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Monday, 7 June 2010

UK Overboard, David Cameron is in charge of lifeboats. Speech full text

You might need this, the lifeboat has a big hole in it!


David Cameron: We must tackle Britain's massive deficit and growing debt FULL TEXT OF SPEECH The contents are so dire, I have no need to add

my thoughts.......but we are all going to Hell...

 JB
Over to The Rt Hon David Cameron, Monday, June 7 2010


I have now been in office for a month.
I have spent much of that time discussing with the Chancellor and government officials the most urgent issue facing Britain today: our massive deficit and growing debt. How we deal with these things will affect our economy, our society - indeed our whole way of life. The decisions we make will affect every single person in our country. And the effects of those decisions will stay with us for years, perhaps decades to come. It is precisely because these decisions are so momentous. Because they will have such enormous implications. And because we cannot afford either to duck them or to get them wrong...


...that I want to make sure we go about the urgent task of cutting our deficit in a way that is open, responsible and fair.





I want this government to carry out Britain's unavoidable deficit reduction plan in a way that strengthens and unites the country.






I have said before that as we deal with the debt crisis we must take the whole country with us - and I mean it.






George Osborne has said that our plans to cut the deficit must be based on the belief that we are all in this together - and he means it.






Tomorrow, George Osborne and Danny Alexander will publish the framework for this year's Spending Review.






They will explain the principles that will underpin our approach, and the process we intend to follow...






...including a process to engage and involve the whole country in the difficult decisions that will have to be taken.






But today, I want to set out for the country the big arguments that form the background to the inevitably painful times that lie ahead of us.






Why we need to do this.






Why the overall scale of the problem is even worse than we thought.






And why its potential consequences are therefore more critical than we feared.






WHY WE NEED TO DO THIS


There are three simple reasons why we have to deal with the country's debts.






One: the more government borrows, the more it has to repay; the more it has to repay, the more lenders worry about getting their money back; the more lenders start to worry, the less confidence there is in our economy.






Two: investors do not have to put their money in Britain - they will only do so if they're confident the economy is being run properly, and when confidence in our economy is hit, we run the risk of higher interest rates.






Three - and the real, human, everyday reason this is the most urgent problem facing Britain...






...is that higher interest rates hurt every family and every business in the land.






They mean higher mortgages and lower employment.






They mean that instead of your taxes going to pay for things we want, like schools, hospitals and policing...






...your money, the money you work so hard for, is going on paying the interest on our national debt.






That's why we have to do something about this.






This argument that we have consistently made - for urgent action to start tackling the deficit this year and an accelerated plan for eliminating it over the years ahead - has already been backed by the Bank of England and the Treasury's own analysis.






It has been made more urgent still by the sovereign debt crisis in the Eurozone over recent months.






The global financial markets are no longer focussing simply on the financial position of the banks.






They want to know that the governments that have supported the banks over the last eighteen months are taking the actions to bring their own finances under control.






And this weekend in South Korea George Osborne received explicit backing from the G20 for the actions this Government has already taken.






Around the world people and their governments are waking up to the dangers of not dealing with their debts.






And Britain must be part of that international mainstream.






So we're clear about what we must do.






We've also been clear about how we must do it - as the Deputy Prime Minister has said - in a way that protects the poorest and most vulnerable in our society; in a way that unites our country rather than divides it; in a way that demonstrates that we're all in this together.






And we should be clear too that these problems have not just appeared overnight.






I think people understand by now that the debt crisis is the legacy of the last government.






But exactly the same applies to the action we will need to take to deal with it.






If there are cuts - they are part of that legacy.






And now that we have had a chance to look at what has really been going on....






...I want to tell you the scale of the problem we face.






SCALE OF THE PROBLEM


We have known for a long time that our debts are huge.






Last year, our budget deficit was the largest in our peacetime history.






This year - at least according to the previous government's forecasts - it is set to be over 11 per cent of GDP.






Today, our national debt stands at £770 billion.






Within just five years it is set to nearly double, to £1.4 trillion.






That is some £22,000 for every man, woman and child in the country.






We knew this before.






Soon, the independent Office for Budget Responsibility will set out independent forecasts that will show the scale of the problem we are in today.






For the first time people will be able to see a really independent assessment of the nation's finances and the size of the structural deficit.






This important innovation has been noticed around the world, and will help to restore confidence in our fiscal framework.






But what I can tell you today - and what we did not know for sure before...






