

It drew on various studies, including the work of the Cities Commission that the economist Jim O’Neill chaired – and who I’m delighted to see remains a Treasury Minister.

The theory that previous attempts by all governments to address the relative underperformance of the north of England have failed because what they’ve amounted to is moving this Inland Revenue office, or that government call centre, from London to some location in the north.

Or it’s involved a grant to build a factory in a former industrial heartland.

I don’t disparage those efforts.  Visit the Nissan plant in Sunderland and you’ll see a big photo of Mrs Thatcher opening it thirty years ago – a classic example of industrial policy, even if she hated the phrase.

But one-off grants or office relocations are never going to change the economic geography of the country.

In my view, you have to do much more.

You have to devolve economic power to local communities so they feel more in control – which is why we now have elections next year for powerful new mayors in almost all the big city areas of the north of England, and the West Midlands.

And in the last couple of weeks I was in office, I agreed new mayoral arrangements in the West of England and East Anglia too.

That is a quiet revolution in local democracy achieved entirely by consent.

Then you have to give those communities the tools and the rewards for supporting economic development, which is why we’re handing over control of business rates.

In 2010, 80% of local council funding came from national government grants; by 2020, 100% of its funding will come from local government taxes.

That’s another quiet revolution.

Then you recognize the fact that these cities are not that physically far away from each other – the distance from Manchester to Leeds is less than the length of the Central Line on the Tube in London.

So we have committed to major new transport links, including high speed rail, between these cities.

And you then enhance the quality of life in these communities by bringing the benefits of academies to local schools, promoting big science investments in the great universities there, and making sure there are major new cultural improvements.

In short, you make the North of England a great place to live, to work and to do business.

For that is the key Conservative insight – it cannot be a public sector effort alone; you have create the conditions for the private sector to flourish and invest drive the success of the north.

Is there much more to do? Yes, of course.  We have to make sure the suburbs, towns and rural areas of the north feel connected too.  We have to make sure the transport projects are now delivered; and that the government effort is sustained.

I knew when I started talking about building a Northern Powerhouse that trying to turn around 100 years of relative economic decline was a tall order.

I knew that I would be criticized almost immediately for a lack of instant success.

But frankly – I was never interested in occupying high office just to say I did the job; I wanted to take risks and do things that might make a difference.

In six years as Chancellor, I regarded it as my job to make big and bold decisions to deal with problems we faced – knowing not every one would work, and most would be controversial.

It’s been only 24 months since we started on this great endeavor of the Northern Powerhouse. Now investment from around the world is flowing into the North of England.

And I will do all I can to make sure the Northern Powerhouse continues to be a priority for this One Nation Conservative Government.

The third and final conscious choice we’ve made as Conservatives is to be internationalists.

And again, there are Conservatives who would choose a different course.

In the eighteenth century, they were called Blue Water Tories.  They wanted to spend the largest possible sum on the navy and then never wanted to use it.

I can recognise the type in some of my colleagues in Parliament today.

But we are also the Party of Pitt’s European alliances; Disraeli’s Berlin Congress; Churchill’s warnings against appeasement and then the iron curtain; and Margaret Thatcher’s Atlantic alliance and South Atlantic success.

I became an MP shortly before 9/11 – and my first parliament, when I was sitting in opposition on the backbenches, was dominated by the build up to, and the aftermath of the Iraq war.

As Chancellor, I sat in the war cabinet that intervened to prevent the massacre in Benghazi and saw to the overthrow of Gaddafi.

My political generation knows the cost of intervention.  The lives lost.  The controversy caused.  The protest marches and the damning post-mortem reports.

It seems so much easier to stay out. Not get involved. Splendid isolationism is what they used to call it.

But my generation is also starting to learn about the cost of non-intervention.

The lives lost in the Syrian civil war. The rise of ISIS.  The instability across North Africa.

I think the vote by the House of Commons in 2013 not to punish Assad for the use of chemical weapons was the worst decision it made in the fifteen years I’ve been an MP.

Britain – more than perhaps any other nation on earth – has shaped the world: its language, its legal and political systems, its culture and its values.

We have been – and we should always remain, in my view – a global power: interested in shaping the world rather than being shaped by it.

As we negotiate our exit from the EU, I hope we seek the closest possible new ties with our European neighbours.  They are, on the  economy and on security, our friends not our foes.

I hope we reach out to build stronger economic and trading ties now with our old allies like the United States, and our new partners like China.

I hope we maintain the 2% of national income I committed us to spend on defence; and the 0.7% we were able to spend on international development – it makes us unique among the major nations, with world-besting hard power and world-changing soft power too.

A Britain strong at home but also strong in the world.

Let me end this Margaret Thatcher lecture with this.

Of all the Iron Lady’s virtues – her integrity, her strength, her determination – I think the greatest of all was her optimism.

She came of political age at a time when people were writing Britain off.  We had lost an empire; but not found a role.  Our once mighty industrial economy had become the sick man of Europe.

I was a child and then a teenager at the time.  I remember the hankering to return to some bygone age. I remember the Conservatives who said it was all much better in 1951, or 1851 – anything other than 1981.

But not Mrs T.  She was interested only in the future.

And she was an optimist.  She believed Britain’s best days lay ahead.

I am an optimist – and so do I.

Date Added: Monday 18th July 2016