My Speech to Policy Exchange's Fringe meeting on the 4th of October on rebalancing the economy. I thought I would start with a reminder about why rebalancing our economy is so important. We all know about the economic situation that was left to us by the previous government. A record deficit and an economy heavily dependent on the financial services sector. By 2007 financial services and the City were responsible for 27.5% of all corporation tax receipts. So when the Masters of the Universe became the Masters of Nothing and the previous government discovered that Boom and Bust couldn’t be abolished was it any surprise that tax revenues reduced so dramatically. Is it really a surprise that with an unbalanced economy, built on top of a growing structural deficit, we were left with the largest deficit in the G7? That deficit means that as a country we have to borrow £150bn a year and pay a shocking £120m a day in interest. That is £120m a day that we are paying to overseas governments and banks rather than investing here at home, and is just one of the reasons that we are so determined to eliminate our structural deficit by the end of this Parliament. We’ve led the world with that determination and for taking that leadership the markets have rewarded us. We now borrow at the same rate as Germany despite having a budget deficit the same as Portugal. So should Government be intervening to restore the balance between finance and other sectors? Government definitely has a significant facilitating role, but what is clear is that we shouldn’t be picking winners. Unlike Ed Milliband who thinks the solution to our economic issues is for Government to act as the arbiter of good or bad companies, the Conservative Party is instead engaging with business to put them in the driving seat. Picking winners has been tried in the past and it doesn’t work. What we need to do instead is identify the things we as a country are good at and do all we can to encourage growth in those areas. What we shouldn’t be trying to do is pick the companies that we think will succeed. So what are we good at? We are amongst the best in the world at innovation, design and working out how to translate that innovation into physical products. To see our prowess in the world of innovation and high-tech engineering you only have take a look at Formula 1. Some of the best engineers and teams are from right here in the UK and whilst China may now host a race they’re still a long way from having the right skills and the level of innovation that would lead to a team of their own. At the same time we have the language and the time-zone, both of which makes us an attractive place to do business. But to ensure that we can get that growth in innovation, we have to look out our education system from top to bottom. Michael Gove is entirely right to look at the basic numeracy and literacy in our primary schools and David Willets is correct to be ensuring that our universities are given the freedom to offer what students and businesses want. Take this an example. Just outside my constituency is Jaguar Land Rover’s Design and engineering centre. It’s an amazing place. About 3,000 of the country’s top designers and engineers all working to create the next generation of Land Rovers and Jaguars. When I visited I heard of the issues they can have in finding experts in some specialist engineering disciplines. Too often their, and other organisation’s search exhausts the UK moves on to Europe and ends with themscouring the rest of the world looking for someone with the right knowledge and skills. Ultimately We have to have that knowledge and those skills here in the UK, and we have to make subjects like engineering attractive. It’s not all been doom and gloom for JLR though. They’ve been able to take advantage of the Regional Growth Fund, a Government initiative specifically aimed at rebalancing the economy away from reliance on the South East. But JLR represent businesses at the biggest end of the scale. Growing them alone won’t help us to rebalance. We also need to help our SMEs and our start-ups. To do that I think we need to look over the Atlantic. To the spiritual home of start-ups and technology. Silicon Valley. YouGov’s US offices are based there so it’s an area I visited frequently before I became an MP. For anyone whose never been what’s amazing there is how everyone is either working for a start-up, about to start one or about to move to a new one. The energy and the innovation is palatable, you can almost feel it in the air. So how do we compare to this Mecca of start-ups? Quite well actually. Every year in Silicon Valley there are about 320 start-ups that receive their first round funding, the £1-2m round, and in the UK the figure is broadly similar. But where we fall of a cliff is the next round. The £10-20m round. In Silicon Valley about 350 companies a year secure that funding. Here in the UK it’s about 20. So this is something we should be looking at. Government can look at the incentives for investors, tweak the EIS programme and through relatively small changes keep or even attract that investment to the UK and help grow our innovative businesses. The Green Investment Bank can also help fund businesses working in the important green sectors. At the same time we could look to history, to the success of 3i, which started as a Bank of England backed investment group and is now a globally successful VC fund. There is much talk from the Labour party that we need a new government backed bank to increase SME lending. Now I think that it’s hardly the time for another nationalised bank, but a new version of 3i, operated by business and the banking sector, in conjunction with government, not controlled by Civil Servants could make a real difference in helping businesses grow. As I said before government shouldn’t ultimately be picking winners, but we do need to do what we can to enable winning companies to flourish. We need to get a balanced economy that takes into account everything, digital, manufacturing, services, retail, construction and yes even finance.