Good afternoon Ladies and Gentlemen, and thank you Professor Hamnett for your kind introduction and a very enjoyable lunch. I'd like to pass on my best wishes on your impending retirement after eight successful years as Principal and congratulate your successor Professor Jim McDonald on his appointment.
It is terrific to be invited to address Strathclyde's Expo 09 event.
The venue is rather special. Opened in 1990, in the face of another economic downturn, the Royal Concert Hall was part of Glasgow's wonderful celebration as European City of Culture and is now an established landmark in the city. How much Glasgow as a city and Strathclyde as a university have changed in that time.
Working in Partnership
The Strathclyde success story reflects the innovative and imaginative approach of this university. It has grown from Professor John Anderson's will of 1796 to create 'a place of useful learning' into Scotland's third largest university.
Anderson's Glasgow was a rapidly growing melting pot during a time of change - in this case the Industrial Revolution. Between 1750 and 1821 the population grew more than fourfold from 32,000 to 147,000.
It was a fertile seedbed for sedition and a beacon for Irish immigrants, whose arrival was not universally appreciated by the locals. This was particularly the case during times of high unemployment, such as the slump at the end of the Napoleonic Wars in 1815. The type of Recessionary racism which I have recently spoken about has deep roots.
Former students at Strathclyde, before my time I add, included Great Scots such as David Livingstone and John Logie Baird, the inventor of the television, which for four decades post-wireless, pre-internet, was the primary global information exchange. They were at the cutting edge of exploration and technology. Through its commitment to research and enterprise this university continues to play a pioneering role in the Scottish and UK economy.
The many successes of the university's Knowledge Exchange activity are showcased here today. Strathclyde has a proven record in delivering real benefits to a range of partners.
The facts are impressive. Of the university's £30 million annual research income, more than 15% comes directly from industry and more than 60% involves partners from industry or commerce.
Talent is shared. Strathclyde is Scotland's largest participant in the Knowledge Transfer Partnership scheme, pointing companies to academics with the right skills to assist their businesses.
Real jobs are created. Over fifty spin-out companies now employ over 800 people in the west of Scotland.
The Strathclyde Links project and the Strathclyde Entrepreneurial Network provides business services and advice to SMEs, students and graduates. The Hunter Centre for Entrepreneurship, set up with an endowment from Sir Tom Hunter, offers flexible learning opportunities to all students.
Through the 'Strathclyde 100' the expertise of successful entrepreneurial alumni is passed on to the next generation. Their Dragon's Den style events for new technologies and emerging businesses sounds rather formidable for the fledgling entrepreneur!
The jobs created by effective Knowledge Exchange bring sustainable low carbon economic growth. These are green jobs harnessing the commercialisation of Intellectual Property. Strathclyde's work in laying the foundations for Scotland's next generation of business successes in this field is essential.
Strathclyde as a university and Scotland as a country have always been outward looking. This is why today's event is so important. Strathclyde is training the engineers and entrepreneurs needed for the UK's future - developing tomorrow's leaders for industries that haven't even properly been developed and jobs that haven't been invented yet.
Dealing with the Downturn
Today I want to focus largely on the economic crisis gripping the world. To understand the scale of the challenge we need to realise three things. Firstly, this is the first international recession induced by a financial crisis. Secondly, the UK cannot solve this problem by itself. No country can.
Even President Obama's 800 billion dollar package agreed this week comes with a health warning. Even though this crisis emanated in the US it cannot be solved by the US alone. Thirdly, is the realisation of just how close to collapse sections of the international banking system came in October last year.
Following the end of the 1990-1992 recession the Scottish and British economies enjoyed sixteen years of growth. But unfortunately bubbling away were the poisonous by-products of the markets most unrestrained excesses. When they came to the surface last autumn the global economy shuddered.
Irresponsible risk taking resulted in the overnight collapse of long established and much respected financial institutions. In the face of market meltdown the government acted in the public interest. Savings and pensions were protected.
The state may be back but we are not talking Command Economy or the Corporate State of the 1970s.
