Talking today about frontline pressure right across the NHS, he will point to new figures released by Labour that show the number of NHS nurses has now fallen by 3,500 since the general election and that indicate the total fall in nurses could be at least 6,000 by the end of this Parliament.

At the same time Labour will highlight that the funds set aside to pay for the costs of the Health Bill’s reorganisation would be more than sufficient to protect all of these 6,000 nursing jobs if Parliament chose in the coming weeks to abandon the reorganisation.

The Labour leader, along with Shadow Health Secretary Andy Burnham, will be visiting staff and patients at the Princess Royal University Hospital in Kent.

It comes as Labour launches the next stage of its campaign against the Government’s Health Bill which is returning to Parliament this week.

Ed Miliband MP, Leader of the Labour Party, will say: “In tough times and with little money around the very first priority should be to protect the frontline NHS. Instead we have a government blowing a vast amount of money on a damaging top-down reorganisation at the same time as it is cutting thousands of nurses, with more than 3,000 already gone.

“Labour’s priority is protecting the frontline, not a pointless and damaging reorganisation of the NHS. So we are calling for the Bill to be scrapped, and for some of the money set aside to fund this reorganisation to instead be made available to the NHS to protect the thousands of nursing posts either already cut or set to be cut in the coming years.

“It is a clear and simple choice for the Government: by stopping this damaging reorganisation we can fund 6,000 nurses.

“In opposition David Cameron told people he could be trusted to protect the NHS. In government he has put Tory free-market ideology ahead of basic patient care.”

Last year, the Government set aside nearly £1.8bn to pay for the costs of Health Bill reorganisation that could only be used once the Health Bill is enacted. Labour is calling for £750m of the money being used to fund the reorganisation to be used instead to fund 6,000 nursing posts over the Spending Review period, replacing the 3,500 nurses that have already been lost, and protecting a further 2,500 posts that research suggests will be lost in the coming years.

Andy Burnham MP, Labour’s Shadow Health Secretary, will say: “In just over 18 months in government, the Coalition has taken a successful and confident NHS and turned it into an organisation that’s demoralised, destabilised and fearful of the future. It is reckless in the extreme to plough on with this reorganisation when organisations that represent 1.2m NHS staff are lined up against it. It threatens seriously damaging the key relationships that underpin the NHS. By allowing existing NHS structures to disintegrate before new ones are in place, the Government is creating a loss of grip and focus at local level and the NHS is showing signs of increasing distress.”

This has been a turbulent week for the British banking industry.

On Sunday, Stephen Hester gave back his bonus, and on Tuesday, the forfeiture committee revoked Fred Goodwin’s knighthood.

But these moments do really not change anything in themselves.

This is about more than one man, one bonus, or one knighthood.

These are symbols – and symptoms – of public discontent with a system that is not working as it should.

For our economy.

And for our society.

That is why these moments do not and should not signal the end of the debate.

Because, three years on from the collapse of Lehman Brothers, the debate is really only just beginning.

We need a banking system that serves a more responsible capitalism, working for the majority of people and enabling us to pay our way in the world.

Everyone can agree that the kind of tug-of-war we have seen in the past fortnight over bonuses is bad for the reputation of the banking sector.
Nobody in this country – neither the banks’ most staunch defenders nor their most outspoken critics – believe that a public argument between executives, shareholders, politicians and the public is the best way for any sector to set pay.

London is one of the world’s great financial centres and Britain’s banking sector is one of our most important employers.

It is in all our interests to find a better way forward.

But if things carry on as they are, I believe the same row over pay and bonuses will erupt again.

So how do we make sure that that does not happen?

We need to learn the most important lesson of the week: we cannot have a banking sector so divorced from the rest of the economy and the rest of society.

We succeed or fail together.

It is not about the politics of envy.

It is about a culture of responsibility.

We need what you might call ‘one nation banking’.

We need banks that serve the real economy.

We need banking serving every region, every sector, every business, every family in this country.

And we need banks run in a way that people believe are consistent with their values – the values of Britain.

It is something I have been talking about for months: responsibility – from the benefits office to the boardroom.

But to understand how we get there, we must understand how we got here.

On almost any measure you choose, banking and finance is going through exceptional times.

Everywhere you look, pillars of the conventional wisdom which have stood solidly for thirty-odd years are crashing to the ground.

Until 2007, it was hard to imagine that: light touch financial regulation would be so thoroughly discredited; financial instruments designed to make each bank safer would make the banking system as a whole riskier; we would be facing interest rates lower than we have seen for decades without lending rising as a result; bank bonuses could be in the billions even as banks’ share price fell; all the banks in this country would be backed by an implicit government guarantee; and two of the biggest would be largely owned by the Government.

We all know this has happened because something has gone deeply wrong.

My party has accepted responsibility, along with governments round the world, for not doing more to prevent the crisis with regulation.

We now must ask questions about the future of banking which have not been asked for a generation.

The banking sector can choose either to continue down the path which led us to big bonuses, busts, and bailouts.

Or it can take a different path.

Today, I want to talk about that different path.

Banking has to change.

Throughout most of our parents and grandparents’ lives, banking was not prone to wild swings in value.

It directed lending towards businesses and entrepreneurs efficiently and soberly.

And the idea of a vote in the House of Commons to affect the pay of an individual banker would have been as outlandish as the idea of a vote to censure the pay of an individual doctor or lawyer.

Thirty years ago, the word ‘banker’ was often used as a compliment to suggest solidity and reassurance.

Since then, however, the sector morphed from something our parents and grandparents would have recognized into something else, with the rise and increasing dominance of investment banks.

We can’t turn back the clock.

This mustn’t be about recreating a bygone era of banking.

But if the rules and norms of banking have changed before, they can change again.

And they must change.

After the crisis and the bailout, we are left in a situation which nobody would have wanted.

Where thanks to the crisis, ten per cent of this country’s tax receipts fell away between 2007 and 2008 alone.

Banks have accepted they bear the burden of responsibility for helping to cause the crisis.

The consequences of their reckless irresponsibility in that era are felt every time a library closes.

Every time a school can’t afford a new book.

And every time a policeman or policewoman is taken off the beat.

Those consequences are being felt by everyone in society.

The banking sector needs to understand this.

People who did not cause the financial crisis are paying the price.

And many feel that those who did cause the financial crisis are not.

When most people see their incomes stagnate, their bills go up, their public services cut, and their jobs increasingly become insecure, pay and bonuses at banks seem to carry on as if the crisis never happened.

The public services we rely on to educate our kids, look after us when we are ill, or help us afford a lawyer if we’re in trouble, cannot go back to normal any time soon.

So when people see the pay of those who caused the crisis continuing to be so abnormal, they are understandably angry.

This is a call for banking to recognise that continuing on its current path will lead to further isolation from society, greater public anger, more years in which each payday is a newspaper headline.

This is a call on banking to recognise that it should take the path of change.

To recognise that it is not isolated from the economy or society.

To recognise that we succeed or fail together.

We have a proud history of banking in this country.

Banking has performed an invaluable service to the economy from Midland Bank’s role restructuring the cotton industry in the 1930s, to Barclays’ role in financing high tech start-ups in Cambridge in the seventies and eighties,

And since the crisis, we have seen some welcome steps.

Notably, the Independent Banking Commission’s recommendations about the ring fencing of retail and investment banking.

And more recently, the way HSBC, Barclays, Lloyds, RBS and Standard Chartered have put up £2.5 billion for a business growth fund focused on British firms.

But there is still a long way to go before we achieve one nation banking.

Public discontent is, if anything, on the rise – as the long lasting impact of the crisis in living standards becomes clear.

For all the reform of the way bonuses are paid, they remain on a scale beyond the imagination of the vast majority of the population.

Although the Government has welcomed the Vickers proposals, their implementation remains a distant prospect.

And most importantly, business frustration with the banks they rely on is as high as ever.

Still, too often, they see the bank, not as a partner in a shared project, but as a problem to be overcome.

I saw this only on Monday in Scotland when a wind turbine manufacturer complained that while he had employed 20 people in his factory it could have been 30 if only he had got the loan he needed from a leading British bank.

Similar stories can be heard from thousands of other businesses around the country.

Banks must not be isolated from the rest of the economy.

Banks must lend to small businesses so we can get the growth and jobs we need for the future.

That is how Britain will compete in the world.

As things stand, that is still not happening enough.

Lending was down £10.8 billion last year.

There are two reasons why not enough capital currently reaches the small and medium sized enterprises in this country which are crying out for it.

The first is that it’s always hardest to get credit when the economy is in a downturn, even though that’s when small and medium-sized firms need finance the most.

And the second is that it is cheaper for banks to lend to big companies than small ones. Particularly when credit is already being rationed, lending to small firms is often deemed not worthwhile for banks.

The market on its own does not work for small businesses.

All the most successful economies around the world recognise this: from Asian capitalist states like Singapore, through active industrial states like Germany, to supposedly free market states like the USA.

And they make sure that the state helps finance to reach the small and medium sized enterprises which need it.

This isn’t about picking winners.

It is about the state getting the market moving, like our most successful competitors have been doing since the fifties.

It’s no coincidence that in Britain we haven’t done as much to develop a Mittelstand like Germany.

Or fast-growing young companies like Apple and Intel – both of which got growth funding from the US government’s Small Business Investment Company programme.

When it comes to competing internationally, our small and medium sized companies are fighting with one hand tied behind their back.

One nation banking means the private sector and the state need to work together in partnership to get the system working for small business.

It means we will need a much more diverse and competitive banking system which is more rooted in our communities.

And it means looking at the case for a British Investment Bank which would provide government backing for entrepreneurs when the market fails.

How we achieve these goals is at the core of our business policy review.

But one nation banking is not just about banks serving the economy.
It also means that banks cannot be isolated from the rest of society either.
They cannot expect their decisions to be immune from public debate.
There will always be some who see public criticism of private decisions, like excessive bonus payments, as illegitimate.
It is an argument I want to tackle head-on.

I believe it is right to address these issues.

Firstly, for economic reasons.

The economy relies on banks to lend to small businesses.

If banks show greater restraint on pay, there will be more money left over for them to lend to businesses.

This is a point forcibly made by the Governor of the Bank of England.

And in the aftermath of a crisis worsened by excessive leverage, if they show restraint on pay, there will be more money left over too for them to repair their balance sheets.

The second reason is because banks have been taking one-way bets which have affected us all as taxpayers.

Banks which were too big to fail were able to take positions in the knowledge that if they profited they could keep the gains, but if they didn’t, the taxpayer would absorb the losses.

I believe in rewards for entrepreneurs and wealth creators.

Exceptional rewards for exceptional performance.

But even banks in this country which are not publicly owned still enjoy an implicit taxpayer guarantee whose value is estimated as at least £10 billion.

That means that many of the bets they make are one-way bets, backed by an implicit taxpayer-funded safety net.

Thirdly, we need change is because banks have a responsibility to society.

Because at the core of one nation banking is the idea that as a country, we succeed or fail together.

We are not isolated individuals, and however affluent we are, whatever the world we inhabit, we owe responsibilities to each other.

So what does that mean in practice?

What are the steps that banks need to take if they to reflect better the values of the British people – the values of their customers.

It starts with transparency.

That means that banks should publish the details of all their large bonuses.

Pay packages at the top should be simpler, so that we can easily understand who is paid what, and shareholders can hold them to account more easily.

We have called on the Government to implement rules we legislated for to make banks reveal how many employees are earning over one million pounds, so that shareholders can hold them to account.

It is absurd for David Cameron to claim this simple effective measure is too onerous for banks and will make British banks uncompetitive.

It is the very least the public has a right to expect and demand.

The next priority is to improve accountability at the top.

That means accountability to employees so that companies put some of their ordinary workers – maybe a teller normally at high street bank window – on the committee which sets executives’ top pay.

If you can’t look a member of your own staff in the eye when you receive a huge bonus, you should not get it.

We need to simplify the current rules on pay packages so that say that executives get just one salary and just one bonus.

When banks are majority owned by the taxpayer, the Government must exercise some shareholder oversight on top pay.

All I ask is that the Government should practice what it preaches to other shareholders and take some responsibility for the pay and bonuses of publicly-owned banks.

But – after transparency and accountability – must come the recognition that executives have a responsibility to wider society.

Of course, there is an international market in banking. But there is also a national imperative: that everybody, from top to bottom, reflects our values of responsibility.

The kind of responsibility shown by the chairman of RBS, Sir Philip Hampton, who recognised that taking his bonus at a time when families are feeling the pinch was wrong.

The kind of responsibility which others in the banking sector could learn from manufacturing in this country: when the crisis hit, managers took pay cuts to save jobs and retain talent for the long-term.

Responsibility means ending the culture of excessive bonuses.

This bonus culture has ultimately been corrosive.

It has enriched individual bankers, but weakened the banking sector as a whole by encouraging a form of risk which crossed the line into sheer recklessness.

Exceptional rewards for exceptional performance means million pound bonuses should not be handed out to people for just doing their job.

It means that performance-related pay should be related to your performance.

It should be earned, not expected.

A reward for exceeding expectations, not meeting them.

I am not talking about the couple of thousand of pounds that employees, including bank tellers, might receive.

I am talking about the couple of millions of pounds which too many people seem to receive as a rule, not as an exception.

The first step towards tackling this problem is recognising it.

Some will argue that the best remedy is the discipline of the free market.

But this argument was proven wrong the day the sector collapsed and had to be rescued by the taxpayer.

Anyone who looks at recent history will find it hard to believe that the discipline of the market will prevent runaway bonuses.

The answer is to change the rules and change the culture.

That is what the House of Commons will debate on Tuesday.

