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Chris Leslie MP, Labour’s Shadow Chancellor of the Exchequer, in a speech to the London Stock Exchange AIM Conference, said:

Thank you Xavier for inviting me to speak at the opening of this 20th anniversary conference marking the launch of AIM and the wider AIM community – a gateway for British business to access finance for growth and innovation.

For those of us who believe that higher living standards – and healthier public finances – depend on successful businesses generating future prosperity and creating wealth, it is crucial we support the continued development of equity investment channels and catalysing new advances in products, and production processes.

The contribution that AIM companies and the wider AIM community makes to our society should not be understated:

Household names such as Dominos

Innovative companies such as AB Dynamics (supplying the global automotive trade and exporting 90 per cent of their products)

And as you can imagine one of my favourite companies YouGov, growing to be a global market research, polling and data company. Although personally I prefer their pre-May7th view of the world!

AIM market has shown it can successfully channel capital towards creative and inventive business, but Government has a role here too. I am proud of the positive impact that the Enterprise Investment Scheme (EIS) has had in recent years, together with Venture Capital Trusts, where the innovations and developments of the previous Labour administration have proven to be successful and enduring.

More recently the Sir George Cox report, commissioned by the Labour Party and launched here in 2013 into Overcoming Short Termism within British Business, recommended the abolition of stamp duty on AIM shares, a recommendation I am pleased to say was taken forward by the Coalition Government.
Supporting access to finance; supporting growth and jobs creation; public policy can make a difference – but that support is grounded in sound public services and public finances.

So today I want to address three issues:
- why productivity matters for business success and how public services can support this;
- why the health of the public finances depends on the health of business and the economy;
- and how I believe Labour should work harder to regain people’s trust as a Party committed to sound public finances

1. WHY PRODUCTIVITY MATTERS FOR BUSINESS SUCCESS

I want the Chancellor to use his forthcoming emergency Budget to do more to support business productivity – to address the constraints on access to capital and new investment; to tackle the limiting features of our country’s infrastructure; to champion the skills and new knowledge needed by the workforce to maximise output for every hour worked.

On 8th July all eyes will be on the choices the Chancellor makes on public expenditure and for the next phase of deficit reduction.

Business success and the choices made on public services are not so separate as some might think.

I want to make the case today that the Chancellor should approach this Budget very much through the prism of how economic productivity could be helped – or hindered – by these immediate choices.

The OECD were right to say last week that “the sustainability of economic expansion and further progress in living standards rests on boosting productivity growth”.  But the big question is whether the Chancellor will ensure that decisions on public infrastructure and public service investment all contribute towards this objective.

If the Chancellor hacks away at crucial skills budgets, undermines investment in broadband, slashes the research council grants or neglects commercial courts, then businesses will feel the difference and find life harder as a result.

It would be a mistake to think that, if Government just got out of the way, productivity improvements will just magically spring from thin air. We need decent infrastructure and decent public services to support business growth:

Motorways that flow freely and trains that commuters can actually get on.

Tax offices answering business queries efficiently, rather than keeping company staff on hold.

Employees off sick able to get treated swiftly in a decent NHS.

An education system that supports a workforce with high quality skills.

So many aspects of our public services are crucial for our future economic productivity – and each depend on the Chancellor making the right fiscal choices for this Parliament.

We have to tackle the deficit – and reductions are needed in expenditure. This task should be guided by the impact cuts would have on business productivity and our future capacity for growth.

2. WHY STRONG PUBLIC FINANCES DEPEND ON A STRONG ECONOMY:

It should be an obvious point, but we can only reduce the deficit if either spending is cut or revenues become more buoyant. We have to boost living standards and create decent jobs with better wages – and a relentless focus on productivity enhancement can deliver this.

But we also have to confront the realities of public spending, and we can’t be afraid to make tough choices, root out waste and set priorities.

For those of us who believe that we achieve more as a society by acting together in cooperation, pooling our resources and delivering services from which we all benefit, it is necessary for us to prove that the public realm – the ‘common pot’ – can be managed prudently and efficiently.

