Category: Economy

The speech made by Gordon Brown, the then Chancellor of the Exchequer, in Birmingham on 1 November 2022.

It is a pleasure to be here in Birmingham today – a city which is a leading example of urban renaissance in progress.

A city with some of the largest regeneration projects in Europe, with new arts facilities, top quality commercial developments and now your nomination this week for the 2008 European City of Culture.

But here to in Birmingham – one of the country’s most successful cities – we have growth side by side with large pockets of deprivation — and so today I want to talk about the challenges of poverty and unemployment in our urban areas:

The steps we have taken.

The challenges ahead.

The lessons we have learned.

And the new policies I think we must introduce.

And I want to congratulate participants here – councillors, local authorities, public servants, academics, community groups, companies, urban specialists in every field – on the huge advances that have been made in our understanding of, and action on, what makes for quality of life in our urban areas: advances in the study and practice of geography, planning, the built environment, the role of cities in regions and – my theme today – understanding of the economic and social forces at work in poorer urban areas. And I want to thank you for the work you do, the service you give and contribution you make.

I think most of you would agree that 50, 20 or even 10 years ago the idea that the treasury would be interested in issues like public space, the design quality of public procurement in urban areas, devolution, regionalism and social exclusion would be almost unthinkable. But we know that not only are these questions vital to successful, economically vibrant cities but they are at the heart of the agenda for social and economic progress.

And I can genuinely say that I and the Treasury are privileged to be associated with the challenge, led by the Deputy Prime Minister John Prescott, of creating sustainable communities in our towns and cities.

One hundred years ago Winston Churchill, then an economics minister, spoke to an audience in the midlands about the unacceptable gap in Britain between the excesses of accumulated wealth and the gaping sorrows of the left out millions.

And I know that today – as one hundred years ago – we must and can do better.

I know that we cannot talk of real prosperity for all of Britain if thousands are left behind on the margins; that for economic efficiency and social justice reasons Britain needs an economy that works not just for some people some of the time but for all of the people all of the time; and that, learning from the work many of you here have done and the service you have given, we must – to achieve our objective that no area is bypassed and no one excluded from the mainstream of economic prosperity:

Not only continue to make the right long term choices about stability and growth – avoiding the old economic instability of boom and bust so damaging to economic activity in the past;

Not only ensure the finance necessary to back reform and modernisation in local public services – the task of last July’s spending review for health, education, the environment, tackling crime and local government services where – for deprived areas where outcomes are worst and the need for good schools, hospitals and other services is greatest – we have introduced new floor targets to raise the performance of public services;

And not only directly tackle low incomes – with the introduction of the new child and working tax credits – expenditure of £4.5 billion pounds more for low paid workers, families with children and pensioners.

…but we must also, more fundamentally, tackle not just the consequences of unemployment and poverty and its symptoms, but the underlying causes — being aware more than ever before of just how much poverty and deprivation are rooted in low levels of economic activity. People are poor because they have no jobs, no skills for jobs – or if disabled, old or sick are poor because of inadequate provision where they or their families have had historically low earnings from employment.

And second – and this is the main point I wish to make to you today – we must recognise that the old approaches to renewing economic activity which have been less than successful must give way to the new:

Neither an old style bricks and mortar only approach which, for example with the experience of enterprise zones in the 1980s, targeted subsidies for property development, often at huge public cost diverting economic activity from one area to another with no overall economic gain;

Nor the old style benefits approach which gave hand-outs to compensate for unemployment but provided no real help to get people back to work, leaving whole communities abandoned on the dole;

…both of which failed to tackle the causes of unemployment and poverty or secure long-term environmental regeneration and social inclusion. And both of which failed to invest, as we must, in the forces of renewal – education, training, jobs, enterprise and business development

So increasingly the emphasis of our approach will be measures to encourage and foster the indigenous skills, talents and potential of local people and communities.

This focus on the drivers of homegrown local economic activity is also at the heart of our new approach to regional policy.

There have been three phases of regional policy in our country

The first generation of British regional policy – from the 1930s – was designed to support hard up areas with emergency measures.

So the second generation – from the 1960s – sought to encourage inward investment with new incentives.

Now we are moving to the third stage of modern regional policy – creating regional development agencies where the emphasis is not just on encouraging inward investment but also on local innovation and local investment and building indigenous strength with freedom and flexibility for local people to make decisions based on local needs.

So first today I want to put the spotlight specifically on measures to renew economic activity and encourage enterprising communities across the country.

And I will secondly suggest that in modern economic regeneration our aims – high and stable levels of economic growth and employment – can best be met by protecting and enhancing the local environment.

Third, modern economic regeneration with its emphasis on local activity not only means but requires the devolution of power – local people making local decisions about local needs.

And fourth, special new measures will be needed to tackle unemployment, measures that recognise that the problems are not simply in the creation of jobs but in the employability of the unemployed.

First, because our comprehensive solution to urban poverty and unemployment has to involve raising levels of economic activity – more businesses if you like rather than more benefit offices – we should start to see inner cities and old industrial areas not as no-go areas for business or simply “problem” areas but as areas of opportunity: new markets where businesses can thrive because of the competitive advantages they often offer – with strategic locations, untapped resources, a high density of local purchasing power and the potential of their workforce.

In the late 1990s the rate of business creation in our high unemployment communities was one sixth of our prosperous areas so we recognise not only that barriers to enterprise are greater in poor communities – many people, for example, trying to start up businesses face special problems – but also that we need to put in place the right incentive structure to stimulate business-led growth.

