Co-operatives Bill to help build a

fairer economy
Thursday, January 19 2012
David Cameron

These are difficult times. We have to deal with the legacy of the deficit and the debt, the
eurozone is in deep and continuing trouble, and yesterday unemployment rose again.

Across Europe, economies have stalled. Here in Britain, it is clear that this is an active
government. Its sleeves arerolled up. We are doing everything we possibly can to get our
economy moving: the biggest work programme since the 1930s, helping three million
people; a massive drive on apprenticeships; major initiatives on regional growth, on
infrastructure, onenterprise. But today, if we are frank, many people are questioning not
just how and when we will recover, but they are questioning the whole way in which our
economy works.

So while our economic challenge starts with dealing with our debts and achieving growth,
itmust not end there. We must aim higher than just coping with the storms that are
affecting the international economy, because I believe that out of this current adversity
we must aim to build a better economy, one that is truly fair and worthwhile.

And my argument today is this: we will not build a better economy by turning our back on
the free market; we will do it by making sure that the market is fair as well as free. While
of course there is a role for government, for regulation, forintervention, the real solution
is more enterprise, more competition, more innovation.

In this debate about the kind of economy we want to see, my position is very clear. I
believe that open markets and free enterprise are the best imaginable force for improving
human wealth and happiness. They are the engine of progress; theygenerate the
enterprise and the innovation that lifts people out of poverty and that gives people
opportunity.

And I would go further: where markets work properly, open markets and free enterprise
can actually promote morality. Why? Because they create a direct link between
contribution and reward, between effort and outcome. The fundamental basis of the
market is the idea of something for something, an idea we need to encourage, not
condemn.

So we should use this crisis of capitalism to improve markets, not undermine them. Now,
I believe Conservatives in particular are well placed to do this. Because we get the free
market, we know its failings as well as its strengths. No true Conservative has a naïve
belief that all politics and politicians have to do is just stand back and let capitalism rip.
We know there is every difference in the world between a market that works and one
that does not. Markets can fail. Uncontrolled globalisation can slide into monopolisation,
sweeping aside the small, the personal, the local.

But we are the party that understands how to make capitalism work, the party that has
constantly defended our open economy against the economics of socialism. So where
others see problems with markets as a chance to weaken them, I see problems with
markets as an opportunity to improve them.

Now, this reflects two principles that have always been at the heart of what I believe, and
that I thinkhave been at the centre of Conservative thinking for centuries. The first is a
vision of social responsibility, recognising that people are not just atomised individuals
and that companies have obligations. And the second principle is a genuinely popular
capitalism, which should alloweveryone to share in the success of the market.

Now, the idea of social responsibility is not somenew departure for my party. It was Burke
who insisted on public accountability for the East India Company; it was William Pitt who
brought it under the control of government. Later, the same spirit of responsibility helped
drive the campaign against the slave traders. Under Peel, it led to the repeal of the Corn
Laws which had forced up the price of food. Under Disraeli, it led to the Factory
Actswhich began to set working conditions.

Now, of course it is true that great campaigns for reform drew strength from many other
movements too. But social responsibility - watching over business, correcting market
failure, recognising obligations - that has been part of the Conservative mission from the
start. And a large part of my leadership has been about renewing that commitment and
that long-standing tradition. Corporate social responsibility and environmental
responsibility have been constant themes in the arguments I have made and the policies I
have developed.

Soon after I was elected leader, I said that we should not just stand up for business but
also we should stand up to big business when it was in the national interest to do so.
Three years ago, I argued that the previous government's turbo-capitalism had turned a
blind eye to corporate excess, while we believed in responsible capitalism and in
government would make it happen.

But the second principle, popular capitalism, is just as important as the first - social
responsibility. We need to open up markets; we need to get more people engaged in a
genuinely popular capitalism, which is what you see when you walk through the space
here at The Hub today in New Zealand House.

Now, Conservatives have always believed in an ownership society. A consistent theme has
been the ambition of building a nation of shareholders,of savers, of home-owners.
Macmillan championed this through home ownership, giving people an asset of their own.
Margaret Thatcher did the same with privatisation, with share ownership, with the right
to buy your council house. And three years ago in Davos, I called for a new popular
capitalism, one that recognised what has gone wrong with capitalism and which freed
people to make something of themselves, to get a good job, to own a home, to start a
business.

