David Cameron's speech to the Conservative conference: full text

"As Prime Minister it has fallen to me to say some hard things and to help our country face some hard truths."

In May 2010, this party stood on the threshold of power for the first time in more than a decade.

We knew then that it was not just the ordinary duties of office that we were assuming.

We were entering into Government at a grave moment in the modern history of Britain.

At a time when people felt uncertainty, even fear.

Here was the challenge:

To make an insolvent nation solvent again.

To set our country back on the path to prosperity that all can share in.

To bring home our troops from danger while keeping our citizens safe from terror.

To mend a broken society.

Two and a half years later of course I can't tell you that all is well, but I can say this:

Britain is on the right track.

As Prime Minister it has fallen to me to say some hard things and to help our country face some hard truths.

All of my adult life, whatever the difficulties, the British people have at least been confident about one thing.

We have thought we can pay our way.

That we can earn our living as a major industrial country...

…and we will always remain one.

It has fallen to us to say - we cannot assume that any longer.

Unless we act, unless we take difficult, painful decisions, unless we show determination and imagination, Britain may not be in the future what it has been in the past.

Because the truth is this.

We are in a global race today.

And that means an hour of reckoning for countries like ours.

Sink or swim. Do or decline.

To take office at such a moment is a duty and an honour…

…and we will rise to the challenge.

Today I’m going to set out a serious argument to this country about how we do that.

How we compete and thrive in this world…

…how we can make sure in this century, like the ones before, Britain is on the rise.

Nothing matters more.

Every battle we fight, every plan we make, every decision we take is to achieve that end…

…Britain on the rise.

BRITAIN CAN DELIVER

Though the challenge before us is daunting, I have confidence in our country.

Why?

Because Britain can deliver. We can do big things.

We saw it this summer.

The Jubilee, the Olympics, the Paralympics…

…the best country in the world…

…and let’s say it: with our Queen, the finest Head of State on earth.

I was trying to think of my favourite moment.

Was it telling President Hollande that no, we hadn’t cheated at the cycling, we didn’t have rounder wheels, it was just that we peddled faster than the French?

No… for me it was seeing that young woman who swam her heart out for years…

…nine training sessions a week, two hours a time.

My best moment was putting that gold medal around the neck of Ellie Simmonds. 

And I am so grateful for what all those Paralympians did.

When I used to push my son Ivan around in his wheelchair, I always thought that some people saw the wheelchair, not the boy.

Today more people would see the boy and not the wheelchair – and that’s because of what happened here this summer.

And the Olympics showed us something else.

Whether our athletes were English, Scottish, Welsh or from Northern Ireland…

….they draped themselves in one flag.

Now, there’s one person who didn’t like that…

…and he’s called Alex Salmond.

I’m going to see him on Monday to sort that referendum on independence by the end of 2014.

There are many things I want this coalition to achieve but what could matter more than saving our United Kingdom…

…let’s say it: we’re better together and we’ll rise together – so let’s fight that referendum with everything we’ve got.

There are so many people to thank for this summer.

Those that won the bid, those that built the stadia, that ran the Games…

…and of course: the man who put a smile on our faces…

…the zinger on the zip-wire…

…the Conservative Mayor of London: our Boris Johnson.

And those Games-Makers.

You know, I’ve spent three years trying to explain the Big Society…

…they did it beautifully in just three weeks.
.
There is another group of people who stepped into the breach this summer – and we in this party never forget them.

Our armed forces have been on the ground in Afghanistan for over ten years now.

433 men and women have made the ultimate sacrifice.

Just last weekend there was a memorial service for one of the fallen, and the eulogy said this:

“All that they had they gave. All that they might have had. All that they had ever been. All that they might ever have become.”

For all those who serve, and their families, I repeat the commitment I made when this Government came to office.

By the end of 2014, all UK combat operations in Afghanistan will have come to an end.

Nearly all our troops will be home – their country proud, their duty done…

…and let everyone in this hall stand and show how profoundly grateful we are for everything they do.