So if a key that unlocks inner city regeneration is fostering the potential strengths of local people, we need to systematically tackle all barriers to development: cutting the cost of buying, starting up, investing, hiring, training, attracting equity, and growing.

Renewing the economic base is one of the main aims behind not only neighbourhood renewal funding in 88 areas worth almost £1.9 billion pounds over this parliament and the new deal for communities in 39 areas worth £2 billion pounds over ten years; but the creation of regional development agencies and the small business service; the new encouragement for local authorities in their economic role; and the creation of local strategic partnerships which can do more to drive forward policies on enterprise and employment at the local level.

And it has led to our policies for enterprise in high unemployment areas to help firms start up, invest, hire and expand:

Encouraging investment – through the community investment tax credit, the community venture capital fund, the phoenix fund, and reforms to the small firms loan guarantee scheme;

Help with hiring, employing and training – the special work of the new deal and training programme;

Support and advice for business – the remit of the new small business service;

Cutting the cost of property purchases – with reforms in stamp duty;

And reforming our planning system to make it quicker, more flexible and more responsive.

Central to this is recognising the importance of regenerating the environment, attracting new businesses to our inner cities. And following the recommendations by Lord Rogers – to whom we owe a debt of gratitude – measures to renew local high streets and urban estates have included:

A 150 per cent accelerated tax credit to clean up contaminated land and bring it back into productive use;

100 per cent capital allowances to enable owners and occupiers to obtain full tax relief when creating flats for letting over shops and other commercial premises;

Breaking with flat rate vat by targeted vat reductions to encourage the renovation and conversion of existing properties to bring vacant homes back into use; and

Measures to tackle the crime that hits businesses, particularly retailers, in inner city areas …showing that our objectives for growth and employment are not at odds with but complimentary to our objectives for environmental care and protection.

We talk a great deal about the 1944 economic objectives that governments across the western world have followed – high and stable levels of growth and employment. With the understanding we have now i believe that these objectives are better expressed as high and stable levels of growth, employment and sustainable development.

Good management of public spaces and high standards of urban design are key to creating urban areas that are attractive, sustainable places to live in, invest in and do business in, as John Prescott said. And so too is investing one billion pounds more in housing over the next three years – the most sustained rise in housing investment for 25 years – with an additional four billion pounds for the transport infrastructure, including money for local authorities to provide transport systems that revitalise recently renovated urban areas and improve the quality of the urban environment.

But there is still much more to do.

So, working in partnership with local authorities and regional development agencies, we will designate 2000 new enterprise areas – not the old enterprise zones of the 1980s where property subsidies diverted activity from one area to another, but 2000 new enterprise areas where we encourage home grown economic activity by cutting the cost of starting up, investing, hiring, training, managing the payroll.

In these enterprise areas – the 2000 most deprived wards in the country – I can state that:

First, having already cut stamp duty in these areas, we plan to abolish it entirely with full stamp duty exemption for all business property purchases;

Second, we will give planning authorities powers to create business planning zones that will cut red tape for growing businesses by removing the need to apply for planning permission;

Third, we will offer businesses special investment help through the community investment tax credit – which offers for every hundred pounds of private investment an extra 25 pounds of public investment – and risk capital from the community venture capital fund;

Fourth, we will increase funding for the phoenix fund by £50 million pounds – providing support to thousands of small businesses with special encouragement for women entrepreneurs and entrepreneurs from ethnic minorities

Fifth, the small business service will provide additional help to firms in these areas – a package of advice and support worth at least £2000 for each new businessman or woman;

Sixth, we will make improvements to the business incubation fund to stimulate the availability of flexible managed workspace for start-up companies;

And all businesses will benefit from financial incentives to help them bring their tax and payroll systems on line.

And because we know that to get the deeper and wider entrepreneurial culture we need we must start in our schools and colleges, by 2006 every school pupil will have the opportunity of five days worth of enterprise education, with extra help for schools and colleges in high unemployment areas.

Together, these measures – combined with help for infrastructure and employment – offer substantial additional resources based on a systematic and coordinated attempt to create a stronger economic base in previously run down and high unemployment areas.

And all these measures are underpinned by devolution of power and responsibility – local people making local decisions about meeting local needs – as the way forward.

While it is right for central government to establish clear long term goals, the people closest to the ground in the regions and our local communities should be equipped and empowered with maximum local flexibility and discretion to innovate, respond to local conditions and meet special needs.

That is why the regional development agencies, who have been given responsibility to promote enterprise in their regions, have been given substantial resources and unprecedented freedoms – within a single budget without the old ring fencing – to decide how to use these resources to create the right conditions for local businesses to grow and prosper.

And because it is crucial for city growth strategies to be embedded within wider regional policies for growth and development, we are making regional planning a statutory activity, and setting up regional housing bodies with a single regional housing budget to match policy decisions to the regional housing market, and link policies on housing with decisions on planning, transport, infrastructure and anti-poverty programmes.

Local public service agreements between central government and local councils are also playing their part in regenerating our urban centres.

Across the country, councils are being given additional powers and flexibilities to allow them to tackle national priorities in the way that works best for them locally. Newcastle city council has set a target to regenerate an extra five hectares of brownfield land each year for the next three years – a one third increase. Hammersmith and Fulham are concentrating on working with government agencies to increase job entry and retention rates. And Leeds city council are using their local PSA to close the gap in the educational attainment of Bangladeshi pupils who lag behind those from other communities.

But the true devolution of power goes beyond regional and local devolution to public authorities – it means devolving more power from government altogether, and into the hands of local communities. Giving local people the tools to make improvements to their own neighbourhoods.