We will say that that too many are getting bonuses which are too big, too often.

All companies must show responsibility, but banks have a particular responsibility because they are either directly or indirectly supported by the taxpayer.

We will give MPs the chance to vote on having another bank bonus tax to get 100,000 of our young people back to work.

But we will also ask MPs to vote on ending a bonus culture based on one-way bets rather than genuine reward for exceptional performance.

It will not be legislation and it will not be binding.

But it will be another step towards hearing the voices of millions of people up and down this country who do a fair day’s work for a fair day’s pay without seeking any extra reward on top, let alone one worth millions.

Because the alternative to this path of one nation banking is a banking and finance sector which continues on its current path.

The path which it has been on for the last decade or so.

The path which leads to a gradual separation from the rest of society.

We are once again at risk of becoming a country separated economically, geographically, and socially.

We are once again at risk of becoming two nations in this country.

That is not the kind of society in which I want to raise my children.

And it is not the kind of society in which the vast majority of people in this country – including bankers – want to raise theirs.

It is over 160 years since Benjamin Disraeli wrote his novel, Sybil, in which he warned of:

“Two nations, between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts and feelings as if they were dwellers in different zones or inhabitants of different planets.”

For the banking community and the rest of us, that is how it has felt this week.

That is not good for Britain and it is not good for banks.

We need a healthy and successful banking sector, creating jobs and wealth, helping the real economy and connecting to the rest of society.

Responsible capitalism can only be built with a successful banking sector. I believe we can achieve this by changing the rules of the system and the culture of our banks.

That is how we will have a fairer society and an economy which pays its way in the world.

That is how we will create one nation banking.

This is my first major policy speech since returning to the Health brief and I was clear from the moment I came back that I wanted it to be about mental health.

That’s because, since my time as Secretary of State was so rudely interrupted, I’ve had a sense of unfinished business and felt the need to say what I’m going to say today.

I can trace it directly back to a moment in the middle of 2009.

It was shortly after I arrived in the Department of Health. I was sitting in the office and was looking through the Bradley Report on Mental Health in the Criminal Justice System, commissioned by Alan Johnson.

To be honest, I wasn’t fully engaged on it. The truth is Ministers often don’t feel the same sense of ownership to things commissioned by your predecessor.

But then a statistic leapt off the page: 70% of prisoners have two or more mental health conditions, but many are undiagnosed or untreated.

I read it, and re-read it. It couldn’t be right, could it? A typo, surely? So I asked officials to check it out.

I was truly taken aback to find it was accurate.

That was the precise moment when I began to think differently about mental health policy.

But, before I got chance to do anything about it, I got swept up in the business of the department, a swine flu pandemic was declared and, anyway, I had already resolved to make social care my personal priority.

But I have often thought about it since and come back to it now at the first opportunity as I want to take this moment in Opposition to send the clearest message I can about our thinking going forward.

My purpose in this speech is to establish the clear principle upon which I will base the renewal of Labour’s health policy: a whole-person approach to good health. In this century of the ageing society, when people live longer, more isolated lives, we need to think of the reform of the NHS, social care and mental health not as three separate, distinct challenges but together as an integrated, preventative, people-centred system.

But I wanted to make this speech for another reason: to make a reflection about the place of mental health policy in Whitehall.

While I had became convinced of the absolute centrality of mental health to the big social challenges of the 21st century, I can recall finding no real reflection of the same in the submissions that crossed my desk nor the meetings that filled my ministerial diary.

Of course, it’s up to Ministers to set the agenda. And the Labour Government did make important progress on mental health, with the National Service Framework early on and then the Improving Access to Psychological Therapies programme towards the end.

But, important as these changes were, Government hasn’t caught up with the changed reality of the 21st century.

People are living longer, less stable, more stressful and isolated lives.

But public services are still, by and large, working on a post-war model when people’s lives were shorter and the dangers we faced were physical.

And the danger is that our national tendency not to talk openly about mental health means we will be slow to make the changes we need to see.

This stiff upper-lip culture is ingrained across our society, Government and Parliament.

Even in the main Department of State that is best placed to do something about it, the urgent demands of hungry acute trusts predominate – even though it widely estimated that around one in four people in hospital have a mental health problem.

So my case today is that the challenges of 21st century living demand a re-think in our approach to mental health.

Specifically, I will focus on three points.

First, if people are to get the support they need from the NHS to live full and economically active lives, and if it is to be sustainable in the 21st century, then mental health must move from the edges to the centre of the NHS.

Second, we can no longer look at people’s physical health, social care and mental health as three separate systems but as part of one vision for a modern health care system.

Third, change in our public services will only be successful if matched by a wider change in attitudes towards mental health. A country which has so often led the world in challenging discrimination needs to recognise that we’ve got much to learn from other countries when it comes to the stigma of mental ill health.

It’s in all our interests that we make this change. It becomes ever more likely that each of us, or those close to us, will experience poor mental health as we all grapple with the challenges and pace of modern life.

So let me start with the NHS.

I love the NHS as much as any politician. But it is still based on 20th century presumptions about healthcare.

Let me explain what I mean by this, with reference to my constituency.

When the NHS was set up, Leigh was a place with physical danger at every turn.

Housing was poor. Air quality dreadful. Work in the mines and the mills was physically arduous and dangerous.

Levels of disease, industrial illness and accidents at work.

But, on the plus side, jobs were stable and extended families lived close to each other.

And, because of the ever-present physical dangers, people learned to lock arms and face them together.

Safety underground depended on everyone looking out for each other, and this culture of solidarity carried over into the streets above.

So Leigh, like many other towns across England, was physically dangerous but emotionally secure.

And it was to face the challenges of this world that the National Health Service was brought into being.

But life has changed. Towns like Leigh are physically much safer places to live and work but people are living more stressful and insecure lives than their parents and grandparents.

Health problems are much more likely to arise from lifestyle choices or even addiction.

Has the NHS has yet fully woken up to these huge social changes?

I wish I could say it has, but I don’t think I can.

One in four of us will experience a mental health problem in our lifetime, an increase linked to how we live our lives in the 21st century.

Mental ill health will soon be the biggest burden on society both economically and sociologically, costing around £105 billion per annum.

By 2030, the World Health Organization predicts more people will be affected by depression than any other health problem.

But we spend a fraction of our overall health budget on mental health. Mental health research only receives just 6.5% of total funding in the UK compared with 25% for cancer, 15% for neurological diseases and 9% for cardiovascular conditions.

But it’s not just about funding. It’s also about how our health system functions.

Our health system still reaches for medical interventions first, rather than social or psychological that might be more successful at breaking the cycle and helping the individual take control.

In 2009, the NHS issued 39.1 million prescriptions for anti-depressants, with a big increase around the time when the financial crisis hit. On the decade, this represented a 95% increase, with 20.2 million issued in 1999.

There is another problem with the way the system functions.

When people arrive at hospital, our system is still geared up to respond to the specific problem before it – the fractured cheekbone, the broken hip or the cancer – without seeing the whole person behind it, or indeed the other health problems that an individual may have.

It tends to treat rather than prevent, responding after the event without looking at the living conditions or the psychological problems that may lie behind it.

And perhaps it does that because of the culture of separateness between our physical and mental health systems in England.

This is not helped by the fact that we have different organizations for both, with separate mental health trusts.

But this separateness has deep roots in our society.

Most mental hospitals are located on entirely separate sites to mainstream – despite the clinical need to connect the physical with the mental.

Some are still based on sites that have long been associated with a mental health institution, with their place names looming large in the folk memory and language of local people which in turn builds the fear of mental ill health and what takes places behind closed doors.

Mental health has been ‘retro-fitted’ into the system but often loses out – the 18 week targets never applied to mental health, nor was a tariff developed. These operational differences compound the inequality between the two systems.

And yet the fact that so many physical health problems are linked to underlying mental health problems arising from modern living means this is no longer sustainable.

But this takes me to my second point about placing mental health at the heart of wider public service reform.

Today, we have in effect three separate systems – the mainstream NHS overwhelmingly focused on physical health, with two poor relations: a malnourished social care system and a mental health system in the margins.

But, in the century of the ageing society, the NHS will not function itself if its two poor cousins aren’t given a higher priority.

Failures or gaps in social care lead to so many older people entering hospital. And it is undiagnosed or untreated mental health problems that can lead to the addiction that causes violence or creates a range of health problems.

So what does this all mean for health policy?

First, if we want a truly preventative health service then there will have to a more balanced approach to the health budget, with a greater percentage of available resources being devoted to mental health.

Second, we need to end the culture of separateness in the physical and mental health systems. It’s time for politicians to grasp the nettle of the reshaping of hospital services for the 21st century and as part of that we need to argue for the co-location of acute and mental health services on the same site. This separateness can lead to inequalities in health. For people in the mental health system, physical health needs can get completely missed. As a result people with severe mental health problems die on average 25 years earlier than other people.

Third, we need to change attitudes in clinical practice and encourage all clinical staff to see promoting good mental health as part of what they do. Awareness of mental health issues should be part of the training for all doctors, nurses and others who work in the NHS. We need to get to the point where when people go to their GP, it would be as normal for them to expect questions about mental as well as physical health and for social or psychological support to be offered as routinely as medication, perhaps more so. That means nurturing embryonic IAPT services and preventing them falling victim to the salami-slicing cuts across the NHS, as identified by the Health Select Committee. I recently shadowed a GP in Coventry and was surprised by the number of time he referred to IAPT. As he said, a huge step forward and an avenue that simply wasn’t available only a few years ago. It came about because of Lord Richard Layard’s work, who made both the social justice case, but also the economic case. It makes no sense to disinvest right now in a service that saves us money in the longer term, by reducing demand for GP consultations and hospital admissions, but unfortunately, there are signs already that these vital services are in danger. We need strong advocates for IAPT amidst the current chaos in the NHS.

Fourth, it points to a proper strategy for lifting rates of physical activity in England to the best in Europe, championed by the NHS. This strikes me as the essential first stage in any good mental health policy, but promoting physical activity remains an orphan policy in Whitehall. It needs to be core business for the DH as the key to breaking cycles of poor health choices, stress and isolation

Fifth, we need to reform social care, mental health and the wider NHS together – to recognise that people are people and can’t be separated out according to the administrative quirks of three historically separate systems. Longer lives in a more uncertain world mean we’ll all need a personalized mix of the social, mental and physical if we are to stay supported at home and out of institutions.

The King’s Fund have highlighted what they call the ‘long term conditions dividend’ – the significant wellbeing and financial gains from responding more effectively to the mental health and psychological needs of people with long term conditions. Addressing these needs should be part of personalised care planning for everyone with a long term condition.

My great worry is that the drive in the Health and Social Care Bill towards a more market-based system in healthcare will take us in the opposite direction, towards greater atomisation and fragmentation of services rather than true integration. As the joint editorial from the HSJ, BMJ and Nursing Times says today, the Bill contains no meaningful incentives for integration of services. By contrast, Monitor can issue fines to drive competition into the heart of the system.

This will reinforce separateness and fragmentation in our health and social care system and is one of the fundamental reasons why we will continue to maintain our outright opposition to the Health and Social Care Bill.

But there is much longer term battle for us all that calls for cross-party consensus.

Real change to health services to meet the demands of the 21st century will only come when we change attitudes to mental health in wider society.

As a country, we have set an international lead on equality legislation and intolerance of nearly all forms of discrimination.

And yet, conversely, archaic attitudes and outdated thinking still define our approach to mental health.

As Lord Stevenson has argued: “This is the last significant form of discrimination in our society” – but, unlike others, we all have a vested interest in this fight as this is discrimination with the potential to directly affect us all.

It is hard as it gets. Not only do people have to face the direct effects of depression, their problems can be compounded by the reactions of others.

People don’t feel able to admit to having a problem. It could change employment your prospects or lose you friends.

With most illnesses, you get a sympathetic shoulder to cry on. With mental illness, people may still get the cold shoulder.

And even if people do admit a problem, family and friends may not know how to advise them.

That is why the public debate that has been so powerfully led by Alastair, Stephen Fry, Frank Bruno and others is so tremendously important.

It is essential that the excellent Time to Change campaign, led by Mind and Rethink and funded by the Department of Health, ultimately prevails.

Just as football helped change attitudes to racism in the 80s and 90s, so sport can lead the way in changing social attitudes towards mental health.

As a cricket-lover, I have followed Marcus Trescothick’s fight against depression.

It is a compelling story and he deserves huge credit for the courage he has shown.

Cricket didn’t initially respond well but has since begun its own journey of understanding and that is something that all institutions and employers need to do.

I’m also interested in the Mental Health First Aid movement, which – just like traditional first aid – gives people the confidence to deal with mental health issues that they come across, in friends, family members or co-workers.

However, sport cannot take on the burden alone. The media, in its current period of self-reflection, needs to change the way depression or breakdowns are often portrayed.

Employers also have massive role to play in this area. One in six employees experience work-related depression and anxiety. Research from Mind found that stress has forced one in five workers to call in sick, yet the vast majority of these say they have had to lie to their boss about the real reason for not turning up.

By working to remove the stigma surrounding mental health problems, we will begin to create a climate where people feel able to talk openly about their own mental health in the same way as physical health.

This is particularly important for children and young people who are often too afraid to talk about what they are going through.

As “Completing the Revolution” highlighted we need to be doing more to address mental health problems at an early age. Half of all long-term mental health conditions start by the age of 14.

Tackling mental health problems early will help improve physical health, education and employment prospects. The savings to the individual and society are vast.

So this isn’t just a job for the Department of Health.

It’s a job for the Treasury, the Home Office, DWP, Education, DCLG – indeed the whole of Government throwing its weight behind it.

