Category: Economy

The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 29 February 2000.

It is a pleasure to be here today at Newham College, a college which is doing so much to make a reality of lifelong learning for so many people. And to be here in Green Street.

Green Street sums up much of what we are aiming to achieve. Asian entrepreneurs have transformed this street from a drab and declining inner city shopping street to what Stephen and Tony tell me is the most successful Asian shopping street in the country.

I can see the improvements since I was last here six years ago. In partnership with the local council, the environment is being improved and parking problems ironed out. Support for new businesses is being provided in partnership with Newham College here at Barclay Hall. And the result is new jobs for people in Newham.

Later this morning I will visit the site of the new international exhibition centre in the Royal Docks. Eventually, 14,000 people will work there. I am going to see how a partnership between the developers, the local council and the local community is making sure people from Newham can get access to those jobs ­ both in construction and later this year when the centre opens.

Unemployment in Newham is today below 10,000 for the first time in 20 years, but there is more to do. We are determined to make sure that everyone who is able to work has the chance to do so. This is what next month’s Budget will be about.

Modern Budgets are less about how within a sheltered national economy we have an annual dividing up of the national cake, but about how in a harshly competitive global economy we can secure the long-term expansion of the national wealth.

The Britain that will succeed in the global economy will be the Britain that opens up the opportunity for employment and enterprise to all.

Our objective is therefore that no one is left out on the margins, no one excluded from the mainstream of economic prosperity.

And this is the time – when the economy is growing – to bring prosperity to those places and peoples the economy has too often and for too long forgotten.

This is the time to bring jobs and enterprise to those areas of the country that have not yet fully participated in the economic recovery.

Now that, under David Blunkett’s leadership at the Department for Education and Employment, employment has grown by over 800,000 since the Election. And now that more people are in work than ever before, with unemployment at its lowest level in the last twenty years, this is indeed the time to concentrate on encouraging the discouraged back to work.

The problem

I understand that the story of economic improvement is not a story of improvement for everyone, that there are still too many people left out of the British success. And that while more people are in work than ever before, there are still pockets of high unemployment in every region of the country.

I know we must and can do better. I know that for our long term success Britain needs an economy that must work not just for some people some of the time, but work for all of the people all of the time.

And I believe we have an obligation to everyone willing to work and seize opportunity – and to all those left out. That there cannot be real prosperity if thousands are left behind, or real progress if the progress is only open to some. The fact is that Britain is strongest when we all move forward as one, that the best form of economic advance is when all communities advance together.

So our aim must be to build a working economy in every community of the country.

That is why we are publishing today our report on vacancies and employment with proposed Budget measures we are considering so that we can achieve, for every community of Britain, employment opportunity for all.

That is why too, in advance of the Budget, we are launching our enterprise tour round the country – starting today here in Newham – to listen to the voices of people in the regions and communities, to share your hopes, to understand your concerns, to take your advice on the shape of our employment and enterprise initiatives for the years to come.

The opportunity

By toughness in pursuing first stability and steady growth, our policies are delivering new opportunities throughout Britain.

Vacancies are at record levels – around one million vacancies. And whilst the recovery of the late 1980s was largely confined to the south of England, this time, every region in Britain has seen sharply falling unemployment and rising levels of vacancies.

Indeed, unemployment has fallen fastest, and vacancies have risen fastest, in those regions that were hit the hardest in the 1980s.

Since 1990 unemployment has fallen by forty per cent in the north west, and a third in the north east. While vacancies in both areas have risen faster than in the south east. And the improvement in opportunities for the unemployed has been greatest in the areas previously hit hardest. In the early 1990s around thirty unemployed chased every single job centre vacancy in the north east, but now it’s under four – the same as the national average.

Enterprise and jobs for all

In tackling the employment and enterprise problem in the high unemployment areas, we will not return to the old ways which have failed.