It needs to be a more agile, more flexible state which supports globalisation, actively advocates free trade and argues for the reform of international institutions.
It is a state that works alongside business and celebrates the virtues of sustainable wealth creation which are on display here today.
The toxic US subprime mortgage debts and the subsequent collapse of Lehman Brothers triggered not just a global banking crisis but a global loss of confidence. As individual economies contracted, we have seen enormous reductions in output across the world. In a globally integrated marketplace UK companies cannot escape from their global exposure. This downturn has necessitated a dramatic departure from the old orthodoxies. But as the Prime Minister and President Obama have both said 'Doing nothing is not an option'.
Our responsibility as a Government is not to stand back but to actively step in and provide real support to workers, families and businesses. By acting in the public interest we have got on top of things. We have looked closely at what happened in previous recessions and are learning from those mistakes.
There is a real difference in economic philosophy between the Labour and Conservative parties today. We are clear that as private sector investment has collapsed, the UK government must step in to fill the vacuum and maintain momentum in vital parts of the economy including bioenergy and the ICT sector.
The £200 billion recapitalisation of the banks reasserted financial stability in the face of the unique global nature of the downturn, which had rapidly affected virtually every country in the world.
The UK Government is not acting in isolation. This approach is now becoming increasingly mainstream in most major economies.
At the same time, the £20 billion fiscal stimulus package announced by Alistair Darling in November, which benefits the Scottish economy by £2 billion, is having a positive impact. Consider the Institute for Fiscal Studies' Green Budget. It states that those dismissing the 2.5% VAT cut as a failure ignored the likelihood that things would have been worse without it. This document added that the temporary VAT reduction is expected to increase purchases in 2009 by 1.2% and 'was a reasonably effective economic stimulant'.The VAT cut and the significant reduction in interest rates have helped boost spending power in difficult times.
Bold solutions are required on the international front too. The Prime Minister is constantly in touch with his fellow world leaders. A couple of weeks ago I was with Gordon Brown in the Gorbals celebrating new investment in new apprenticeships when he took his first call from President Obama. They talked in detail about the challenges of the recession.
At the G20 meeting in London in April, the UK Government will seek to combat regressive tendencies towards financial protectionism and economic nationalism. 'The Road to the London Summit' document published on Wednesday sets out a package of internationally coordinated measures to restore stability and set the course for sustainable recovery.
The danger in this crisis is that leaders learn the wrong lessons from history. Restraining trade and adopting a 'beggar thy neighbour' approach has failed in the past. Tariffs in the US exacerbated the Great Depression in the early 1930s. Throughout the 1930s countries hit by the slump turned to protectionism and the global capital market collapsed.
The 'Global Deal' proposes, firstly, action to reform international regulation to close the regulatory gap and secondly, argues for reform of the international financial sector, creating a new early warning system and enhancing the IMF's role.
We will also continue to argue that the responsible and strategic thing to do is for government to spend more now in order to lessen the impact of the downturn. But we acknowledge the need for tough fiscal decisions in the future to bring public borrowing back into balance by 2016.
Real Help Now
As you may know in addition to serving in the Cabinet I also sit on the Prime Minister¿s National Economic Council and it also meets weekly. Our focus is about delivering real help now. We are committed to making sure that capital remains available to businesses, enterprises and families. That was what the recapitalisation of the banks was about and subsequent measures such as the comprehensive bank lending package announced in late January. It's also why we are accelerating £40 billion of capital expenditure throughout the UK.
Small firms play a crucial role in Scotland's diverse economy. It is vital that we support them through these difficult and unprecedented times. They account for 99% of all enterprises and more than half of all employment. That is why it is urgent that capital again flows into good and viable businesses.
I know that over nine thousand Scottish companies have already signed up to the Supply2.gov.uk website to tender for public sector contracts available from the UK government. I encourage more SMEs to log on. The Tendering for Success roadshow visits Glasgow on 19 May.
In addition the Business Payment Support Service was also announced in the Pre-Budget report to help businesses. This allows businesses to spread their tax payments over a timetable they can afford. Almost 3,800 Scottish firms have already benefited from this scheme - real help to businesses today.
