Today I took part in Policy Exchange's pre-budget panel and gave the speech below: I think it’s useful first to set a little bit of context for next week’s budget. With the economy recovering it’s easy to forget where we’ve come from and as a result the fiscal challenges still facing the chancellor. In May 2010, we inherited the biggest budget deficit in the developed world, the economic picture was grim. £120m a day in interest payments alone and £150 billion a year being borrowed. If we were still borrowing at the same rate we were back in 2010 then by the time I’ve finished my opening remarks we’d have borrowed 1.4 million pounds. It was against this backdrop that we had an emergency budget laying out initial plans for fiscal consolidation. Plans that were unfortunately derailed by the Eurozone crisis. Back in 2010, no major forecaster predicted a crisis in the Eurozone dragging down global growth, but that was where we found ourselves. We all know the result. With our largest export market in a state of flux the economy took longer to grow than we would have liked, but now we’re back on track. With growth of 0.7% last quarter we’ll find out next week what the OBR expects growth to be moving forward. Given that nearly every forecaster has been upgrading expectations in recent weeks and months, something tells me we can expect the same. And whilst some of my gloomier colleagues, and of course my colleagues across the floor, will claim that this isn’t a balanced recovery I’m afraid I’ve got to disagree with them. Just yesterday the ONS announced that production was up by 2.9% and that manufacturing was again up, this time by 3.3%. We’re making things again and selling them to the world. In my own region, the West Midlands there’s been a huge resurgence in car manufacturing. In fact, that resurgence has been across the country and today a car rolls of a british production line every 6 seconds. And it’s not just manufacturing, services are up, and even the previously slow moving construction is showing signs of growth. Then there are the employment figures , with every new release seemingly showing more people than ever before in work. So sentiment is most definitely up, but in this lies a danger. Because there’s still a lot of fiscal consolidation to go. We shouldn’t forget that the task of repairing the public finances is far from complete. But, with the economy recovering there will be those calling for giveaways, and the more the economy grows the bigger those calls will get. And here-in lies a communication challenge for the Chancellor. How does he give the good news, whilst at the same time saying that it doesn’t mean we’ve got more money to spend. Now, the Chancellor is a master of politics and the politics of this are important. Why? because if the public believe the economy is fixed then come next year they might hand the keys back to the those people who broke it in the first place….. who will of course just break it again! So next week, I think we can expect to hear something about this. About how the economy is recovering, but that doesn’t mean we can return to the bad old days of spend, spend spend. I suspect in fact, that may be part of the overarching message, readying us for 2015. That doesn’t mean there won’t be the odd tweak here and there though. After all, tackling cost of living and making sure people feel that they have more in their pocket at the end of the month is vital in sustaining the consumer led elements of this recovery. So we can probably expect to see something there The Chancellor and the Prime Minister have already said that if there’s any spare money then it should go towards helping those on the lowest incomes so if there is anything left in the kitty that’s where we can expect it to go. Then there’s National Insurance, or as my colleague Ben Gummer would prefer it be called, the Earnings Tax. Whilst we’ve looked at the employers side of this already, cancelling planned rises when we came into office and offering the employment allowance from 1st of April, I do think there’s more to be done on the employee side. We have made a big play of of saying you’ll pay no tax on the first £10,000 of earnings but at the moment you still pay 12% NI on everything between £7,748 and £10,000. That definitely won’t be possible right away but I’d like to see it as an intention. And finally I think we’ll see some more help for exporters, something the Chancellor hinted at in his recent speech in Hong Kong. So that’s my thoughts, looking forward to a good discussion this morning.