Below is the text of Mr Major’s speech to the Scottish CBI at the Forte Crest Hotel in Glasgow on Thursday 10th September 1992.
Prime Minister, President, My Lords, Ladies and Gentlemen, welcome to CBI Scotland’s Annual Dinner. I hope you'll have a very happy evening. The Grace will be said by Dr. William Morris. The Rev. Dr. William Morris.
THE REV. DR. WILLIAM MORRIS:
Let us pray.
Oh, Lord, since these good things are of Thy giving
Help us to use them all for wiser living
Each use restraint, reduce inflation
To be a slimmer, fitter nation
And not be sunk in deep depression
When waist and hairlines face recession
Oh, Lord Thou dost with steady interest wait
Which of Thy family will devaluate?
Lord, guide us in our problems from on high
And, for this evening, bless the CBI
THE PRIME MINISTER:
Alistair, thank you very much for your kind words, and perhaps first I can offer my thanks to you and your colleagues in the CBI for your hospitality here this evening. I knew when I arrived a couple of hours ago that this evening was going to be a special evening [Laughter] and so, for one reason or another it has so far proved. I was piped in, I was offered what I was told, in that lovely bowl, was a half glass of whisky. If that was half a glass of whisky, I’m half a Dutchman. [Laughter].
Then we had what I can only call a rather novel Grace from Dr. Morris ...., [Applause]. It’s always good to see the Church join the State in a little battle against inflation [Laughter] so the CBI has lost none of its originality, and none of its hospitality, and then when Alistair and I stood up for the Loyal Toast a few moments ago, you may or may not have noticed, but a part of this platform nearly collapsed. I felt rather like the Nationalists on Election night [Laughter] but let me turn from the ridiculous to the relevant.
I want, if I may, Chairman, to speak tonight about the economy of our Country, the whole of our Country, every part of it, its role in Europe, and its future prospects, and they’re big subjects all of them, but what I want to seek to do this evening is to put them into proper perspective because far too often comment on the economy is partial, and is narrowly focused. It takes no account of the wider domestic and international scheme. It’s a snapshot, not a portrait; a detail, not a landscape. It’s too often darkly lit because too many always think it’s fashionable to be gloomy about our future. They forget what we've achieved so they underrate what we can do.
Chairman, it’s only two years ago that business was demanding two things from the Government, and, as Chancellor at that time, I remember the insistence of business, and I remember well what they were seeking from the Government. Business wanted a stable pound, and it wanted lower inflation, and it wanted this, I think, for good reasons. Inflation robs people of their savings.
It impoverishes those on fixed incomes. It wrecks profits and investment. If Britain has higher inflation than our competitors we lose competitiveness and we lose jobs. Inflation loads the scales against us, and business wanted stable exchange rates because it wanted certainty. It wanted a climate in which it could plan for the long term. I believe that business was right to demand low inflation, and stable exchange rates. They are the essential preconditions for sustained economic success.
Two years ago, before we joined the Exchange Rate Mechanism, inflation was over 10% and seemed to be rising. We forget too readily the alarm that that caused. Now inflation is 3.7% and falling, and we overlook too readily the opportunities that that offers. We saw such figures before. We saw them briefly in the mid-
We forget also that, two years ago, exchange rates against our European trading partners, where 60% of our trade now goes, exchange rates against our European trading partners were uncertain and volatile. Now they’re kept within a 6% band in the Exchange Rate Mechanism, and, in due course, will move to the two and a quarter per cent band. Sterling still fluctuates, of course, against the dollar and other currencies, as we've seen all too vividly in recent weeks, but it does now have a fresh and certain stability against the currencies of our main trading partners.
Chairman, as the fear of inflation and exchange rate instability has diminished, so the cry of many of the Government’s critics has changed. Now, we have the inevitable chorus of quack doctors peddling their remedies. There is, I think, a difficulty with these remedies. As we've learned from experience, miracle cures simply don’t work, never have, and never will. We need to face our problems squarely. It’s too easy to regard Britain’s problems as unique, or to blame them on the Exchange Rate Mechanism. Neither point is true. The problem of slow growth, a difficult problem, one we face at present, the problem of slow growth is not peculiar to Britain. It is, at the moment, a worldwide problem. We've seen the same chain of events in the United States, in Canada, in Australia, in New Zealand, and elsewhere, and in all those Countries, not just in the UK, in all those Countries businesses and individuals took on too much debt in the late part of the 1980’s. Asset prices, especially property, rose sharply on the back of that, and general inflation began to accelerate. Eventually, of course, as interest rates rose and debt burdens became intolerable, people’s top priority was to reduce their debts, and, as a result, businesses stopped expanding, and consumers stopped spending. Some of those Countries have lower interest rates than Britain, but as the United States has illustrated in recent months, the problems of adjustment are just as difficult.
Equally, I dare say any businessman returning from Continental Europe will have become only too well aware of economic difficulties faced there -
I will tell you what my conviction is. My conviction is that adjustment is best managed within the framework and the discipline provided by our membership of the Exchange Rate Mechanism. That discipline ensures that we keep in line with our major competitors in Europe. One thing is certain. If we have inflation around 4%, and our principal competitors have inflation around 2%, then we will lose markets, competitiveness, jobs, and prosperity. It would, at this moment, be madness to let our competitors steal the edge on inflation. I am absolutely clear that for us to compete effectively in Europe, we would need our present policies, whether or not Britain was a member of the Exchange Rate Mechanism, and as we have seen in Scandinavia this week, it is a cold world outside the Mechanism for many Countries that one day wish to join it.
