We need to think bolder if we are to rebalance the UK economy

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Jack Hands

The recent report by the Centre for Cities was a startling yet perhaps unsurprising indictment of the UK economy in 2014. London dominates Britain more than at any other time in our history. Why, you may argue, is this even unhealthy; surely whilst London prospers the rest of the UK benefits too? Put simply, the rest of the UK does benefit but it also pays a price because as London has grown, it has become a black hole sucking in more and more talent from elsewhere to the detriment of local economies from Inverness to Plymouth.

All political parties have argued the need for a great rebalancing of the UK economy yet have offered little way in terms of substantial setups. The Government’s flagship regional Growth Fund is one such policy and has made a marked difference. In some regions such as the East Midlands, job creation is seeing a mini boom.  Relocation however is one aspect which sees far too little political air time.  The one move of real political courage was to relocate the BBC studios from London to Salford. It has been an overwhelming success which reaches far beyond the simple relocation of jobs from London to Manchester.

Of course, the focus on any regional growth programme should be first and foremost about sustainable, private sector growth. Public Sector institutions and private investment are however, at times inextricably linked. The BBC’s move has improved the image of Manchester, attracting young, creative talent and helping to expand the media industry in the region. These factors in turn have led to greater private sector investment and, in the long term, will make Manchester a place where businesses are more attracted to relocate.

Why then should we not look at further bold relocations to rebalance the UK? Perhaps the inconvenient truth is that this issue simply does not feature as prominently as perhaps it should do. Is moving Parliament to Birmingham such a nonsensical idea? Are moving our leading museums to Sheffield such a backwards step? If you believe in the need to transform our regions to help them attract more private sector investment and, put frankly, improve their image, then these are valid debates we should be having.

Bold moves such as this desperately need to be advocated by more politicians because the gap between London and the rest of the UK has grown so terrifyingly wide. Travelling from London to the rest of the UK often feels more alien than travelling to other major European cities. London’s identity is its own – its excellent success has allowed it to prosper in a way which means it is now unrecognisable from many parts of the UK. Long term, our national identity will be threatened because London has the potential to warp into its own state, distant and non-needing of any other UK city. 

When the UK economy was on its knees after the financial crisis in 2009, the Government stepped in to provide a stimulus effectively propping the UK economy up until it recovered. London is creating ten times as many private sector jobs than anywhere else in Britain. It is prospering. Why then should no one argue that some UK institutions currently based in London such as museums or Civil Service departments not be relocated to help cities outside of London prosper until they can create enough private investment to recover and prosper themselves.

The top five take-aways from 2013

Ryan Gray

Below are five things to consider when evaluating 2013.

1. The gender pay gap is almost solved.

The findings are here. And what they show is disparities in gender pay are becoming non-existent.

According to the Annual Survey of Hours and Earnings (ASHE), this figure ‘shows median gender pay differences by age group based on full-time hourly earnings (excluding overtime). The gender pay gap is relatively small in age groups up to, and including, the 30-39 age group (with the exception of the 16-17 age group)’. The fact that those aged 18 to 39 are more or less equal is encouraging and shows the positive impact of legislation. While there are differences in pay after 40, there are multiple reasons why – e.g. older age groups would not have felt the full impact of changes and would have been impacted by discrimination before the changes. Nevertheless, as those in the younger sections become older, there equality will become evident in future statistics, making the pay differences in older sections shrink to the levels seen between 18 and 39 as time goes on.

2. Britain’s economy is predicted to become the largest one in Europe by 2030.

The Centre for Economics and Business Research (CEBR) has declared Britain the second best performing economy in the western world. Its research states that by 2030, Britain will overtake Germany and become the largest economy in Europe despite having a smaller population.

3. Plan A is working.

Following on from (2), austerity is working! Despite Labour’s claims of Plan A failing, think-tanks like the CEBR hail Britain’s austerity programme and others are quick to heap praise on the country’s optimistic growth figures for the coming year. It’s not only in Britain, however, where austerity is a success; thanks to the work of Taoiseach Enda Kenny, Ireland has left the so-called ‘Troika’.

4. Plan B is failing.

Whereas Plan A is working, Plan B is not! When France decided to try a different approach to recovery from Britain’s, many applauded on the Left; but now the French economy is one the worst performing economies in the Western world. The French leader, President Francois Hollande, is deeply unpopular and richer members of the country are leaving. While Britain and Ireland’s future look positive entering 2014, Plan B has left France’s prospects looking very uncertain.