Perhaps there needs to be a senior Minister for Mental Health, even possibly at Cabinet level, to lead this coordinated drive.

Some progress is being made.

David Cameron and Nick Clegg are right to focus on well-being in the consideration of new Government policy.

But in this policy area the language is important.

I don’t think we should frame discussion about mental health in terms of happiness – itself an excluding term with the potential to reinforce.

There is a real risk for the Government to talk of a Happiness Index when millions of people don’t have the basics. It risks sounding out of touch and that risks damaging an otherwise laudable policy intent.

It seems to me that some of the terminology behind this drive, which developed here in the last decade, needs to be changed to reflect the new economic reality that many people face.

There’s a graph in Alastair Campbell’s new e-book, The Happy Depressive, which shows the only point at which happiness and income correlate is when people move from a low income to a middle income.

For many people, particularly in the current climate, it follows that happiness might simply not be achievable in the short term, but talking about it in this way risks reinforcing the sense of divide between those who consider themselves happy and those who do not, compounding a sense of failure.

It implies that you’ve got to be happy and if you are not happy, you are failing. That is not the case.

A focus on happiness might also lead to the wrong policy choices.

Let me illustrate that with a specific point.

Jane Ferrie has talked much about the links between job insecurity and mental illness. In the 1980s suicide rates for young unemployed men rocketed. A recent study in the Lancet found that every 1% increase in unemployment was associated with a 0.79% rise in suicides. Yet successive Government’s haven’t done anywhere near enough to build the resilience of people out of work.

If we don’t do more now, and the focus is on raising levels of happiness rather than resilience, then we risk repeating the mistakes of the past.

So instead our policy aim should be to help all people cope and surely it’s therefore better to frame this debate in terms of building personal resilience and control.

But challenging attitudes must start at the very top.

At present, the message sent out by our laws risks legitimising rather than eradicating this discrimination.

Under existing legislation, people who have suffered a breakdown can lose the freedom to run a company or to make a wider contribution to society by serving in Parliament, as a school governor or on a jury.

The clear message is that recovery from breakdown is not possible. That is wrong and has to be challenged.

When the Norwegian Prime Minister Kjell Magne Bondevik had to take time off for depression, he admitted that was the reason. By doing so he changed the culture in Norway – and he also got re-elected and went on to become Norway’s longest serving non Labour Party Prime Minister since World War II.

Rather than question Bondevik’s suitability for office, Norwegians admired his honesty and bravery.

Politicians in the UK need to show the same kind of leadership. We should work together to give a lasting legacy to the Time to Change campaign by repealing these archaic and discriminatory laws.

Lord Stevenson has put forward a Private Members’ Bill to end these discriminations and I can say today that it will have Labour’s support, even if it needs to be re-introduced.

These are two predominant reasons why we should repeal these laws.

Firstly, it would enhance our wider understanding of mental health and Parliament, schools, companies and courts would be richer from the involvement of people with experience of mental ill health.

Secondly, it will send an important message.

A message to employers, to politicians, to society – no longer will we tolerate an outdated prejudice that prevents capable people from taking part in public life.

In conclusion, mental health is an equality issue and social progress in the 21st century depends upon us waking up to that. Children from the poorest 20% of households are at a three-fold greater risk of mental health problems than children from the richest 20% of households.

And, as the Bradley Report brought home to me, many of them will sadly end up in the criminal justice system if we don’t change things.

Labour will only fulfill its historic mission of creating a fairer more equal society in this century if we not only lead the way on changing attitudes on mental health, but also changing services towards a whole-person approach to healthcare – so that the problems we might all face at some point in our lives don’t stop us from reaching our potential.

Thank you Johann.

And thank you Margaret and Anas for everything you’re doing.

Let me start directly by talking about the developments on the issue of RBS bonuses.

Stephen Hester has done the right thing.

I welcome his decision not to take his bonus.

But I am sorry we have a Prime Minister so out of touch with the British people that he did not act to stop it earlier. He failed to be a responsible shareholder.

It took Labour’s threat of a parliamentary vote for the right thing to happen.

Nobody will think the events of the last few days are a good way to set pay in our banks.

But we can only avoid this kind of story repeating itself if there is a decisive shift in rules and behaviour.

We need a proper debate now about executive pay and responsible capitalism.

My challenge to the Government is to show they understand they got it wrong on RBS and can act differently in the future.

First, the bonus merry go round looks set to continue for a while. They cannot stop bonuses in the private sector banks but they can introduce a bank bonus tax.

They should do so.

This could raise £2 billion a year.

Second, they must now act to change the rules on executive pay so that an ordinary employee sits on every single remuneration committee of every public company.

If the executives cannot look the ordinary worker in the eye and justify the salaries being paid, then they shouldn’t be paying them.

Third, we should change the rules on corporate governance so that bonuses are not for just doing your job but for exceptional performance.

And introduce rules which say one salary, one bonus.

These are three immediate steps the Government must take.

But there is a challenge that goes beyond this Government.

What the RBS issue has shown is the gap between the lives and behaviour of a few at the top and the deep commitment to fairness and responsibility among Britain’s working families.

It is this gap which has led directly to today’s events.

The gap between the squeezed middle and the very top.

Successful economies depend on public consent.

People are not against rewards for outstanding success or risk.

But they want to live in a country where there is fairness when it comes to the fruits of success and fairness when it comes to the need for sacrifice.

This isn’t happening and hasn’t been happening for a long time.

So I’m not saying we got this right in Government.

But if one good thing is to come out of the RBS fiasco, it must be this.

We must relearn the lesson that we have forgotten:

As a country, we succeed or fail together.

We are not isolated individuals.

However affluent we are, whatever the world we inhabit, we owe responsibilities to each other.

That is the country I stand for.

That is the country I believe in.

That is the country my Labour Party will fight for.

But tackling this wider inequality, this injustice, this unfairness is the mission for politics.

Today I want to make that case.

The case for a fair, just and equal United Kingdom, with Scotland part of it.

Not a case based on fear of separatism.

But a case based on hope.

Hope for a more equal, more just, more progressive future for Scotland and the United Kingdom.

I come here with humility about the scale of challenge for Labour – nine months after we lost the Scottish elections.

And I come here to stand shoulder to shoulder with you Johann, our new Leader of Scottish Labour.

You have already shown you understand the scale of the challenge for our party, and that you have the determination to make the positive case for the United Kingdom.

I have no doubt, even as we speak, that the SNP are getting ready to say how dare I, as someone born and living in England, come here and join this argument.

And when they ask, what has it got to do with me, let me address this head-on.

Not just as leader of the Labour Party, but on the basis of my personal history, as someone who has a deep reason to appreciate the strength of the United Kingdom.

My parents came to our island as refugees from Nazi terror.

My father joined the British Navy.

He did his training aboard HMS Valorous, on the Firth of Forth.

A Belgian, he fought Fascism with people from every part of the United Kingdom.

As I was growing up, he didn’t talk to me about coming to England, then moving to Scotland.

He talked about coming to Britain; the country that gave him and my mother shelter.

He was proud of the country that had adopted him, proud of this country.

My story is repeated a million times across the United Kingdom.

My story shows that this country has been a refuge to many and a cause to fight for.

And therefore, if the people of Scotland decide to separate, as they can, it would not affect Scotland alone.

It will affect all of us in the four nations of this country.

That is why I am here today.

So as this campaign begins, we need to understand the stakes.

Some people, including the First Minister, will tell you it is a battle between him and the Prime Minister, between the Government of Scotland and the Government of the United Kingdom.

So let me say clearly:

It is right that the people of Scotland decide the rules and timing of this referendum.

But it must be the people of Scotland, not just Alex Salmond.

It is right that the decision in this referendum is made in Scotland.

But as Johann has said, it is right that it is based on one fair question and one clear answer.

Every time you hear a Nationalist politician talk about the process of the referendum, it is because they want to avoid talking about the substance of separation.

Today, I want to concentrate on the substance of the argument.

About one part of the positive case for the United Kingdom.

In the past, Labour has warned about the dangers of separatism and we will continue to point to the evidence.

There are vital questions around the possible costs and benefits of a separate Scotland that deserve to be explored.

But I support Scotland as part of the United Kingdom, not because I think Scotland is too poor or too weak to break away.

But for a profoundly different reason:

Because I believe that Scotland as part of the United Kingdom is better for the working people of Scotland, and better for the working people of the United Kingdom as a whole.

Let’s start by asking the question that Labour at its best has always asked about this country: what are the injustices facing working people and how do we overcome them?

What is the most urgent priority for the people of Scotland?

We are living through some of the toughest times in recent history.

Unemployment at its highest in 18 years.

Rising food and energy prices.

And more than that:

We know in our heads and in our hearts that there are deep problems about the way our economy has been run.

When I meet working families who have been struggling, year after year just to earn enough to get by and put food on the table, I know we need to change things.

When I meet people who have the will to work but who keep getting turned down because they are up against hundreds of others, I know we need to change things.

When I meet parents who worry profoundly about their sons or daughters’ prospects in this world, I know we need to change things.

So when I look around, I see a country crying out for change.

Inequality.

Injustice.

And talent betrayed.

These are the problems facing people in every part of the United Kingdom — England, Scotland, Wales, and Northern Ireland.

And so what is the most urgent task facing us today?

Putting up a border across the A1 and M74?

Or the task of creating a more equal, just and fair society?

I say let’s confront the real divide in Britain.

Not between Scotland and the rest of the United Kingdom.

But between the haves and the have-nots.

So I am not here to tell Scots that Scotland cannot survive outside the United Kingdom.

I am here with the same call of Labour leaders down the ages, to say that we need to make the United Kingdom a fairer, more just place to live.

And we can do that best, together.

I believe it firstly because it is the lesson of history.

Our story, as a party and as a country, is not what we achieved separately but what we achieved together.

The story of the Scotsman, the Englishman, and the Welshman is not just the start of a good joke.

It is the history of social justice in this country.

It was a Scotsman, Keir Hardie, who founded the Labour party a hundred and twelve years ago,

An Englishman, Clement Attlee, who led the most successful Labour Government in history.

And a Welshman, Nye Bevan, who pioneered that Government’s greatest legacy, our National Health Service.

These are the achievements of our nations working together.

And that’s not all.

Before we passed the Provision of School Meals Act together, children from Lands End to John O’ Groats would go hungry just because their family was poor.

Before we built the NHS together, if you fell ill, you would only be treated if you could pay for it.

Before we passed the Equal Pay Act together, a woman could do exactly the same job as the man sitting next to her and still only be paid half his salary.

And before we established the minimum wage together, someone could work every day until their muscles ached and still be paid less than £1 an hour.

These progressive achievements do not belong to one nation of the United Kingdom. They are British achievements.

Our history is that we have made this country fairer, together.

And the challenges of today demand that we once again respond together.

We live in the shadow of the banking crisis.

The young person joining a dole queue behind a million others.

The small business which wants to grow but can’t get a loan.

And the father who lies awake at night worrying about how to pay the bills.

That is the real priority for all of us who want to make this country fairer.

That is what I mean when I say that we need to build a more responsible capitalism.

That is the true project for social justice in our United Kingdom.

It is a big challenge, and one I believe we can only overcome together.

Why?

Not only because together we are stronger; sharing the risks and rewards in an uncertain world.

But because we are not separate economies, Scotland and the United Kingdom.

We are one economy.

The banks serving Glasgow are the same as the ones serving Gloucester.

The shops on your high street are the same as the shops on my high street.

And decisions made by British companies like BAE will affect their employees in Govan as much as their employees in Barrow.

We can make our economy work for the majority. We can make capitalism more responsible.

But I tell you this:

We can only do it together.

We must reform our financial services; its rules, its culture, its institutions.

But if we change the rules separately, banks would move wherever the rules were weakest.

We need stronger rules together, not weaker rules apart.

We can change our economy so that there are more and better jobs by encouraging businesses to think long-term, in years not quarters.

But we can only do it together.

Because our economies are as connected as they are: more people in Scotland are employed by large companies based in the rest of the UK than in Scotland.

So reform in one country and not in another would simply mean companies moving a few miles north or south to where rules are easiest for them.

Rather than advancing fairness together, the risk is a race to the bottom on bank regulation, on wages, and conditions at work.

We can achieve more progress together.

Take another great progressive challenge of our time, climate change.

Every nation is now making efforts to tackle this but separation creates the danger that we compete on where companies should go to be able to produce more carbon.

We should tackle climate change together.

That’s why I say that the best way to make this country fairer is to do it together, as one country.

Mr Salmond, you can’t build fairness in Scotland by giving up on fairness in the United Kingdom.

And I don’t believe either, that people in Scotland want to give up on fairness in the rest of the United Kingdom.

For the basic reason that we care about each other.

Alex Salmond claims to want to set a progressive example.

Let me tell him, there is nothing progressive about a brand of politics which is based on dividing people with the same needs, living on this same small island.

There is nothing progressive about a vision which says a pensioner in Liverpool is no concern of his, a child growing up in poverty in East London is no concern of his, a disabled person in the Midlands is no concern of his.

That isn’t a progressive vision.

That is shutting the door on the problems of your fellow citizens.

I believe he is wrong.

Because Britain is united in its diversity.

By shared values and common interests.

Not an island divided by borders on the basis of nationalities or nationalisms.

But one brought together with the strength drawn from multiple identities.

Bound together by common ties.

Nearly half of all Scots have English relatives.

When a Scotsman who works in the shipyards of Govan meets an Englishman who works on the docks in Merseyside, he doesn’t see a foreigner, he sees a fellow countryman.

