I would like to thank John Wright for all his work as National Chair.  His timely and to the point advice on the support businesses need has been heard loud and clear in my department.  Of course, many congratulations to John Walker on his election to the National Chairmanship last night.  I look forward to working with him in the near, and of course longer term, future.

It's starting to feel like we really are out of the worst of the recession.  The last eighteen months have been exceptionally tough for small businesses and the people they employ.  Anyone managing a business knows that the recovery is still fragile.  We can see a path ahead but it's going to be bumpy.

Still it's been a week of some very good news for the UK's industrial future.  Big new investments from Nissan, Ford and Vauxhall have been secured.  Of course a huge and very welcome new investment from Total in West Shetland which we have worked hard to secure.

Before I say anything else let me be clear who I think we need to thank most for getting us through this recession.  They are the thousands of business owners who bent over backwards to keep their company afloat and their people in jobs. As well as the employees who took cuts in hours or pay to keep jobs alive.  I don't want to minimise for one second how tough it's been here in Scotland and around the UK. But two years ago plenty of people were predictig that the economy was about to fall off a cliff.   That didn't happen because we threw everything we had into saving the banks from collapse and prevent demand in the wider economy falling through the floor, taking jobs and businesses with it.   Of course Oppositions criticise.  That's their job.  But they can't argue about the results. The facts speak for themselves.

Business failure rates are half those of the recession of the early 90s.  Mortgage repossessions are also half. Unemployment as we saw on Wednesday was far lower than many predicted, including the Government itself.  The businesses that we fought hard to defend are the businesses that are going to drive the recovery.  They will provide its backbone.  The recovery can only be driven by private enterprise and investment.  Much more real engineering and less financial engineering – not that Aberdeen is short on real engineering.  A return to the business values of long term over short term.

Small business people are all about building companies, and that ethic really matters.  The ethic of genuine wealth creation maybe not fortunes, but enough to invest, to create a new job or two, and who knows where from there that ethic is absolutely central to our future.  A culture of the fast buck isn't the foundation for anything. 

Now we all know a certain political event is not far off. Business is looking for a clear vision.  First and foremost that means prudent action on the public deficit.  We all agree that in the medium term debt has to come down as the economy recovers. But it is crucial that government strikes the right balance in deciding how and when to cut.  We all know that private demand is still very weak. We also know that every pound government spends helps balance up that weakness.  For thousands of businesses on the ground, it's only public spending that is keeping people in jobs and businesses in contracts. Cut it away before private demand is strong enough to take its place and we put the recovery at risk.

That's why I believe the government has got the balance right. We've committed to halving the deficit in four years and we have a clear plan to achieve it.  We haven't hidden the fact that this is going to involve the biggest change in the public finances in a generation.  Try mentioning my name to a university vice chancellor right now.

It's right that we've capped public sector pay rises at 1%. We will also cut senior civil service costs by 20% over the next three years.  It's also meant targeted tax rises.  I know this is never going to win the government many friends in business. But in tough times it's what a responsible government has to be prepared to do.  However much Her Majesty's Opposition may want you to think they would have done differently, they're not prepared to tell you what they would do in their place.  What really matters here is timing and here the Tories are wrong.  We won't put the recovery at risk.

So I don't have any problem with the coming election being a bit of a referendum on how we back small British businesses to drive the recovery.  That's why next week's budget will have small businesses at its heart.   My benchmark here has always been what makes a difference for that small business on the high street.  By that benchmark, we have a creditable record.  The World Bank ranks Britain the best place in Europe to do business.  Our capital gains and corporation tax remain among the lowest in the world, especially for entrepreneurs.  We're on track to have make three billion pounds in annual savings for business by cutting red tape between 2005 and 2010.  We've committed to a further six billion pounds in savings by 2015.  

We've set out plans to get broadband and 2Mbs into every business in Britain by 2012.

The lending agreements with the banks and the EFG have helped keep credit flowing to SMEs through the downturn. We're looking at what we replace the EFG with after 2011.   We've started setting out plans for more competition for business banking on the High Street.  We want to expand banking at the Post Office network and are restructuring the assets of Lloyds, RBS and Northern Rock to be sold to new players in the market.

We've worked with the FSB over the last year to place 10,000 graduates who would otherwise be unemployed with small and micro businesses as apprentices, which is part of a bigger revival under this government of the British apprenticeship. 

I'm pleased to be able to announce today a big new extension of the BusinessLink and Business Gateway services and their equivalents in Wales and Northern Ireland.  The new system will for the first time make it possible to use one single website to find out everything you need to know to apply for an authorisation or license for almost any services trade from architecture to hairdressing, and to make an application. More than 500 local authorities and bodies will be seamlessly linked into one system.  The FSB has played a huge role in helping us getting this up and running in a way that really works at street level. So thanks for that. 

