George Osborne: Britain must start to save and learn to live within its means

The great question that Britain faces is: how can the whole country live within its means and pay its way in the world? Our current debt crisis is a reflection of the fact that we have not paid it. Our trade balance went from a $7bn surplus in 1997 to a $95bn deficit ten years later. Last year, three quarters of our government debt was bought overseas. Of course righting the global imbalances must be tackled internationally. While the imbalance might be global, that does not mean we should not act at home and ensure we can pay our way in the world. And to do that we need to become more productive. We need nothing short of a second supply-side revolution. We need a stronger and broader economy.

That means a dramatically simpler tax system, and we now have detailed proposals about how to deliver that. Education reform will be vital. That's why we are devoting huge time and effort to ensuring we can deliver changes to the structure and standards of our school and further education system. And we are deadly serious about creating a low-carbon economy, with all the manufacturing jobs that will bring. The low-carbon policy paper we published, which includes plans for a new smart electricity grid and high-speed rail network, is the most coherent and visionary plan produced by any major political party in the world. All these measures will allow Britain to find the economic strength that we need to give confidence in our recovery, to grow our exports once again, and to pay our way in the world.

Expanding our export base is one side of rebalancing our economy. The other is rebalancing how we pay for growth. We need a long-term structural change in the amount we save. When overseas capital dries up, it is only by restoring domestic saving that we can maintain domestic investment. Yet our national savings rate is one of the lowest in the developed world. So, in the long term, we must save more as a nation. And government needs to support savers. That's why we have asked the Government to abolish tax on savings income at the basic rate in the Spring Budget. In the short term, it helps the innocent victims of the recession. In the long term, it encourages saving and eliminates the double taxation of those savings.

Shadow chancellor George Osborne spoke at a Reform conference yesterday