HM Treasury

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92/08

09 September 2008

Speech by The Chancellor of the Exchequer, The Rt Hon Alistair Darling MP, at the TUC Congress, Brighton

Check Against Delivery

1. Let me start by thanking you for the opportunity to address the Trade Union Congress Annual Conference.

2. I know that you want me to talk today about where we are, the challenges that we face, and how we're going to meet them.

3. Times are tough - but provided we do the right things - supporting people, supporting the economy - we'll get through it.

4. Above all, we must maintain economic stability - now and in the future.

5. The stability on which all the progress we have made was built over the last eleven years.

6. Stability is not an end in itself. It's there for a purpose.

7. Our purpose as a Government is fairness: to build a country where everyone has the opportunity to succeed regardless of their background.

8. Sustainable growth, higher employment, better living standards, more investment in health, transport, education.

9. These are all essential if we are to build the fairer, stronger, country we want to see.

10. A stable economy is not an optional extra. It's a means to an end - fairness; rising prosperity; opportunities for everyone. That's what we've achieved over the past eleven years

11. But first I want to talk about the difficult economic climate facing us right now, and why I believe we have good reason to be confident about the future.

12. As everyone can see, the global economic environment has changed dramatically in the last year - here and in every country in the world.

13. The decision this weekend by the US government to take control of institutions that guarantee over $5trillion of mortgages demonstrates the scale of the problem.

14. Last year we intervened to save Northern Rock to stop problems spreading to other banks. It was controversial. But necessary and right.

15. The world has changed profoundly over the past decades. What happens in one part of the world almost immediately affects every other.

16. Globalisation - more trade - will mean more prosperity and jobs.

17. But it also brings risks - because economic problems in one country can no longer be contained within its borders.

18. Every country in the world has found itself hit by two global shocks - the credit crunch and the surge in food and energy prices.

19. Last summer, when the US sub-prime market collapsed, it only took a few weeks before financial markets were affected across the world.

20. And everywhere financial institutions reacted by reducing the amounts of money they lend to each other.

21. And that quickly made it much more difficult for people and businesses to borrow money from them.

22. The biggest impact is being felt in mortgage markets. You can see that today.

23. A decade ago, almost all mortgages in the UK were funded from deposits we saved in banks and building societies.

24. By last summer, half of all new mortgages were instead funded by global money markets.

25. As this funding disappeared, UK mortgage lending was severely reduced.

26. And this credit crunch coincided with a massive surge in the price of oil and other basic materials.

27. Wheat prices up by 24 per cent. Rice 118 per cent.

28. Partly it's the short-term impact of geopolitical uncertainty and bad harvests.

29. And also because of a rapidly changing world, countries like China, India and Brazil have been growing at record-breaking speed.

30. Now that's a good thing. But it means that their demand for food, oil and other commodities is growing too.

31. The most dramatic rise has been in the price of oil.

32. It's hard to believe that ten years ago a barrel of oil cost $10. This year it's jumped $10 in a single day.

33. This time last year, a barrel cost just $60. This summer oil peaked at $147.

34. The impact of these two shocks is being felt:

35. Across the world inflation up and growth down:

36. For you and your members it means higher prices at petrol stations, higher prices at the supermarket and more expensive gas and electricity bills.

37. Yes times are tough. But yes we will get through them.

38. Two events - on their own bad enough - together having a profound effect here and all over the world.

39. And the difference this time, for us, is that we can deal with the consequences.

40. Provided we do the right thing - provided we don't make the mistakes of the past.

41. And that's why I am confident that we will get through this.

42. Because this is different from the home-grown problems of the seventies, eighties or early nineties.

43. And because our economy is stronger than in the past:

44. As I've said before, the economy will slow down.

45. But with strong fundamentals and with the right support from the government, we will get through this.

46. Provided we don't risk stability - we'll never return to those days.

47. Most people understand that the problems we face are global.

48. They recognise no country or Government can turn back these global economic forces on its own.

49. Internationally, we are working with other governments to find the long-term answers to these problems.

50. But at home you expect now - and rightly - that we do what we can to help families through this difficult time.

51. So from this month, around 22 million people on low and middle incomes will get a £60 tax rebate in their pay packet - and an extra £10 a month from now until April.

52. On housing, we are supporting people by spending £1 billion to speed up the delivery of social homes, increase help for people facing repossession and extra support for first time buyers.

53. Something you called for. Something we've delivered.

54. We coupled this with an immediate stamp duty holiday for house purchases.

55. Helping families through the housing downturn, particularly those struggling to meet mortgage payments.

56. On fuel prices, too, we've frozen fuel duty this year - saving families and businesses around £100m a month.

57. The Winter Fuel Allowance - introduced by this Government and opposed by some - this year up by £50 to £250 for the over-60s, and up by £100 to £400 for over 80s.

58. Earlier this year too we secured money from the energy companies to cut the tariffs for those on lowest incomes.

59. Energy companies must face their responsibilities to help people in this difficult period.

60. So we'll do more. And they must do more.

61. Soon we will announce how we will help people reduce their energy bills this winter - and every winter.

62. Millions of homes to benefit, and thousands of jobs to be created, from becoming a more energy-efficient society.

63. I've said I'm listening. I have heard the calls for a windfall tax on energy companies and I'm sure we'll return to this in the Question & Answer.

64. We have three goals. Energy security: becoming less reliant on imported oil and gas.

65. Clean green energy: so that we can tackle climate change.

66. Keeping energy prices down, as low as we can, for business and families. No-one should go cold this winter.

67. And meeting those goals is what's important. And they will need continuous investment, over many years - bringing energy security and creating new jobs.