...in fact what we could not know, because the previous Chancellor of the Exchequer did not make the figures available...






...is how much the interest on our debt is likely to increase in the years to come.






Now we have looked at the figures.






Based on the calculations of the last government, in five years' time the interest we are paying on our debt is predicted to be around £70 billion.






That is a simply staggering amount.






No wonder the previous government refused to publish the information.






Let me explain what it means.






Today we spend more on debt interest than we do on running schools in England.






But £70 billion means spending more on debt interest than we currently do on running schools in England plus climate change plus transport.






Interest payments of £70 billion mean that for every single pound you pay in tax, 10 pence would be spent on interest.






Is that what people work so hard for, that their taxes are blown on interest payments on the national debt?






What a terrible, terrible waste of money.






So, this is how bad things have got.






This is how far we have been living beyond our means.






This is the legacy our generation threatens to leave the next.






NATURE OF THE PROBLEM


So no one can deny that the scale of the problem is huge.






But what makes this such a monumental challenge is the nature of the problem.






There are some who say that our massive deficit is just because we've been in a recession, and that when growth comes back everything will be OK.






But there's a flaw in this argument.






Rather a major flaw, in fact.






We had a significant deficit problem way before the recession.






In fact, much of the deficit is structural.






A problem built up before the recession, caused by government spending and planning to spend more than we could afford.






It had nothing to do with the recession.






And so growth will not sort it out.






This really is the crux of the problem we face today - and the reason we can't just sit here and hope for the best.






The previous government really did think they had abolished boom and bust.






They thought the good times would go on forever; the economy would keep on growing and they could keep on spending.






But the truth about that economic growth - and the tragedy - was that it was based on things that could never go on forever.






Their economy was based on a boom in financial services, which at its peak accounted for a quarter of all corporation tax receipts.






But this was unsustainable because the success of financial services was partly an illusion, conjured from years of low interest rates, cheap money and a bubble in the price of assets like houses.






Their economy was based on a boom in immigration, which at one point accounted for a fifth of our annual economic growth






But this was unsustainable because it's just not possible to keep bringing more and more people into our country to work while at the same time leaving millions of people to live a life on welfare.






And their economy was based on a boom in government spending, with some budgets doubled or even trebled in a decade.






This was not sustainable because in the end, someone has to pay for all that spending.






So when the inevitable happened, and the boom did turn to bust...






...this country was left high and dry, with a massive deficit that threatens to loom over our economy and our society for a generation.






So the problem we face today is not just the size of our debts, but the nature of them.






And the fact that the roots of the present situation lie so deeply in the profound economic mistakes of the past thirteen years.






MISTAKES OF THE PAST


This is where the complete economic failure of the last government is laid bare.






They talked about their economic competence, but look at how recklessly they spent our money.






By publishing the information about how your money is spent, we are now shining a spotlight on that waste...






...and it is a scandalous sight to see.






A Department for Work and Pensions that increased benefit spending by over £20 billion and gave some families as much as £93,000 in Housing Benefit every year.






A Ministry of Defence that allowed 14 major projects to over-run, which at the last count are £4.5 billion over budget.






A Department of Health which almost doubled the number of managers in the NHS.






A Treasury that sanctioned all of this because it published growth forecasts that were far more optimistic than independent forecasts.






And look at how they did all this, while at the same time doing so much damage to the fundamentals of our economy.






Letting it get completely out of balance by hitching our fortunes to a select few industries.






Accepting as a fact of life the eight million people who are economically inactive.






Allowing it to become far too dependent on a public sector whose productivity was falling...






...and far too hostile to a private sector that has now actually shrunk in size to a level not seen since 2004.






Nothing illustrates better the total irresponsibility of the last government's approach than the fact that they kept on ratcheting up unaffordable government spending even when the economy was shrinking.






By the end of last year our economy was over 4 per cent smaller than in 2007.






But if you look behind the headline figures, you see why we face such a massive deficit today.






Because while the private sector of the economy was shrinking, the public sector was continuing its inexorable expansion.






While everyday life was incredibly tough for people who didn't work in the public sector...






...with job losses, pay cuts, reduced working and falling profits...






...for those in the public sector, life went on much as before.






Since 2007 public spending has actually gone up by over 15 per cent - some £120 billion in just three years.






And while private sector employment fell in this period by 3.7 per cent, public sector employment actually rose.






So it really has been a tale of two economies.






A public sector boom - and a private sector bust.






