Chancellor speech: CBI Annual Dinner 2018
The Chancellor of the Exchequer, Philip Hammond's speech at the Confederation of British Industry (CBI) Annual Dinner 2018.
[Check against delivery]
Thank you, Paul.
And let me join you in commemorating those who lost their lives and those who were injured during the appalling attack in Manchester, a year ago today鈥�
鈥ur thoughts this evening are with the families and friends of those affected.
As ever it鈥檚 a pleasure to speak to you tonight.
And what a week it has been.
The Royal Wedding; the FA Cup Final; and now the CBI dinner!
And I鈥檓 especially pleased to be here this evening to mark the end of Paul鈥檚 three-year tenure at the helm.
I was doing a little research and stumbled across an FT interview with Paul in 2011.
When asked 鈥渨hich historical or fictional character do you most identify with?鈥�, Paul replied, with characteristic modesty: 鈥淣elson Mandela鈥�.
[History will determine!]
Paul, congratulations on the achievements of your Presidency, and thank you for the leadership you have shown.
It was Nelson Mandela, reflecting on his first 100 days as President, who noted that 鈥渙n occasion, strong language has been used to drive home a strongly held belief鈥濃��
鈥nd he reassured his audience that this was a sign of 鈥渁 robust, vibrant democracy, with broad consensus on the most important national questions鈥�.
Paul, I will welcome your speech tonight as a sign of our 鈥渞obust, vibrant democracy鈥�!
Because we are in broad agreement on the big questions facing our country and our economy.
We agree that:
We must rebuild a consensus for the liberal market economy as the best way to deliver future prosperity.
We must embrace digital technology, and ensure Britain is at the forefront of the technological revolution.
We must invest in skills and training 鈥� to ensure the next generation is prepared for the economy of the future.
We must build the world class infrastructure and invest in the R&D needed to ensure Britain stays ahead in the global race.
We must raise our productivity 鈥� and thus deliver higher wages for people up and down this country.
And yes, we must deliver a Brexit that prioritises jobs, growth, and prosperity.
And it is absolutely my belief that central to all of this, is listening to business, and believing in the power of business to deliver higher living standards, and spread greater prosperity.
I can promise you, Paul, business advice is a welcome input, not an 鈥渋nconvenient truth鈥�!
So I hear the concerns you have set out tonight about the Brexit challenge鈥�
鈥ut I remain confident. And, by the way, when Donald Tusk says Brexit is the 鈥渟addest moment in Modern European history鈥濃��
鈥 assume he didn鈥檛 see this year鈥檚 Eurovision.
The PM has always had a vision for a close economic partnership between the UK and the EU鈥�
鈥 partnership that protects supply chains, and established trade relationships鈥�
鈥hat backs businesses, and safeguards jobs鈥�
鈥nd that promotes the values that we share across the continent of Europe.
We have made good progress:
In March we agreed on an implementation period鈥�
鈥hich allows 鈥渂usiness as usual鈥濃��
鈥nd ensures you only have to navigate one set of changes.
Focus has now moved on to our future economic partnership, and in particular the customs relationship.
I have listened to the four customs tests you have set out tonight鈥�
鈥nd we share your aspirations to minimise frictions and burdens鈥�
鈥o avoid new barriers in Ireland鈥�
鈥nd to grow Britishexports.
But we do not agree that staying in the customs union is necessary to deliver them.
The UK has proposed two possible future customs models鈥�
鈥oth are 鈥渨orks in progress鈥濃��
鈥ut we are confident that, building on these two models, we can develop a solution that will allow us to move forward while meeting your concerns, Paul.
And beyond customs, we will seek a comprehensive system of mutual recognition to ensure that, as now, products only need to undergo approvals in one country to show that they meet regulatory standards across Europe鈥�
鈥nd we will explore the terms on which the UK could maintain a relationship with the EU agencies, such as those for the chemicals, pharmaceutical, and aerospace industries鈥�
鈥s the route to deliver such an outcome.
On services, we have the opportunity to establish a broader agreement than ever before鈥�
鈥ncluding continued recognition of professional qualifications, and a labour mobility framework that enables travel to provide services to clients in person.
And an opportunity to seek a bespoke partnership in financial services鈥�
鈥hat will enable the ongoing delivery of cross-border financial services in both directions, while protecting financial stability and maintaining fair competition.
We made good progress in December and March, and I hope and expect we will make further progress at the upcoming June Council.
It is in the interests of both the UK and the EU to secure a mutually beneficial deal that will allow us to continue to have a close economic partnership鈥�
鈥nd to do so as soon as possible to give businesses the certainty they need.