CONSERVATIVES CAN DELIVER

To meet the challenges our country faces, we must have confidence in ourselves… confidence as a party.

We’ve been in office two and a half years now – and we’ve done some big, life-changing things.

Just ask Clive Stone, who you saw in a film earlier.

I met him years ago, when we were in Opposition.

He had cancer and he said to me: the drug I need – it’s out there but they won’t give it to me because it’s too expensive…

…please, if you get in, do something about it.

And we have. A new cancer drugs fund that has got the latest drugs to more than 21,000 people and counting.

There was a reason we could do that.

It’s because we made a big decision to protect the NHS from spending cuts.

No other party made that commitment.

Not Labour. Not the Liberal Democrats. Just us – the Conservatives.

To all those people who said we’d bring the NHS down…

...I say…

…well, yes, you’ve got a point.

I’ll tell you what is down.

Waiting lists – down. Mixed wards – down. The number of managers – down. Bureaucratic targets – down. Hospital infections – down.

And what’s up? The number of doctors, the number of dentists, the number of midwives, the number of operations carried out in our NHS.

So be in no doubt: this is the party of the NHS and that’s the way it’s going to stay.

We made a big decision to go on saving lives abroad too.

I know some are sceptical about our aid budget.

But picture the scene – you’re in a health centre in Kinshasa.

See the child with a needle in her arm, being injected with a Yellow Fever vaccine…

…the difference between living and dying…

…how can anyone tell me that’s a waste of money.

Since we gathered here in Birmingham on Sunday, British aid money has vaccinated 130 thousand children around the world. One hundred and thirty thousand children.

You, the Conservative party helped do that, and you should be proud of what you’ve done. 

Here’s something else this party’s done in government.

Last December I was at a European Council in Brussels.

It was three in the morning, there was a treaty on the table that was not in Britain’s interests…

…and twenty five people around that table were telling me to sign it.

But I did something that no other British leader has ever done before…

…I said no – Britain comes first – and I vetoed that EU treaty.

We’re doing big, Conservative things.

For years people said you’ll never reform public sector pensions, the trade unions won’t stand for it.

Well, we’ve done it, and it’s going to cut the cost to the taxpayer almost in half.

For years people said benefits are out of control and there’s nothing you can do about it.

Well, because of our welfare cap, no family will be getting more in benefits than the average family earns.

For years people asked why we couldn’t get rid of those radical preachers who spout hatred about Britain while living off the taxpayer…

…well, Theresa May – a great Home Secretary - has done it – and she’s got Abu Hamza on that plane and out of our country to face justice.

Be proud of what we’ve done already.

Two million of the lowest-paid workers being taken out of income tax altogether.

Over eighteen million households helped with a freeze in their council tax – and we’re freezing it all over again next year too.

BRITAIN ON THE RISE

Big, Conservative things - delivered by this government; made possible by this party.

We can deliver. We can do big things.

The Olympics reminded us how great it feels to be successful.

But we mustn’t let that warm glow give us a false sense of security.

All around the world, countries are on the rise.

Yes, we’ve been hearing about China and India for years…

…but it’s hard to believe what’s happening in Brazil, in Indonesia, in Nigeria too.

Meanwhile, the old powers are on the slide.

What do the countries on the rise have in common?

They are lean, fit, obsessed with enterprise, spending money on the future – on education, incredible infrastructure and technology.

And what do the countries on the slide have in common?

They’re fat, sclerotic, over-regulated, spending money on unaffordable welfare systems, huge pension bills, unreformed public services.

I sit in those European Council meetings where we talk endlessly about Greece…

…while on the other side of the world, China is moving so fast it’s creating a new economy the size of Greece every three months. 

I am not going to stand here as Prime Minister and allow this country to join the slide.

My job – our job - is to make sure that in this twenty first century, as in the centuries that came before, our country, Britain, is on the rise.

And we here know how that is done.

It is the collective result of individual effort and aspiration…

… the ideas you have, the businesses you start, the hours you put in.

