22 October 2009
This time last year, the world banking system and the global economy were staring into the abyss.
We took action.Â We stepped into support our economy and led the global response through our leadership of the G20.
The action we took is working, although the job isnâ€™t finished yet.Â Without it, another 500,000 jobs would have been lost.
Â·Â Â Â Â We cut VAT and income tax to help people and support the economy
Â·Â Â Â Â We gave 150,000 businesses more time to pay their tax bills
Â·Â Â Â Â We put in place the measures that have helped 300,000 people stay in their homes
Â We must support the economy now and until recovery is secured.
Â We have set out how we will half the deficit over four years once the recovery is in place and how we will plan for future growth.
Â Our Approach to the Economy
Â We took action to prevent a global recession becoming a global depression
The global economy is predicted to shrink this year for the first time since World War II.Â
This time last year, we faced a collapse of the banking system and the threat of the global economy falling into depression.
We have led the international response to the downturn, and under our Presidency the G20 has taken unprecedented action to deliver commitments made at the London Summit in April. The stimulus measures implemented by the Government and the Bank of England in response to the global downturn are working.
We have taken action to support people and businesses.Â Weâ€™ve put an additional Â£1bn each month into the pockets of families and retailers by cutting VAT; weâ€™ve cut taxes and given 150,000 firms more time to pay their tax bills to help them survive; weâ€™ve helped 300,000 people with their mortgages to help them stay in their homes. Together, action taken by the Government and Bank of England Together is supporting up to half a million jobs.
There has been a cost to stepping in, but not doing so would have cost us more â€“ by damaging our economy for years to come.Â Â If the Government had not taken action, many more jobs would have been lost, more families would have lost their homes, and more businesses would have closed.
We are continuing to act to secure the recovery
Whilst the fiscal stimulus is temporary, the situation in the world economy remains fragile and unemployment is rising here and across the world. We need to continue to support the economy until the recovery is secured. The greatest risk to the recovery is complacency.
We will continue to help businesses and families that are struggling to deal with the impact of the downturn until the recovery is entrenched.
Borrowing to support people now and to invest in the future may feel counter-intuitive.Â But in the longer run, it will mean the bills we face as a country are lower, and that we are better placed to pay them off.
Â We will rebuild our fiscal strength in the medium return
Â Once the recovery is secured, we will need to take action to rebuild our fiscal strength and reduce our online order xenical borrowing.
Â That is why we have already set out a deficit reduction plan that will halve the deficit over four years.
Â We will do this in three ways:Â
Â·Â Â Â Â raising taxes as set out in Budget 2009 â€“ for example a new 50p rate of income tax for those earning above Â£150,000
Â·Â Â Â Â taking some tough choices on public spending for the years ahead.Â That will mean cutting costs, cutting waste and cutting lower priority budgets, while continuing to invest in our priorities and our future.
Â·Â Â Â Â but there must be a third, and crucial, part of our strategy for the economy â€“ growth.
Â Growth is the best way to creating jobs, increasing prosperity and paying down debt
Â Not only is growth the best way of creating jobs and increasing prosperity â€“ it is also the best way to earn the money to pay down debt.Â
Â We know that wallowing in the age of austerity and refusing to invest will simply mean that the economy gets smaller, we all get poorer, and even greater and deeper cuts are needed.Â We have seen this before â€“ the savage cuts of the 1980s meant whole swathes of our economy disappeared.
Â Securing growth means the invisible hand of the market working alongside the enabling hand of government.Â We will need to encourage innovation and enterprise, and so far we have:
Â·Â Â Â Â More than doubled the science budget;
Â·Â Â Â Â The most engineering and science PhDs relative to population in the G7;
Â·Â Â Â Â And doubled the money universities make from knowledge transfer and spin-outs.
But we need to exploit this advantage.
Â The new Innovation Investment Fund will focus on investing in start-ups and spin-outs â€“ across digital and life sciences, clean technology and advanced manufacturing. And in the next few weeks, Chris Rowlandâ€™s Review will set out how we can support the provision of growth capital for UK firms.
Â On skills, Government training programmes have supported millions more to improve their skills. Apprenticeships have more than trebled â€“ with over 2 million since 1997.Â But there is still a skills gap with our competitors â€“ and we need to address it.Â Next month we will publish a skills white paper, so we can focus on the areas where training can have the greatest productivity impact.
Increasing apprenticeships for young people, training aimed at the high-growth sectors of the future, and raising employer demand for skills.
Â Infrastructure is a vital element of growth.Â Since 1997, we have increased capital spending and transformed the way we invest.Â In transport, nearly 70 major roads and motorways improved since 2001. Increased rail reliability while carrying record numbers of passengers.Â But we still need to do more â€“ thatâ€™s why we are looking at new high-speed rail links.Â
On digital infrastructure, weâ€™re investing in the faster roll-out of next generation broadband to enable new business opportunities â€“ opposed by the Tories.
Â And weâ€™re looking at our infrastructure needs across energy, waste, water, telecoms and transport over the next 50 years.Â Alongside changes to the planning regime, these steps will encourage private investment and reduce market uncertainty.Â
Â Itâ€™s about government taking real action.Â Since the Budget, we have:
Â·Â Â Â Â Extended the scrappage scheme for cars, which has already supported 250,000 deals;
Â·Â Â Â Â Increased resources for the promotion of UK exports;
Â·Â Â Â Â Supported Rolls-Royce to invest in low-carbon R&D, alongside new aerospace and nuclear component factories;
Â·Â Â Â Â Contributed to the Â£340m Airbus launch investment;
Â·Â Â Â Â Expanded a ground-breaking research centre for printable electronics;
Â·Â Â Â Â And part-funded a biotech demonstrator project.
Â It is only by growing and investing in our key sectors that we will be able to deal with the many global challenges of the coming decades.