I am confident that we will reach such a deal.
That is my most immediate priority as Chancellor.
But as we embark on a technological revolution that will transform our economy and our lives鈥�
鈥y most important long-term challenge is to ensure that the UK continues to be at the forefront of that technological revolution, leading the world in innovation.
This is what our Modern Industrial Strategy is all about.
It isn鈥檛 about picking winners鈥�
鈥r propping up failed industries.
But about exploiting the synergy between the facilitating power of the state鈥�
鈥nd the energy of the private sector鈥�
鈥o deliver the innovation that will secure Britain鈥檚 future鈥�
鈥ithin a market that is working properly and fairly.
Supporting entrepreneurship to ensure the industries of the future get off the ground鈥�
鈥nvesting in research and development鈥�
鈥nsuring that start-ups can access the finance they need to become 鈥渟cale-ups鈥濃��
鈥nd, most importantly, creating an environment where innovation can flourish.
And we鈥檙e putting our money where our mouth is鈥�
鈥e鈥檝e committed to the largest increase in public R&D spending in three decades, as part of our ambition to raise R&D investment across the economy to 2.4% of GDP.
We鈥檙e investing 拢640 million of public money in artificial intelligence and over 拢1.7 billion in autonomous and ultra-low emission vehicles鈥�
鈥nd in the Budget last Autumn I launched a plan to unlock over 拢20 billion of patient capital, for the UK鈥檚 most innovative firms to grow to scale.
But we won鈥檛 be able to put the UK at the front of the pack unless we have infrastructure that is fit for the future.
And that is why infrastructure is at the heart of our plan.
In the 18th century, it was canals;
In the 19th, it was the railways, and in the 20th the arterial roads and then the motorways.
In the 21st century, fibre networks will be the enabling infrastructure that drives economic growth.
We鈥檝e already connected more than 95% of the UK to superfast broadband.
But we must now take the next big leap forward.
Full-fibre networks are faster, more reliable, and cheaper to operate than their copper predecessors.
Over a million premises already have direct access to them鈥�
鈥�70% of those connected in the last 18 months alone.
But if we are to achieve our ambition of a truly high-speed economy, and keep up with our competitors, then we need a step change in our approach.
So I am now setting a new target to see full-fibre to the premises connections being available to 15 million premises, that鈥檚 the majority of homes and businesses, by 2025.
This is ambitious鈥�
鈥nd it will require industry to connect more than 2 million additional premises a year for the next seven years.
We won鈥檛 do that by government diktat.
We will do it by creating the conditions for the market to deliver鈥�
鈥nd we will use all the tools at the government鈥檚 disposal to ensure that target is met鈥�
鈥nd we鈥檒l go further, by committing to finish the job 鈥� and deliver a nationwide full-fibre to the premises network by 2033.
Running both copper and fibre networks indefinitely will not benefit either the consumer or the industry鈥�
鈥o we must start thinking now about that switchover and how to sharpen the incentives for industry to move customers away from copper and on to fibre.
And Matt Hancock, the DCMS Secretary, will set out our strategy to deliver these ambitious targets in the Future Telecoms Infrastructure Review, later this Summer.
The talent of the future
The digital industrial revolution and Artificial Intelligence will bring about a step-change in automation.
This, in turn, will have profound implications for jobs, and the way we work.
And if we want our people to embrace the digital economy, we must support them when they are affected by automation鈥�
鈥nd help them train and retrain into the new high quality jobs of the future.
Because just as the assembly line allowed Ford to triple the number of cars produced per worker鈥�
鈥ut the price of a car in half鈥�
鈥nd increase employment eleven-fold鈥�
So the digital industrial revolution will also create millions of new jobs, and huge increases in living standards鈥�
鈥ut that will not reassure those whose current jobs will be displaced.
So, between us in government and business we have a vital role in managing this transition;
In investing in skills and retraining;
In providing the reassurance our workforce will need.
We have made a start.
Through the Apprenticeship Levy, we are increasing the quality of apprenticeships, and the capacity of the system.
We鈥檝e already seen a 25% increase in higher level apprenticeship starts.
But I recognise the new levy system presents some challenges鈥�
鈥nd we鈥檙e listening to your concerns around flexibility, and will keep that issue under review to make sure the levy works as intended.
We鈥檙e investing over 拢500 million a year in our new T-Level technical qualifications鈥�
鈥nd with the help of the CBI and the TUC we are establishing a new National Retraining Scheme鈥�
鈥o help adults faced with the consequences of technological change to re-train throughout their working lives.