Neither an old style benefits approach which has ignored the causes of poverty and unemployment – and not invested in education, training, jobs and business development. Nor a bricks and mortar only approach which, with enterprise zones, targeted subsidies for property development at the expense of help for enterprising local people.

Our initiative is not the old ways of backing simply zones of enterprise and forgetting about the people – it is about backing people of enterprise

We believe that in the new economy we will succeed in creating an economy with employment opportunity for all when we create an economy with enterprise open to all.

I want to see not only the work ethic reinvigorated in every community of Britain but a dynamic business culture which encourages enterprise open to all.

In our inner cities and old industrial areas we need not more benefit offices but more businesses.

And in our new approach to regeneration which is about building on the potential strengths of local people – an approach that is about encouraging new dynamism, not the old dependency, backing success, not the old subsidies, there are three pillars:

first, in every area we want to build an enterprise culture not for the few but open to all;

second, in the high unemployment areas, we want to encourage private investment flows and new businesses;

third, as we create more job opportunities, we want to tackle all the barriers that people face to getting into work.

Let me set out our policies in these key areas.

First, building an enterprise culture open to all

In the past enterprise was open to some but all too often it was a closed circle which excluded too many.

In the Britain I want – a Britain where there is opportunity for all, fairness to all, and responsibility accepted by all – we need enterprise open to all.

How much stronger our economy and our society will be if we see released all the dynamism, creativity and potential of all our people.

So we are introducing measures to boost enterprise skills from school to adulthood.

Let me tell you how this and many other areas will benefit:

• we aim to double to 200,000 the number of pupils benefiting from enterprise courses in our schools;
• we are improving the national network which introduces schools to businesses and has them working together. We will link all 30,000 schools to the world of business;
• – and we are trying to ensure pupils and teachers are given the opportunity for work experience and placements. Already six hundred thousand 14 to 16 year olds are benefiting from work experience and thirty thousand teachers are in work placements.
• And we are now working with business and the world of education to build on this, improving the quality of placements and experience.

In addition, we are launching this spring a national campaign with the message that enterprise is open to all. Our business leaders – including Alan Sugar and Richard Branson – will run a series of enterprise events in schools and colleges. And I am meeting business leaders next week to help plan a campaign that will include our high unemployment areas.

New businesses need advice and mentoring. So working with the Princes Trust and others, we are building a national network of mentors to help start businesses in the poorest areas.

And we are offering new management scholarships – aimed specifically at entrepreneurs from high unemployment areas. From next year, these will give top class business training to our budding entrepreneurs. Three pilot scholarships in London, Manchester and Cornwall are being launched later this year.

Second, encouraging private investment flows to the high unemployment areas

Investment in enterprise is the key to delivering jobs and opportunity for all.

But many enterprises in our least well off communities face special problems in obtaining access to support, advice and finance.

Through our national strategy for neighbourhood renewal and our regeneration programmes, high unemployment communities will have extra support to allow enterprise to flourish.

But we need to do more.

Inner cities and established industrial areas should be seen as new markets with competitive advantages – their strategic locations, their often untapped retail markets, and the potential of their workforce. And so we want to put in place the right incentive structure to stimulate business-led growth in our inner cities and estates and encourage much bigger flows of private investment.

Let me explain how our new Phoenix Fund will be a catalyst for harnessing the
enterprise that is present – but often hidden – in our poorest communities:

• it will fund a new network of 1000 volunteer business mentors, to be up and running by April 2001. These mentors will be people with practical business experience. If you’re just starting out, they’ll help you avoid the basic mistakes that mean so many businesses fail.
• it will fund the development of more ‘incubators’ – workspace where small businesses get accommodation and practical help from experienced managers. Incubators give new businesses the right environment – space to rent, hands-on advice, and a ready-made network of firms also trying to succeed.
• we know that there are other gaps in the finance markets for the poorest communities. So new loan funds will help businesses get the finance they need. And help that will be linked to the training and support, that is often as important as the finance.

I can say today that our new Phoenix Fund will start supporting these new loan funds from the Spring.