Neighbourhood renewal and new deal for communities are excellent examples of policy areas where local communities are in the driving seat; where we know that Whitehall does not always know best. Within a strategic national framework, including challenging floor targets, neighbourhood renewal gives local strategic partnerships both responsibility for deciding what is needed in their area and discretion for deciding how it will be delivered.

And we must also harness the expertise of the private and voluntary sector alongside the public sector. Sure Start, the New Deal, Neighbourhood Renewal, New Deal for Communities, Urban Regeneration Companies – all these programmes are putting these principles into practice.

But any solution based on renewing economic activity in our urban areas must tackle the persistent, often chronic, problems of employment and employability

In the mid 1980s, Glasgow had over seventy thousand unemployed, in Liverpool there were over fifty thousand and in London over four hundred thousand – rising to nearly half a million in the early 1990s — an arithmetic of poverty and deprivation so great that the whole fabric of community life was undermined.

So when we came to power, five years ago, our new programme – the new deal – was not only based on the principle that work was the best route out of poverty and the need for rights and opportunities to work to be accompanied by new responsibilities and obligations to work, but the new deal and our make-work-pay measure – the working families tax credit – was designed to offer special help to people and areas left behind.

Helped by the new deal, and our other employment programmes, 1.5 million more people are in work than in 1997. And I can report that unemployment has fallen furthest, and vacancies risen fastest, in those regions that were hit the hardest in the 1980s. It is a measure of the achievement of the new deal – for which i thank local authorities, voluntary and charity groups and the public services – that in the 1980s 350,000 young people were long term unemployed. Today the figure is less than 5,000. But this is not the time to relax our efforts but to step them up.

Improving employment means improved employability – with more investment in inner city schools, more further education places, a 50 per cent target for young people reaching universities by 2010 with enhanced measures to ensure access, and for the unemployed, literacy and numeracy training and help.

But while more people are in work than ever before, there are still areas of high unemployment in every region of the country, and particularly in our most deprived urban areas where a quarter of the unemployed live.

Our analysis shows that too often side by side with long lists of vacancies are large pools of the unemployed.

In Liverpool, while there are no longer fifty thousand unemployed there are now fifteen thousand people registered as unemployed but eighteen thousand vacancies registered at jobcentres over the last six months. In Glasgow, while there are no longer seventy thousand there are now seventeen thousand unemployed, but over thirty thousand vacancies. Here in Birmingham, there are thirty thousand unemployed and over thirty six thousand vacancies.

Too often in too many areas the long-term unemployed have slipped through the net in these areas

Too often there are workers without jobs side by side with jobs without workers

Tottenham, for example, has 3,500 men, 4,800 adults, unemployed while neighbouring jobcentre plus districts have seen over sixty thousand vacancies in the last six months, with many more in the wider London economy.

Labour shortages exist today in large numbers in retail, hotels and restaurants, transport and communications and in every region

To match the unemployed to vacancies we have introduced intensive area-based initiatives in difficult areas:

– fifteen employment zones

– 63 action teams

Which have helped nearly seventy thousand people into jobs so far.

And building on this, we are piloting the step up scheme in fourteen areas, with another six starting in December — obliging the long-term unemployed to accept a guaranteed job which will offer, instead of the dole, secure waged employment. In London and selected cities, we are matching this new regime with mandatory work preparation courses for the long-term unemployed.

But we must go further and so tackling the barriers to full employment and encouraging the unemployed back to work in our most deprived areas will form a major feature of the pre-budget report.

Because we must break the destructive culture that “no-one around here works” which damages both the areas themselves and people’s chances of jobs, we will provide far more help than in the past in these areas, using the sanctions and opportunities available in the new deal and where necessary taking job advisers onto estates, and extending access to the help available through the new deal and equip the unemployed with the skills they need to get into work, including providing training in literacy, numeracy and other basic skills. But in return we will expect the unemployed to take up the jobs that are available.

In pilot areas, we will look to test a more intensive approach to tackling the worst concentrations of unemployment, street by street, estate by estate. As we insist on unemployed adults and young people getting back to work, we will identify the barriers to their employability, offering them training, advice and sometimes cash help, and linking them to jobs in the vicinity.

This will be an onslaught in favour of full employment and against the unacceptable culture of worklessness that ruined some of our communities in the 1980s and early 1990s as we address the underlying causes of poverty in Britain.

So in conclusion I want to match the radical environmental, social and quality of life improvement that you are all contributing to with three changes, economically, over the next few years in our urban areas that will help enhance the quality of life:

More people moving into jobs, with the work ethic reinvigorated in every community of Britain as we advance to full employment not just in one region, but in every region;

More people able to transfer their ideas and hopes into small firm start ups and growing businesses as we create a Britain of high and stable levels of growth and sustainable development where enterprise is open to all;

And more people taking advantage of education, thus true equality of opportunity in education – life-long recurrent education open to all, regardless of where they live.

I want Britain’s cities to be world leaders.

And just as this conference has already shown that public space, quality of life, the built environment and quality infrastructure can help create world class cities, so too I hope I have shown that new economic and employment policies can contribute to urban regeneration with Britain leading the world in its commitment to full employment and enterprise for all.

More importantly I believe this conference shows that working together – central and local government, business, voluntary organisations and local communities – we can, and will, deliver our aim that prosperity should be not for some but for all in every city, every town, every community in our country.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, in Brussels on 5 November 2002.

