Below is the text of Mr Major’s speech to the 107th Conservative Party Conference, held at the Bournemouth International Centre on Thursday 11 October 1990. The speech was issued as a Conservative Party news release, reference 637/90.
CHANCELLOR OF THE EXCHEQUER:
Let me turn immediately to the concern that I know is in most people’s minds. Two years ago inflation seemed beaten. Continuing growth, falling taxes, rising prosperity. That was what people had come to expect.
Then we hit difficulties. In essence the case was simple. We grew too fast. We spent too much. We saved too little. And too much of what we spent was borrowed. The result was inflation at home and a trade gap abroad.
Our objective must be to get back on course: most importantly to reduce inflation; and then eliminate it. And we must close that trade gap. At the moment we import far too much that both could and should be made here in Britain.
Too often our industry – especially manufacturing industry – is portrayed as though it was the weak link in our economy – constantly in need of a crutch.
That image is insulting to industry; more importantly, it simply is not true. Manufacturing industry is fitter and more competitive than for years. Increasingly it is attracting the best and brightest of our young people. An independent report recently argued that Britain has the potential to become the manufacturing dynamo of Europe in the 1990s. We have provided the right tax regime – the best in Europe. We have provided the right industrial relations framework – the best in Europe. Now we need to match that with the right low inflation economy and make that the best in Europe.
On Monday of this week we took an historic step towards that when sterling joined the ERM. No one should think this will be an easy option. Or a soft one. It is not a quick fix. And it was not intended as such. It will not remove the need for tight domestic policies. But it will help us to get our inflation rate down and to keep it down.
Membership of the ERM will not make it easier overnight for our industry to compete in Europe. But it will help to keep the exchange rate stable and to provide the certainty which industry needs to plan for the future. And we have gone in at a rate at which industry can compete. It is now up to them to stay competitive by keeping costs down.
But let me correct one misconception that seems to have appeared. Joining the ERM does not mean that we are now on a road leading inexorably to a single currency. It does demonstrate yet again that we take our commitment to Europe seriously and that we mean what we say. But we also mean it when we say that we cannot accept the Delors plan and we will continue to press our own alternative that we believe will better promote European integration and keep the Community together.
Joining was not a light or casual decision. But it was the right one. And it does target inflation as the poison in the economy that must be destroyed. Only as we do so can we take further steps to reduce interest rates and mortgage rates. I want to see that as much as anyone. I do understand – very well – the difficulties many people and many small businesses are facing. But I know too, that the countries that achieve the lowest inflation rates are the countries that will enjoy the lowest interest rates.
The trouble with inflation is that the welcome bits come first – more money, cheap goods, expanding output. The unwelcome bits follow – soaring prices, collapsing businesses, lost jobs.
But the cure works in reverse: high interest rates, bankruptcies, and tightening belts come first. Then we get stable prices, competitive businesses and a growing economy. In recent months we have been right at the nasty end of the cycle – feeling the pain but not yet seeing any of the benefits.
Although oil prices have not fed through fully into the Retail Price Index I am now in no doubt that inflation will fall sharply over the next year. That will be next year’s reward for this year’s policy.
And there is a further point. The first time I addressed this Conference was as a Social Security Minister. I noticed then that many pensioners were on social security benefits. Not because they were feckless. They weren’t. Not because they had not saved. They had – and often from modest incomes throughout a lifetime of work. No, they were on benefits because rampant inflation in the 1970s wrecked the value of their savings. I believe that was unforgiveable; we must never let it happen again.
In recent weeks we have heard little enough of these realities from Labour. One of the main causes of our present difficulties is that, after the Stock Exchange crash in 1987, we reduced interest rates too fast. In retrospect it was a mistake. But we did so because we feared recession. So, at the time, did everyone else: economists, businessmen, pundits, even – heaven help us – the Labour Party.
So I was astonished to hear Mr Kinnock claim that, at that time, in 1987, he was saying “Steady, steady!”. Now in retrospect that would have been right. But Mr Kinnock? “Steady, steady”, somehow I don’t recall that. So I looked it up. And, try as I might, I couldn’t find him saying that. Almost everything else, it is true, but not “Steady, steady”! Now it may be that I’m being unfair to Mr Kinnock. So let us try a larger sample.