The pensioner from Aberdeen or Ayr has more in common with the pensioner in Bristol or Bolton than with a pensioner in France or Belgium.

When the Olympics are on next year, nobody in the pubs in Newcastle will cheer any less loudly for Chris Hoy, wearing the Union flag, just because he was born in Edinburgh.

Because over hundreds of years, we have written a story of four nations forging a country together.

Of defending that country against fascism.

And of fighting to make it fairer for working people.

Today, that struggle for social justice,

That spirit of solidarity.

That fight, together, is what we need now more than ever.

So Alex Salmond wants to tell you a very particular story.

In this story, England is conservative, while Scotland is a progressive beacon.

Of course, the Scottish people have always stood out for their strongest ideals of social justice,

Shown by the history of educational opportunity for all,

Shown by the campaign down the years for the right to work.

And the opposition to the poll tax.

But my case is that these ideals for Scotland can best be realised in the United Kingdom.

And that the progressive ideals of the people of Scotland are more ambitious than Alex Salmond would claim.

He ran in 2011 on the slogan ‘be part of better’.

I passionately believe people do want to be part of better – a better United Kingdom.

So let’s reform our banks together.

Let’s create prosperity together.

Let’s tackle inequality together.

Let’s build a sustainable country together.

Let’s pass on the right opportunities for the next generation together.

I stand here today as a challenger against a Government in Westminster which is wrong on the economy, and has no vision for the United Kingdom.

And as a challenger against a Government in Holyrood with a plan for separation which will not help the working people of Scotland.

A challenger, determined to fight to make this whole country fairer.

Because I am proud of what our nations have achieved together.

And because I know that our best, our fairest, our most just days lie ahead of us, together.

Having returned from the meeting of business, media and politics in Davos to the storm around RBS bonuses, I would like to offer some broader perspective on this debate.

It was only my second time in Davos, but what struck me was that – even there – the issue of how to make capitalism more responsible is firmly on the agenda. The vast majority of those present seem to realise a certain type of capitalism has been found wanting. The model was too dependent on financial services to the exclusion of success in other industries, too much in grip of certain vested interests, and too often led to huge inequalities of wealth and income.

The reality is that we must – and I think we can – find a better way to live together. One of the most controversial questions is on pay and reward. This has recently focused of the row over bank bonuses in general and the Royal Bank of Scotland in particular. What is the real problem here? In my view, it is based on around three issues: fairness, the link between reward and performance, and public consent.

First, fairness. RBS is state-owned with the Government as the biggest shareholder. That puts a particular responsibility on government to ensure that it participates as an active shareholder as it has urged others to do.

At the same time, this government is imposing a pay freeze and then 1% pay rises on other public sector employees. Labour has supported that latter measure because we recognize that in in tough times there is less money around. In such circumstances, I believe the Government has a particular responsibility to practice what it preaches about the role of shareholders in restraining top pay.

Second, there must be reward for those who do well, but it must be linked to performance and it should not be a one-way bet. The problem in the current case is that while nobody doubts Mr Hester has done a decent job, there are grounds for real doubt about whether this really justifies a bonus which practically doubles his salary. For example, the Chancellor explicitly said that reward would be linked to performance in small business lending but we know RBS failed to meet their Project Merlin targets in the third quarter of last year.

The wider issue is about risk. Entrepreneurs who start at the bottom and grow businesses are taking genuine risk with their own money. Too often, there does not seem to be much risk associated with pay and bonuses at the top.

Third, a market economy exists within a framework of public consent. There are all kinds of reasons why people feel dissatisfied with the system now: most importantly what is happening to their living standards. They are being squeezed, while the spiraling salaries and undeserved rewards at the top seems to be unaffected what is happening everywhere else. In tough times, here are choices to be made which tell you a lot about political parties’ values. We are calling for another bankers bonus tax this year to get 100,000 young people back to work. The Government, while presiding over a rise in young unemployment to the one million mark, is giving the banks a tax cut.

Many businesspeople really dislike the public nature of the controversy over their salaries. They feel they work hard to try and make Britain a better place. Most of them do and they deserve applause, not opprobrium.

That is why Labour is calling for a clearer, fairer system of remuneration to deal with this issue. I am disappointed the Government failed to support all the recommendations rom the High Pay Commission because, if you really care about consent, having one employee on the board of each remuneration committee is something for which agreement should be easy to reach. Put it this way, would not the RBS board have been in a stronger position if it had an employee representative out there arguing the case for a salary and bonus which had been justified and voted upon in a fully transparent, accountable way?

My hope is that business can lead the agenda on reform in this area with people like Richard Lambert, the former Director-general of the CBI, already showing the way.

Indeed, there is a clamour for change coming from many places. People are demanding not a change for one year or from just one bank, but lasting change. The global financial crisis did not just cause great damage to Britain’s economy, it changed what we are prepared to tolerate, what we regard as fair. I think that is because we have come to understand the causes of the crisis: we have seen that our country is too much in grip of certain vested interests and made too vulnerable by their reckless pursuit of wealth. We are determined that we will not go back o business-as-usual.

Finally, a word about the utter failure of leadership by David Cameron . He has been found wanting and been found out on this issue. His words on January 19 could not have been clearer. Asked by James Landale of the BBC if he would veto million pound bonuses at RBS, he replied “The short answer is yes.”

Having said that, it is now ridiculous for him either to suggest he cannot do anything about it now – or pretend he has achieved that pledge by ensuring Mr Hester’s bonus comes just short of seven figures.

Mr Cameron and George Osborne are caught between what they really believe and what the public thinks. They do not give a monkey’s about tackling irresponsible capitalism or indeed the bonus culture. Their first priority for a tax cut still seems to be the 50p rate for people earning £150,000 or more a year. Neither Prime Minister nor Chancellor really believe government has a role in setting rules which make systems work better for most people rather just the wealthiest few. They will get nowhere trying to blame the last Labour government because they have broken their promises on this issue. Instead, people will judge them by their deeds which show them to be utterly out of touch.

I’m very pleased to be here today – meeting up with those of you I haven’t met before and with many of you who I have known for years – but in my new capacity as Shadow Culture Secretary.

At the age of 61 it’s exciting to be part of Ed Miliband’s new generation. Not so much the face book generation as the face lift generation.

We meet in historic times:

* Never before have the creative industries been so important to help take us through these difficult economic times;

* And never before has the media been under such scrutiny because of the phone hacking scandal;

And all of this against the backdrop of astonishing developments in technology.

One of the things that we are most proud of from our time in government is the support we gave to culture, the creative industries and sport.

From free entry to museums and galleries, to boosting the film industry with tax credits, to winning the Olympics.

Labour supported something that is hugely important to people’s lives, something we are good at in this country and something that has a massive importance in the future.

If our politics is to reflect the aspirations and concerns of young people, then culture, media and sport must be at its heart. In my constituency of Camberwell and Peckham – as everywhere else – it is impossible to overstate how central culture, media and sport is in the lives of young people. They are all consumers – and great many of them want their future to be working in your industries.

You, in the creative industries have punched above your weight economically and as well as being the centre of our cultural agenda you must be at the heart of our education, economic and business agenda.

That is why the DCMS must never be seen as the ministry of fun. It is fun – but it’s bread as well as roses. DCMS policy must not stand alone but must be completely integrated with Education, Business and the Treasury.

I am determined to do that and next month, I’ve brought together a summit with our shadow chancellor, Ed Balls, our Shadow Business Secretary, Chuka Umunna, and our Shadow Schools Secretary, Stephen Twigg.

We want to work with you to develop a comprehensive plan for jobs and growth in the creative industries – and knowing Ed Balls it’s bound to end up being a 5 point plan.

We will be looking at a number of areas that many of you have raised including:

* Access to finance – making the City realise that creative industries are a good investment;

* Making sure that the next generation have the right education and skills – to foster the designers, the technicians, and the animator of the future;

* Giving proper support for our exports – when the Prime Minister leads a high level business delegation overseas – I want to see the creative industries right in there;

* Protection against copyright theft and getting the correct balance for intellectual property rights.

Britain creates some of the best and most sought after content in the world. We’re the world leader in exporting television formats, the second biggest exporter of music and our video games industry is one of the largest in Europe. These industries bring great pleasure to millions of people here in the UK but they are also an engine for jobs and growth across the economy. That’s what we were trying to support with our Digital Economy Act. It is vital that new business models are allowed to flourish as technology advances but we must also support the creators and owners of copyright to have a right for their work not to be stolen. The irony is that many of the kids who are downloading free music want to make a living out of creating too. We need to protect their right to a future in the industry. It’s tough for young people entering the industry today. The force of the internet ripping through age-old business models mean many industries are still searching for new ways to generate revenue.

That’s four points – the fifth one is still up for grabs.

What has been well reflected throughout today’s debates is that there are huge issues across the landscape – from newspapers to broadcasters. And we’ve heard today from BBC Chair – Chris Patten.

It’s impossible to describe – without sounding gushing – the centrality of the BBC in the life of this country. We think we bring up our own children – but Auntie is there alongside us as we do it. The BBC news is most trusted not just here – but around the world. The sheer scale of the BBC – the world’s biggest broadcasting organisation – means that it is able to be – and is – a massive centre of gravity for our creative industries. Under its wings, there flourish an eco-system of trainees and independent production companies. The BBC doesn’t belong to the Government of the day. And when we were in Government we were not always the best of friends. But the BBC doesn’t belong to the Government of the day, it belongs to the people which is why they trust it more than any Government and why my approach as shadow sec of state is to be an ardent and outspoken supporter of the BBC.

Many who usually come to this conference aren’t here today because they’re in the High Court – at the Leveson Enquiry.

The phone hacking scandal went to the heart of the politics, police and the press and one thing is clear – things will have to change.

Though there was nothing new about public figures complaining about the press, what changed things and where public anger erupted was that it was not just celebrities – the rich and powerful who had been targeted – but ordinary people who had suffered terrible tragedy.

It was because of the revelations about what had been done to the Dowler family that Ed Miliband spoke out against News International and called for a judge-led inquiry. He was right to do that – it was brave – and it led to the Government setting up the Leveson Inquiry.

Leveson has been a painful process as everything has been played out in public. However it has been powerful and cathartic and it should leave no-one in any doubt that it cannot be business as usual.

There is much heat and justifiable emotion in the demand for change. But there is an important need too, for the response from politicians and the press to be balanced.

It is a paradox. The public worry that the relationship between the press and politicians has been far too close. The press worry that politicians will use this scandal to exact revenge on the press and settle old scores for the friction which is inevitable when the press hold government and politicians to account.

Its fair to say that over 30 years in parliament, I’ve don’t ever remember being described as a “darling of the press”. Harriet Harperson – Hapless Hattie – “she who hates men” – and those are some of the nicer things that have been said.

So it might come as a surprise to some that I am standing up for press freedom.

But I have spent enough time in Opposition to dread the thought of the Government interfering in the press.

And I’ve spent enough time in government to recognise that government power is dangerous if not held to account by the press.

And, indeed, at the start of my professional life, I fought the cause of press freedom – at Liberty. And because of my work there holding the government to account – I was prosecuted for contempt by the then Attorney General who launched a prosecution against me in what became the landmark case of Home Office v Harman.

Those of us who are politicians in a democracy should be the first to understand that politics cannot operate in a democracy without a free press.

In my new role as Shadow Culture Secretary, I want to be very clear Labour’s starting point will be a commitment to defend the freedom of the free press.

Because the press are now in the dock, it looks like special pleading from a vested interest when they make the case for press freedom.

So that’s why its all the more important that politicians must insist on the freedom of the press.

But the press must acknowledge the outrage that was felt by people all round the country. And editors must understand that the status quo is not an option. It will just not be good enough to let the dust settle and then go back to business as usual.

There now needs to be a thoughtful, clear-eyed sober debate that focuses on shaping the future for the British press

There appears to be an emerging consensus around some key principles. That a new system must be:

* Independent – independent of political interference but also independent of serving editors. There needs to be advice and expertise – we can’t have people marking their own homework.

* It must be citizen centric – it must be accessible and straightforward for people. Seeking redress should not work just for the rich and powerful.

* It must apply to all newspapers – there can be no opting out.

These are all clearly sensible principles but we need to see how they could be made to work. And the key question is who is in the best position to do that.

Instead of doing things the usual way – Government and Opposition each coming up with our own proposals and then Leveson coming forward with his – I propose something different.

I think it would help Leveson if newspaper editors got together and came forward with a solution and I challenge them to do that. We have had a good airing of concerns and scoping of the issues but it is time for editors to lay their cards on the table and come up with a solution that guarantee these principles. It cannot just be rhetoric. I would like to see them frame the solution rather than have one imposed upon them

And with regards to the Press Complaints Commission. I know there are attempts to revive it. But I feel strongly that we’ve gone beyond that and it is time for a fresh start.

On the question of media power and cross media ownership, it is important that we have plurality in our media because it allows for competition and prevents obstacles to new entrants in the market which is bad for the consumer.

This is what the plurality framework is for.

But, by the end of the fiasco around the Murdoch/BSkyB takeover bid, it was clear to everyone that change is needed:

* To make clear that the judgments are made independently and not politically;

* To make sense of the application of the “fit and proper person” test;

* To make sure that we look across the media – not just at the newspapers – or any one siloed sector in a converging world – in a vacuum;

* To make sure that, even without an “event” such as a takeover bid, there is the power to stop a monopoly developing.

In the end, our plurality laws were intended to ensure that no one person gained unwelcome control over our media and accumulated too much power in our public affairs. In July, Parliament, at the instigation of a small number of MPs, and backed by Ed Miliband and others returned to this original intent. We must now complete that work and Ofcom and the Culture, Media and Sport select committee will have an important role in leading the debate on this.

