On the 24th of October I gave a talk as part of the Stratford Insurance Institute's lecture programme entitled "Government Policy and You", the text of that talk is below: Thank you for having me here to speak today. As you probably all know I’ve been the Member of Parliament for Stratford on Avon since 2010 and before that I was an entrepreneur, founding the market research and polling business YouGov in 2000 and taking it public in 2005. I thought that I’d spend a little bit of time today, talking about how politics - and the debates we have in Westminster - impact on you and also how you impact on us. In fact, right now is probably the perfect time to do this as the political debates of Westminster are already dominating news coverage thanks to next year’s election. And what’s interesting about this, is that for the first time in British history, we know exactly when the election will be. In 194 days the nation will be going to the polls. Thanks to the fixed term parliament act we know the exact date. It’s no longer the prerogative of the Prime Minister to go to the palace and ask the Queen to dissolve Parliament, it’s laid down in law instead. Why? Well, for an explanation of that we have to go back to a dark night in January 2004 when Sir Andrew Large, the deputy Governor of the Bank of England, took a short trip from Threadneedle Street to the Strand in central London. As he wrapped himself up in his coat and climbed the steps to the newly refurbished lecture theatre, an audience of economics students waited patiently. What Sir Andrew had to say in his LSE speech questioned a central assumption. An assumption on which the explosion in finance of the last 3 decades had been based. His argument rested on a simple distinction between two concepts: technical sophistication and progress. According to Sir Andrew they might be related, but they were not the same thing. Since the late 1980s bankers, economists, regulators and politicians had generally assumed that increased technical sophistication in the financial system would translate into greater stability across the economy. Computer technology, which allowed financial assets to be whizzed across the globe at the touch of a button, supposedly ensured that the riskiest assets would always find their way into the hands of those most able to bear that risk. Financial crises, it was assumed, occurred because risk was too concentrated. Recent financial innovation meant it would be safely diffused across the system, like chlorine molecules in a swimming pool. But according to Sir Andrew, all these heroic arguments about efficiency and the spreading of risk hinged on a big ‘If’. The system was only safer if everyone knew what they were doing - that is, if they properly understood the risks they were dealing with. And yet the modern financial system itself worked against such an understanding. Despite steps such as enhanced disclosure and improved accounting standards, there had been other steps back towards opacity: the result of the sheer complexity, speed of movement of risks, and in some cases obfuscation through off-balance sheet devices. He noticed that for many firms cultivating complexity had become an end in itself. After all, the more complicated a product or institution became, the harder it was for investors and regulators alike to track the underlying risks. And the less risky an institution appeared to the outside world, the more easily it could borrow to take on even more risk. The speech was warmly received by its undergraduate audience, questions were dutifully asked and answered. The text was published on the Bank’s website. But ultimately, No-one noticed. Sir Andrew continued to give speeches warning of the risk for another two years. Then he quietly retired before his term was up. Of course Sir Andrew was well ahead of the curve, a year after his retirement we had the first run on a British bank since 1886 and a year later the biggest financial crisis in the history of capitalism began. A crisis that began what we now call the Great Recession. A crisis that has defined our politics for the entirety of this Parliament. So what’s that got to do with fixed term parliaments? let’s fast forward to election night 2010 and what happened after that to find out At 2am in the Stratford Upon Avon leisure centre, The Council’s Chief executive Paul Lankester stood in front of the microphone and begun reading the results. “I, Paul Lankester, being the Returning Officer at the Parliamentary Election for the Stratford on Avon Constituency held on 6th May 2010, do hereby give notice that the number of votes recorded for each Candidate at the said election is as follows..” After a long 4 months, knocking on doors, visiting every village in the constituency, I’d been elected as the MP for Stratford on Avon. 51% of the votes in an eight horse race. Now, as you may have guessed with a name like Zahawi, I could hardly have claimed that my ancestors fought at the Battle of Hastings. Yet despite this the people of Stratford had voted for me to represent them. What happens next is wonderfully British. I was handed an envelope addressed to “The New MP, Stratford on Avon”. Inside it was a single piece of