We live in a highly globalised world and global movement of capital – essential for the effective operation of the world economy – brings vastly increased opportunities for countries, business and individuals. But with these gains come new challenges – tackling terrorist financing and preventing money laundering, as well as avoiding a situation where people are given the opportunity to evade paying their taxes.

Countries right across the world face problems caused by a minority of their residents who seek to evade the taxes they owe by hiding their money in other jurisdictions — making it harder for Governments to fund the schools, hospitals and public services that their citizens expect, and unfairly penalising the honest taxpayer.

When individuals hide their income from their tax authorities, and make false tax returns, most countries recognise this as a serious offence — one that they are determined to combat individually and collectively.

There are those who argue that there are two equally effective and desirable ways to ensure people pay the right amount of tax on cross border income from savings – and that a withholding tax is as effective as co-operation and exchange of information between countries’ tax authorities.

I believe they are wrong.

At the Helsinki European Council in December 1999 the European Union agreed that all citizens in a Member State of the European Union should pay the tax due on all their savings income. And at the Feira European Council in June 2000, the European Union agreed that the best way to achieve that was exchange of information on as wide a basis as possible.

The previously proposed harmonisation of savings taxes by a withholding tax – a centrally imposed, one-size-fits-all solution – was exposed as an inadequate response to tax fraud.

And we should recall why.

A withholding tax on cross border income flows will almost invariably result in the wrong amount of tax being paid, and in the wrong country.

It will always be the wrong amount unless the tax is levied at the same rate as the individual’s marginal tax rate in their home country.

And it will be paid to the wrong country because authorities will collect tax in the country it is deposited in rather than the country where the citizen is resident. You would need a cumbersome revenue sharing arrangement to get the money back to where it belonged.

Besides which, people who cheat on tax are generally interested not only in evading tax on interest income but in hiding their wealth. Withholding taxes do nothing to address this issue. And they typically have huge avoidance problems.

So without the most pressing reasons, the introduction of new taxes across Europe is in nobody’s interest. It runs counter to the sort of healthy, fair tax competition which benefits countries, business and individual taxpayers.

By contrast, exchange of information delivers the right amount of tax to the right country as the tax authorities in the individual taxpayer’s home country receive the information they need to determine the tax due on the overall income of their residents.

It involves countries exchanging information in respect of non-residents, so that the home country can collect the tax properly due under its laws. Exchange of information does not impact on how a country chooses to tax and deal with its own residents so protects the sovereignty of individual nation states.

Exchange of information enables governments to apply correctly the tax rules voted for by their people, without constraining their capacity to indulge in fair tax competition.

And exchange of information addresses the issue of capital, as well as income, offshore.

So the European Union had compelling reasons for the choice it made.

At Feira, the blunt instrument of tax harmonisation lost and economic reform based on exchange of information won.

But transparency and exchange of information are not only important for tax purposes but are also vital to our efforts to combat money laundering and the financing of terrorism. Since the tragic events of September 11th it has been crucial for countries to work closely together to ensure that criminals and terrorists have no place to hide their funds.

As terrorists and money launderers become more sophisticated, Governments have to respond, making financial systems more transparent and utilising high quality, comprehensive information exchange. Because terrorists and money launderers do not distinguish between tax and non tax issues, we cannot afford to have a loophole that means that information is not exchanged in respect of tax matters.

It is also important that developed countries set an example to the rest of the world. Lack of transparency in developed countries gives cover for smaller, and less developed countries, to engage in illicit transactions – be they related to drug trafficking, or terrorist financing, or illegal arms trading. Developed countries cannot stand up effectively to these countries if they are able to point a finger back.

At Feira we had good reasons for saying that, in a globalised economy, a solution to tax evasion will do best when it extends wider than Europe alone. And so analogous co-operation between tax authorities is being extended at least to key third countries, and to offshore territories with the closest cultural, political and financial links to the EU where EU residents’ savings might already be invested or to which they might be transferred.

The US is one example and there is a long history of close co-operation between America and its tax treaty partners in providing and receiving information and in joint efforts to tackle tax evasion. The US has taken the lead in entering into exchange of information agreements with offshore centres whilst respecting their fiscal sovereignty. And in the aftermath of September 11, cooperation with the US has been – and will continue to be – particularly vital in our efforts to combat money laundering and the financing of terrorism.

The best chance of agreeing an approach that reaches across both America and Europe is exchange of information not a withholding tax. And I also welcome the clear signs of greater transparency, openness and a willingness to co-operate in the fight against tax evasion in the Isle of Man, Jersey and Guernsey – which will undoubtedly help them to develop, diversify and remain competitive in line with international standards.

Switzerland is one of the world’s key financial centres and it ought to remain so. Their professional expertise is exceptional, their economy and political situation sound and stable, and their history of prudence invaluable.

But the Swiss system is unique amongst the world’s leading financial centres in that it allows clients of its banks to be shielded from their own tax authorities.

Clearly there are sensitive and closely linked political and legal issues involved, but their cooperation in helping to combat tax evasion is crucial.

The arrangements the Swiss make for dealing with Swiss taxes to be paid by Swiss residents are clearly a matter for them.
But the arrangements they make for dealing with non Swiss taxes due by non Swiss residents affect us all.

We are not suggesting how the Swiss tax Swiss residents – indeed our whole approach is to uphold the sovereignty of Member States with reference to tax – but we have a deep interest in securing the tax due to Germany, France, Italy, Netherlands, Britain and other countries by German, French, Italian, Dutch, British and other taxpayers who have accounts in Swiss banks and financial institutions.

These are taxes due not to Switzerland but to France, Germany, Italy, the Netherlands, Britain and other countries.