The Government is doing all it can to stimulate lending. We want to make sure that businesses can get access to loans, remain trading and continue to employ Scottish workers. The SME lending package announced by RBS and NatWest earlier this month will make an additional £250 million of loans available in this sector in 2009. The creation of a local fund in Scotland, one of 12 created nationally, will bring some confidence to SMEs as well as providing practical help with their capital and cashflow.
Losing a job is difficult enough but we want to stop families losing their homes as a consequence. That's why we have introduced a Homeowner Mortgage Support Scheme allowing a 2 year repayments holiday for those who suffer a sudden loss of income; and a Mortgage Rescue Scheme for low income families who would otherwise face repossession.
Unemployment
Unemployment has risen and continues to rise.
But in households across Scotland it is more than this. The rise in unemployment represents real hardship for real people - hard-working Scots who may have lost their jobs or whose businesses are struggling as a result of the global downturn.
I formally announced earlier today here in Glasgow that those who lose their jobs will get extra help to get them back into employment. We are recruiting 300 more frontline staff at Jobcentre Plus Scotland, part of a long-term recruitment drive to increase staff numbers by 1400.
A specialist service is planned for Glasgow to assist professionals who find themselves out of work because of the economic climate Jobcentre Plus's core business is getting people into sustainable, rewarding jobs.
We will continue to do all we can to prevent the newly unemployed slipping into the long term unemployment that scarred communities in the 1980s and 90s. Too many were diverted to Incapacity Benefit and abandoned. It was bad economic policy and bad social policy.
Beveridge's welfare values endure but further welfare reform is long overdue. Labour's implementation of that famous Liberal's report has been one of the greatest influences on the modern British state, but it was designed for a different era. In terms of the challenges of today, the Beveridge model suffers from something Aneurin Bevan once called a poverty of ambition. Beveridge's values are timeless but we need to reapply them to a modern world; to a more sophisticated, more personalised society.
The emphasis in the Welfare Reform Bill is to improve the support and incentives for people to move from benefits into work when it is implemented fully after 2012. Localised welfare provision is being piloted here in Glasgow, developing innovative ways of helping people back into work.
At UK Government has held the first National Employment Partnership with Britain's leading employers and hopes to get 200,000 workers back into employment across the UK this year.
Here in Scotland we are encouraging employers to recruit from a broader field of applicants, and urging them to advertise all non-specialist vacancies through the JobCentre Plus network.
Economics is also changing Politics
The financial crisis means that Scotland expects it's politicians to be working together like never before. That is why I have invited the First Minister to more talks on the economy.
We should try our best to set aside traditional partisan differences. What I find surprising is that the SNP Scottish government seem as determined as before to put their fixation with Scotland's constitutional position front and centre again at a time when it is almost the last thing on people's minds.
Amidst the economic downturn the SNP are losing sight of the Scottish public's priorities. Their renewed fixation on a referendum on breaking up Britain is a politics of no compromise with today's economic reality.
The Prime Minister will be meeting the First Minister soon and I continue to stress the need for us to work productively and closely with the Scottish Government and others to ensure a coherent response to the demands of the downturn.
However, while we are working to bring about the Banking Bill, the Welfare Reform Bill and the Savings Gateway Accounts Bill - measures to make Scots' lives better in the face of the downturn - others seem to be fixed on the constitutional question in perpetuity.
Some journalists have asked me how I will respond to this and my answer is clear. I'm not going to respond. None of us should be sidetracked during these challenging times.
While there are competing visions of Scotland's future, the benefits of the Union seem manifest to me. Our Union of the four nations of the United Kingdom is about pooling resources, reward and risk. It provides prosperity in good times and ensures greater security in today's more difficult times.
There are some who claim that Scotland would be better going it alone and even today claim that Scotland should join Ireland and Iceland in a now defunct Arc of Prosperity. Some are still producing policy documents extolling its virtues. I respect their view but profoundly disagree.
But in Ireland VAT has been raised to 21.5%. The global economic crisis has led Iceland to seek loans from the IMF. The Icelandic economy is predicted to contract by 10%. The government has collapsed.