5. Britain’s youth are more right-wing than older generations.

Earlier this year, the polling company Ipsos MORI began to publish 17 years’ worth of polling results, spread across four generations, starting with those born in 1945 or before and ending with ‘Generation Y’. The latter (all adults aged under 31) reject left-wing notions of higher taxes and hand outs and are far more embracing of free market economics – breaking the stereotype that young people are left wing. It is important to note, however, while Generation Y are economically more right-wing than previous generations, they are socially more liberal than any before them also. With young people displaying libertarian trends, the political landscape of Britain will be increasingly more centre-right in hue.

Overall, 2013 was a good year for the Conservative Party, but if we want to stay in power after the next election, we must have an even better 2014.  As the economy continues to grow, the Party must address the unpredictability of its own support.

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We need to realise the economic potential of our other major cities

Andrew Thorpe-Apps

The announcement that Hull will be the City of Culture 2017 was met with a few chides and sniggers in the media. Whatever its cultural pedigree, Hull is a city tarnished by high unemployment and youth crime. It has seen the highest rate of Jobseeker claimants in the country.

Hull is not alone. A number of other cities and towns, particularly in the north of England, have been facing these challenges since the 1970s. While some people are able to travel in search of work, for others this is not an option. The result is that generation after generation are locked in a cycle of desperation and poverty.  

During the boom years prior to 2008, London’s financial sector was able to pull the whole national economy along. The Government did not need to concern itself with maximising the economic potential of other cities. This inertia allowed for the national economic imbalance to be further entrenched, and Britain fell behind its competitors in promoting regional growth.   

Yet this situation can no longer be accepted. The UK economy is growing again, but unemployment remains stubbornly high, particularly youth unemployment. With the rise of the BRIC nations, and with other developing countries hot on their heels, it is vital that Britain maximises all of its resources. This means encouraging innovation and creating jobs in our cities.   

Decentralised fiscal reform will boost the economic prospects of Britain’s cities. Greater financial freedom will allow local politicians to better direct growth to drive their local economies. The current formula of majority Government grant has long restricted the growth of cities outside London. Centralised funding, managed as it is by Whitehall bureaucrats lacking sufficient local knowledge, is ineffective in supplying the investment cities need to maximise growth.

Speaking at a recent TRG event, Lord Heseltine argued that more must be done to encourage city economic growth. The vast majority of the recommendations from Heseltine’s report No Stone Left Unturned, published last year, have now been adopted. Yet the UK economy remains staggeringly unbalanced, particularly in geographical terms.

Cities need devolution of property tax revenue streams. This includes council tax, stamp duty, land tax and business rates. Cities also need to have the power to reform these taxes to suit local conditions. These powers would provide stable funding to stimulate economic growth and allow cities to raise sustained investment for infrastructure such as transport, schools, housing, energy supply and technology. City governments are best placed to create jobs and free up spending.

In most developed countries, top cities outperform the national economic average. Yet in the UK, only London is able to do so consistently. This suggests that many of Britain’s ‘Core Cities’ – such as Birmingham, Manchester, Nottingham and Leeds – have a great deal of economic potential. More financial freedom would allow this potential to be realised and could contribute a further £1.5bn per year to the UK economy. 

Not only will city devolution benefit our national economy through jobs and growth, it will also help end welfare dependency for thousands of families across the country. The vast majority of those on benefits do not want to be clients of the state. City devolution, therefore, will give independence to the cities, but more importantly, it will give back power and self-respect to the individual.

In a recent cross-party initiative, London and some of England’s other largest cities have called on the Government for more substantial devolution. This follows on from the London Finance Commission’s report Raising the Capital, published in May 2013, which suggested measures that would give Londoners more say over a greater proportion of taxes raised in their city.

In London, only 7 per cent of tax paid by its residents and businesses is redistributed directly by the Mayor and borough councils. In New York City this figure is 70 per cent, in Paris it is 83 per cent, and in Tokyo it is 92 per cent.   

Despite devolution to Scotland, Wales and Northern Ireland, the UK remains far too centralised. City devolution is the most effective way to make Britain grow. It will be a positive step in answering England’s devolution question. It will also help deliver the Conservative Party’s localism agenda.