paper which simply said “Report to Portcullis House, SW1A 0AA at 9:30am on Monday the 10th May”. and that was it. By Friday morning it was clear that no single party had won a majority and we were into uncharted territory. There hadn’t been a coalition government in the UK since 1974 David Cameron gave a press conference saying “I want to make a big, open and comprehensive offer to the Liberal Democrats. I want us to work together in tackling our country's big and urgent problems - the debt crisis, our deep social problems and our broken political system.” Like everyone else, I was watching events unfold on the news channels the next day when I got a text message. It was pretty short “If you’re available David Cameron would like to see you at his office in Parliament” Now when your boss of just one day asks to see you I think it’s a brave new employee who says no. So, at the agreed time I presented myself to the armed policeman standing at the Derby Gate entrance to the Parliamentary estate and said “I’m the new Member of Parliament for Stratford on Avon”. He looked me up and down, probably thought I was a terrorist, but eventually went inside to check if I was expected. I was then ushered up to the opposition leaders offices and went into a conference room to see David sat there shirt sleeves rolled up, looking like he’d had a long night. I’d expected there to be a whole group of us but there was just a handful of other new colleagues. He wanted to know what we thought of entering a coalition with the Lib Dems. He said we’d been out pounding the pavements, talking to the voters, working with our party members and wanted to know what we thought they’d think. My advice was simple, the nation needed stability, it needed a government ASAP. We were two and a half years from the run on Northern Rock, but the global economy was still very much in progress, the country, indeed the world was still in a recession. This was the right decision for country and the voters and indeed our members would agree with it. Four days later the coalition agreement was published and the new Prime Minister and his deputy gave the historic Rose Garden press conference. Where, you may remember, the PM was asked about his statement during the campaign that his favourite political joke was Nick Clegg. So the first coalition Government in 36 years began, during the greatest period of economic insecurity in decades, if not hundreds of years. There was a real fear amongst commentators and the markets that it wouldn’t last. That the differences were too great between the Lib Dems and Conservatives for us to be able to govern together. And whilst now, other than the odd grumble from Vince Cable, and the occasional wobbly from Nick Clegg, we know that isn’t true. Both parties have stuck to the agreement, but then there was a real fear they wouldn’t. It was a problem that needed a solution, and that solution was the Fixed Term Parliament Act. A law that would give us the time to put our long term economic plan into action, without the markets fearing it would be derailed part way through. Because at that point in time the name of the game was confidence. How could we retain the confidence of the markets to keep our borrowing down. Unlike other countries in the developed world we hadn’t fixed the roof while the sun was shining. Despite a decade of growth we’d entered the crash with the one of the biggest budget deficits in the developed world at 11% of GDP. Every day we were borrowing £400m… …and paying out £120m a day in interest alone. That’s more in interest than we were spending on education, the police and defence combined. And to borrow that money you have to go to the markets and ask nicely. So every few weeks there’s a nation somewhere on the planet going to the markets to say “Please can we borrow several billion pounds Mr International Investor” And those investors get to set the interest rate you have to pay. Which impacts on the amount you have to pay out every month to service that debt. In February 2010 - just 3 months before the election - UK bond yields where actually higher than those of Italy and Spain. The rate you’re charged is technically linked to the likelihood that you’ll be able to pay it back. It’s a measure of the market’s confidence in your economy. And when confidence fails those rates go up Costing you more every month Making it more difficult for you to service the debts you’ve already got and a vicious circle begins. We saw this with Greece. The markets lost confidence in their ability to grow their economy to service their debts and their ability to control state spending to reduce their borrowing requirements. And as a result the rest of the Eurozone had to step in and bail them out. Today, internal political instability is threatening that economy again. There is talk in Government of them taking the foot off the austerity pedal. And as a result Greek bond yields have risen again. Potentially restarting the circle and dragging the Eurozone back for a third dip of recession. Greece should be a constant reminder to us that it really is “the economy stupid”. And with growth returned to the UK, it’s all too easy to think that the mission is done. The