Finally, can I turn to the press and the police? The police are prohibited from taking money from the press for stories – and the press are not allowed to pay them. But clearly that has been happening and no doubt Leveson will bring forward proposals to address that. We have to be sure that the police investigate without fear or favour.

We, in Labour, embrace the cultural vitality of our media sector. The richness it provides our nation and the opportunities it offers our people. And its appeal to modernity.

A vibrant and flourishing creative and cultural life is a symbol a of modern, progressive society. From Harold Wilson’s “white hot heat of the technological revolution” to, dare I say it, Tony Blair’s “Cool Britannia”, we’ve striven to champion an advanced media sector.

It’s a real privilege to be holding the responsibility of this brief at such an important moment, and I look forward to working with you.

“From bank charges to train costs, from energy companies to low cost airlines and pensions, the Government can act.

“You’ll have noticed that it’s not just me talking about irresponsible capitalism.

“We had a speech earlier this week from the Deputy Prime Minister and today we have a speech from the Prime Minister.

“I welcome the fact that other leaders are coming onto the ground that I set out in my Labour Party conference speech about the need to tackle predatory capitalism.

“But what I say to David Cameron is:

“Let’s judge you on your deeds and not your words.

“If he is serious about tackling irresponsible capitalism he needs to clamp down on the fact that train companies are ripping people off.

“If he is serious about tackling irresponsible capitalism he needs to take action to break up the rigged energy market.

“If he is serious about tackling irresponsible capitalism he needs to take action to stop those exorbitant bank charges.

“That’s the proof that he is really serious about this agenda.

“And if he takes action, we’ll support him.

“But if he doesn’t take action, we’ll call him on it.

“Because I frankly don’t believe that this Prime Minister is serious about this agenda.

“Why? He attacked me last year when I talked about irresponsible capitalism and I’m afraid its never going to work if your basic view is that government should just get out of the way.

“What you need is government willing to take action – willing to stand up to the vested interests.

“I strongly believe that this agenda is incredibly important to people at this time when people are hard pressed. We are determined as a party to show that we will stand up for the squeezed middle.

“We as a Labour Party are determined to be champions of the consumer.

“We are determined to stand up against the vested interests that are imposing a surcharge culture on people.”

Ed Miliband also highlighted the Government’s lack of action on executive pay and bank bonuses. He said:

“I think that you’ve got to judge politicians on their deeds, not their words, on this issue.

“Look at everything that the government have done so far: not making it easier for train companies to overcharge customers, not acting on the energy market, and not acting on the bonus culture in our banks. We’ve got another example of that today with Stephen Hester’s potential bonus from the Royal Bank of Scotland.

“All those things suggest that this is a government not acting in a way its rhetoric would suggest.

“I’m up for any politician talking about these issues. But let’s judge everyone on their action, not on their rhetoric.

“That is the test for David Cameron today. Not whether he can talk the talk on responsible capitalism, but if he walks the walk.

“What action is he going to take on behalf of hard pressed consumers, on behalf of the squeezed middle who want action from him, not words.”

Thank you Suresh and Andrew – and to all of you for coming along today and giving up your Saturday.

And let me start by saying – after over 20 years of attending the Fabian annual January conference – what a great honour it is to be invited to give the opening speech.

I first spoke at this conference in January 1993 – when I was a junior leader writer at the Financial Times.

It was a very different conference then – not the huge event it has become – with perhaps 100 or so people gathered at Ruskin College, Oxford, including among them the leader of the Labour Party, John Smith.

That conference was held the January after Labour’s election defeat in 1992 – an election in which the Labour opposition had failed to pass either of the two necessary political economy tests for electoral success:

- neither having a real alternative to the straitjacket of the Exchange Rate Mechanism, which could meet the aspirations of anxious voters on growth and jobs;

- nor a credible approach to tax and spending which could win public trust.

Ten months on from that defeat, as we met in Oxford, sterling had recently crashed out of a troubled ERM, the idea of the single currency as the solution for Europe was gaining momentum in Brussels, and here in Britain Labour’s ‘modernisers’ were trying to persuade John Smith that ’safety first’ would not be enough.

And my contribution at that Conference?

To speak about my Fabian pamphlet, published a week or so before, which argued:

- that Labour could only win the argument for a radical alternative on growth and jobs if we had economic credibility;

- that neither the ERM nor the single currency could provide that credibility;

- and that the right approach for Labour and Britain was to make the Bank of England independent – a pretty controversial idea at the time.

I remember showing the pamphlet draft to my FT colleagues Martin Wolf and John Plender, who both said: right approach, very brave – but the Labour Party will never forgive you.

THE GLOBAL ECONOMIC SHADOW
That 1993 Fabian Conference was held in the shadow of seminal events:

- German unification in Europe;

- Black Wednesday in Britain;

- a fourth election defeat for Labour.

And today’s conference – again to debate The Economic Alternative – is, without doubt, being held in the shadow of much greater and more defining events:

- political deadlock and an abject failure of economic leadership in the Euro area, Britain and the US Congress;

- following on from the biggest global financial crisis of the last century.

A toxic combination of grossly irresponsible bank lending, poor governance and weak regulation round the world which in its aftermath poses – as I have argued consistently over the last eighteen months – a threat to the world economy as grave as that which we faced in the depression of the 1930s.

So this is my starting point for today’s Conference.

If Britain and the world are to avoid repeating the mistakes of that 1930s ‘lost decade’ and the 2008 global crisis, then we badly needs political leadership in Britain, Europe and the world to meet two great challenges:

The Growth Challenge – to stop the aftermath of the financial crisis turning into years of slow growth, high unemployment and rising debts – leaving a permanent dent in our prosperity;

and,

The Reform Challenge – long-term reform to make sure such a financial crisis on this scale can never happen again and to build a stronger and fairer economic model for the future – what Ed Miliband has called a more responsible capitalism – which can, even in tougher times, meet our aspirations for social justice and strong public services.

LABOUR’S POLITICAL SHADOW
But of course, there is another shadow which casts itself across this Conference today – a political shadow which presents a particular challenge to Labour.

I believe we are right to resist the ideological and ahistorical Tory analysis which tries to pin the blame for a global financial crisis on Labour’s approach to public spending – when it is clear that the global financial crisis bankrupted banks and pushed up deficits in high spending and low spending countries alike.

But it is a fact that this financial crisis did happen on Labour’s watch – and that Labour lost the subsequent General Election.

We have never denied that a plan is needed to get the deficit down, and that it would mean tough decisions on tax and public spending. Before the election, I set out £1 billion of cuts to education.

But as a party and a leadership, I said then and I still believe now that Labour should have been clearer before the election that if we had been re-elected there would have been spending cuts as well as tax rises.

And I have no illusions that there is a big task to turn round Labour’s economic credibility and show – even as George Osborne’s plans deliver unemployment rising, growth stagnating and long-term reform stalling – that Labour can be trusted again.

It is not enough simply to be right in our diagnosis of the Coalition’s failures and unfairness.

And it is not enough to set out a clear alternative – on growth, as we have with our five point plan for jobs; or on long-term reform of our economy, as Ed Miliband did this week and Chuka, Rachel and John Denham have too.

The challenge we face is both to set out a radical and credible alternative; and to win public trust for that alternative vision.

‘KEYNESIAN ORTHODOXY’
I referred to that January 1993 Fabian Conference.
Eighteen months later, in September 1994, just a few weeks after Tony Blair was elected Labour leader, and against the backdrop of stubbornly high youth unemployment, rising inflation and squeezed living standards, the Labour Party held a conference at the National Film Theatre on the new economy and Labour’s alternative.

As it happens, that conference was the occasion of the infamous ‘post neo-classical endogenous growth theory’ moment – which, for those who don’t know what it means, says that the rules of the game that the government sets on taxes, spending and regulation are not irrelevant to growth but can have a profound impact – for good or bad – on how the economy works.

Of course, those were very different times, and the policy debates of that time emphatically do not offer a blueprint based on the past when today we face such different economic and political challenges.

But the unspoken purpose of that 1994 conference – and its emphasis on Bank of England reform and fiscal discipline – was to address Labour’s economic credibility deficit, and dispel the idea that the party was addicted to the short-term, quick fix, vested-interest-appeasing solution to every problem.
I went back this week to look at the reporting of that conference – and in particular a preview piece in the Independent on Sunday with an anonymous briefing from ‘a senior party insider’.

The article started by saying Tony Blair and Gordon Brown will “ceremoniously ditch Labour’s traditional ‘tax, spend and borrow’ image this week, in a fundamental re-positioning of his party’s economic strategy”.

All under the headline… Labour Ditches Keynes.

As someone who had only recently studied ‘New Keynesian’ economics at Harvard, with Democrat Keynesians like Larry Summers and Republican Keynesians like Greg Mankiw, I must admit I was pretty appalled to see the greatest economist of the twentieth century traduced like that.

But the fact was that in the Monetarists versus Keynesians economic debates of the 1970s and 80s, the label ‘Keynesian’ had become – certainly in Conservative circles – a dirty word: profligate, irresponsible, statist, inflation-loving, not to be trusted.

A caricature that clearly could not be allowed to be a Labour caricature if we were to go on and win the 1997 election.

And what has been so striking to me over the past year listening to right-of-centre politicians and commentators – in Britain, America and Europe too – is how much the austerity debate has been used to try to reprise those old ideological divides.

Warn about the risks of deflationary fiscal policy – and that makes you a ‘deficit denier’.

Worry about the dangers of all countries trying to cut their deficits at once – and you are a ‘deluded Keynesian’.

Counsel that the world needs a plan for growth as well as deficit reduction – and you are ‘an irresponsible deluded Keynesian deficit denier’.

Keynes himself must be turning in his grave.

For, as has been fully documented in Lord Skidelsky’s biography, the real Keynes was no profligate tax-and-spender. He would have had no time for some of his disciples.

His seminal 1930 Treatise on Money was as hawkish on inflation as Milton Friedman decades later.

His attitude to irresponsible wage bargaining in the 1920s was as unforgiving as Margaret Thatcher in the 1980s.

Central bank independence? I think Keynes would have backed it – though not if his contemporary Montagu Norman was the Governor.

And as for the irresponsible and inflationary profligacy of the 1970s Tory Barber boom? He would have abhorred it.

KEYNES AND THE GROWTH CHALLENGE
But – and this was his great insight – Keynes also knew that economies could occasionally get stuck in a deflationary rut.

Although he called his famous book in 1936 ‘The General Theory’, it actually was not a general theory at all.

It was a description of what can happen in the unusual and special circumstances after a big financial crash – for him 1929, for us 2008 – when the ‘animal spirits’ of companies and consumers are so depressed that private spending stagnates.

When interest rates are so low that they can’t be cut any further.

When governments crudely cutting spending risks making deficits worse.

Of course, there will be naïve ‘Keynesians’ who will think it is always a special case – time to let rip and just ‘tax, spend and borrow’ in the hope that will deliver full employment – people who think we are always in 1930s-style depression and more borrowing is always the solution to unemployment.

And that is what gave Keynesianism a bad name in the 1970s.

It is why Labour leader Jim Callaghan was right to tell the Labour Party Conference in 1976 that that you can’t just spend your way to full employment.

But, as I argued well over a year ago now in my Bloomberg speech, the reason why the real Keynes is so relevant today is that the global economy has been sliding into that rare and dangerous ’special case’ that Keynes identified in the 1930s and Japan suffered in the 1990s.

You either learn the lessons of history or repeat the mistakes of history.

With growth stagnating around the world, every country pressing ahead with deep cuts risks being a catastrophic mistake.

Which is why Ed Miliband and I have argued for a global plan for growth, with clear medium-term plans to get deficits down, but stimulus now to avoid a global slump too.

Rejecting the complacent isolationism of the 1930s and instead following Keynes’ lead by setting out a global solution to global problems – an economic alternative based on growth, job creation and balanced deficit reduction, which is the only sane way forward for Britain – and the only way back to credibility in the Euro area too.

Let us be honest: the Eurozone crisis is a catastrophe building week by week. And the pre-Christmas summit was a disaster for Europe and the Euro and for Britain too.

Europe’s leaders failed to back decisive action by the European Central Bank; they did not address the issue of the current fiscal straitjacket; and they still have no plan for jobs and growth – hence the downgrades of the past 24 hours.

And did our Prime Minister bang the table and demand action?

No, he walked out and undermined our national interests as he did so.

Given the huge risks that the Eurozone crisis poses for Britain, we desperately need a Prime Minister and Chancellor who can lead in Europe.

But they can’t – and not just because their party won’t let them.

Because to do so means also admitting that they have got things wrong here in Britain too.

George Osborne and David Cameron took it as read that deep and immediate spending cuts and tax rises would at least serve the goal of deficit reduction – no matter how much Labour warned that going too far, too fast would be bad for borrowing as well as for jobs and growth.

The Chancellor claimed that public retrenchment would boost private sector confidence, investment and job creation. He called it ‘expansionary fiscal contraction’.
But this has turned out to be a false prospectus – a repeat of the discredited ‘Treasury View’ of the 1920s. Fragile consumer and business confidence has been crushed by the inflationary hike in VAT, the threatened withdrawal of public sector demand, the reality of falling incomes and the fear of rising unemployment.

And now the Government claim growth is stagnating because of the chilling effect of the Eurozone crisis – when our exports have actually been over performing compared with expectations, and it is weak domestic demand that has driven growth in the UK down, borrowing up and depressed long-term interest rates on government bonds.