Cities are the engine of growth in any national economy, and if Britain is to compete in the future, that engine needs to be firing on all cylinders.

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Where is Osborne’s ‘March of the Makers’?

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George Smith

During a recession the temptation for the government is understandably to find GDP growth from anywhere, even if that means ignoring emerging long-term trends as something we can tackle when the economy is stronger. Especially approaching an election, it can be seen as decadent to believe that we economic ‘beggars’ should also try to be ‘choosers’ over what type of economic growth we desire.

However, as a child of Thatcher, what I always admired about the Iron Lady was that even in the darkest economic times, she was willing to not just go after the low hanging fruit of economic growth, but risk more pain in order to pursue the right long-term trajectory for the UK economy.

It is for this reason that the recently announced 0.6% growth in Q2 and the continued fall in unemployment, whilst undoubtedly positive in the short-term, is not unalloyed good news in the long term. Specifically the much talked about rebalancing of the economy to manufacturing and exports is just not happening.

I greatly enjoyed Mr Osborne’s proud declaration in 2011 that his Conservative-led recovery would herald “a march of the makers”. This is not because of some banal grudge at the financial services sector, or a desire to return to a promised golden age when Britain made things. The need to focus on long-term growth in manufacturing is due to the effect of the digital revolution on middleman services like retail.

I was reminded of this recently when I read the speech by Sir Martin Sorrell at last month’s WWP event ‘The Future of Retail. Sir Martin compared the impact of ecommerce on the retail sector to it’s recent devastation of industries like music and newspapers. Those content providing industries had existed as essential middlemen in the pre-digital age, brokering relationships between content creators and content consumers. However just as the UK consumer no longer needs HMV to find its music, or Blockbusters to acquire the latest movies, so all retailers are under threat because their position as essential middlemen for creators and manufacturers is no longer required.

In a world where P&G is selling 75% of its nappies online and direct to consumer and even my dad has his own eBay shop, it is not clear to me that most manufacturers will need retailers in the future to reach consumers. Over recent decades many western economies have profited from high-margin ‘value added’ services like retail, where products have been manufactured abroad in low-cost countries, but sold to a local western market through British retailers who profit from the scarcity of physical high-street stores. So whilst competition on the high-street was fierce, prices were higher due to the need to have a british based retailer with a physical location, but digital technology and ecommerce changes all that.

HMV was one of the early casualties of ‘Showrooming’ the term used to describe the common act of customers browsing their in-store stock of music, games and DVDs, only to then purchase the item cheaper on Amazon, eBay or other online providers. With a recent report estimating that 63% of smartphone owners check prices online while in-store this trend for ‘Showrooming’ is set to only get worse for retailers. Whereas once high-street retailers could demand a high-margin profit because they owned the physical stores, now these physical retail spaces are the deadweight overhead that is destroying their cost model.

In the years to come the Left will inevitably argue for the protectionist measures required to ‘Save our high street’ but not only does economic protectionism not work, it will be impossible in this case because the internet is a global market, not a British one.

The naysayers will argue that British manufacturers cannot compete on price with low-wage countries like China, but this is also to miss the awesome potential of technologies like Additive printing (a.k.a. 3D printing) which will turn manufacturers away form needing to ‘own the means of production’ and increasingly towards ‘value-adding’ design, innovation and creative skills.

The UK with its creative, educated and high-cost workforce can dominate global manufacturing if it has the vision to recognise that when our economy recovers from this current recession it will be existing in a reality that has been reshaped by another industrial revolution.  Hence the future will not look like the past and if Britain grabs just any economic growth on offer instead of trying to rebalance the economy towards manufacturing and exports then it will be the ‘march of foreign makers’ that trample over this nation of shop-keepers.

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Growth, expectations, and confidence are all on the rise

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Daniel Cowdrill

It’s all about confidence.

The importance of ‘confidence’ in economics was articulated in The General Theory by John Maynard Keynes. He set out what he termed the ‘marginal efficiency of investment’, or the expected return on investments. As it is difficult for individuals to rationally calculate future returns, ‘confidence’ becomes a key factor in investment decisions.

In the debate that raged over austerity, it was argued that reducing public spending when the economy was fragile would damage confidence. In an interview, the economist Paul Krugman predicted that austerity would fail to instill confidence and condemn the economy to an “endless slump”.