Today, this mission of improving markets and ensuring they are fair as well as free,
informed by the principles of social responsibility and genuinely popular capitalism,
should have three things at its heart. First, we need be clear about the specific mistakes
of the last decade. Second, we need to put the right rules and institutions in place to
correct them. And third - and I think this mattersmore than anything else - we need to
open up enterprise and opportunity so that everyone has the chance to participate and
benefit from a genuine market economy. So we need to boost competition, back
enterprise, encourage the adventurous spirits who challenge the status quo. That is how
we will build a fairer and more worthwhile economy.

So, first, what went wrong? Now, the last government claimed to have got rid of boom
and bust. But what really happened was it allowed a debt-fuelled boom to get out of
control. The result was, if you like, a series of lethal imbalances in our economy, between
north and south, between financial services and manufacturing, between the people who
got huge rewards at the top or welfare at the bottom while everyone else seemed to
getleft out.

The truth is the last government made something of a Faustian pact with the City. It
encouraged a debt-crazed economy because it needed to pay for spiralling welfare costs
and a very much top-down, interventionist state. It tolerated market failuresbecause at
heart it did not really accept that markets could be made to work properly. It seemed
frightened of challenging vested interests, believing too often that the interests of big
business were always one and the same as those of the economy as a whole.

Now, all this left us with a level of public spending we could not afford and a model of
economic growth that would not work. Now, I understand why this has made many
people today disenchanted with markets, even angry. Because far from abolishing boom
and bust, what we had was the biggest boom and then the biggest bust, leaving everyone
with a share of the debt. But when things went well only a few seemed to get a share of
the profit. Too many people found they couldn't count on their savings growing. They
couldn't afford to buy a home. They worried about how they'd pay their bills in old age.
And the City, which should have been a powerhouse of competition and creativity,
became instead a by-word for a sort of financial wizardry that left the taxpayer with all
the risk and a fortunate few with all of the rewards. So instead of a popular capitalism, we
ended up with an unpopular capitalism.

So the next question is: what needs to change? My answer is that we need to change the
way the free market works, not to stop the free market from working. We need to
reconnect the principals of risk, hard work and success with reward. When people take
risks with their own ideas, their own energy, their own money; when they succeed in the
competitive market where anyone can come along and knock them off their perch at any
time, we should celebrate entrepreneurs that succeed and create wealth, and yes, get rich
in that way. We should support business leaders who earn great rewards for building
great businesses, for doing great things for their company, for our economy, for our
society. There should be a proper, functioning market for talent at the top of business and
that will inevitably mean that some people will yes, earn great rewards.

But that is a world away from what we've seen in recent years where the bonus culture -
particularly in the City - has got out of control. Where the link between risk, hard work,
success and reward has been broken. Now this is not the politics of envy. As the Governor
of the Bank of England reminded us this week, excessive, undeserved bonuses reduce
lending that's available to small businesses. Large rewards for failure when companies are
suffering means that even less is left over for customers and for shareholders.

So next week the Business Secretary will set out our detailed proposals on executive pay
including any necessary legislation to follow because there is a need for new rules. But we
should be clear about what will do most to bring about true responsibility. We need to
make the market work and we'll do that by empowering shareholders and using the
powers of transparency as well. That is why I welcome this week's decision by Fidelity
Worldwide to add their voice to calls for better policing of boardroom pay. Its responsible
action to make markets work and it's a thread that runs through this government. Now
regulation is part of it but again, I think the last government got regulation the wrong way
round.Small companies were often strangled in red tape while the banks were allowed to
let rip.

We need to turn the tables on this so we're acting to make banks work for the people and
the firms who rely on them. This means implementing the Vickers' report to separate
investment banking from retail banking. We will ensure banks are properly capitalised as
losses should be borne by investors not by taxpayers. We're completely overhauling
financial services regulation, abolishing the failed tri-partite system and putting in place a
system that will work and that will protect the consumer. We're fundamentally reviewing
the private finance initiative to strike a proper balance between risk and reward to the
private sector and we're also busting open the cosy collusion between big business and
big government that has locked small business out of public sector contracts: a market
worth £150 billion a year.

Now none of this should mean more regulation. It means less but better regulation. We
need strong frameworks that people can understand, not endless but ineffective box-
ticking red tape. That's what lies behind the new anti-tax abuse rule that the Chancellor is
examining which will make the tax codes simpler, not more complex, but stop abuse at
the same time. At the end of all this, be in no doubt this government will have reduced
regulation, not increased it.
But the third part of the mission, to improve markets and make them fair as well as free,
is about enterprise and opportunity. Capitalism will never be genuinely popular unless
there are genuine opportunities for everyone to participate and benefit. Now of course
this means a greater emphasis on equality of opportunity. You can never create a fair
economy if there are people who are automatically excluded from it through poor
education, or if there are people who are encouraged to think that the only way to live
their lives is to depend on state hand-outs. People need the capacity to succeed, that is
why this government has made the education revolution its priority, with academies, free
schools, rigour in exams and a complete intolerance of failure - as we saw this week with
the abolition of the idea that you can have a school that is less than good being called
satisfactory. We are slanting the funding system in education in favour of the poorest,
with a pupil premium that means disadvantaged pupils get more. So every time a child on
free school meals walks into a school, that school knows they will get more money for
teaching that pupil and asa result will be able to help turn their lives and their prospects
around.