Let's be clear, Britain needs to build a new growth model for the future. George Osborne says the same.  The only trouble is that his description of this new growth model was an extremely thin two pages.  There were a lot of the familiar mantras  cut taxes, cut spending, cut red tape, get out of the way.  Some of this is necessary and important.  But a bit like the deficit debate, it's more complicated than that. So you get Ken Clarke saying that the recipe for business growth is to cut investment allowances to squeeze a cut in headline corporation tax.  Is that really what we need at a time when we want to be doing everything we can to encourage small business investment?  You get him saying the Conservatives would abolish the English Regional Development Agencies in the teeth of resistance from business, and despite the fact that they've turned every pound of public investment they've made over the last decade into £4 of growth.

It's all a bit 1980s, to be honest and you have to ask, why is the new Tory Growth plan so like every old Tory Growth plan, when the world in which British companies compete has changed beyond recognition since the Conservatives were last in Government?  In a globalised economy we need to think about being pro-business much more as a partnership between business and government.  The skills, infrastructure,science and technology that you leverage into jobs and growth are a critical part of our comparative advantage and they don't come out of the air.  We need to look for new and innovative ways to use the power of government to deliver the frameworks, the skills the science, the opportunities that business needs to drive growth.   A lot of that is about investing in our capacity for innovation, especially for small firms.  The Edinburgh BioQuarter is a good example of how government investment can help innovative young companies break through.

Look at what's happening with wind and wave power around Pentland this week. That's a huge opportunity for SMEs in Scotland and throughout the UK, both in developing the new technologies but also ultimately in the supply chains once they go commercial.  But it's built on public investment in the prototype technology.  In the last month we've seen the UK start to develop the first signs of genuine critical mass in offshore wind and wave power development.  Mitsubishi and ClipperWind, both announced investments in the UK, backed by support from government in finance and skills.

We have a couple of history lessons here, if we want to take them.  The first is the onshore wind industry twenty years ago  where we missed the boat because we failed to nurture the industry at that critical early point in its growth and viability.   The other is out there, North Sea energy.  With a longterm strategic view, with judicious public-private partnership to break down the initial barriers to viability.   When people say…ah, but you're picking winners…I say, when we partner Sheffield Forgemasters to build a new 15,000 tonne press as we did this week one of only three in the world… or when we partner Rolls Royce, or Nissan, or Ford, or Airbus, or GM or Toyota, we are making a pragmatic decision about what it takes to keep and nurture industrial leaders in this country. We've got to be bolder about this. Ditch the 80s dogma.

The key thing that concerns me is not just these global giants committing to Britain, but the supply chains they create made up of tens of thousands of small businesses.  A whole ecosystem of local economies, often invisible beneath the headlines.  My point is that you can get a bit too purist and ideological about keeping government out of the way. What business needs is a government on your side. 

This is a moment for renewing confidence.  We all know there is pain coming, especially for the public sector.  But let's talk about the huge opportunities too.  So you know, my argument is that this should be an election about what it means to be pro-business in a world in which our businesses face unprecedented global competition, in which the demands on them are intense.  That's a debate that has to be defined by business itself, with government backing and boosting it. That's our joint challenge.

Comments and questions from the floor:

When will the government stop the banks acting like loan sharks to small businesses?   After an outline of a specific member's problem the question was asked: Can you personally help with national companies not paying suppliers promptly?  Details of how to make public sector procurement simpler were given to the conference, which do not contrevene EU rules.

Lord Mandelson responded to the delegates in reverse order. On the matter of procurement rules he said he would like to have the details sent to him to follow this up. He said that he had worked on government initiatives and had rolled out three pilots in Whitehall and was seeking agreements to do more across Government. He felt a great deal more could be done and that this issue was one of his particular hobby horses.

On the matter of prompt payment, Lord Mandelson referred to the Small Firms Working Panel on which the FSB sits and how he wanted to achieve better prompt payment by Government to provide a good example. Central Government had done well and in the main was paying within ten days, but he was looking to bring this down to zero days. He acknowledged that things were not perfect in other parts of Government. He was disappointed by the number of national companies signing up to the Prompt Payment Code. He asked to be given the name of the company referred to by thequestioning delegate, outside the conference if wished, and agreed to personally call the Chief Executive and ask for this matter to be resolved. If it is not, then he would not shy away from 'naming and shaming' the company.

On the matter of the Banks, Lord Mandelson reported that the Banks say they are extending more credit and are more flexible than a year ago, and that may be the case, but it doesn't say much. As the recovery strengthens, the supply of credit has to flow better to meet demand. He gives the Banks a very tough time, has heard all the excuses and is concerned not just to maintain pressure to get a change of policy. He is dismayed to hear about the number of good, reliable, trustworthy small businesses that have had a relationship going back years with their bank who are now treated with scorn and disdain. He said 'We will not have it'. The Banks will have to set up a central service at the top of their bank, so that businesses can appeal centrally and at a high level. He acknowledged that some banks have done this, but it had not been widely advertised. The Government was not satisfied, are looking for an alternative and are in the midst of considering different options. He said that loan sharks have no place in the UK banking market place.