And we will work with the Social Investment Task Force, reporting in the Autumn, to look at the next steps in this agenda.

This will include considering:

• tax incentives for investing in community development projects, like incubators, loan funds, and social enterprises;
• for the long term, constituting a permanent investment fund with a continuing remit to help fund a regular wave of new projects.

We are also looking at a new venture capital framework. Our new regional venture capital funds will boost investment in early stage venture capital. I want to see more resources in venture capital funds targeted at our high unemployment areas. The new Social Investment Task Force we have just set up will look into this.

We plan to learn from our experience with these initiatives – and from experience in the US – and to build on what we learn. In particular, we are looking at America’s new private investment companies, which are designed to stimulate major private investment in America’s most distressed areas. And we are interested in developing the potential of our own community finance intermediaries. Monitoring banks’ activities in disadvantaged areas is important also to ensuring that services are available to all.

In July, Stephen Byers and I will be hosting a UK/US conference with Ambassador Lader. After the conference, we will take teams of US business people round some of our most disadvantaged areas, looking at how they can reach their full potential. I want to see us firms over here investing in British inner cities, in the same way they invest in their own inner cities.

But if we are to encourage more inner city entrepreneurs, we also need to get better help to unemployed people wanting to start their own business.

We want to encourage those who start with nothing – and who, in the past, thought they could never reach higher or rise far – and tell them that there is not only a chance to do better, but no limit on their ambitions for themselves and their children.

So I can say that Tessa Jowell our Employment Minister plans that the New Deal will offer help for long term unemployed to become self-employed and to start a business – for the over-50s, up to 3,000 pounds during the first year in business and in work.

So our aim is to make the market more likely to work in places where it wouldn’t otherwise work. To build a network of relationships between the high unemployment areas and the private sector.

Third, tackling the barriers that people face to getting into work

The challenge is not only to promote enterprise and jobs in the poorest areas, but also to tackle the barriers that people face getting into work.

Not only to get jobs to people, but to ensure that people can get into the available jobs.

Today’s Government Report on Jobs has revealed the barriers in the poorest areas – including inadequate matching between employers and jobless people; worries about making the transition from benefits to work; a lack of skills; and racial discrimination.

And as our report today shows – these barriers are preventing people in the high unemployment areas taking the jobs that exist nearby.

In almost every case, the areas of highest unemployment sit alongside, and within travelling distance of, areas where vacancies are going unfilled.

For example in Haringey where the unemployment rate of over 13 per cent is the worst in the country there are over 10,000 unemployed – but across London, with an unemployment rate of 4.5 per cent, there are over 30,000 vacancies unfilled. Knowsley in Liverpool, with an unemployment rate of 12.1 per cent, has over 5,800 unemployed but there are over 10,800 vacancies within travelling distance.

So we are determined to surmount these obstacles to jobs through policies to bridge the skills gap, to match jobs without workers to the workers without jobs, to make work pay, and to tackle discrimination.

Let me set out our policies in each area.

First, to bridge the skills gap, we need to equip the unemployed with all the skills they need for all the jobs that exist.

The new employment zones which David Blunkett is pioneering are targeted on the areas of highest unemployment.

Led by the private sector – groups like Reed in Partnership and Pertemps – or by partnerships between the private, voluntary and public sectors, they will provide innovative tailor-made support and advice for the unemployed to get back into work. These could include:

• providing individually tailored work and training places;
• innovative ways to help people get work related qualifications;
• assistance to the unemployed to start their own businesses – including training, grants for equipment and mentoring.

And they will use new methods of funding, which increase the incentive for providers to get people into jobs.

Over 60,000 employers in Britain have signed up to participate in the New Deal. In the last two years, long term youth unemployment has been cut by three quarters under the Welfare to Work programme that demands responsibility as well as gives opportunity.

The New Deal, first introduced for the under-25s, will be extended to all those over- 25 in every part of the country, building on the principles of the New Deal for 18-24s.