Aspiration is the engine of progress.

Countries rise when they allow their people to rise.

In this world where brains matter more, where technologies shape our lives, where no-one is owed a living…

…the most powerful natural resource we have is our people.

Not just the scientists, the entrepreneurs, the engineers…

...not just the teachers, the parents, the nurses…

…but all our people: including the poorest, those who’ve never had a job, never had a chance, never had hope.

That’s why the mission for this government is to build an aspiration nation…

…to unleash and unlock the promise in all our people.

And for us Conservatives, this is not just an economic mission – it’s also a moral one.

It’s not just about growth and GDP…

…it’s what’s always made our hearts beat faster – aspiration; people rising from the bottom to the top.

Line one, rule one of being a Conservative is that it’s not where you’ve come from that counts, it’s where you’re going.

We’ve been led by the daughter of a grocer, the son of a music hall performer…

…by a Jew when Jews were marginalised, by a woman when women were sidelined.

We don’t look at the label on the tin; we look at what’s in it.

Let me put that another way.

We don’t preach about one nation but practise class war…

…we just get behind people who want to get on in life.

The doers. The risk takers. The young people who dream of their first pay-cheque, their first car, their first home – and are ready and willing to work hard to get those things.

While the intellectuals of other parties sneer at people who want to get on in life, we here salute you.

They call us the party of the better-off…

…no: we are the party of the want to be better-off, those who strive to make a better life for themselves and their families – and we should never, ever be ashamed of saying so.

THE RIGHT IDEAS

This party has a heart but we don’t like wearing it on our sleeve.

Conservatives think: let’s just get on with the job and help people and not bang on about it. It’s not our style.

But there’s a problem with that.

It leaves a space for others to twist our ideas and distort who we are: the cartoon Conservatives who don’t care.

My mission from the day I became leader was to change that.

Yes, to show the Conservative party is for everyone: North or South, black or white, straight or gay.

But above all - to show that Conservative methods are not just the way we grow a strong economy, but the way we build a big society.

That Conservative methods are not just good for the strong and the successful but the best way to help the poor, and the weak, and the vulnerable.

Because it’s not enough to know our ideas are right – we’ve got to explain why they are compassionate too.

Because we know what we’re up against.

We say we’ve got to get the private sector bigger and the public sector smaller…our opponents call it ‘Tory cuts, slashing the state’.

No: it’s the best way to create the sustainable jobs people need.

We say help people become independent from welfare…our opponents call it: ‘cruel Tories, leaving people to fend for themselves.’

No: there is only one real route out of poverty and it is work.

We say we’ve got to insist on a disciplined, rigorous education for our children…our opponents call it: ‘elitist Tories, old-fashioned and out of touch.’

No: a decent education is the only way to give all our children a proper start in this world.

The reason we want to reform schools, to cut welfare dependency, to reduce government spending is not because we’re the same old Tories who want to help the rich...

...it’s because we’re the Tories whose ideas help everyone - the poorest the most.

A strong private sector. Welfare that works. Schools that teach.

These three things are essential to helping our people rise.

They are essential to our success in this world.

And you know what – Labour will fight them all the way.

So these things are not just the battle-ground for Britain’s future…

…they are also the battle-lines for the next election – and it is a fight we’ve got to win, for our party and our country.

ECONOMY

To help our people rise, then – number one – we need an economy that creates good jobs.

We need businesses, of every size, in every type of industry, in every part of the country – investing and taking people on.

There are some basic things they need to do that.

Low interest rates so they can afford to take out a loan.

And confidence that it’s worth investing - because the customers will be there, whether at home or abroad.

Getting the deficit down is essential for both.

That’s why our deficit reduction plan is not an alternative to a growth plan: it’s the very foundation of our growth plan.

It’s the only way we’ll get Britain on the rise.

Now I know you are asking whether the plan is working.

And here’s the truth: the damage was worse than we thought, and it’s taking longer than we hoped.

The world economy – especially in the Eurozone – has been much weaker than expected in the past two years.