They are our citizens and our taxes and we have not only an interest in ensuring that tax evasion is prevented but ensuring this is achieved by the best and most effective means possible.

So the presence, on the EU’s immediate borders, of a system that fails to recognise the deliberate submission of a false tax return as fraud is an open invitation for abuse and causes us concern.

All we are asking is for Switzerland to exchange information on the savings accounts of EU residents, not their own citizens. And in a world in which the general drive is for cross-border co-operation and transparency, I have no doubt that if Switzerland respected the international consensus in favour of exchange of information it would be better placed than ever to maintain its role as one of the world’s leading financial centres.

I also believe that, as a major world financial centre, Switzerland has a responsibility to lead by example.

The Swiss have taken many positive steps to combat terrorism and money laundering. I welcome that. But tax evasion is not a predicate offence in Switzerland so criminals have the opportunity to avoid legal action if they can persuade the authorities that their activities are to do with tax evasion. And the Swiss have abstained from the OECD’s initiative on harmful tax competition, which promotes exchange of information and transparency for tax purposes.

We recognise that the transition to automatic exchange of information can’t always happen overnight. The EU has agreed that some Member States may need up to seven years to make the transition – and it would not be unreasonable for the Swiss to negotiate for similar arrangements or to make their commitment subject to endorsement by the Swiss people.

But the ultimate objective internationally must be automatic exchange of information.

There is growing recognition around the world in favour of exchange of information. It has been endorsed not just by the European Union but by the OECD in its work on harmful tax competition, banking secrecy and double taxation. And two prominent Swiss academics have themselves criticised the Swiss Government’s approach to banking secrecy.

If we are to have a consistent principle rather than an ad hoc approach for tackling international terrorist financing, money laundering and tax evasion effectively, we need exchange of information across the world.

Developed countries need to act together and set a strong example. And I call upon all countries to help us achieve this goal.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, in London on 5 November 2002.

Can I say first of all what a pleasure it is to be present at these awards for Inner City 100 – these “Oscars for Business”; to thank not only the New Economics Foundation, for their work in developing and running IC100, but the lead sponsors, Royal Bank of Scotland and NatWest; to be able to congratulate all of you who are finalists for the contribution you make both to your community and to the British economy; and to say that Inner City 100 is not just a competition between new high growth firms in our inner cities but a celebration of the dynamism of new enterprise in our inner cities.

Having started last year with only a few entries, Inner City 100 has, with 400 nominations from across the country this year, become the premier showcase for the initiative, innovation and renewal that is a feature of so many of our inner cities today.

And in thanking all of you for what you have achieved – and will achieve – I want, in the minute or two I have, to show how your achievements, your ingenuity and your creativity are building a new Britain of enterprise and initiative.

For just as the work ethic is being restored in Britain I believe we are now engaged in an even greater and more ambitious project – encouraging not just in the most successful or wealthiest areas of our country, but in all areas of our country, the spirit of enterprise.

For too long, in too many areas, for too much of our recent past, enterprise has been seen as something for someone else, for a small elite. People thought the opportunity to start a business or become self-employed was, somehow, not for them.

And so the business league tables I am publishing today show that the rate of British business creation, while higher than in France and Germany, is still only two thirds of that in the United States. And in the best performing areas of the UK, there are ten times the number of firm start-ups than in the worst performing.

The chance to start a business should not depend on your background, contacts or just luck. In every area of Britain I want the enterprising to go as far as their talents and potential can take them. The British economy will do best when enterprise is – and is seen to be – open to all.

We should start to see inner cities and old industrial areas not as no-go areas for business or simply “problem” areas but as areas of opportunity: new markets where businesses can thrive because of the competitive advantages they often offer – with strategic locations, untapped resources, a high density of local purchasing power and the potential of their workforce.

And to achieve all this we must modernise our attitudes to enterprise, embrace a wealth creation agenda and build a new British and European consensus around the importance of enterprise and business success to prosperity and social cohesion.

I want British young people to see businessmen and women as role models in their communities. I want teachers willing to extol the virtues of enterprise and a career in commerce. And because I believe the way forward is to open up enterprise to all who have the talent, I want, even in our poorest communities, men and women to see an expansion of enterprise as the best solution to unemployment and deprivation and there to be no no-go areas for the enterprise economy in Britain.

Most of all I want to entrench a consensus where from the poorest to the richest community, from left to right of the political spectrum, across all countries in Europe, there is a deep and enduring understanding that enterprise is open to all as a force for wealth creation and equality of opportunity, and that enterprise and fairness are not mutually irreconcilable opposites but depend upon each other.

And building on the new Enterprise and Competition Bills, on our capital gains, small business and corporation tax cuts, and our measures to encourage enterprise in schools and colleges, the Pre-Budget Report will contain new measures that open up competition, cut red tape, abolish tax barriers to business creation and, from the classroom to the boardroom, deepen and widen the enterprise culture in our economy.

And working in partnership with local authorities and Regional Development Agencies, we will designate 2000 new Enterprise Areas – not the old Enterprise Zones of the 1980s where property subsidies diverted activity from one area to another, but 2000 new Enterprise Areas where we encourage home grown economic activity by cutting the cost of starting up, investing, hiring, training, managing the payroll.