A string of positive economic results, culminating in a 0.6% expansion in second quarter GDP, has made the arguments of critics like Krugman less plausible. They perhaps failed to take full account of the context surrounding the Coalition’s deficit reduction plan.

In May 2010 the UK was running a public sector borrowing requirement of over 11% of GDP. This was an unprecedented figure and part of rising defictis across the West. Bond yields rose dramatically across the Euro zone with financial bailouts being sought by Greece, Ireland, Portugal, and the economies of Spain and Italy facing significant pressure. 

The Government was therefore right to secure the medium-term trajectory of the public finances to increase confidence in the near term. To do this the other way round, to try to build confidence before consolidating the public finances, would have been like building on quick sand. Fortunately, it also placed the UK ahead of the curve in Europe.

When Moody’s and Fitch downgraded the UK’s triple A, Osborne was widely criticised for placing too much emphasis on defending it. However, we arguably retained the Triple A long enough to make its eventual loss less damaging. It should be noted that we still retain three As with one of the major credit agencies.

Businesses have therefore enjoyed a relatively benign environment in which low interest rates have stimulated growth, and in which the main banks have had time to improve their capital positions. It has also given the Government some latitude in terms of the scale of cuts, and in terms of the public debt target which has been postponed without unnerving the markets. 

It is a little known fact that the Great Depression in Britain was not as bad as it was in the United States. In fact, after a period of austerity, Britain enjoyed steady growth through the 1930s. In 1934, Neville Chamberlain was able to tell the Commons, “We have now finished the story of Bleak House and are sitting down this afternoon to enjoy the first chapter of Great Expectations.” 

It is premature to say the same, but for now we have rising expectations and renewed confidence. This in itself, is no mean feat.

Degrees are no longer passports to top jobs

Ryan Gray

It is the end of the academic year for students across Britain. A time to sit back, relax and enjoy the summer is now upon them – or is it? It is predicted that around 427,000 graduates will be applying for jobs, which is staggeringly high, especially when there is nowhere near that many for all of them.

No country in the world, however good its economy may be, can produce jobs in this scale just for its graduates therefore it is not surprising to discover that many of those that apply for them will not have secured a role after six months of leaving education (one in twelve graduates).

The latest HighFliers report is damning of those students who go to university but don’t do any work experience while they are there – stating that work experience is now a must. Over half the recruiters who took part in the research warn that graduates who have had no experience at all are unlikely to be successful during the selection process and have little or no chance of receiving a job offer for their organisations’ graduate programmes. The research goes further, stating that students who have done work placements/internships are three times more likely to secure a top role.

This finding is common throughout the world with other countries graduates recruitment pointing to the same issues. A report by GradIreland, the leading graduate site in Ireland, supports findings in the UK, with 89.7% of the top one hundred graduate employers in Ireland stating that having completed a work placement or internship is the most effective way of improving one’s chances of being employed.

Whilst the total number of graduate recruitments is set to increase in 2013 by 2.7%, recruiters have confirmed that over a third of this year’s entry-level positions are expected to be filled by those who have already worked for their organisations, either through internships and industrial placements. Therefore these jobs are not open to other students and so they will never be able to apply.

Despite our world-renowned academic institutions, companies are noticing applications are often generally similar to the previous year’s applications: 46.9% of graduate applications to the top one hundred employers that are no different to one another. And so it is no surprise that they are employing those who have previously worked for them if such a high proportion of applicants are indistinguishable on paper.

University is a great way to improve one’s chances of employment, but it is not being used properly by many students who are wasting three or four years gaining a degree. A growing number of employers do not care what it is in or the classification, they only care about the experience gained outside of university. Young people must be educated in the reality that university is not what it was a few decades ago, it no longer guarantees employment and is a financial risk if things go wrong.

With a growing number of students facing unemployment or underemployment, now is the time for the government to highlight what other avenues there are besides university.

Obviously, it will still be essential and a positive experience for many, but for those who do not get a job or simply end up working in one they could have had anyway, university is not them. The idea that you can go there and do nothing but drink and sleep yet somehow secure a top job is laughable. I do not know if it was ever possible, but it is certainly impossible now.

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Macmillan Lecture 2013: ‘Keep Calm and Carry On Reforming’

 MACMILLAN LECTURE 2013

Keep Calm and Carry On Reforming 

By Rt Hon Damian Green MP

The previous occasion I delivered the Macmillan Lecture was in 2005, just after a disastrous election result for the Conservative Party which saw us make little progress even though Tony Blair’s Government was visibly crumbling.