When some of our big trading partners like Ireland, Spain and Italy are suffering, they buy less from us.

That hurts our growth and makes it harder to pay off our debts.

But here is the crucial thing you need to know.

Yes it’s worse than we thought, yes it’s taking longer, but we are making progress.

Thanks to the grit and resolve of George Osborne, we have cut a quarter off the deficit in the past two years.

25 per cent. 

That’s helped to keep interest rates at record low levels...

...keeping mortgages low.  Leaving more money in your pockets.  Giving businesses more confidence to invest.

Creating more jobs.

And if you don’t believe me, just look at the job creation figures.

Since this government took office, over one million new jobs have been created in the private sector.

That is more – net – in the last two years than Labour managed in ten years.

LABOUR

Now, the Labour politicians who got us into the mess say they have a different way out of it.

They call it Plan B and it goes like this:

We should stop worrying about deficit reduction, borrow more money and spend it to boost the economy.

It sounds so reasonable when you put it like that.

Let me tell you why it’s not.

Right now, while we’ve got a deficit, the people we’re borrowing money from believe that we’ll pay it back - because we’ve set out a tough plan to cut spending and live within our means.

That’s why our interest rates are among the lowest in the world, even though the deficit left to us by Labour was one of the highest in the world.

If we did what Labour want, and watered down our plans, the risk is that the people we borrow money from would start to question our ability and resolve to pay off our debts.

Some may actually refuse to lend us that money.

Others would only lend it to us at higher interest rates.

That would hurt the economy and hit people hard.

If you have a mortgage of £100,000, just a 1 per cent interest rate rise would mean an extra thousand pounds to pay each year.

Labour’s plan to borrow more is actually a massive gamble with our economy and our future.

And it would squander the sacrifices we’ve already made.

We’re here because they spent too much and borrowed too much.

How can the answer be more spending and more borrowing?

I honestly think Labour haven’t learned a single thing.

When they were in office, their answer was always:

Borrow more money.

Now they’re out of office it’s:

Borrow more money.

Whatever the day, whatever the question, whatever the weather it’s: borrow more money.

Borrow, borrow, borrow.

Labour: the party of one notion: more borrowing.

I sometimes wonder if they know anything about the real economy at all.

Did you hear what Ed Miliband said last week about taxes?

He described a tax cut as the government writing people a cheque.

Ed... Let me explain to you how it works.

When people earn money, it’s their money.  

Not the government’s money: their money.

Then, the government takes some of it away in tax.

So, if we cut taxes, we’re not giving them money - we’re taking less of it away.  OK?

And while we’re on that - who suffers when the wealthy businessman goes off to live in Geneva?

Not him – he’s paying about half the tax he would do here…

…it’s those who want to work who suffer because the jobs aren’t being created here.

We promised that those with the broadest shoulders would bear the biggest burden...

…and with us, the rich will pay a greater share of tax in every year of this Parliament than in any one of the thirteen years under Labour.

Under Labour.

We haven’t forgotten, you know.

We remember who spent our golden legacy, who sold our gold…

…who busted our banks, who smothered our businesses…

… who wracked up our debts, who wrecked our economy…

…who ruined our reputation, who risked our future…

…who did this? – Labour did this – and this country should never forget it.

ASPIRATION ECONOMY

To get Britain on the rise we need a whole new economy…

…more enterprising, more aspirational…

…and it’s taking shape already.

We’re getting our entrepreneurial streak back: last year the rate of new business creation was faster than any other year in our history.

Let me repeat that.

The rate at which new businesses started – faster than any year on record.

We’re making things again.

We had a trade surplus in cars last year for the first time in almost 40 years.

And it’s not just the old industries growing, it’s the new.

We’re number one in the world for offshore wind.

Number one in the world for tidal power.

The world’s first green investment bank.

Britain leading; Britain on the rise.  We’re showing we can do it.

Look at the new investment coming in.

In the last two years, Google, Intel, Cisco – the big tech firms – they’ve all set up new bases here.