economy’s recovered and we can return to business as usual. But, that simply isn’t true. Just as the defining feature of this Parliament has been deficit reduction, so too will it be the defining feature of the next. Since May 2010 we’ve reduced the deficit - that’s the gap between what we get in tax revenues and what we spend every year - by more than a third, from 11% to 5% of GDP, but that still leaves us borrowing £101bn a year. £8.4bn a month, £1.89bn week, £276m a day. The title of this talk is Government Policy and You, but perhaps I should have called it “the deficit and you”. Because ultimately every government policy decision is driven by this and it has to be. Contrary to what my political opponents may claim you can’t pay for good public services and grow an economy without dealing with the deficit. You can’t pay for an efficient, effective NHS without a long term plan to deal with the defecit and pay down our debts. It’s always there. There is no magic money tree. So the policy decisions we take today have to be about one of two things How do we bring in more money or How do we reduce the amount of money we’re spending. But that isn’t to say that within that we can’t also make spending commitments. Despite the fiscal restrictions we’re still protecting the lowest paid, protecting the health service, and protecting dignity in old age. In fact many policies are investments in the future. Investing more money in the Health Service, ultimately ensuring a more productive population. A population who are sick less often and recover more quickly. Allowing people to keep more of their hard earned money at the end of every month actually encourages people to work more Why should someone on low wages slog away an extra hour or two at work if they’re hardly going to see any more money in their pay packet at the end of every week. Remember by the end of this Parliament the lowest paid in this country will have received a £900 a year tax cut. And even at the other end of the income scale, something that to many people seems counterintuitive - the reduction of the 50p income tax rate to 45p - is actually resulting in more tax income. Since the removal of the 50p rate income into the exchequer from the richest people in this country has actually increased by £9bn. And for those that are determined to avoid tax we are doing more than ever to recover unpaid taxes from deals with Swiss Banks and tax havens, through to the closure of tax avoidance schemes. In the area of education, every international study shows that a better qualified workforce results in more economic growth. So with an eye on the long term we’ve reformed our education system significantly, putting head teachers, not politicians in charge of schools, and investing heavily in apprenticeships. Even in higher education the reforms we made back in 2010 are not just about putting student finance on a stable footing. They’re also about improving the quality of the offering and opening it up to more people. Today, more people from disadvantaged background are going to university than ever before In welfare reform, whilst many would like to paint our reforms as being only about reducing costs, that couldn’t be further from the truth. No single person in government, in fact no single person in politics is more committed to improving the situations of the unemployed and those on benefits than Ian Duncan Smith. Since leaving the party’s leadership he has dedicated himself to that task and now in government he’s able to put his ideas into action. And they’re working. More people are in employment than ever before More than 2 million new private sector jobs have been created since May 2010 That’s more tax payers, helping us reduce the deficit and ultimately pay down out debts. But it’s also more people with the security of a job, more people providing for their family. And whilst the crash is now receding into memory, challenges to the global economy still remain. China, so long a bastion of global growth is slowing, fears that Greece will ditch austerity are raising bond yields and threatening the Euro zone once again, and there are continuing fears for global security from Islamic State. So now is certainly not the time to decide that the job is done. You don’t start fixing the roof, get halfway through, then - despite a cloud on the horizon - decide the job is done and you can go back to life as usual. So, that’s the backdrop to both the last 4 and a half years and the next parliament. What we see after 7th of May 2015 is obviously going to be up to the electorate. The choice is between two visions for the United Kingdom A country governed by the Conservative Party, that is committed to making sure the hard working people of this country keep more of their money, get good quality public services and do so with a set of balanced national accounts. Or a country governed by the Labour party, that is committed to punishing business, borrowing more, taxing more and risking our recovery. One of the first actions of this government was to announce a staged reduction in corporation tax levels. By 2015 we will have the joint lowest Corporation Tax in the G20 at 20% helping attract and retain business here