In these Enterprise Areas – the 2000 most deprived wards in the country – I can state that:

first, having already cut stamp duty in these areas, we plan to abolish it entirely with full stamp duty exemption for all business property purchases;

second, we will give planning authorities powers to create Business Planning Zones that will cut red tape for growing businesses by removing the need to apply for planning permission;

third, we will offer businesses special investment help through the Community Investment Tax Credit – which offers for every £100 of private investment an extra £25 of public investment – and risk capital from the Community Venture Capital Fund;

fourth, we will increase funding for the Phoenix Fund by £50 million – providing support to thousands of small businesses with special encouragement for women entrepreneurs and entrepreneurs from ethnic minorities

fifth, the Small Business Service will provide additional help to firms in these areas – a package of advice and support worth at least £2000 for each new businessman or woman;

And sixth, we will make improvements to the Business Incubation Fund to stimulate the availability of flexible managed workspace for start-up companies.

And because we know that to get the deeper and wider entrepreneurial culture we need we must start in our schools and colleges, by 2006 every school pupil will have the opportunity of five days worth of enterprise education, with extra help for schools and colleges in high unemployment areas. And I call on businesses and colleges to look for ways in which they might help build on the popularity of summer schools to offer enterprise experience to secondary school pupils during the school holidays.

Together, these measures are a concentrated attempt to recreate economic activity as a basis for prosperity in previously run down and high-unemployment areas.

Our aim – to work together to build a wider, deeper enterprise culture where starting a business or becoming self employed is seen as open to all with the talent, ideas and will to do it — so building a strong, dynamic, economic culture not just in prosperous areas but across Britain.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, at the Mansion House in London on 20 June 2001.

Mr Lord Mayor, Mr Governor, My Lords, Aldermen, Mr Recorder, Sheriffs, Ladies and Gentlemen.

Tonight I want to talk about how our new-won and hard-won stability can strengthen Britain for the future: how, building upon that stability and a wider and deeper culture of enterprise, our country can aspire to, and achieve, the best levels of productivity growth.  And how, just as stability and reform can create a more competitive and prosperous Britain, so too stability and reform can create a more competitive and prosperous Europe.

But first, in thanking you for your invitation, let me at the outset pay tribute to the contribution you and your companies and institutions make to the prosperity of Britain, the service you give and the difference you make.

You are leaders in a financial services sector that generates 50 billions of wealth each year for Britain, provides work for over 1 million British citizens, and represents those enduring British qualities of creativity, enterprise, duty and openness to the world.  With the London Stock Exchange, the largest trading centre for foreign equities in the world, and the foreign exchange market the largest and most important in the world, you lead for Britain in the world.

The context for my remarks is the changing global economy.

My theme is that in just a few short years the world has moved from sheltered to open economies; from local to global competition; from national to world wide financial markets; from location, raw materials and indigenous capital as sources of national competitive advantage to skills, knowledge and creativity as what makes a difference.

To rise to these global challenges we have this week announced the next stage in our competitiveness reforms:

The Secretary for Industry Patricia Hewitt has announced a major reform in the competition regime and deregulatory measures to help small business;

The Secretary for Education new measures to improve skills and, under the leadership of Sir Howard Davies, an examination of how schools and business can work to promote the enterprise culture;

The Secretary for Local Government a reform in our physical planning laws;

And I have been able to announce cuts in Capital Gains Tax, in small company Corporation Tax and deregulatory measures including a simplification of the VAT system that will help small businesses.

These reforms reflect the modern role of Government – not to interfere but to enable: by breaking down the barriers to enterprise and ensuring that more people with ideas have access to the finance, technology, advice and skills they need to transform their insights and initiative into business success.

But, as I have said on each occasion I have addressed you in the mansion house, the foundation of all we do is economic stability.

Every time in recent decades when the British economy has started to grow, Governments of both parties have taken short-term decisions which too often have created unsustainable consumer booms, let the economy get out of control and sacrificed monetary and fiscal prudence. And everyone here will remember how quickly and easily boom turned to bust in the early nineties.

So Britain did need a wholly new monetary and fiscal framework that went beyond the crude Keynesian fine tuning of the fifties and sixties and the crude monetarism of the seventies and eighties and, instead, offered a modern British route to stability.

With first, clear policy rules: a symmetrical inflation target and our fiscal disciplines.

Second, clearly established procedures: the Code for Fiscal Stability and, most of all, Bank independence – and here I thank Sir Eddie George the Governor of the Bank of England for his leadership, leadership which we rightly applaud.

And third, an openness and transparency we have not seen in the past.

I believe that as we are tested by events like rising oil prices, exchange rate pressures, and now the US slowdown, our new framework makes us better placed than before to cope with the ups and downs of the economic cycle.

And I can say categorically that we will continue to steer a course of stability and support our monetary authorities in the difficult decisions they have to take to ensure that we remain on track to meet the inflation target and sustain high and stable levels of growth and employment.  We will entrench not relax our fiscal discipline and at all times avoid short termism – a return to the mistaken monetary and fiscal policies of the past.

Not just in Britain but in the euro area a modern route to economic stability is being sought based on a shared recognition that the old fine-tuning cannot work, that in liberalised markets rigid monetary targets cannot on their own deliver stability and that the discretion necessary for effective economic policy is possible only within a framework that commands public and market credibility.

And there is, I believe, also a growing understanding that this credibility depends upon clearly defined and publicly understood long-term policy objectives.

So, just like Britain, the euro area has been establishing a framework for economic stability.

And, as I said in October 1997, in principle British membership of a successful single currency offers us obvious benefits – in terms of trade, transparency, costs and currency stability.  And membership of a successful single currency could help us create the conditions for higher and more productive investment and greater trade and business in Europe.