And we are selling to the world again.

When I became Prime Minister I said to the Foreign Office: those embassies you’ve got…

…turn them into showrooms for our cars, department stores for our fashion, technology hubs for British start-ups.

Yes, you’re diplomats but you need to be our country’s salesforce too.

And look what’s happening.

In just two years, our exports to Brazil are up 25 per cent…

…to China – 40 per cent…

…to Russia – 80 per cent.

There are so many opportunities in this world.

I want to tell you about one business that’s seizing them.

It’s run by a guy called Alastair Lukies.

He and his business partner saw a world with almost 6 billion mobile phones and just 2 billion bank accounts.

They saw the huge gap in the market– and they started a mobile banking firm…

…helping people in the poorest parts of the world manage their money and start new companies.

He’s been with me on trade missions all over the world – and his business is booming.

Back in 2010, when we came to office, they employed about 100 people – now it’s more than 700.

Then they were nowhere in Africa, nowhere in Asia, now they are the global player, with one million new users every month.

So don’t let anyone tell you Britain can’t make it in this world – we’re the most enterprising, buccaneering, creative, dynamic nation on earth.

And to those who question whether it’s right to load up a plane with businesspeople – whether we’re flying to Africa, Indonesia, to the Gulf or China…

…whether we’re taking people from energy, finance, technology or yes – defence …

…I say – there is a global battle out there to win jobs, orders, contracts…

…and in that battle I believe in leading from the front.

To get our economy on the rise there’s a lot more to do – and frankly a lot more fights to be had.

Because there are too many of what I’d call the “yes-but-no” people.

The ones who say “yes, our businesses need to expand…

…but no we can’t reform planning.”

It’s simple.

For a business to expand, it needs places to build.

If it takes too long, they’ll just build elsewhere.

I visited a business the other day that wanted to open a big factory just outside Liverpool.

But the council was going to take so long to approve the decision that they’re now building that factory on the continent – and taking hundreds of jobs with them.

If we’re going to be a winner in this global race we’ve got to beat off this suffocating bureaucracy once and for all.

And then there are those who say “yes of course we need more housing”…

…but “no” to every development – and not in my backyard.

Look - it's OK for my generation. Many of us have got on the ladder.

But you know the average age that someone buys their first home today, without any help for their parents?

33 years old.

We are the party of home ownership – we cannot let this carry on.

So yes – we’re doubling the discount for buying your council house…

…we’re helping first-time buyers get a 95 per cent mortgage…

…but there’s something else we need to do – and that’s accept we need to build more houses in Britain.

There are young people who work hard year after year but are still living at home.

They sit in their childhood bedroom, looking out of the window dreaming of a place of their own.

I want us to say to them – you are our people, we are on your side, we will help you reach your dreams.

WELFARE

If we want our people to rise so Britain can rise, we must tackle welfare.

Here’s two facts for you.

Fact one.  We spend £90 billion a year on welfare for working-age people.

Not pensions. Just welfare for working age people – and that’s one pound in every eight the government spends.

Fact two.  More of our children live in households where nobody works than almost any other nation in Europe.

Let me put it simply.  Welfare isn’t working. And this is a tragedy.

Our reforms are just as profound as those of Beveridge 60 years ago.

He had his great evils to slay. Squalor. Ignorance. Want. Idleness.  And Disease.

Here are mine.

First, unfairness. 

What are hard-working people who travel long distances to get into work and pay their taxes meant to think when they see families – individual families – getting 40, 50, 60 thousand pounds of housing benefit to live in homes that these hard working people could never afford themselves?

It is an outrage. And we are ending it by capping housing benefit.

The second evil: injustice.

Here’s the choice we give our young people today.

Choice one: Work hard. Go to college. Get a job. Live at home. Save up for a flat. And as I’ve just said, that can feel like forever.

Or: Don’t get a job. Sign on. Don’t even need to produce a CV when you do sign on. Get housing benefit. Get a flat. And then don’t ever get a job or you’ll lose a load of housing benefit.