But there was a problem with the previous government's public sector splurge.






They argued that more spending would support the economy, conveniently forgetting that if you start with a large structural deficit, ramping up spending even further is likely to undermine confidence and investment, not encourage it.






So while the people employed by the taxpayer were insulated from the harsh realities of the recession...






...everyone else in the economy was paying the price.






And now we're all paying the price because the size of the public sector has got way out of step with the size of the private sector.






We're going to have to get it back in line - and that will be much more painful than if we had kept things properly in balance all along.






And the final part of the legacy is the fact that the money the government put in to the public sector didn't make it dramatically better or more efficient.






So while the cutbacks that are coming are unavoidable now...






...they could have been avoided if the previous government had spent wisely instead of showering the public sector with cash at a time when everyone else in the country was tightening their belt.






CONSEQUENCES


So that is the overall scale and nature of the problem.






And I want to be equally clear about what the potential consequences are if we fail to act decisively and quickly to cut spending, bring our borrowing down and reduce our deficit.






If we do nothing, there are three possible scenarios.






As we have seen, the best case scenario is that we pay increasingly punishing amounts of interest on our debt.






Dozens of billions a year - every year - without ever actually paying our debts off.






That huge drain on the public finances would threaten money that could have been spent on the things we really want to achieve as a government...






...improving the NHS, giving our children a better education, investing in our country's infrastructure.






This is a dire, unprogressive outcome for our country.






But as I said, this is just the best case scenario.






If we fail to confront our problems we could suffer worse - a steady, painful erosion of confidence in our economy.






Today, almost every major country in the world is focusing on the need to cut their deficits.






And the G20 has called on those countries with the biggest deficits to accelerate their plans for reducing them.






If in Britain investors saw no will at the top of government to get a grip on our public finances, they would doubt Britain's ability to pay its way.






That means they would demand a higher price for taking our debt on, interest rates would have to rise, investment would fall.






If that were to happen, there would be no proper growth, there would be no real recovery, there would be no substantial new jobs - Britain's economy would begin an inevitable slide into decline.






These outcomes would be nothing less than disastrous, not just for our economy but for our society too - and our vision of a Britain that is more free, more fair and more responsible.






But even more worrying is the example of Greece - a sudden loss of confidence and sharp increases in interest rates.






Let me be clear.






Our debts are not as bad as Greece.






Our underlying economic position is stronger.






And crucially we now have a Government that has already demonstrated its willingness - and ability - to deal with the problem.






But Greece stands as a warning of what happens to countries that lose their credibility, or whose Governments pretend that difficult decisions can be avoided.






Thankfully this is a warning that has now focused the attention of the international community.






This is why we believe there is only one option in front of us: to take immediate and decisive action.






That's why we have already launched and completed an in-year spending review to save £6 billion of public spending.






It's why shortly our new, independent, Office for Budget Responsibility will set out independent forecasts for both our growth and borrowing so that never again can this country sleepwalk into such a massive debt crisis.






And it's why in two weeks, we will have an emergency Budget, setting out how we will cut the bulk of our deficit over the course of this Parliament.






Our actions have already been noticed around the world, and I'm glad that the G20 summit this weekend explicitly endorsed the decisions we have taken.






CONCLUSION


So this is the sober reality I must set out for the country today.






The legacy left by the last government is terrible.






The private sector has shrunk back to what it was over six years ago.






Unless we act now, interest payments in five years' time could end up being higher than the sums we spend on schools, climate change and transport.






Because the legacy we have been left is so bad, the measures to deal with it will be unavoidably tough.






But people's lives will be worse unless we do something now.






The cause of building a fairer society will be set back for years unless we do something now.






We are not alone in this - many countries around the world have been living beyond their means, and they too are having to face the music.






And I make this promise to everyone in Britain: you will not be left on your own in this.






We are all in this together, and we will get through this together.






We will carry out Britain's unavoidable deficit reduction plan in a way that strengthens and unites the country.






We are not doing this because we want to, driven by theory or ideology.





We are doing this because we have to, driven by the urgent truth that unless we do, people will suffer and our national interest will suffer.






But this government will not cut this deficit in a way that hurts those we most need to help...






...that divides the country...






...or that undermines the spirit and ethos of our public services.






Freedom, fairness, responsibility: those are the values that drive this government, and they are the values that will drive our efforts to deal with our debts and turn this economy around






So yes, it will be tough.






But we will get through this together - and Britain will come out stronger on the other side.

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