In 1997, the Government said that, while we recognise the constitutional issue as a factor in the decision, we do not consider it a bar to entry if there is clear and unambiguous evidence of the economic benefits of joining, and if the people have the final say in a referendum.

And that commitment to a referendum – if the economic tests are met – is a promise we made in our election manifesto only a few weeks ago.

The 1997 statement also set five economic tests:

First, sustainable convergence between Britain and the economies of a single currency; second, whether there is sufficient flexibility to cope with economic change; third, the effect on investment; fourth, the impact on our financial services industry; and fifth, whether it is good for employment. These tests are the necessary economic pre-requisites for membership of a successful currency union.

So I reject the view of those who would rule out membership of the single currency on principle. They would refuse to join even if it were in the national economic interest to do so. To rule out membership of the single currency on dogmatic grounds would in my view be damaging for investment, jobs and business generally.

Similarly, I reject those who would urge us to join regardless of the assessment of the five tests.  Such a course would risk repeating past failures, would prejudice our stability and would also be damaging for investment, jobs and business generally.

Our approach is, and will continue to be, considered and cautious – one of pro-euro realism.

Pro-euro because, as we said in 1997, we believe that – in principle – membership of the euro can bring benefits to Britain.

Realist because to short-cut or fudge the assessment, and to join in the wrong way or on the wrong basis without rigorously ensuring the tests are met, would not be in the national economic interest.

Because the Government is determined that we will make the right long term decisions for Britain, we will not take risks with Britain’s hard won stability.

So the assessment as to whether it is in the British national economic interest or not will be comprehensive and rigorous.  It is only on this basis – taking into account all relevant economic information – that the Cabinet will decide whether to recommend membership to Parliament and then to the British people.

Before any such assessment is started, we must, of course, continue to do the necessary preliminary work for our analysis – technical work that is necessary to allow us to undertake the assessment within two years as we promised.

Indeed, since 1997, our strategy has been, as I set out then, to prepare and decide.  This has already involved the publication of the draft national changeover plans and the work of our standing committee with business.

To prepare and then decide is the approach that we will continue to pursue.

Around the future of the euro there is, of course, an ongoing national debate.

But across Europe a debate on the future of Europe is also taking place and Britain must be at the centre of that debate too – a debate on economic reform amidst the challenge of globalisation, enlargement into the East, and the wider Nice agenda to make decision-making in Europe more open, accountable and relevant to the population as a whole.

Because this is a time of great change and challenges for the European Union, every country must not only debate its place in Europe but what kind of Europe we want.

Britain’s relationship with Europe is a question that every generation in this country has had to ask and answer.

And in this generation – for our time – let us remind ourselves why Europe is so important.

It is sometimes said that there are no great causes left.

Being part of Europe is itself a great cause – to have granted to us, in our generation, the opportunity to set aside old enmities and feuds, to contribute to a mission that has helped secure half a century of peace in Western Europe, and now the historic task to cement peace and democracy in Central and Eastern Europe as we have done in the West.

At one time the case for Europe was simply peace. But today the case for Europe must be not only that, working together, we can maintain peace but that, working together, we can maximise prosperity.

And getting the economic future of Europe right matters for Britain because over three quarters of a million United Kingdom companies now trade with the rest of the European Union.  It is a fact that in the 1970s, when we joined Europe, less than 8 billions of our trade was with the rest of Europe.  Today it is £132 billions – half our total trade – with 3 million jobs affected.

So Europe is where we are, where we trade, from where thousands of businesses and jobs arise. And we are part of Europe by geography, by history, by economics and by choice. The channel has always been a route to the wider world, not a moat cutting ourselves off from it. And, as a trading nation, the greater the stability in our relationship with our major trading partners, the greater the benefit to us.

I believe that those who seek to renegotiate the very basis of our membership with Europe, even when they simultaneously protest they do not want to leave, put at risk the stability that is so central to modern business and investment decisions. And I believe that government and business must join together in putting the case unequivocally for Britain being in Europe – a stronger Britain on the basis of a strong and secure relationship with Europe.

And as the great debate on Europe’s future begins, we should not only put the case for Europe but for a reformed Europe – and for Britain leading reform in Europe.

Indeed the more Europe extends its single market, the better it is for Britain and Europe.

The more Europe embraces economic and institutional reform, the better it is for Britain and Europe.

The more Europe looks outwards, the better it is for Britain and Europe.

And the more Europe and America work closely together, the better it is for Britain, Europe and the world.

While the single market encompasses 375 million people today – and potentially nearly 500 million in the future, we have still a long way to go to secure for British business and British consumers the full benefits in commercial opportunities  and consumer prices.

So here the economic reform agenda is clear and challenging: it is to complete the single market in utilities, energy, telecoms and financial and professional services that we have argued not just for action plans which signal intent but timetables which signal deadlines.

Liberalisation in telecoms by the end of 2001 Liberalisation in financial services by 2004 Energy liberalisation – where we continue to push our neighbours.

Potentially too air liberalisation, with reforms to the allocation of take-off and landing slots that introduce market mechanisms to allocate scarce capacity.

And liberalisation in the capital markets – a cause you and I share – promoting more open markets and more choice in pensions, insurance, savings and mortgages for people across Europe is a development from which Britain – because of our vibrant and successful financial services sector – stands well placed to benefit.

And it is to complete the single market and create a level playing field for British companies that we have opposed state subsidies, whether through public expenditures or through discriminatory tax practices, and we have led the way in arguing for the new Code of Conduct group and work by the OECD to tackle unfair tax competition.