We must be crazy.

So this is what we’ve done.

Now you have to have to sign a contract that says: you do your bit and we’ll do ours.

It requires you to have a real CV and it makes clear: you have to seek work and take work – or you will lose your benefit.

And we’re going to look at ending automatic access to housing benefit for people under 25 too.

If hard-working young people have to live at home while they work and save, why should it be any different for those who don’t?

The next evil: bureaucracy.

Sign on. Sign here. Come back in a fortnight. Repeat as required.

What does this do for the guy who’s been out of work for years, playing computer games all day, living out a fantasy because he hates real life?

For people like him we’re doing something new.

The Work Programme takes the money we’re going to save from getting people off the dole…

…and uses it today to get them into work, with proper training.

We’re spending up to £14,000 on one individual to get them into work – and already almost 700,000 people have got onto the Work Programme.

So let’s be clear: in British politics today it is this party saying no-one is a write-off, no-one is hopeless…

…and with Iain Duncan Smith leading this revolution let this be the party that shows there is ability and promise in everyone.

And just one more thing on welfare.

You know our work experience programme, where we give young people the chance to work in a supermarket, a shop, an office?

Here’s what one union official said about it.

I quote: “The scheme belongs back in the nineteenth century, along with Oliver Twist and the workhouse. It is nothing short of state sponsored slavery…”

Honestly. What an appalling, snobbish attitude to the idea of work.

We’re not sending children up chimneys, we’re giving them a chance.

What’s cruel isn’t asking something of people – it’s when we ask nothing of them.

Work isn’t slavery, it’s poverty that is slavery…

…and again it’s us, the modern compassionate Conservative party, who are the real champions of fighting poverty in Britain today.

EDUCATION

To help people to rise, to help Britain rise, there’s a third – crucial – thing we must do.

Educate all our children.

And I mean really educate them, not just pump up the grades each year.

In maths, in science, in reading, we’ve fallen behind…

…not just behind Germany and Canada but Estonia and Australia too.

This is Britain’s real school report and the verdict is clear: must try harder.

You’ve heard of pushy parents, sharp-elbowing their way to a better education for
their kids?

Well – this is a pushy government.

My approach is very simple.

I’ve got two children in primary school, and I want for your children what I want for mine.

To go to schools where discipline is strict, expectations are high and no excuses are accepted for failure.

I don’t want great schools to just be the preserve of those that can pay the fees, or buy the nice house in the right catchment area…

…I want those schools to be open to every child – in every neighbourhood.

And the reason I know that every child can go to a school like that is because with this Government, more and more new ones are opening.

We’ve heard from some of them this week…

…not just the 79 new free schools – with over a hundred more to come…

…but from some of the more than 2000 academies we’ve helped create – state schools given all the freedoms, and carrying all the high expectations, of private schools.

Yes – that’s my plan – millions of children sent to independent schools…

…independent schools, in the state sector.

That’s the genuine revolution that’s now underway.

The Harris Academy in Peckham has increased the number of students getting five good GCSEs – from 12 percent when it was under local authority control to almost 90 percent now.

The transformation has been astonishing – and the methods have been Conservative.

Smart uniforms, teachers in suits.

Children taught physics, chemistry and biology not soft options.

Children set by ability – with excellence applauded, extra resources for those most in need but no excuses for slacking.

When you see a school like that succeed it prompts the question:

Why can’t every school be that way? Why can’t every child have those chances?

It’s not because parents aren’t ambitious enough – most of these schools are massively over-subscribed.

It’s because the old educational establishment – the left-wing local authorities, the leaders of the teachers unions, the Labour party theorists – stood in the way.

When we saw a badly failing school in Haringey and wanted to turn it into an Academy, the Labour authority, the Labour MP and the teaching unions said no.

When inspirational teachers and parents – in Hammersmith, in Norwich, in Bristol and in Wigan – wanted to open free schools, the left-wing establishment said no.