“Why aren’t we thinking what they’re thinking” was the rather gloomy title, prompted by the thought that the lack of progress made it much more difficult to obtain an overall majority in the subsequent election—a sadly prescient point. One thought I was keen to make then is equally true in the very different world of today; that if the Conservative Party does not like modern Britain it is unlikely that modern Britain will warm to the Conservative Party.

Of course there is much that needs to be changed, and much that is changing because of this Government. As I say in the title of this lecture, we must carry on reforming.  But we should not let the long recovery from recession, or individual horrible incidents such as the Woolwich killing, leave us gloomy or grumpy as a country. It is less than twelve months since the world admired the best Olympics of the modern age. They admired not just our national organisational skills but the character, warmth and openness of the British people. We should not just keep calm, we should cheer up.

I should move from the national to the party.  The same injunction applies.  

Perhaps this is the appropriate moment to fulfil the duty of all who deliver this lecture to quote Harold Macmillan; “It is the duty of Her Majesty’s Government neither to flap nor to falter.” Admirable advice which is both timeless and timely.  For centre-right politicians there are significant reasons to be both calm and cheerful , the most notable of which is the public’s reaction to the financial crisis and subsequent recession. It was the fond hope of those on the left, perhaps particularly those who grew up at the feet of Marxist philosophers, that this would be seen as a crisis of capitalism. The people would throw off the shackles of false consciousness and realise that free markets had failed, and that state spending, borrowing and control was the route out of recession.

Fortunately the British people have more sense than that, and tend to prefer the analysis that state spending and borrowing was precisely the route into recession. There is no spin in this analysis. Successive poll findings have shown  that even when Labour is enjoying a significant lead the Conservative team is markedly ahead on managing the economy. This is true even over the past few weeks, where calmness has not been the prevailing emotion.

The most recent Ipsos Mori poll showed a 14 percent lead for David Cameron on managing the economy. Truly, if it still is the economy, stupid, that sets the political tone we are winning the most important argument.  British Keynesianism failed in the 1970s, and enough people know that to ensure that its modern enthusiasts have little credibility. The world has not gone left since the crisis. Where right wing Governments have been ejected, as in France, the left-wing alternative is already in trouble. The economic facts of life are still Tory.

So keep calm. But also carry on reforming, and more particularly carry on reforming in a Tory way. There is gathering strength to the argument that the reforms we are seeing to, for example, immigration, welfare and education address exactly the issues that people want Government to concentrate on.

These key reforms have three significant features. The first is that they are as important to the success of the Government as the central economic policy. The second is that all of them are dependent on Conservative ideas and energy to drive them through. The third is that they are precisely on the Common Ground originally identified by Keith Joseph as the proper target for successful Government, rather than the centre ground.

So as well as winning the central economic argument we are reforming in the areas where the country needs changing, and we are doing so in a Conservative direction. This message cannot be sent too often or too loudly, particularly to traditional Conservative supporters. They want lower immigration, an end to abuse of the welfare state, and higher standards in schools. Conservative Ministers, drawing on Conservative principles and our Manifesto promises, are delivering this.  

On immigration, the latest figures show that net migration is down by more than a third since June 2010, and is now at its lowest level for a decade. At the same time as seeing this dramatic decline in overall numbers, which is the main requirement, we have continued to support economic growth by welcoming the brightest and best to the UK. Higher numbers of skilled worker visas were issued over the last year, as were university student visas. So we have lower immigration, and more selective immigration: both good Conservative policies.

On welfare, we have introduced the biggest welfare to work programme the UK has ever seen to get people back to work.  We also believe it must always pay to work – which is why we have capped benefits so that no one can get more on benefits than the average person earns in work. We want to help people escape poverty, not trap them in it. This reform is squarely in the tradition of  which Harold Macmillan would have approved.

The same is true with our education policy. We are making sure that every parent has the choice of a good local state school for their child, teachers have the powers they need to keep discipline in the classroom and the exam system is rigorous, respected and on a par with the world’s best.