in the UK. Just for comparison in the US its 46%. We shouldn’t forget that whilst Government can provide the environment to create jobs, it’s businesses that truly create jobs and growth. And, whilst when businesses behave badly its right to hold them to account, what we shouldn’t do is try to drive them away from the UK. Because to do so, risks our economic recovery, it risks jobs, it risks tax revenue from those jobs to balance the books. Of course, whoever is in government - and I sincerely hope that it’s my party - there is still a chance for the public, charities and businesses to influence the direction of government policy. Lobbying is a dirty word, but the fact that you can all contact me - or your own elected representative if you’re not from Stratford - to influence legislation and government policy is an essential part of the democratic process. As an example of how this works take Flood Insurance, something I’m sure many of you in this room know much more about than me! As you all know under the statement of Principles, Insurers agreed to continue to provide flood insurance to properties that were a flood risk on the basis that the Government would continue to invest in flood prevention. This was only meant to be a short term solution which is why we now have Flood Re. Again, as you all no doubt know, Flood Re involves a levy on all home insurance in order to pay into a pool to pay out on high risk property claims. One of the alternatives would have been for Government to subsidise policies or even in an extreme case to pay out claims on high risk properties. Given the status of the public finances you can all see why that wasn’t an option. In the instance of Flood Insurance we’re talking about thousands of people who work for hundreds of insurance companies who all need to feed into the process. So, luckily we have the ABI who worked with government to develop something that would achieve the aims of Government and of the industry. But that’s not where it ends. Throughout the process I can also tell you I received a large number of emails from victims of flooding in my constituency, calling on Government to resolve this issue and adding their own demands into the process. And since Flood Re has been announced this has continued, with owners of Council Tax band H properties writing to MPs like me, to ask that they be included. Emails like this don’t always influence policy. Sometimes what people want just isn’t possible within the context of the fiscal challenges we face. But, sometimes they can make a difference and they let us hear the views of experts and the general public in ways that weren’t possible 10 or 20 years ago. As MPs we can then use these real life people and their stories to talk to our ministerial colleagues and raise them as examples in debates on legislation or at Ministerial question times in the Chamber. In March 2012 I had two Stratford PCSO’s come to see me at my surgery. They wanted to tell me about a new “legal high” that they were increasingly encountering on the streets of Stratford. It was a synthetic canaboid called Black Mamba that was for sale in shops in Stratford and over the internet. And they told me the story of a teenage boy they discovered collapsed on the street who had taken it because he thought “legal high” meant it was safe. The next Wednesday I was able to raise this at PMQs with the Prime Minister and just a month later the Home Secretary placed a temporary drug classification order on the substance. By November Black Mamba was officially made a class-B drug. That’s the democratic process at work. A local PCSO, who was an expert in what was happening amongst young people, identified an issue that was impacting on the local area and brought it to the attention of their MP. I could raise that with the Executive. And as a result the law was changed. And on real local issues the knowledge and expertise of local people is also of huge benefits to me. Those of you that live locally will probably be aware that I recently began holding a series of traffic summits, designed to find solutions to Stratford’s increasing Traffic problems. Part of the reason I decided to hold a series of public meetings was transparency, but it was also about using the wisdom and knowledge of the people of Stratford to help us solve problems. One of the wonderful things about Stratford is just how many experts we have living here. As a nice place to live and indeed to retire we seem to attract more than our fair share of world class authorities on any subject you care to mention. And the traffic summits have proved this. We have highways engineers, traffic consultants and even the ex head of the World Bank’s global Roads and Highways programme. They’re all living here in the constituency and willing to add their views and support. They just needed to be asked. So, the biggest aspect of government policy affecting you is undoubtably whether and how we tackle our deficit. But this doesn’t mean Government can’t also invest in the things that matter to the nation. And if you don’t like what we’re doing, then tell your MP, because it just might make a difference. Thank you for listening and I’m very happy to take questions.