I will let you into a secret. I will tell you why Mr Kinnock always speaks at such length. It’s because he has nothing worthwhile to say. And because he has nothing worthwhile to say, the poor chap never knows when he’s finished. We know when he’s finished. The day after the next General Election.
By the way, I did find out what he said in 1987 – and I quote;
“This is a time of judgement and that judgement should be a big cut in interest rates”.
So much for “Steady, steady”. So much for Mr Kinnock’s memory. And so much for our prospects had we taken his advice.
For what he really proposed was a policy that would have given us far higher inflation today. And what he plans now would give us even higher inflation tomorrow.
For every pressure group he has a spending promise. Many are appealing. Some are appalling, others are frankly loopy. But together they are unaffordable. Even the large tax and national insurance increases they admit to could not pay for Labour’s real programme. But, of course, if they kept their promises, tax increases would be bigger. And if tax increases were not bigger then they could not keep their promises. That’s why Labour will not price their programme. But in due course, we will. Just to help them out – and also, of course, to help keep them out.
There is now only one solitary part of John Smith’s economic programme that still survives: credit controls. The problem for him is that they don’t work, they’re out of date and the rest of the world is ditching them. What a commentary on the modern Labour Party. As the Third World tosses out failed economic policies, John Smith picks them up. Well, after this week he’ll have to pick up a few more if he wishes to look distinctive.
But put aside for a moment the rights and wrongs of any particular policy. Consider their priorities: the State and tax and spend. And the individual can pay and be controlled. Doesn’t that just sum up the essential differences between our two parties? They are the party that builds up choices by the State. We are the Party that provides choices for the individual.
They are, of course, closer than us to the trade union leaders. But we know what that means. It means that when it comes to the crunch the trade unions will put their arm around Mr Kinnock’s shoulders and say “Neil”. And he will.
By contrast, our Party is about people and for choice. People know what we stand for. Our policy is to promote economic well-
We have done so because we have been prepared to take the long view, to make fundamental changes, often controversial at the time. To deregulate, to denationalise, to allow enterprise to flourish, and to encourage people to take responsibility for their own lives. This approach is often less cost than promising that the Government will do everything for everybody. But, in 11 years, it has improved the prospects for the future out of all recognition.
We owe a great deal of that to the policies pursued by Geoffrey Howe and by Nigel Lawson.
Our approach has been based on the fundamental premise that people want opportunity:
And not only for the better off.
We know the answer to that. They do not.
The changes we have introduced give choice and opportunity to millions of people who never had them before. That is what we have achieved in the last 11 years. It is a truly remarkable achievement. And it could not and would not have happened without the leadership of Margaret Thatcher.
And that is what we must continue to build on in the future. As we do so, the Labour Party will accuse us of being materialists. I plead guilty. In that one charge they admit the dramatic improvements in living standards we have brought about.
Of course the charge is meant to make us look selfish. But does it?
What materialism means for many people is that they are better fed, better clothed, better housed than ever before. They own homes, cars, washing machines and televisions, on a scale earlier generations never dreamed of. They live in a society where literature, art and music are available in abundance. In which political and personal freedom are taken for granted. In which the class barriers that once strangled social mobility are gone.
And what our opponents cannot stomach is that they live in a society that knows it is the free market and capitalism that have delivered this improvement. For here as elsewhere the market economy has won the political, the social and the economic argument and Socialism has lost.
Since 1979 we have rebuilt a market economy; we have untangled bureaucracy, we have denationalised industries and reformed trade unions. And it has worked. We enter the 1990s in incomparably better shape than we entered the 1980s.
And the prizes before us now are enormous. The 1990s will be a period of immense opportunity. Increasing trade will flow from the completion of the Single Market and the opening up of Eastern European economies.
I have no time for the misery mongers with no faith in our future. It’s about time people stopped talking this country down and started talking it up. Throughout much of the 1980s the British economy outperformed the rest of Europe.
Overseas investors have shown their confidence in our country and our workers – and that is why we attract more inward investment than any other European country. We should have more faith in ourselves. And that must be one of our aims for the 1990s.
And when inflation comes down, as it will; when interest rates can prudently be lowered, as in due course they can; when 11 years’ improvement to the economy brings more prosperity, as it must; the electorate will know which way to turn.
Once again, it will put its trust in a Government that delivers. That keeps its word and keeps it nerve. That knows what we should aim for and plans to achieve it. A Government, above all, with the will, the authority, and ‘The Strength to Succeed’.