Conservative ministers scoff at our five point plan for jobs and growth, saying ‘Labour’s proposal is to borrow even more’. But it is Chancellor George Osborne who is being forced to borrow billions more – £158 billion more than he planned.

Not borrowing to support the economy through difficult times and help get people back to work, but wasteful extra borrowing to pay for failure – the price of slow growth, rising unemployment and a bigger benefits bill.

Because every time George Osborne revises down his growth forecast, he has to revise down tax revenues and increase the benefits bill too.

Even the IMF has said that if our economy undershoots expectations and risks a period of stagnation, then the UK should slow down the pace of spending cuts and tax rises to get the economy growing again.

Just think: last autumn, many 16 year olds who would otherwise have stayed on at school have lost their Education Maintenance Allowances, and – following the abandonment of the Future Jobs Fund – many have gone straight onto the dole, adding to the more than 1 million young people now unemployed in our country.

On the surface of things, cutting EMAs and the Future Jobs Fund saved money and reduced borrowing.

But at what cost? How much more will it cost our society and our economy to leave those young people long-term unemployed and unproductive; they and their children receiving benefits rather than paying taxes and contributing to the national wealth?

If we do not invest now in jobs and growth, if we let a year of economic flat-lining become a decade of stagnation, what price will our country pay in the long-term?

That is why to meet the Growth Challenge and get the deficit down we are right, as we have set out in the five point plan for jobs, to call for temporary tax cuts and investment in jobs and growth – to stop a decade of slow growth and higher debts becoming a self-fulfilling prophecy.

Action now for growth, jobs and reform which does not conflict with the need for a credible medium term plan on the deficit, but which reinforces it.

KEYNES AND THE REFORM CHALLENGE
But changing times also demand new and long-term reforms to re-shape our economy for the future.

As Ed Miliband argued earlier this week, we will need long-term reforms of our economy to boost growth and deliver social justice in straitened times.

And here again, the words of Keynes writing in The General Theory in 1936 are instructive:
“Speculators may do no harm as bubbles on a steady stream of enterprise” he wrote.

“But the position is serious when enterprise becomes the bubble on a whirl-pool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.

Keynes was right then and now – we cannot simply let markets, in which speculators spend their time chasing one another’s tails, dictate important investment decisions and set the benchmark for what is fair and unfair.

Unregulated capitalism is not only unstable; it is inherently short-termist too.

So just as the current coalition are wrong to reject the insight of Keynes based on his experience of the 1930s, we must, as Ed Miliband has said, learn the lessons of the past three decades and meet the Reform Challenge:

- tougher financial regulation and new capital standards with financial stability at the heart of economic policymaking and banking reform to make sure that the needs of small businesses are addressed, including examining the case for a National Investment Bank;

- stronger corporate governance to make sure decisions are taken in the long-term interests of wealth creation and jobs, not the short-term interests of traders, speculators and their chums;

- government action to back business and ensure markets work for the long-term, including tougher competition rules, tax incentives for long-term investment, research and development and skills;

- and a youth jobs guarantee with tough rights and responsibilities -­ and an expectation that every young person would take up work or training.

GROWTH, REFORM AND DEFICIT REDUCTION
This is the Economic Alternative:

- to meet the Growth Challenge: short term action now to support jobs, growth and get deficits down;

- to meet the Reform Challenge: long-term reform to tackle short-termism and instability and support long-term investment, growth and fairness.

But to make that alternative work and be credible, it must be underpinned by a clear commitment to balanced but tough spending and budget discipline now and into the medium-term.

The question for Labour has never been about ‘whether’ to get the deficit down but ‘how’ and ‘when’, who carries the greatest burden, and what kind of country we leave behind for our children.

And while we would not have started from here – a fairer and more balanced approach to deficit reduction would not have choked off recovery and thrown borrowing plans off track – we are where we are.

As Ed Miliband and I have said for months this government’s failure means the next Labour government will inherit a substantial deficit that we will have to deal with.

After just 18 months, the government’s autumn statement admitted that it will not balance the books by 2015 – the promise that was the cornerstone of the coalition.

And George Osborne has had to admit that he will now have to borrow more than the plan Alistair Darling set out before the election – because of the slow growth and higher unemployment his reckless plan has delivered.

This represents a big challenge for Labour, as Ed Miliband made clear earlier this week. As I said at Labour’s annual conference, we will set out before the next election tough fiscal rules that the next Labour government will have to stick to – to get our country’s current budget back to balance and national debt on a downward path.

In our manifesto we will commit to do the responsible thing and use any windfall gain from the sale of the government’s stakes in RBS and Lloyds to repay the national debt – not for a giveaway.

And, however difficult this is for me, for some of my colleagues and for our wider supporters, we cannot make any commitments now that the next Labour government will reverse tax rises or spending cuts. And we will not.

Because we don’t know how bad things will be on jobs, growth and the deficit. But we do know that the next Labour government will have to sort out the deficit where this government failed and deliver social justice in tougher times.

And as we make the argument that cutting spending and raising taxes too far and too fast risks making the economy and the deficit worse not better, it is right that we set out where we do support cuts and where we would be making the tough but necessary decisions.

In education, as I have said, £1 billion of cuts – but not the biggest cuts to schools since the 1950s. In policing, 12 per cent cuts to budgets – but not 20 per cent cuts which will hit the frontline hard and see 16,000 officers lost. In defence, £5 billion of cuts – but not a strategic defence review that raises more questions than answers.

And because as progressives we believe in the role of the state and public services to do good, it is vital that we are even tougher on waste than our political opponents – whether that is the £2 billion being wasted on a reckless reorganisation of the NHS, billions being lost in tax avoidance or the waste of mass unemployment.

Times will be tough – we will have no choice but to make difficult choices.
Let me give you one example.

Pay restraint in the public sector in this parliament would have been necessary whoever was in government.

But George Osborne’s economic mistakes mean more difficult decisions on tax, spending and pay. It is now inevitable that public sector pay restraint will have to continue for longer in this parliament.

Labour cannot duck that reality. And we won’t. Jobs must be our priority before higher pay.

That said, there are important issues on incomes, pay and pensions that George Osborne must get right.

We will continue to press for fair pay and fair pensions reform while defending the vital role the national pay review bodies play in delivering discipline, reform and fairness.

We believe the 3p in the pound rise in pension contributions should never have been imposed without negotiation.

And it is wrong and unfair to penalize those on low and middle incomes by cutting tax credits, hitting women harder than men and families with children hardest of all.

But pay discipline in the public and private sector needs to be accompanied by fairness.

That is why the government should also ask the pay review bodies to deliver the 1 per cent average settlement cap in a fair way – being tougher to those at the top in order to offer more protection to those at the bottom.

Pay also needs to be fair in the private sector, where there have also been tough decisions – with real pay in the private sector falling around 3 % in the last year. But for those at the top boardroom salaries in FTSE 100 companies have increased by 50% in the past 12 months.

That is why Ed Miliband has rightly called for reforms to ensure that rewards at the top better reflect the success people achieve and the contribution they have make to our economy. David Cameron has now started to talk the talk on this issue, but he now needs to take the action we have been calling for.

THE POLITICAL CHALLENGE FOR LABOUR
Let me finish by returning to the politics.

Because it would be naïve for anybody to think that the government’s deepening economic failure will automatically translate over the coming months into success for Labour.

And the question the public will of course ask is: who can we trust?

Credibility is based on trust and trust is based on honesty.

And let’s be clear: the Tories won’t own up either to the scale of the challenge or the failure of their plans.

They claim Britain is a safe haven… when our low long-term interest rates are not a sign of enhanced credibility but a reflection of stagnant growth in our economy, as it was in Japan in the 1990s.

And they claim we’re all in it together… when middle and lower income families, women and young people are hardest hit, and the pain is only now beginning.

So with determination and vigour – loud and direct – we must expose day by day the huge gulf between what Coalition ministers say and the truth.

But we must be honest with the British people that under Labour there will have to be cuts, and that – on spending, pay and pensions – there will be disappointments and difficult decisions from which we will not flinch.

But honesty does not mean going along with a failed Conservative plan because it is easier in the short-term. We tried that when Labour supported the disastrous decision to join the ERM and stuck with a failing policy right up until September 1992.

I have heard much advice over the past year from people who admit that combining stimulus now to get the economy moving with a tough but balanced medium-term deficit plan may be good economics – but who argue that it is bad politics because it is ‘out of tune’ with the public mood.

But that is not honest politics either.

Now is not the time to stand aside, bite our collective lip while this government and Euro area governments make historic and terrible mistakes.

I do believe that we have both a duty to make the right argument on growth and jobs – even if this has put us outside the consensus for a time.

And I do believe this is an argument we can win.

Now is the time to hold our nerve.

To make the case for The Economic Alternative.

To speak up for the people we seek to represent and the values that we stand for.

And to do so in a typically Fabian way – steady, step by step, determined, credible and radical in our vision for a better and fairer future for Britain.

Thank you.

Thank you for that introduction Michael and to the ICAEW for hosting this event.

And thank you too to the High Pay Commission and the Institute of Public Policy Research for inviting me to speak.

All three organisations have made major contributions to informing and stimulating the national debate on this issue which has dominated the news agenda since the year started, the High Pay Commission in particular.

The headlines and clipped news reports do not do justice to this issue so today my aim is:

* to explain why excessive pay and rewards for failure matter from the point of view of our businesses, those who own them and society at large; and,

* to get to the heart of the problem and outline the solutions as we see them in Her Majesty’s Opposition.

The economy is the issue of this parliament not simply because of the lack of growth and the highest rate of unemployment for 17 years which people are experiencing in the here and now. But also because of the long term structural trends in an economy which has failed to deliver incomes to keep pace with rising living costs, a pattern repeated in other developed economies.

What do I mean by this? Not enough of the reward from rising productivity has found its way into the wage packets of average earners with the result that middle income earners have actually seen their wages stagnate from 2003, whilst high earners have seen their wages soar. Consequently many people have come to feel that, in the good times the economy did not really work for them, while in the bad times they were being made to carry much of the risk.

So it is time for some hard reflection on the nature and direction of our economy and the changes we need to make:

* changes to get growth going again in the short term, which is why we have put forward an immediate stimulus package in the form of our 5 point plan for growth and jobs;

* changes to ensure that future prosperity benefits everyone;

* changes to ensure we can pay our way in the world and take full advantage of the new opportunities that new markets bring – which is why we need to build a New Economy based on a reformed capitalism.

The FT have just started a series of articles under the title Capitalism in Crisis. I wouldn’t go as far as those dangerous lefties. Capitalism has been and remains a powerful engine of human progress. But in recent speeches and, again, over the weekend I argued that what we need is a New Economy based on a better, more responsible and more productive capitalism than our current national variety.

That New Economy must be built on a partnership between productive business and active government: the entrepreneurial impulse in us all encouraged and supported; closed circles broken up and opened to everyone. And, as Ed Miliband said in his speech on Tuesday, we must think how we build a New Economy that delivers fairness for Britain at a time when there is less money to spend.

In many ways, the issues around executive pay are a good place to start. Excessive pay and rewards for failure are symptomatic of what is wrong with the way our economy has been operating over the last 30 years – of how wealth is created, how opportunities are shared, how success is rewarded, and how power is exercised in our companies. It is something Ed Miliband has been talking about for many, many months now.

There are some who say it is no business of government – no business of politicians – to be commenting on these matters. We have no right to interfere in the affairs of privately owned companies is their refrain. I could not disagree more strongly with that statement.

At the heart of my politics is the belief that we are all mutually dependent. This notion is deeply embedded in the values of the Labour Party. Better together. Stronger together.

So to argue that politicians and society at large, should not take an interest in these matters, is to feed the idea that society is here and business is over in the corner there which is dangerous.

Why? Because business and society are not separate islands – they are mutually dependent. Business needs a strong society, providing it with human resource, talent and custom. A strong society needs everything that productive business can offer: the jobs, the growth, the innovation, the opportunities, the wealth creating potential. That is why we should take an interest in the pay issue.

And while it is right that those who work hard, generate wealth and create jobs for our country are rewarded, where failure is rewarded or people award themselves huge pay rises that bear no relation to performance or what their companies can bear, trust is severely undermined. As Ken Costa, the former Chair of Lazard International said last October:

“Put bluntly, ultimately businesses cannot work, banks cannot lend, economies cannot function and societies cannot flourish without mutual trust and respect, or without fundamental honesty and integrity.”

That is why the contributions that the ICEAW have made are so welcome – you are the important keepers of the accountancy flame, your mission to ensure that “people can do business with confidence”. And here you are helping to ensure that people can have confidence in business. That has to be right.

As Sir Roger Carr, the current Chair of the CBI, said on taking up his post last year, business needs to show that it is “a force for good.” This is why it was so ridiculous for the Prime Minister and others to infer or suggest that Ed Miliband was being anti-business for raising these issues in his Labour Party conference speech last year – it is very much in the interests of business to resolve these problems and it is rather ironic that the PM is now talking about the need for reform in much the same terms as Ed.

The discussion should start by asking what we pay people for? We pay people to do a job and, where they do so successfully, people do not object to them enjoying the fruits of their success. As for bonuses – my colleague the former Chancellor Alistair Darling put it well last Sunday when he said a bonus is surely “something special, something unusual, something that you give for that little bit extra, not a matter of routine and entitlement.”

Having a skill that is in short supply but high demand is likely to be well rewarded in the marketplace. And as the size of some markets has increased – to become continental and in some cases genuinely global – so have rewards to those at the top have risen.

Of course it is not easy to chart a successful course for a major corporation, where the contours of the market place can change rapidly, where new competitors are around every corner, and where new technologies can make an entire business model obsolete overnight. It takes special skill and extraordinary commitment. So no one is against success that rewards this merit and application. Success should be rewarded.