We have a programme to improve the quality of teaching, including scholarships to attract the best graduates, higher literacy and numeracy requirements for trainee teachers and a network of ‘Teaching Schools’ across the country.  79 Free Schools and more than 2,000 new Academies have been delivered already. Many of them are in areas where most people have not been able, up to now, to gain access to an excellent education for their children. We are restoring discipline to the classroom with new search powers for teachers, an end to the ‘no-touch’ rule, and higher fines for truancy.

All of these essential reforms have been delivered by Conservatives working in a Coalition Government.

Which brings me to a theme which is particularly important for the Tory Reform Group, and all moderate Conservatives.  There may be areas of policy where we agree with Liberal Democrats, but we are not the same.  We believe in change and modernisation , and we recognise that what modernisation means changes over time, but we are first of all Conservatives. We have principles which are not shared even by the most orange of the Orange Bookers. We also do not regard ourselves in any way morally deficient compared to Liberal Democrats.

I get on very well with many of my LibDem Ministerial colleagues, but I am entitled to challenge their thesis that this Government can only be kept compassionate by their presence. There is a long and honourable tradition of decent Conservatives who want to help those who need help, and Macmillan himself was of course a prime example at all stages of his political career.

Macmillan  was alive to the difference. As he put it; “As usual the Liberals offer a mixture of sound and original ideas. Unfortunately none of the sound ideas is original and none of the original ideas is sound.”  We do have practical differences, as I discovered on a regular basis when I was Immigration Minister.

There are similar debates about key issues such as childcare. All of these debates can be, and are, resolved within Government, as they would be whether it was a Coalition or a one-party administration. But they illustrate that the moderate Conservative tradition is a vital part of any Conservative mix, and is distinctive from the instincts and habits that the LibDems bring to politics.

This distinction is key for those who worry that in the Coalition the tail is wagging the dog. We are reforming and we are reforming in a Conservative direction. Every Conservative policy is about promoting opportunity and social mobility.  We know that  making Britain succeed globally and allowing people to achieve their aspirations are the two keys to a successful society. Economic growth and individual growth need to go hand in hand. This is the basis for economic and social policy under this Government and I cannot understand why any Conservative, whichever tradition they adhere to, would object in principle to this approach.

There will always be disagreements about tactics and day-to-day priorities but these must not be allowed to divide the right, when the only beneficiaries will be the left. All  of us who campaigned so hard and so successfully to preserve a first-past-the-post electoral system must accept the consequences. Under first-past-the post a serious party that aspires to Government has to be a broad coalition.  This in turn requires a degree of self-discipline and capacity to compromise. If we Conservatives forget that, our opponents will be the beneficiaries.

This means that the tone of the discourse between Conservatives is important. If we sound as though we dislike each other, others will draw the obvious conclusion. I love Twitter, but its general tone should not be a guide to how Conservatives address each other. Disagreement on an issue, however emotive, does not mean treachery, or not being a proper Conservative. Politics is a team game, and mutual loyalty is vital for a successful team.

The biggest and longest-running cause of Conservative discord is Europe. Every Conservative should have a high regard for the lessons of history, and the party’s history on this issue since the 1990s is terrible. The effect of this has been, ironically and yet predictably, that Britain’s fate in Europe has been in the hands of those who have no sympathy at all for the Eurosceptic viewpoint. Surely we are all able to learn this lesson of history and not repeat it.

I am not just lecturing others. We must all learn lessons. For years pro-Europeans opposed the idea of a referendum. But the strategy of negotiating a new settlement, and then putting that to British people, is clearly the right one for current times. Most British people want it to happen. So much has changed since the 1975 vote that it is time to put the argument again. I hope and expect that the outcome of this process will be to renegotiate, reform, and revalidate Britain’s place in Europe. The Prime Minister has made clear that this plan will be central to Conservative policy up to and beyond the next election. It is time for the whole party to get behind it. And it is possible for those who hold the whole range of views on Europe to do so.

For those of us sympathetic to the European argument this is an opportunity to make our case, and the Prime Minister’s case, that a properly reformed EU will be hugely to Britain’s advantage. For too long only a few lonely voices in the Conservative Party have made the case that we are better off in. Those of us who hold that view cannot wait for the few weeks before a Referendum to argue our corner.  There is a hard-headed Conservative case for Britain’s membership of the EU, for all its imperfections, and it needs to be heard.