68. That is what we are doing - more support now - on housing, energy and from this month through pay-packets.

69. And helping those at risk.

70. Everyone in the country, in this hall, knows these are tough times.

71. But families and businesses would face even tougher times in the future if we throw away the stability that we have worked so hard to secure.

72. And we've seen what happens when that stability went in the past.

73. It's not the people on the highest incomes who pay the price. It's the low paid and the elderly. And those who would lose their jobs.

74. A stable economy is not an optional extra. It's a means to an end - fairness.

75. It's been the foundation from which we have delivered the changes that the country demanded from us.

76. The alternative would cost jobs up and down the country.

77. And that's why pay matters right across the board - in the private and the public sector - in the boardroom as much as on the shop-floor

78. You're rightly concerned about excessive bonuses - especially when people seem to get money for failing not succeeding. And that's got to change.
79. A bonus should be for hard work, not big mistakes.

80. Excessive bonuses, which encourage traders to take excessive risks, at a time of easy global credit - one of the major reasons for the global credit crunch.

81. We need to learn the lessons to prevent this happening again.

82. I know you'll want to come back to pay in the questions. But let me just say this.

83. Inflation today is mostly caused by the rise in oil and food prices. That's the primary cause.

84. But oil prices have fallen. Most forecasters expect inflation to come down next year.

85. That's why it would be so damaging for us to allow inflation to become entrenched, as it did in the past.

86. That's why, in the private and public sectors, pay rises must be consistent with our inflation target.

87. Otherwise every penny in pay rises will be very quickly swallowed up by higher prices.

88. And we all remember the job losses that followed in the past once inflation takes a grip.

89. Hundreds of thousands out of work, as happened in the 80s and 90s.

90. We cannot allow that to happen.

91. And yes, fairness is about pay. That's why we introduced the minimum wage.

92. But it is also about jobs, fighting discrimination, cutting waiting lists, providing quality childcare and a decent education.

93. And it's also about opportunities for the future. Even in these tough times we need to look ahead.

94. Here the Government and the TUC are working closely together.

95. So we can continue to compete and win in a changing global economy.

96. If we are to ensure economic growth we need to be clear where the economy is strong and where new jobs will be created in years to come.

97. We must all be ready to keep working together to make the most of these opportunities.

98. In many cases our most successful industries are the ones where many of you have members.

99. Like manufacturing, which accounts for half of our exports and attracts most foreign investment.

100. Like knowledge based industries, pharmaceuticals, biotechnology and science, which have created over half of new jobs in the last 20 years.

101. In all these cases, it's not a case of picking winners but recognising that Government support can make a difference.

102. In biotechnology and pharmaceuticals, we are helping with publicly funded research and with tax credits.

103. In aerospace, by helping finance new projects like Airbus.

104. In manufacturing we launched yesterday a new strategy to build on this huge success story.

105. Britain is good at manufacturing, we can be even more successful with the right support.

106. And together we can secure many new high-value green-collar jobs - making the most of our transition to a low-carbon world.

107. Britain could be the world leader on carbon capture and renewable energy.

108. In 20 years this could mean a potential one million new jobs in low carbon industries.

109. So now and in the future, we are guided by the spirit of fairness which underpins the ambitions and priorities of everyone in this hall - and in the country.

110. Working together to create new jobs and new opportunities, just as we've done since 1997.

111. It's almost 11 years since I stood in this very hall.

112. It's all too easy to forget what the country was like then.

113. Public services starved of investment, an underfunded NHS, classrooms built by the Victorians, tens of thousands earning less than £3 an hour and almost no childcare.

114. Let's not take for granted how we've changed the country.

115. Of course we need to do more. But don't let that overshadow what we've achieved.

116. A country changed for the better.

117. Not at the expense of economic stability, but because of it.

118. That's why this Government made the Bank of England independent - and why we will support their independence.

119. We've trebled public investment and at the same time reduced national debt - to one of the lowest levels of any major developed country.

120. It means we can allow borrowing to rise, to support the economy and families at this crucial time.

121. But in the medium term, governments everywhere have to live within their means - so I will set out at the pre-Budget Report how I will continue to deliver sound public finances.

122. Because that's the platform for all we've achieved.

123. 150,000 more teachers, nurses and doctors working in new hospitals and rebuilt schools.

124. Public sector pay increased by 39% since 2000, more than in the private sector.

125. Instead of three million out of work, three million more jobs.

126. Better working conditions. Paid holidays. Childcare support. Help for carers.

127. Jobs for lone parent and people with disabilities. Equal treatment for agency workers.

128. For the first time ever, every employer contributing to pensions.

129. Increased child benefit, maternity leave, tax credits. The lowest income families as much as £4,000 a year better off.

130. Before, child poverty doubled. Now it's fallen. And we're determined to eliminate it.

131. In 1997, employers paying what they liked. Today a decent minimum wage. You asked for it. We delivered it.

132. That's why we're ensuring that tips don't count as part of the minimum wage. You campaigned for it. We agreed.

133. We have achieved a great deal together - but we have more to do.

134. Times are tough right now. But together we will get through it.

135. We are a government of fairness. Of opportunity for everyone.

136. Our mission to build a country where everyone has the opportunity to succeed regardless of their background.

137. Our priority to help families at these difficult times.

138. That's what this government is for.

139. Preparing our country for the challenges of the future.

ENDS

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