When we proposed: More pay for good teachers... Getting rid of bad teachers…

…Longer school days to help children learn… Flexible school hours to help parents work…

…More stretching exams for those who’re really able… Less nonsense about health and safety…

…the left-wing establishment have said just one thing: No.

When you ask them: why is a school failing? Why aren’t the children succeeding?

You hear the same thing over and over again.

‘What can you expect with children like these?’ they say.  ‘These children are disadvantaged.’

Of course we want to tackle every disadvantage.

But isn’t the greatest disadvantage of all being written off by those so in hock to a culture of low expectations that they have forgotten what it’s like to be ambitious, to want to transcend your background, to overcome circumstance and succeed on your own terms?

It’s that toxic culture of low expectations – that lack of ambition for every child – which has held this country back.

Well, Michael Gove and I are not waiting for an outbreak of sanity in the headquarters of the NUT or an embrace of aspiration in the higher reaches of Labour before we act.

Because our children can’t wait.

So when people say we should slow down our education reforms – so adults can adjust to them, I say:

I want more free schools, more Academies, more rigorous exams in every school, more expected of every child.

And to all those people who say: he wants children to have the kind of education he had at his posh school…

…I say: yes – you’re absolutely right.

I went to a great school and I want every child to have a great education.

I’m not here to defend privilege, I’m here to spread it.

CONCLUSION

I don’t have a hard luck story.

My dad was a stockbroker from Berkshire.

It’s only when your dad’s gone that you realise – not just how much you really miss them – but how much you really owe them. 

My dad influenced me much more than I ever thought.

He was born with no heels on his feet and legs about a foot shorter than they’re meant to be.  But he never complained - even when he lost both those legs later in life.

Because disability in the 1930s was such a stigma, he was an only child.  Probably a lonely child.  

But Dad was the eternal optimist.  To him the glass was always half full.  Usually with something alcoholic in it.

When I was a boy I remember once going on a long walk with him in the village where we lived, passing the church he supported and the village hall where he took part in interminable parish council meetings. 

He told me what he was most proud of. 

It was simple – working hard from the moment he left school and providing a good start in life for his family. 

Not just all of us, but helping his mum too, when his father ran off.

Not a hard luck story, but a hard work story. 

Work hard.  Family comes first.  But put back in to the community too.

There is nothing complicated about me.

I believe in working hard, caring for my family and serving my country.

And there is nothing complicated about what we need today.

This is still the greatest country on earth.  We showed that again this summer.  22nd in world population.  3rd in the medals table. 

But it’s tough.  These are difficult times.  We’re being tested. 

How will we come through it?  Again, it’s not complicated.

Hard work.  Strong families.  Taking responsibility.  Serving others.

As I said on the steps of No10 Downing Street before walking through that door:  Those who can should, those who can’t we will always help.

The job of this party … of this government … is to help to bring out the best in this country.  Because at our best we’re unbeatable.

We know Britain can deliver because we’ve seen it time and again.

This is the country that … invented the computer, defeated the Nazis, started the web, saw off the slave trade, unravelled DNA and fought off every invader for a thousand years.

We even persuaded the Queen to jump out of a helicopter to make the rest of the world smile …. there is absolutely nothing we cannot do.

Can we make Britain the best place in the world to start a business, grow a business and help that business take on the world and win?  Yes.

Can we – the people who invented the welfare state in the first place – turn it into something that rewards effort, helps keep families together and really helps the poorest with a new start in life.  Yes. 

Can we take our schools and turn out students that will take on the brightest in the world?  Yes. Of course we can.

Let us here in this hall, here in this government, together in this country make this pledge – let’s build an aspiration nation…

…let’s get Britain on the rise.

Deficit, paid down.  Tough decisions, taJken.  Growth, fired up.  Aspiration, backed all the way. 

We know what it takes to win … to win in the tough world of today …. to win for all our people … to win for Britain.  So let’s get out there and do it.

 

David Cameron delivering his conference speech. Photograph: Getty Images
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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?