The sound stewardship of public finances is vital if we are to retain the confidence of taxpayers in believing that they get a better deal by opting into collectively provided public services such as the NHS and the school system, rather than by having to exit and opt out into individual provision.  

This is why I believe that the centre-left should embrace the goal of balancing the books and controlling national debt; because sustainability and living within our means is at the heart of good governance and rebuilding public trust. There is nothing ‘left-wing’ about running a deficit.

And I believe passionately that Labour must be in the business of proving to taxpayers that they can have faith in a well-functioning, efficient public realm.

The impact of the banking crisis on public finances was enormous. It is true that levels of spending could have been lower, but that this would have made only a marginal difference in what was overwhelmingly a story of falling revenues after the banking collapse. It stands to reason that – had we known the banking crisis was coming – Government would have braced itself more for that shockwave. But the shockwave would have hit nonetheless.

The key lesson for all those politicians who shared the consensus at the time about levels of public expenditure – including the current Chancellor – is that preparedness for unforeseen events must be hard-wired into decision-making.

3 – LABOUR’S TASK TO REGAIN PUBLIC TRUST

Labour’s election defeat reflects our failure to convince the public that we could guarantee fiscal stability. That’s why I believe we have to consider the hesitancy of that undecided voter – the voter who wanted to support a fairer government - but who wavered over whether they could do so safely and who in the end stuck with the Conservatives.

The public do want a fairer society. But they want the country to spend wisely and responsibly too.

That’s why I believe Labour must make our case for the sound stewardship of public resources our top priority over the coming months.
And it’s why we must provide the public with a guarantee that we will always live within our means.

We will only earn the right to govern if we have proved to people we are responsible guardians of their money.

And for those of us on the centre-left the challenge is to relentlessly demonstrate to the country our conviction that this is necessary. Protecting public services means protecting public finances.

It is not an either/or question: for any future Labour government these two objectives must exist hand-in-hand.

This argument is not going to go away. The deficit is still £75 billion and more spending cuts must be made. Let’s not kid ourselves: if Labour had been elected it would have been faced with very tough decisions, even if our values would have brought us to different choices.

So as government spending continues to come down, we must take a more sophisticated and less dogmatic approach – focusing more on how money is spent, not simply on how much is spent.

From now on we must:
• be rigorous in highlighting waste in government – such as the continuing fraud and errors in the welfare system
• point out when Ministers risk poor value for the taxpayer – such as the risk of a premature sale of RBS shares
• Champion the reform of public services – and achieving stronger public sector productivity too
• ruthlessly pursue tax abuses and help create a system with clear rules and adequate enforcement if those rules are broken
• Make the case for investment in skills, infrastructure and stronger productivity, that supports enterprise growth and ultimately generates the higher receipts for the Exchequer.

I believe that the choices Governments make on public services can influence wealth creation and economic prosperity. But we need to take a more mature approach to how departments allocate resources and ruthlessly prioritise investment where there are clear productivity benefits.

Recent history shows that we need diverse sources of capital for new business growth and AIM, together with the wider resource of the London Stock Exchange, have been an essential source for alternative finance when lending from the banking sector was in jeopardy.

Across the political divide we need to focus on why British business is underutilising equity finance for risk capital. And we need to articulate the wider and positive benefits that equity finance can bring.

I want to work with the business community and hear your views and frustrations about an economy that provides what you need to flourish and how we can modernise our public infrastructure and facilities to help clear obstacles in the way.

I am open to new thinking about how public policy can help deliver a lower cost of capital for innovative companies and it is my job to hold Ministers and the Treasury to account so that this remains on their agenda.

We should guard against unnecessary burdens and create a regulatory framework that actively helps take a great idea and make it into a great reality.

And, of course, we must ensure Britain remains an outward, facing open economy at the heart of European markets.

The public finances may be the immediate challenge in Westminster, but we have to ensure that business is given a fair wind to grasp new opportunities and maximise the output produced.

I will be focusing on these questions – which are central to creating a more productive economy – and I hope that together we can create a positive environment for the AIM community to flourish over the next 20 years.

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