But increasingly, what we have seen is something else. Reward that is not linked to success or performance: a self-perpetuating spiral of remuneration for those in the golden circle. Handsome rewards for failure. Rewards that seem quite unbelievable to the vast majority of people in this country; rewards from another planet.

And while there are more egregious examples that have gained notoriety, this is not about individuals. The growing gap between increases in pay and increases in company performance is systemic. In the last decade the value of FTSE 350 companies increased by eight per cent, while the average total earning of executives in those companies increased by one hundred and eight per cent.

As rewards at the top have become disproportionate to company performance, so rewards for executives have become disconnected from the rest of the workforce. They are no longer just the best paid employees. Increasingly, they are becoming a class apart.

And let us be absolutely clear who we are talking about – we are not talking about the budding entrepreneur, the small business owner struggling in tough times; this does not apply across all business. We are talking about the relatively small number of people running our largest businesses and working in our more prominent financial institutions. We are talking about FTSE 100 bosses who were paid 14 times the median pay of a worker in 1980, and who are now paid 75 times the median pay of a worker.

I should also point out that this is not a recent phenomenon, but a trend over the last three decades. In the three decades to 1979, executive pay grew 0.8% on average. In the last ten years, growth in the pay of FTSE 100 executives has been closer to 20% a year. It has now reached a point where, as Richard Lambert, former Director General of the CBI said last November, it is “damaging the interests of British business in political, economic and reputational terms”.

Why is this ballooning pay such a problem? For three reasons: it is a bad for the companies themselves; it is bad for our economy overall; and, yes, it is bad for our society.

For the companies themselves, the issue is a classic problem of agency.
Since the 1980s there was a move to create an entrepreneurial culture amongst executives at the top of our large corporations but it didn’t quite work. I’ll explain why.

The owners of the company – the shareholders – entrust executives with substantial powers to make far reaching decisions about the running of the company. Oversight is difficult, because those involved in the day to day management have plenty of discretion and a large information advantage. How can shareholders ensure their agents, the directors – the executive directors in particular – act consistently in those shareholders best interests? The solution was to try to align the incentives – through bonuses, shares, share options, incentive plans and the like, using different mechanisms and over different time frames.

But the fact is that it is hard to create a true entrepreneurial culture among executives at the top of a large corporation. Upside incentives can be made similar, but the structure of downside risk is completely different for an entrepreneur who has everything on the line. Entrepreneurs have most of their own money on the line when they make decisions; executive directors of large companies do not.

The result has been that the value of incentive packages for executives has risen out of all proportion to improvements in company performance. If it ever worked, it seems that there are now declining returns. In the first decade of this century FTSE 350 firms increased their pre-tax profits by 50% and their earnings per share by 73%, while year end share prices fell by 5%. Over the same period, bonuses for executives in these companies have risen by 187%, long term incentive plans by 254%. This demonstrates what psychologists have already found – that the relationship between financial incentives and performance is far from simple, and is not even reliably positive.

At the same time, the heavy focus on the alignment of high powered incentives risks crowding out other, more rounded but equally powerful intrinsic motivations of executives that are just as relevant to the company’s success – the satisfaction of doing a good job, the pride in leading and growing a great company, of winning in the market place, of having the respect of peers, of creating a legacy of sustained and sustainable success.

We are not opposed to performance related pay but it does make you wonder: if a company is so concerned that an executive paid only their salary won’t be motivated to work hard in the best interests of the company, then maybe they have the wrong person in the job?

At its worst you end up with perverse incentive structures which encourage the wrong kind of decision making, as the failures in many financial institutions in the wake of the 2008/9 financial crash so clearly illustrated.

And this approach to executive reward creates negative consequences in other parts of the business. Overemphasising the importance of the contribution of those of those at the top can undermine the motivations of others in the business. As the High Pay Commission has shown, there is a growing body of research that confirms that just as relative rewards matter as a basis for social comparison among executives, so they matter to other employees too. They matter for employee engagement, and their sense of identification with company goals. Feelings of unfairness in pay reduce the willingness to cooperate, can reduce effort and weaken commitment. Unsurprisingly, greater pay inequality in a firm has been found to be associated with lower firm performance.

So excessive pay and rewards for failure are undoubtedly bad for business.

The second reason this is a problem is because it is bad for our economy. I’ve lost count of the number of companies I’ve visited who say to me that they can’t find the engineering graduates they need to hire. Where are they? Lets face it – many of them are following the money. In the decade to 2007, 60% of the increase in the income share of the top 10 per cent went to finance workers. This talent drain, with rewards disproportionate to success, has distorted the market and makes the challenge of rebalancing the economy – by region as well as by sector – so much harder.

Likewise, entrepreneurs, those running our small businesses are the lifeblood of our economy, providing approximately two thirds of private sector jobs and almost half of private sector turnover. We need people to take risks and set up these businesses – why would they do so if they can earn excessive wealth in the boardroom and the City?

And the third reason this matters is because it is bad for our society. Executive pay has helped promote inequality and there is a huge body of research to show that this has a detrimental impact on society. At this juncture many people refer to the “Spirit Level”, the book by Richard Wilkinson and Kate Pickett.

Today, I’ll refer you to comments of the former Chief Economist at the IMF, Raghuram Rajan – the IMF is of course George Osborne’s institution of choice when it comes to quoting people! He has argued that high levels of inequality contributed to the financial crisis. In his recent book, Fault Lines, Rajan explains how high levels of wage inflation at the top and wage stagnation for the rest of the population led to a growth in easy credit.

So I have talked about what we pay people for, how a small group are being paid far in excess of what they deserve, and the adverse impact this is having on our businesses, our economy and our society. What would we – the Opposition – do to change all this?

The High Pay Commission has put forward a tranche of recommendations to increase transparency, accountability and fairness. The recommendations enjoy support in the business community and are in line with measures implemented in the U.S., Germany and other countries to address these issues. We support them too.

In the main, the Commission suggests seeking to effect the changes through the UK Corporate Governance Code in the first instance, followed by legislation if the amendments to the Code do not bring about the change needed. This is the right approach. Legislation should be the last resort, used only if there is not sufficient compliance with the Code within a reasonable period of time.

On the proposals themselves: first, transparency – over the level of reward and over the approval of reward packages. In trying to align executive incentives, reward packages have become increasingly complex, making it difficult for shareholders to understand exactly what is being paid.

This problem is intensifying. Increasing numbers of directors are being rewarded through ever more complex service agreements. Individual reward packages are more generous and ‘performance’ targets seem to be getting easier to hit.

To enhance transparency, the High Pay Commission recommends that:

* Executive pay should comprise a basic salary, with only one additional performance related element where necessary;

* The publication of pay packages of the ten highest paid employees outside the boardroom; and,

* The reporting of pay packages in a standardised form, including a single figure showing total remuneration.

We endorse these proposals. They will give shareholders access to simple, standardised information on which they can make reasoned judgements. While we wait and wait for this Conservative led-government to match words with deeds, there is no reason why business cannot begin taking action now.

In addition, the Commission proposes that investment and pension fund managers be required to disclose how they vote on all issues, including on remuneration. This transparency would allow pensioners and investors to see where their monies are being used to finance big pay deals. It is their money, after all.

This increase in transparency would also increase accountability, and is just one of a number of changes needed to do so.

To examine the dynamics of a remuneration committee is to observe a case study of what happens when responsibility is diffused, backgrounds of participants are homogenous, and loyalties can overlap. Participants are drawn mostly from a narrow class of, mostly male, current or former executives. The voice of employees is silent and shareholders vote in an advisory capacity on remuneration reports after the event. You don’t need to be a rocket scientist to detect a problem with this old way of doing business.

The way non-executive directors are appointed and the backgrounds from which they are drawn – they are often ex-executives themselves – is not conducive to the appointment of people who are prepared to shake it up and introduce new ways of thinking. That is why we endorse the Commission’s recommendations to have employee representation on remuneration committees and to open up the recruitment of non-execs to a wider pool.

But I want to look at where we should go further. In the UK, the nomination committee of the Board – which is responsible for hunting out people to serve on boards – is made up of other Board members. Candidates are nominated by those Board members at the company’s AGM and, in most cases, are elected as a matter of course.

We should consider moving towards a system which other countries have adopted where the nomination committee is not composed of board members but is composed of the four or five biggest shareholders in the company along with the non-executive chair of the board – that same committee, composed of shareholders, also recommends the structure and amount of remuneration. This would create far stronger lines of accountability to those who ultimately own the business and would promote the shareholder activism and engagement which is key.

In addition the role of remuneration consultants must be looked at, as the Commission says in its report. In his 2006 letter to Berkshire Hathaway shareholders, Warren Buffet referred to a remuneration consultancy called “Ratchet, Ratchet and Bingo”; “The name may be phony,” he said, “but the action it conveys is not”, highlighting his view that such consultancies inflate executive pay. There are widespread concerns that these consultancies are ratcheting up pay here too.

Indeed, it is my view that, unchecked, their effect could be similar to that of unscrupulous football players’ agents – inflating salaries sometimes way beyond talent or contribution and often working against the long term interests of the companies themselves.

Part of the problem is that – in their advisory role to remuneration committees – the consultants owe their duties to the Board and not to shareholders. This needs to be looked at, along with the risk of conflict where consultants are advising both executive management and non-executive directors on remuneration. That is why it is right that companies should publish the extent of their use of remuneration consultants.

I am aware of the voluntary guidelines to prevent remuneration consultants cross-selling services but, given the risk of conflict, consideration should be given to taking a more strict approach. Lawyers giving legal advice in the same context are not subject to some voluntary code but to binding rules that prevent the provision of advice where there is a potential for conflict of interests, unless strong, viable and properly policed Chinese Walls are erected. Why should the same not apply here?

Finally, on fairness, the disconnection of executive reward from the pay of other employees is at the heart of loss of trust. This needs to be rebuilt. That is why we endorse the Commission’s call for companies to publish the ratios between the highest paid employees and the median.

It is also another reason for having an employee on the remuneration committee of the Board, something the Prime Minister has failed to commit to implement – as Ed said on Tuesday, it would mean top executives would have to look an ordinary member of staff in the eye before they award these pay packages.

To continue to inform this important debate, we endorse the High Pay Commission’s call for a permanent body to monitor high pay, along the lines of the Low Pay Commission Labour established.

All of these measures are designed to empower shareholders – to give them the tools to be able to take action, and to increase the accountability of directors to them.

David Cameron has sought to do this by making shareholder votes on remuneration binding. We will examine this proposal when Vince Cable, my opposite number, provides further detail later this month.

However, there are a number of problems with what he has suggested. First, it is backward looking. As CBI Head John Cridland has said, this would be like shutting the stable door after the horse has bolted.

Secondly, there are large practical difficulties with the proposal as its retrospective impact would create legal problems in trying to unpick contracts already agreed – I say this from my own experience, having practiced as a specialist employment law solicitor for the best part of a decade.

And thirdly, without a matching requirement of transparency – the provision of clear and simple information – shareholders may not be any the wiser about what they are voting on, and may even be less inclined to vote.

So it is not enough for David Cameron to say he wants shareholders to be given a vote on these issues. We have seen and heard this kind of thing from him before – talking a good game but fiddling at the margins.

I believe in shareholders’ democracy but democracy is about more than voting. If we are to empower shareholders, they need information provided through greater transparency of boardroom pay – as well as the means to mobilise and become more active in the running of their companies.

And this takes us to the heart of the issue – the need to encourage greater activism amongst shareholders. We cannot ignore the long term trends that are working against this. Since the early 1990s, foreign ownership of total UK equity has increased from less than 15% to around 40% in 2008. The average length of time investors hold their shares has fallen from 5 years in the 1960s to less than 8 months by 2007, with an enormous increase in high frequency trading.

These trends make it harder, but all is not lost – there are grounds for optimism. Voting by shareholders in FTSE 350 companies has now risen to a respectable 68%. There is clearly an appetite for more shareholder power and we have to nurture the use of it. It can be built upon by putting more – and more effective – tools in the hands of shareholders in the way I have described.

And all this needs to be underpinned by a renewed and explicit focus on relative reward based on merit – the fairness that inspires employee loyalty to a company, and the fairness that renews public trust in business.

The current business environment is as tough as it has ever been. Labour has set out a plan for jobs and growth to get the economy moving again, get people back into work, and to reduce the deficit.

But we also must address the underlying challenges in our economy that have persisted over many years, and which the financial crisis brought in to sharp relief. Excessive executive pay is one of them.

That is why I am glad that this debate is going on and proud of the role that Ed has played in leading it. Let’s make it count. Let us begin preparing the ground for the better days that lie ahead. Let us build a better economy for Britain.

Thank you.

Ed Miliband MP, Leader of the Opposition and Leader of the Labour Party, said today in a speech to London Citizens at the OXO Tower:

Thank you for that inspiring introduction Richard, and thank you for everything you do to showcase the great things young people do across our capital city.

And thank you all for coming this morning.

It’s great to see so many members of Citizens UK here.

Every day, you take action to change communities for the better, from the CitySafe initiative to campaigning for the Living Wage.

Thanks to you, the cleaners at the Queen Mary University are earning a Living Wage.

And they’re not the only ones.

From KPMG to the Olympic Delivery Authority – working men and women are now being paid enough to cover the essentials of life.

Citizens UK don’t just read about problems in society, you get organised and lead change.

You know that with a bit of optimism, coordination, and persistence, we can change the world around us, one fight at a time.

Those are your values, and they are mine as well.