I was pleased to note, Chairman, that the CBI, in your August Economic Situation Report, firmly endorsed the view that our exchange rate against European currencies, is an exchange rate at which industry can compete successfully, and Howard Davies repeated this very clearly when he addressed the TUC this week. I am sure that that is the right view. As the Chancellor has made crystal clear, there is going to be no devaluation, no realignment, and the export performance of many British, and notably many Scottish companies, provides convincing evidence of our current competitiveness.
I know that things are not easy, even in Scotland -
Let me say this to you, Chairman, for it is something that I believe passionately -
All too often at difficult times in the past the solution was the same. Let the exchange rate go, and every time, sooner or later the result was the same -
Since the late ‘60’s the pound’s external value has halved. There were some who saw that as a way to steal a competitive advantage. They were wrong. Maynard Keynes, whom I have to tell you I don’t often quote -
There is a question, a question we might usefully ask ourselves -
We shouldn't expect the road to permanently low inflation to be quick or to be easy, and we still have some way to go. Our inflation is above that of France and Germany, our most important competitors. Well over half our exports go to Countries with lower inflation than ourselves, so we must bite the anti-
Let me turn to something else that I believe is good for Britain, and good for business, and that is the Government’s European policy. In December, the Heads of Governments of the 12 will meet at Holyrood House in Edinburgh, the high point of the British Presidency. I’m delighted that so important an occasion will take place in Scotland, and I hope the famous, or perhaps in Glasgow I should say, the infamous Edinburgh climate will be benign.
Earlier this week I spoke at some length about the Maastricht Treaty. Tonight, I would add only this. Britain stayed firm at Maastricht, firm in its determination to resist the encroachment of European regulations into the workplace. We rejected completely the Social Chapter, and we did so because our ambition is to free industry to compete on its own terms in the widest possible market for its products. Free trade is the route to growth. Free trade is the way out of recession, and to our Presidency of the European Community falls the task of completing two great efforts to liberalise international trade, the single market of the European Community, and the Uruguay round of negotiations under the General Agreement on Tariffs and Trade. When completed, the single market will be the biggest free trade area in the world -
So, it’s not only our self interest that’s at stake. A GATT agreement already, in my judgment, long overdue is vital to the developing world, it’s essential to the survival of a world trading system that’s far too vulnerable to national protectionism. It is, that GATT agreement, one of the engines to restore growth. Negotiation of this in Europe, is a matter for the Commission, but we, the British Presidency, will press them, help them, cajole them, until that settlement is reached, but that is only part of our European agenda.
We've already agreed far-
Chairman, I want to conclude by looking at a different Union, a special Union, that very special partnership between Scotland and England. We should never express the value of that Union in purely economic terms. By the start of the 18th Century we had already shared a Monarch for a hundred years. Since your Stuart King, James VI, went South to succeed Queen Elizabeth, the last of the Welsh Tudors, that Royal bond, that military strategy formed good reasons for a closer Union, but it was the economic opportunities that persuaded many Scots of a necessity of Union with England in 1707, and that economic Union has prospered, and today Scotland can justly claim to have one of the most modern and diverse economies in Western Europe, and since 1707 Scotland and England, with Wales and Northern Ireland, have carried out a remarkably successful joint enterprise. It is the Union, with Scotland’s distinctive contribution, which has made all of this possible. It is since the Union, and because of the Union, that Scottish values, Scottish traditions, the Scottish Church, are to be found around the whole world.
I believe the result of the General Election showed that there remains in Scotland, a strong desire to keep Britain united. [Applause]. I believe that when Ian Lang and I made that a central plank of our General Election campaign, we reached out above the normal issues of inflation, and mortgages, and education, and health, and touched something that is a very basic instinct for people in every part of these united Islands of ours and I don’t believe it was an accident that while all the other Parties suffered reverses in Scotland, the Conservatives defied the polls and the pundits, and won both seats and increased our share of the vote, but that is in the past. We must look to the future, and now we must uphold, develop, and strengthen that remarkable magical Union that has lasted for so long, and that in essence, Chairman, is what taking stock is all about.
Ian Lang and Peter Fraser have already met a wide range of groups and individuals, each of whom has a special interest in and particular perspective on the role of Scotland within the United Kingdom. Their door will remain open to anyone with a genuine commitment to the integrity of the Union, and with ideas for making it work better. When I come to Scotland, or when I see Scots South of the Border, I will always be receptive to proposals designed to strengthen Scotland’s place in the United Kingdom, and it is as part of that continuing process of taking stock that I have invited a number of leading Scots from a variety of walks of life, to come and meet me in Edinburgh tomorrow so that we can exchange and generate ideas. I know that what they say will be immensely valuable. I’m looking forward to what I hope will be a wide ranging and productive discussion, and I want to hear myself, personally, from Scots, how they believe we can build up and strengthen that Union. These are matters of immense importance, not just to Scotland, but I think to every part of the United Kingdom. Sometimes I think the debate in Scotland has not focused on a wide enough canvas. It isn't just a question of keeping Scotland in the United Kingdom. It is not just a question of that. It is a question of the contribution and the importance of Scotland to every single part of the United Kingdom. We would not have the United Kingdom without the support and the strength of each of its component parts. It is that capacity of each of the parts of the United Kingdom to come together with common aims, common purposes, common beliefs, but retaining the distinctive cultures of the English, the Welsh, the Irish, and the Scots, that makes this such a remarkable United Kingdom. We propose to strengthen it and build it.
Chairman, in the few moments I've had this evening, I've taken the opportunity to touch on a number of important subjects -
Chairman, you are our host, and I have both the privilege and the pleasure of thanking you not only for an excellent dinner, but for a great occasion, and the very great privilege also of inviting everyone to join me in proposing a toast to our hosts this evening.
The toast -
The CBI Scotland. [Applause].