Scotland's very own dragon Duncan Ballantyne came out of his den to highlight the benefits of being part of the UK. He said "We all need to work together and work harder to get out of this recession. I don't know how the Royal Bank of Scotland would have survived if it hadn't been supported by the British Government."
This international perspective is crucial because Scotland has always been a trading nation. But our international exports are only part of the picture.
Since 1707 we have been part of a free trade area, using the same currency as our neighbours and enjoying the benefits arising from economies of scale.
We trade more with our nearest neighbour England than the combined total of Scotland's trade with every other nation on earth. Through the UK we are part of the world's fifth largest economy and have top table seats on the UN Security Council, G8 and EU. In the EU we have access to a market with 455 million potential customers.
Foundations for prosperity
Sometimes, however, a wee reminder is needed that even in the tough economic conditions there is potential for some sectors to continue to shine.
In Aberdeen I opened the Subsea 09 conference, a sector which faces challenges but where Scottish companies are at the forefront of technological breakthroughs.
Energy offers Scotland so many opportunities. The renewables and low carbon alternatives, wind and wave, give us the chance to exploit our geography rather than just our geology which will of course continue to provide us with oil and gas for some time.
Despite the buffeting of recent months, Scotland can remain a world leader in financial services. Edinburgh is the 9th largest centre for fund management in the world. The Scottish financial services industry is strong and diverse enough to counter the current downturn. The coming decades will see the growth of middle class consumers in emerging markets.
The World Bank estimates that the global middle class is likely to almost treble from 430 million in 2000 to 1.15 billion in 2030.
China and India account for two-thirds of this expansion, with China alone contributing up to 350 million more people to the new middle class. Their demands for financial products presents tremendous opportunities for Scotland's financial institutions.
We also remain strong in hi-tech engineering, a sector of significant productivity growth in recent years.
And as I have said before Scotland itself is a unique product. Eco-tourism is made for Scotland¿s rugged beauty, wide open spaces and healthy air. The Home of Golf also hosts the Open Championship at Turnberry in July.
Conclusion
The unprecedented turmoil we have witnessed since the autumn of 2008 means that the world, including Scotland will never be the same again.
It is heartbreaking to see so recently prosperous Iceland reduced to IMF handouts and burdened with 18% interest rates.
Our children all play with toys manufactured in China. Some 70% of toys are made there. But last year half of China's toy factories closed. Overall, the figures for China are staggering. In 2008, 70,000 Chinese factories closed.
But there are some certainties.
We must continue to compete on high skills not low cost with re-emerging economies and Scotland¿s universities are crucial in that.
We can't stop globalisation and despite this crisis we shouldn't try to but we can exploit our potential advantages. A globally integrated market is the only show in town. And through Scotland's membership of the unique double Union of the United Kingdom and the European Union we can both influence it and again benefit from it.
In closing, I repeat our determination to see our country emerge safely from the current downturn and into a new period of prosperity.
It\'s increasingly clear that it won't be easy. The detrimental impact of the global financial crisis on his likely freedom for action has already led Barrack Obama to reportedly remark that he could become 'a zombie President'.
But we will not go back to the future. The government wants to reshape the British economy in line with its values to ensure a future of prosperity rather than aim only to return to the economic framework in place before the difficulties began.
I don't want to enter the bank blame game; suffice to say that the banks have not been given a loan to tide them over a rough patch. The goalposts have been moved ¿ there are rigorous conditions attached to the rescue packages and a far higher level accountability injected into the way they do business in the future. There must be no reward for failure. There will never again be stratospheric bonuses for short term bankers gambles with other peoples money and well being. No British banker will be paid a penny in bonuses if they have been associated with past failures in the Banks the government has a stake in.
And it is only common sense to be ready for recovery. The imaginative approach I have seen today at Strathclyde today is precisely the kind of engagement and working in partnership which lays the foundations for our future prosperity and will give it sustainable momentum. Only through sharing ideas, inviting input and engendering confidence can we move ahead together.
ends
Date: 20 Feb 2009