In the coming year the economic reform agenda must be pushed forward to enhance labour market flexibility and capital and product market modernisation and reform. We will publish proposals for the Spanish economic reform summit next year and I can confirm that for the Spanish Presidency the Government will be producing a white paper on economic reform in Europe.

A Europe reformed is a Europe that serves Britain and Europe best. As Europe enlarges, the reform agenda is again equally clear – and challenging reform of the CAP and of the budget – which has always been necessary – will become urgent.

Leading up to the IGC of 2004 there is now a debate on the future of Europe where matters not just of economic integration and reform, but of political legitimacy and accountability, are coming to the fore.

Our Government’s vision of Europe, as set out by Tony Blair in Warsaw, is not a federalist one but one in which independent nation states work together to shape the decisions. It is one where there is, increasingly, mutual recognition of national standards and solutions based on exchange of information, peer review and benchmarking rather than the central imposition of “one size fits all”.

It is of a market that must, rightly, have a social dimension, but with subsidiarity or national decision-making the way forward.  It is of tax competition not tax harmonisation.

And as Tony Blair also said, it is of an open and accountable administration subject to the direction of elected ministers, not an unaccountable bureaucracy.

Alliances are being built for reform. The old pressures for tax harmonisation are already now being vigorously pushed back as we argue for the principles of tax competition.  Countries are coming together to insist the European budget is brought under control and following Britain’s initiative on fraud to set up an independent fraud office, there is a need to expose and tackle waste and fraud vigorously. It is now also accepted that widespread reform of the commission must take place.

So here again the reform agenda is clear and challenging. And right across Europe people now clearly want the debate on integration to be complimented by a debate on accountability. And on these issues relevant to the 2004 IGC the Prime Minister will, during the next year, be setting out our Government’s proposals.

I believe that those genuinely committed to advancing Britain’s national interest should support rather than dismiss a practical approach to making the reform agenda work.

And, perhaps most important of all, the new Europe must be outward looking rather than inward looking.

The first post-war reshaping of Europe into a common market took place in the shadow of war as we moved beyond the old conflicts of the past. The second reshaping of Europe is happening not just as a result of internal forces at work within Europe but in response to vast global changes – not least fast increasing trade and capital flows, between Europe and the rest of the world and the growth of transcontinental companies.  In just one decade, direct European investment in the USA has increased more than ten fold, from 20 billion dollars a year to 230 billion dollars a year. And we need only look at the impact of the American slowdown on European economic growth to understand this growing economic interdependence.

I give just one example of the implications for policy. When European finance ministers examined whether to impose a Withholding Tax on savings which – as we argued – would have done huge damage to the bond market here in the City, they were persuaded to opt for exchange of information instead of a European wide tax. They were persuaded that, in the new global economy, tax decisions could not be taken in Europe in a vacuum.  If capital could move freely out of the European Union – to either Switzerland or Liechtenstein or the USA – tax decisions had to be taken with a view to forces at work round the world.

Here again the economic reform agenda is clear and challenging. Rightly, with its initiative to open our economies to the Least Developed Countries free of tariffs and free of barriers, Europe is leading the efforts to get an ambitious world trade round underway. And we lead too in retargeting international aid and development.

Between them, Europe and America together account for 55 percent of world trade, 60 per cent of trade in services and – remarkably – 80 per cent of world wealth. But it is more than commerce that binds us. Increasingly, in this age of globalisation, our national goals are shared international goals, our responsibilities are shared responsibilities, and our opportunities are shared opportunities.

And, together, Europe and America have an even greater responsibility for world stability and growth, not least as they affect developing countries. So we must think transcontinentally as well as continentally.

If someone had said to any of us 20 years ago that Eastern and Central Europe would soon embrace Western Europe, Russia would start to look westwards, and that in Western Europe the old ideological conflicts between state and market would be resolved such that state and markets work together and that there would be a free flow of capital round the world, all of us would have been astounded to the point of disbelief. But we would have been even more astounded if we were told that at precisely that point of opportunity for the world economy, voices would advocate American disengagement and settle for a Europe that looks inwards.

The end of the Cold War should not be the signal for disengagement or parochialism but for a new and enhanced form of engagement between our continents, where shared interests that could yield mutual benefits lead to a reform agenda that is yet again clear and challenging and as ambitious and wide ranging as:

• the elimination of industrial tariffs;
• open skies;
• the mutual recognition of standards across the professional services;
• common rules of competition;
• eliminating barriers to the establishment of European and US companies in each other’s markets;
• and a joint strategy for oil supplies as well as for tackling debt and poverty in developing countries.

In 1988 the Cecchini report looked at the advantages of cooperation for a European single market. We need a Cecchini style report that investigates the benefits for growth, jobs, prosperity and world trade of a stronger trading and commercial relationship between Europe and America.

In forging that stronger relationship, Britain plays a pivotal role.  Britain does not have to choose between America and Europe, but is well positioned as the vital link between America and Europe.

And so this Government believes in a Europe where cooperation is widening and deepening as we extend the single market and embrace economic and institutional reform – not at the expense of the rest of the world but in concert with it.

Mr Lord Mayor, Winston Churchill said that those who build the present only in the image of the past will miss out entirely on the challenges of the future.

I believe that, learning from each other, all of us – businesses and  governments working together – can face the great challenges of today’s economy not by resisting change but by helping people to cope with it; not by standing still but by radical economic reform; and not by protectionism but by promoting open, competitive markets and international cooperation. It makes for a Britain that is outward looking and open to the world, ambitious to succeed, wholly committed to an enterprise culture and determined to be fully equipped to lead in the 21st century economy.