It鈥檚 a groundbreaking collaboration and I鈥檓 delighted we were able to make it happen through the leadership of Paul and others here tonight.
But government cannot solve our nation鈥檚 productivity challenge on its own.
Because it is not only about infrastructure and skills鈥�
It is also about management.
Britain of course has many world-leading companies with globally competitive productivity鈥�
鈥ut there are also far too many that could be doing a lot better.
Tomorrow I will publish a call for evidence into why some businesses aren鈥檛 keeping up and don鈥檛 learn from the best鈥�
鈥eeking ideas for how government and industry can work together to help more firms realise their potential by taking best practice.
And in parallel with the call for evidence I will announce with Greg Clark, the Business Secretary, further steps to boost firm-level productivity.聽
We鈥檒l invest 拢5.6 million to support smaller firms to adapt modern management practices and simple digital technologies, through two new pilot programmes delivered by Charlie Mayfield鈥檚 Be the Business.
And we鈥檙e extending our backing for the Made Smarter Digital Manufacturing strategy鈥�
鈥ed by Juergen Maier 鈥� and supported by the CBI.
Made Smarter will help to maintain our position as a global leader in the digital revolution鈥�
鈥nd so we鈥檒l provide 拢20 million for a pilot in the North West, to support SME manufacturers to adopt industrial digital technologies, such as robotics and data analytics.
Before I close, I want to touch on one further, important issue.
I have talked about the big opportunities ahead;
But there will be big challenges too 鈥� and challenges that go beyond the mere uptake of technology鈥�
鈥o pose questions about economic governance and the organisation of society in the 21st century digital economy.
For those of us who believe in the demonstrated power of liberal market economics to deliver both prosperity and political freedom鈥�
鈥his is a question about how this most resilient of economic models transforms itself in response to the challenges of technological and societal change鈥�
鈥s it has done so many times before.
But if you are a politician [political content removed]
鈥our prescription will be very different.
For people of my generation 鈥� and looking around the room at many 鈥� though not all 鈥� of you, I see people who I think are of my generation鈥�
鈥ongratulations that you can still get out of an evening!
For people like us, who lived through the 1970s, the economic model [political content removed] is not a text book theory, but a vivid memory.
And for people in a small number of countries around the globe, it is a miserable reality today.
But not everyone in our society has shared that experience.
And some of a younger generation will be tempted by ideas that sound radical; maybe even 鈥渘ew鈥� (even though they are rooted in a book written in the 1860s).
鈥ecause they do not feel the system is working for them.
Many of them have started their working lives at a difficult time for our country鈥�
鈥merging into the workforce as the financial crisis and its aftermath shook our system鈥�
鈥nd enduring a decade of recovery from it.
They look at their parents鈥� and their grandparents鈥� generations鈥�
鈥t the home ownership levels, the defined benefit pensions, the traditional jobs鈥�
鈥nd they ask who or what decreed that so many of the things that previous generations took for granted, should be so much harder for them to obtain.
They are not looking for a hand-out鈥�
鈥ut they are looking for a reassurance that hard work will allow them, too, to achieve their aspirations for a better life for their kids.
And as we look forward to, and prepare for, the transformational impact that technology will have on our economy and our society鈥�
鈥e must answer their challenge.
We must articulate how we will refresh our economic model to respond to technologicial change鈥�
鈥n competition policy鈥�
鈥n taxation policy鈥�
鈥n ensuring an equitable distribution of the proceeds of growth as we manage the impact of smart automation and artificial intelligence on the world of work鈥�
鈥o that it speaks to their values鈥�
鈥ddresses their concerns鈥�
鈥nd unlocks the door to the achievement of their aspirations鈥�
鈥ith solutions, which are framed not by the stale ideologies of the past, but by the exciting potential of our future.
Solutions that build on, not undermine, the liberal market economy that is the bedrock, not only of our prosperity鈥�
鈥ut of our freedom too.
I have spoken tonight of our strategy for negotiating Brexit鈥�
鈥nd of our vision for post-Brexit Britain.
It is a vision of an open, dynamic, evolving, market economy鈥�
Of a Britain whose firms are at the cutting edge of technology and innovation.
A Britain with infrastructure fit for the future鈥�
鈥nd workers equipped with the skills they need for the challenges that lie ahead.
A Britain where government and business work together to realise the potential of unlocking Britain鈥檚 productivity puzzle鈥�
鈥o deliver an economy that works for everyone.
That is our vision of the prize that lies within our grasp.
And I know we can count on British business to work with us to deliver it for the British people.
Thank you.