A lot of people will hear me talk about values and say:

“Welcome to the real world: values cost money, but right now the government just doesn’t have money to spend.”

A lot of people say:

“These are tough times. It’s easy to talk about fairness, but how are you going to achieve it when there’s less money around?”

That’s the challenge for Labour.

And it’s a challenge for me as the leader of the party.

A challenge I relish.

Yes, we live in tough times.

Yes, in the years ahead there will be less money to spend.

But however tough the times are, I believe a simple truth:

Politics can always make a difference.

The Labour Party stands for fairness and fighting injustice.

Those commitments are more important now than ever.

But my argument starts by recognising that tough times will continue.

The government wanted to eliminate the deficit before the next election.

That was the foundation on which their entire programme was built.

But they didn’t understand that you can only eliminate the deficit if the economy is growing.

So they failed.

Last November was a defining moment.

George Osborne admitted that his plan to eliminate the deficit in one Parliament had crumbled.

He wanted to get us to borrow less.

But he bled so much demand out of the economy, that he will have to borrow more.

Much more.

Over five years, £158 billion more than he promised.

Not borrowing to get people back into work, but paying them to be out of work.

That’s the price of George Osborne’s failure.

Of course he’s got excuses.

He’ll blame the Eurozone.

But it’s not as if he wasn’t warned.

As Ed Balls said, if there’s a global hurricane brewing, you don’t rip out the foundations of your house.

But that’s what George Osborne has done.

We always said the deficit had to be reduced.

But in a steady and balanced way.

We warned that trying to cut spending and raise taxes too far and too fast would make it harder to get that deficit down.

The Government’s failure in eighteen short months has proved the point.

And the consequences of that will be with us for years to come.

The failure of George Osborne’s economic policy creates a different landscape for the 2015 General Election and whoever wins it.

Whoever is the next Prime Minister will still have a deficit to reduce, and will not have money to spend.

Whoever governs after 2015 will have to find more savings.

It means that the Blair/Brown approach will not be enough.

Those governments achieved great things.

Ask the parents who drop their kids off every day at the schools we transformed.

Ask the patients being treated in the new hospitals we built.

Ask people who see more police on their streets.

We should all be proud of that.

But we could only do it because the economy was growing.

Each time New Labour won an election, it won at a time when business was prospering.

When entrepreneurs could set up new firms and be confident of a return.

When companies knew that there were markets for their goods, and consumers ready to spend.

That growing economy meant that there were tax revenues to invest in our infrastructure, to help hardworking families, and to protect the most vulnerable in our country.

Next time we come back to power, it will be different.

We will be handed a deficit.

We will have to make difficult choices that all of us wish we did not have to make.

So we must rethink how we achieve fairness for Britain in a time when there is less money to spend.

There are some who say that fairness is a luxury we cannot afford in tough times.

That it is inevitable that this country must become:

More unfair.

More unequal.

More unjust.

That fairness is something for good times, and nothing more.

I believe that is profoundly wrong.

When there is less money to spend, the choices are starker.

So our values matter even more.

And if you don’t believe me, talk to the low paid working families who are losing the most, thanks to this Government’s priorities.

Talk to the school-leaver, joining a queue of one million young people looking for work.

It’s Labour’s responsibility to find a new approach for tough times.

So we will be a different party from the one we were in the past.

A changed Labour Party.

The ideas which won three elections between 1997 and 2005 won’t be the ideas which will win the election in 2015.

And not just out of necessity, because there’s less money around.

But because we have to recognise some of the things we didn’t achieve.

The last Labour government did more to tackle poverty than any in British history.

Yet, inequality between the very top and the very bottom still grew.

The last Labour Government saw many jobs created.

But too many people found themselves stuck in low skilled, low wage jobs which offered neither satisfaction, nor time to spend with the family.

New Labour’s answer, tax credits, made a real difference.

But they weren’t enough.

Sometimes in government it felt like, instead of building a new economy, we were spending money to patch up the failures of the economy we in-herited.

Fairness wasn’t hard-wired into our economy and society.

That, as well as the deficit, means Labour needs a new approach.

We have already set out what we would do to get the economy growing again immediately.

We would tax bank bonuses and use the money to get young people back to work.

In short, where the Government is stripping demand out of the economy, we would go less far and less fast.

We call for these things not because we aren’t interested in dealing with the deficit.

We call for them because we are.

The sooner growth and jobs return the easier it is to reduce the deficit we face.

That action to get growth moving must be combined with balanced cuts.

And to get Britain’s budget back into balance and the national debt back on a downward path, we will set out tough new fiscal rules.

But as I said earlier, the deficit will persist well into the next parliament, well beyond 2015.

So today I want to focus on that horizon.

I want to explain the principles which will guide the Labour Party under my leadership.

I want to set out a new approach.

To demonstrate once and for all that Labour is a party for all times, not only a party for good times.

So in the future, how we deliver when there is much less money available is going to have to be different to the approach taken by Labour in the past.

That means three new ways of delivering fairness in difficult times.

First, reforming our economy so we have long-term wealth creation with rewards fairly shared.

Second, acting against vested interests that squeeze the living standards of families.

And third, making choices that favour the hard-working majority.

So first, Britain needs a new era of long-term wealth creation.

Both to pay its way in the world and to create fairness in tough times.

Too often in the past we ended up with wealth creation which was built on unstable foundations.

With excessive rewards at the top and everybody else seeing their incomes squeezed.

The New Labour approach focused on how government could act to address the consequences of this failure.

But it didn’t focus enough on stopping it happening in the first place.

Not enough on dealing with the roots of our economy’s problems:

Poor quality jobs;

The over-reliance on finance;

And the squeeze on living standards.

The school-leaver in my constituency who years ago would have gone into mining or manufacturing but who now faces an insecure, low-paying job.

The young engineering graduate who is told she is better off designing derivatives than helping British firms design the aeroplanes of tomorrow.

And the workers wondering why their living standards are squeezed and their company is struggling, when the people at the top seem to be getting ever greater rewards.

So what is Labour’s new approach to addressing these problems when there is less money around?

To use the power of government in new ways.

To set new rules that promote the long-term and fair wealth creation we need.

To share a vision with British industry of how we pay our way in an ever more competitive world.

To nurture a growing, thriving economy which creates better jobs, new companies and innovative industries.

That means we have to end the situation where British employers want their companies to invest but can’t find the finance to do so.

That’s why we are looking at plans for a British Investment Bank so small businesses can invest and grow.

It means we have to end the situation where an industry knows it is in its long-term interest to invest in the skills of its workforce, but each firm doesn’t act because it isn’t in their short-term interest.

That’s why we will need new leadership from industry, undertaking their responsibilities to bring on the next generation.

And government must play its part.

That’s why we say that major government contracts should only go to those who offer apprenticeships.

It means we have to end the situation where the chief executive wants to make decisions which will benefit his company in five years, when some of his shareholders are only interested in results in the next two months.

That’s why Ed Balls will shortly be announcing our review of short-termism in British corporate life, like quarterly reporting.

All of this is an agenda for responsible business that our business leaders already champion.

It is the one they urge me to address as I go around the country talking with entrepreneurs, visiting factories.

It’s not anti-business it’s pro-business.

Government also has a particular responsibility when times are tough to ensure that rewards go to those who work hard and do the right thing.

That is why we have to take on irresponsibility wherever we find it.

At the top and at the bottom of society.

We have to end the situation where we have rewards for failure at the top — harming the company and its workforce.

That is why we need real change.

Like an employee on every remuneration committee so that top executives have to look an ordinary member of staff in the eye before they award themselves a pay rise.

We are determined to reform our welfare system too, so that it rewards those who do the right thing.

That’s why I’ve said that those on the waiting list for council accommodation should move up that list if they are contributing to their communities, being good neighbours, and seeking work.

We need an economy that builds long-term wealth creation, fairly shared.

But we also need to act on the vested interests that squeeze the living standards of vast numbers of people across the country.

Does anyone doubt that people are feeling squeezed?

The price of food is going up.

The price of gas and electricity is going up.

And the price of getting around, getting to work is going up.

And when there is little money to spend, fairness starts with how you are treated when you spend the money you have.

We need a big change in approach from government.

When big companies use their dominant position to charge too much, we mustn’t be afraid to intervene.

No company that is engaging in predatory behaviour should be too big to challenge.

Take train fares.

This month, some are going up by as much as 11%.

Next year and the year after, some are going to go up by as much as 13%.

And that at a time when so many peoples’ wages are falling.

Some train companies have jacked up prices so much that some season tickets are now a fifth of the average salary in this country.

So much that some parents are giving up jobs because they can’t afford a child minder and a season ticket.

And what are the Government doing about it?

Nothing.

They are afraid to take on the train companies.

In fact they are making it worse.

Just ask a commuter coming into London from Basildon or Basingstoke.

The Government are giving the train companies more freedom to rig the system of fares, so that the busiest routes get the biggest fare increases.

That’s got to change.

I’d make sure the rail companies followed a really simple rule.

The limit for fare increases should apply to every regulated train fare, not just the routes fewer people use.

And it’s not just transport we need change.

Take energy.

Everyone here today who has enjoyed Christmas and New Year with their family has had the central heating on.

But it’s expensive.

And we all know that particularly with the rising costs of energy, there are a growing number of people, many of them elderly, who find it difficult to afford.

We introduced the Winter Fuel Allowance for all pensioners, and we gave specific help to those who were struggling with fuel poverty.
Great Labour achievements.

But what’s going to happen in the future?

As energy gets more expensive, how can we offer the help people need when there is very little money to spend?

The Government has already cut the Winter Fuel Allowance so that it provides less support.

That cut may be something we cannot reverse.

With the economic outlook that we face, we’ll find it hard to do that.

But that doesn’t mean we give up.

Instead our new approach starts by looking at the root of the problem – the way our energy market is letting British consumers down.

We’ve got six main energy companies in Britain.

Competition should be good for consumers.

But the way that the current market works is disadvantaging them.

The tariffs are so complicated at the moment that 80% of people are overpaying for their gas and electricity.

Eighty per cent.

And we know who the most vulnerable are.

Those least able to find the cheapest deal, or to be online.

Often the elderly.

Offering different products is a good thing.

But if those products end up taking advantage of older people – that is wrong.

So I’ll give the energy companies a simple rule.

By all means put different products out there and for different kinds of consumers.

But we will ensure you give pensioners over seventy-five the lowest tariff on offer.

You make it happen, or we’ll put it into law.

There may be less money around.

But for those four million pensioners, Labour can still deliver fairness in these tough times.

So we need action against these vested interests.

But these new straitened times also mean that the next Labour govern-ment will have to have a clear sense of priorities.

In the past, the proceeds of a growing economy gave the last Labour government greater room for manoeuvre.

You could cut capital gains tax and reduce child poverty.

It was easier to avoid tough choices.

But that era is gone.

That doesn’t mean there won’t be political choices about the balance be-tween taxation and spending, and about where our priorities are.

But in these times, with less money, spending more on one thing means finding the money from somewhere else.

When someone wins, someone else loses.

And for Labour, that means there are no easy choices.

That’s why when we say invest money in our young people to make uni-versity more affordable, we also have to be clear that means not giving the banks the corporation tax cut this Government has planned.

Bringing the cap on university fees down to £6,000 would make a real dent in the awful levels of student debt this Government is going to im-pose on families.

Let me give you another example.

Everyone is now joining us talking about the squeezed middle and the next generation.

But it’s not enough just to talk about them.

If you want to make taxes fairer for those on middle and low incomes, your priority can’t be to scrap the 50p rate for those earning £150,000 or more.

In the years ahead, we will be focused on how we can make the right, tough, long-term decisions to help those on lower and middle incomes succeed.

Building long-term wealth creation, tackling vested interests, and being clear about our priorities – that is how we can deliver fairness even when there is less money around.

It’s my agenda for a fairer country and a more responsible capitalism.

The new approach – only Labour can deliver

When I talked about that in my conference speech, you might say I wasn’t overwhelmed with support from other political parties.

Some even said that I was anti-business.

But in the last few months something strange has happened.

Suddenly, the Prime Minister and the Deputy Prime Minister are falling over themselves to say that they too are burning with passion to take on “crony capitalism”.

A Prime Minister who six months ago was gagging to scrap the 50p tax rate now tells us he will keep it for a few more years.

And the same Prime Minister, who said I was anti-business when I called time on undeserved rewards at the top, now claims he’s desperate to stop them too.

I say to the Prime Minister, who are you trying to kid?

No-one is ever going to believe you’re the man to take on crony capitalism.

No-one will believe this is what gets you out of bed in the morning.

But now that you have accepted that this is the battleground of politics, I say:

“Bring it on”.

Because my message today is not simply that Labour can deliver fairness when there is less money around.

But that only Labour can.

Because the core belief of this Prime Minister is that we can solve the problems Britain faces by government getting out of the way.

His answer to the problems thrown up by the economic crisis, is simply more of the same.

My answer is different.

Different to this Prime Minister.

And different too to the previous Labour Government.

My Labour Party is not going to bow to the outdated idea that says that government cannot help, that there are no choices to be made.

My Labour Party is going to show that we can deliver fairness even when there’s less money around.

And in the end, once the savings have been made and the deficit has been reduced, the question is this:

What is your vision for this country?

This Government doesn’t have one.

But we do.

Because we understand that a responsible economy is also a stronger, growing economy.

Our vision is for an economy based on sustainable wealth creation.

Where rewards are more fairly shared.

Where we take on the vested interests that squeeze people’s living standards.

Where we stand up for the hard-working majority with the choices we make.

That is the basis on which Labour will govern.

That is what Labour stands for.

That is where Labour stands.