In an age when we're having to cut public spending we're actually investing more in early
years childcare and also we're intervening comprehensively and early in families that are
failing to help children who otherwise will get a poor start in life. But popular capitalism
also means believing in what I call the insurgent economy where we support the new, the
innovative and the bold. Where we give a chance to thousands upon thousands in our
country who aren't in business yet but who want to be; whose ideas and energy, whose
enterprise and ambition need that first crucial springboard. Intelligence, ingenuity,
energy, guts - I believe Britain is fizzing with business potential and you can see it just a
few yards from where I'm standing.

But we need to end the fear that says this is opportunity only for a few. I admire, all more
than anything, the bravery of those who turn their back on the security of a regular wage
to follow their dreams and start a company. If you take a risk, quit your job, create the
next Google or Facebook and wind up a billionaire, then more power to your elbow. And if
you took a punt, invested your money in that hugely risky start-up and made a fortune,
then fair play to you. And let's also recognise people who take risks who don't succeed the
first time, who often find the first investment, the first business fails, doesn't succeed, but
who persevere. We have to recognise that that is a process leading to success, not a
failure in itself and we should be open to that, I want to see it happen and encourage it.

So that's why we're taking a whole series of steps. We are improving entrepreneur relief
so that founders of companies get to keep a bigger slice of the gains that they make. It's
why we launched the entrepreneur visa so that the best and brightest would-be
entrepreneurs from around the world can start their business right here in the UK. It's
why we've implemented some of the most generous tax incentives for early-stage
investment of any developed economy. And next week I'll be launching a new campaign
to StartUp Britain, helping people take that brave step into business for themselves.

It is a basic truth that if people have a stake in business they will support its growth and
share in its success, but the reality is that even as our country has grown richer,
participation has actually shrunk. Yes, we're boosting shareholding by giving tax relief to
people who invest in new small businesses and for this Olympic year of 2012, we're taking
another step that hasn't been much commented on. We are effectively abolishing Capital
Gains Tax for people who this year are prepared to have a go and invest in a start-up.

But I don't believe we should stop there. To build a fairer economy we need more
shareholders, more home owners, more entrepreneurs. That's why we're reinvigorating
the right to buy your council home and we're transforming the failing housing market.
And as the Deputy Prime Minister said on Monday, we need to help encourage different
models of capitalism. One where employees have a much more direct stake in the success
of their company. This is an issue that I've long cared about. Back in 2007 I established the
Conservative Co-operative Movement which now has over 40 Conservative MPs as
members. In a government where we're providing new rights for public sector workers to
create mutuals and to own a stake in their success, with employee-led mutuals now
delivering almost £1 billion worth of health services, I think it's right to take further steps.
Because we know that breaking monopolies, encouraging choice, opening up new forms
of enterprise, is not just right for business, it's also the best way of improving our public
services too.

Now there are over 12 million Co-op members in the UK. It is, if you like, a vital branch of
popular capitalism. But right now there are too many barriers in the way to extending and
improving that record.

There are over a dozen separate and out-dated pieces of legislation that add cost and
complexity to the process. So today I can announce they'll all be brought together and
simplified in a new Co-operatives bill that we'll be putting before Parliament.

Now I want, in these difficult economic times, to achieve more than just paying down the
deficit and encouraging growth. I want these times to lead to a more socially responsible
and genuinely popular capitalism, one in which the power of the market and the
obligations of responsibility really come together. One in which we improve the market by
making it fair as well as free, and in which many more people get a stake in the economy
and a share in the rewards of success. That is the vision of a better, more worthwhile
economy that we're building. An economy where people who work hard get rewards that
are fair in the true, conservative sense of the word. An economy where people feel in
control of their destiny because they've started their own business, or they're
shareholders in the company they work for, or indeed are part of a co-operative. An
economy where everyone has the chance to build up assets, to pass something on to the
next generation. That is how we will make markets work for all of us - to spread wealth, to
spread freedom and to spread opportunity. Thank you very much indeed for listening.