The core of the argument is economic. All sectors of industry agree that we are better off in. Let’s start with manufacturing. Five out of every six cars made in this country are exported, and 700,000 jobs depend on the industry.  How many of those firms would invest long-term in Britain outside the EU? No wonder Ford’s European Chief Executive, Stephen Oddell, has said that “Leaving a trading partner where 50% of your exports go… would be devastating for the UK economy.”  

Then there is the City, often seen as the part of the economy most hampered by EU rules. Goldman Sachs are unlikely to be sentimental about the economic effects of leaving, and they have concluded that departure would be a loss/loss scenario, in which the loss would be greater for the UK than the EU.  In particular they argue that “The UK’s ability to conduct business in financial services across the European Union is likely to be severely compromised by a departure from the EU.”

Then there is the argument that we should concentrate on the fast-growing economies in Asia and South America rather than sclerotic old Europe.  I have never understood how you make it easier to export to China by making it more difficult to export to Germany, and indeed the German example is surely one to follow. Last year Germany exported $804bn worth of goods to Europe, and another $519bn to the rest of the world. They are complementary markets, not alternatives.

Finally there is the argument that our businesses have to obey all these petty rules that hinder them. Does anyone imagine that the rules would be less onerous, or indeed less of a hindrance to British business, if they were made without any input from Britain? Since Britain will need to trade with Europe, we would be putting an added burden on our business, not removing one. And we would have to pay a large fee for access to the Single Market, as Norway does. The idea that we can remove all the irritations, but retain all the benefits, is not worthy even of the saloon bar.

Of course there is need for reform, not just for Britain’s sake but for Europe’s. We need a Transatlantic Free Trade deal. We need a single market in a number of new areas, including digital services. Above all, we need a reform deal which will deliver benefits to every country in the EU, so that others will be as keen as we are on reform.  This will show how beneficial it can be when Britain plays a leading role in Europe.

This European reform will be consistent with all the other hard-headed, unsentimental, pragmatic, Conservative reforms which the Government has embarked on. It will fit in with a wider modernising agenda which is nothing to do with party image and everything to do with making Britain (and Europe) fit to compete in the modern world. All these reforms, taken together, will change Britain for the better. So the job of all Conservatives at this point is neither to flap nor falter, but to get on with the job of persuading people that Conservative principles in action give all British people the chance to succeed. We should be proud of our record so far, and we know there is much more to come. We have an important job to do. We should devote all our energy and time to doing it. 

Margaret Thatcher’s message for the TRG’s inaugural conference in 1975

Nik Darlington 9.00am

The morning’s newspapers are devoted to the death of Baroness Thatcher. The TRG made a statement yesterday and I made my own comments later.

While millions around the world mourn her passing, we remember her words at this organisation’s birth, in September 1975.

"I am pleased to learn of the formation of this new and vigorous group, and thank you for your good wishes to me as Leader of the Conservative Party.

As a nation, we face three problems:

First, we must beat inflation, or it will destroy the basis of our society.

Second, we must secure the future of economic and political liberty by genuinely distributing power and property among our people—a policy which is the reverse of that which the present Government is pursuing.

Third, we must play an active and influential part in world affairs, showing concern both for the western democratic ideal and for those nations whose primary task is to overcome poverty.

It is good to know that the Conservative Party can look to the Tory Reform Group for creative and practical ideas on these matters and for the will to see them through. We face the future with a sense of hope, and confidence in the capacity of our people to cope with whatever lies ahead.”

Peter Walker, the founder of the Tory Reform Group, who served under Mrs Thatcher as Energy Secretary in the pivotal period of the miners’ strike, responded with the following words:

"The members of the Tory Reform Group are holding their inaugural conference in London today and have asked me to convey to you their good wishes and to express to you their determination to do all in their power to see the early return of a Conservative Government and the defeat of the Socialist Government that is doing so much harm to our country.

They have also asked me to tell you that besides your being able to rely upon their fullest support in bringing victory to our Party they hope they will be able to make a creative and constructive contribution to the preparation of our Party’s policies for the years that lie ahead.”

The “Socialist Government” was indeed defeated in 1979. Margaret Thatcher went on to revolutionise British politics, and change the course of not one but two political parties as even her Labour opponents under Tony Blair and Gordon Brown comprehended the sea change before them.

For our part, the Tory Reform Group remains wholly committed to continuing that “creative and constructive contribution” as we all work towards the return of a Conservative Government in 2015.