Gratitude and Reflection
Lady Mayor, Governor, esteemed guests,
I wish to express my sincere gratitude to the Lady Mayor for her kind words and to the City of London Corporation for graciously hosting us this evening.
Additionally, I extend my thanks to the Financial Secretary, Economic Secretary, and Chief Secretary for their invaluable contributions to my address tonight. I would also like to acknowledge the exceptional Gwyneth Nurse and her dedicated team at the Treasury for their unwavering support.
As I stand before you for the third time as your Chancellor, I remain a staunch advocate for the notion that the prosperity of our world-renowned financial services sector benefits the entirety of the United Kingdom.
This month marks two years since our government assumed office and my appointment as Chancellor of the Exchequer. This evening serves as an opportunity for me to reflect on our journey over the past two years—examining the choices I have made, evaluating the current state of Britain’s economy, and identifying the opportunities that lie ahead.
The Strength of the British Economy
I take great pride in announcing that the British economy is robust. At the beginning of this year, we boasted the fastest economic growth rate among G7 nations. Last year, we managed to reduce borrowing from 5.2% to 4.2% of GDP, marking the lowest level in six years. Investment, productivity, and wages have all seen a notable increase.
Moreover, NHS waiting lists are declining at the fastest rate in 17 years, and half a million children are set to be lifted out of poverty during this parliamentary term. If I had predicted two years ago that we would reach this point, I suspect many would have been sceptical. Yet, we have proven the naysayers wrong.
Through our strength, resilience, and unwavering determination, Britain has defied the odds once more. Two years ago, I inherited an economy burdened with multiple challenges—public finance issues, a deteriorating state of public services, and sluggish economic growth compounded by rising interest rates and a cost-of-living crisis affecting ordinary citizens.
Addressing Economic Challenges
Since our election, I have diligently tackled each of these challenges. In my inaugural Budget, I repaired the public finances while outlining a pathway towards fiscal consolidation aimed at lowering borrowing costs. Simultaneously, I executed bold reforms to our fiscal rules, enabling an additional £120 billion investment in public services and the vital infrastructure necessary for economic expansion.
During my second Budget last year, I capitalised on these robust foundations to alleviate the cost of living by reducing energy bills, freezing prescription charges, and halting rail fare increases. Additionally, I doubled our fiscal buffers to shield both households and public finances from increasingly frequent economic shocks.
The recent resurgence of conflicts in the Middle East serves as a reminder that our economic resilience will be continuously tested. The market’s response to these developments highlights the ongoing work required to safeguard our economy and nation against a fluctuating global landscape.
Introducing Securonomics
The actions I have undertaken are underpinned by a fresh approach to fostering sustainable and resilient economic growth throughout our nation—what I refer to as ‘securonomics.’ This investment-led growth model for Britain involves an engaged and strategic state that makes informed and deliberate choices. It focuses on maintaining public financial stability, investing in infrastructure, and reforming our economy.
This government has demonstrated that transformative change is indeed achievable, and the record of the past two years illustrates that such change can only be realised when radicalism is paired with credibility. I earned this credibility during my time in opposition, and I have reaffirmed it through my actions since becoming Chancellor.
To sustain this hard-won credibility and the foundations we have established, we must continue this work of radical change. Historically, radical governments lacking credibility have struggled to gain the trust needed to execute their agendas. Conversely, credible governments that fail to enact meaningful change risk losing that credibility due to public impatience for reform.
Future Growth and Opportunities
The most successful governments must pursue the dual goal of radical change alongside economic credibility. The work of transformation has commenced, and I take pride in the decisions I have made as Chancellor, which lay the groundwork for the next Prime Minister to advance our country.
I am profoundly optimistic about our nation’s potential and the economic future that lies within our reach. However, this future is not predetermined; it requires deliberate choices. In my second Mais lecture earlier this year, I outlined three significant choices aimed at amplifying the areas that present the greatest opportunities for Britain’s growth, prosperity, and security.
Firstly, we must cultivate growth throughout every region of our country, moving away from the outdated notion that prosperity can only emerge from a few select areas. Secondly, we must commit to ensuring that the jobs, industries, and innovations of the future are developed here in Britain. Lastly, we must confront the repercussions of Brexit by forging deeper connections with our largest and closest trading partner, the European Union.
Investment Beyond London
Britain should not be a nation where opportunities and prosperity are confined to a select few regions, while the potential of others remains untapped. This longstanding weakness in the British economy sets us apart from our global counterparts. Since our election, we have adopted a new approach that involves increasing investment across regions and dismantling the old model that centralised too much power in London, with Whitehall monopolising not only the distribution of funds but also the methodology of spending.
To enhance regional investment, I have reformed the Treasury’s Green Book—our investment manual—to ensure that every part of our country receives fair consideration. I have also increased funding for transport in city regions, supported Development Corporations in our growth corridors, and allocated resources for new place-based funds aimed at enhancing defence, innovation, and creative clusters across our regions and nations.
Empowering Local Leaders
Just yesterday, I engaged with Mayors from various parts of Britain. Their familiar frustrations resonate with me from my sixteen years as a Member of Parliament in Leeds, where I witnessed the struggle of knowing the right priorities for local areas without having the authority to implement them. We have made strides in this area as well.
This government has devolved power more significantly in the last two years than any previous administration has achieved in the last two decades. We have expanded integrated settlements, allowing more Mayors access to a single, multi-year funding pot with the flexibility to determine how that money should be spent. We have introduced City Investment Funds, providing established regional leaders with control over long-term, self-sustaining capital, with returns that can be reinvested for further growth. Additionally, we have granted Mayors the ability to implement an overnight visitor levy.
However, true devolution of power requires a much more extensive approach. In my Mais lecture, I outlined the next major step: granting regional leaders control over a share of national taxes, including income tax and business rates. Although we have made progress, there remains much work to be done.
The Role of the State in Economic Growth
The steps I have taken thus far set us on a path towards a permanent transfer of power and resources away from central government to foster long-term investment, local accountability, and regional leadership that generates growth across our nation. Our economy thrives when an engaged and strategic state collaborates with businesses to innovate and compete on a global scale. This is a fundamental principle of securonomics and our industrial strategy.
We must not shy away from technological advancements; instead, we should embrace them and navigate the economic landscape as it evolves. We cannot permit our industrial base to deteriorate, leaving us vulnerable to unpredictable global supply chains. It is imperative to recognise that economic security equates to national security.
Protecting Key Industries
This is why we intervened to save British steel, preventing a significant decline in the UK’s steel capacity and ensuring that our infrastructure, industries, and security are not reliant on foreign imports. We are also supporting our world-class defence sector, ensuring that as global defence spending increases, the benefits and jobs associated with that investment remain within the UK.
Furthermore, we have reformed our procurement rules to ensure that government spending is a launchpad for British businesses rather than merely a cheque for international incumbents. This guarantees that we can prioritise British products when it is essential for our national security, be it in steel, shipbuilding, or the burgeoning field of artificial intelligence.
Embracing AI for the Future
AI represents the defining technology of our era, playing a pivotal role in our national security and economic prospects. It is clear to me that the role of an active and strategic state is not to withdraw from the challenges posed by this new technology but to take proactive steps—seizing the opportunities presented by AI while safeguarding against its associated risks.
This necessitates a comprehensive plan concerning AI sovereignty, supporting UK companies in securing critical roles within the AI ecosystem. Initiatives such as our Sovereign AI unit, our commitment to quantum technology, our AI hardware strategy, and the establishment of the new AI Economics Institute will ensure that the jobs of the future are created right here in Britain.
Advancements in Financial Services
The financial services sector is already at the