In addition to the self employment option I have mentioned, options will include:

• the offer of a job with a private sector employer;
• work based retraining;
• or college training.

And there are new choices for lone parents to get new skills, go to college and go to work.

From now on, lone parents will not only be able to train for jobs while receiving income support, but they will also benefit from college-based childcare places. All lone parents with children above three will receive notice of these new choices.

Second, we are doing more to match the jobs without workers to the workers without jobs, including:

• creating an Internet-based jobs and learning bank, putting information about jobs, job seekers, careers and learning opportunities on-line;
• expanding the network of touch-screen jobpoints in Job Centres and other locations – so that jobseekers can search not only all job vacancies notified to the employment service, but in addition job vacancies carried by private agencies and newspapers;
• setting up a national network of call-centres – providing a single national telephone number for employers to register vacancies and jobseekers to get information about the jobs on offer. In addition, call-centres will telephone jobseekers to put them in contact with employers who have suitable vacancies; and
• developing links with the BBC and other potential partners to harness the potential of interactive television to link employers and jobseekers.

And, as we extend opportunities to those who are out of work, we will extend the responsibility to take up the work on offer. The informal or hidden economy is now draining billions of pounds in fraudulent benefit claims and unpaid taxes.

This loss of revenues, this incidence of fraud, this waste of resources, cannot be allowed to continue and especially when there are jobs that benefit claimants could take. In the coming weeks, Lord Grabiner QC will recommend his plan of action.

I say to the unemployed who can work: we will meet our responsibility to ensure there are job opportunities and the chance to learn new skills. You must now meet your responsibility – to earn a wage.

And in the Budget, working with David Blunkett, I will outline proposals for action teams that will work in high unemployment areas to:

• identify suitable vacancies within travelling distance of pockets of high unemployment;
• match these vacancies to long term unemployed people within these areas;
• tackle any specific barriers which stop people taking these vacancies.

Over the coming weeks, we will also examine the other barriers to getting into work that people face – including transport costs in areas of high unemployment and the obstacles sometimes caused by a gap between coming off benefits and getting paid for the first time.

Third, to get more people into jobs and to overcome worries about making the transition from benefits to work, we must ensure that work pays more than benefits.

When this Government came to power, with no minimum wage in place and the tax and benefits system unreformed, many of those without work faced an unemployment trap, where work paid less than benefits, and the low-paid in work faced a poverty trap which meant that they faced marginal tax and benefit rates of 80, 90 or even over 100 per cent.

To make work pay we have introduced the national minimum wage. To reward work and encourage job creation we have introduced the new 10p starting rate of tax and cut the basic rate of income tax from April.

The biggest reform of all – the working families tax credit – means that every working family with someone working full-time is guaranteed a minimum income of 200 pounds a week, more than 10,000 pounds a year.

As well as making this significant improvement in the rewards from work, the working families tax credit helps to overcome the biggest barrier preventing a return to work for many mothers – lack of access to high-quality, affordable childcare.

While the childcare disregard in family credit provided no help to parents on the lowest incomes, the new childcare tax credit provides maximum help to lower-paid parents – up to 70 pounds of help for families with one child and up to 105 pounds for families with two or more children in qualifying childcare.

And for lone parents, the two-week benefit run-on, together with the extended payments scheme for housing benefit, means they could gain 300-400 pound on moving into work.

Fourth, we are tackling racial discrimination. We will ensure there is no place for discrimination – that opportunity is open to all.

Under the New Deal for 18-24s, partnerships must ensure equal opportunities for people of ethnic minority backgrounds.

We are asking the equality commissions, working with employers and other organisations, to put together an effective package of support and advice for businesses.

And the public sector must take a lead – by implementing the commitments in the Modernising Government White Paper to set targets for fair representation for people of ethnic minority backgrounds and by putting in place the policies to ensure these targets are met.

Leading in the knowledge economy

But to meet our ambition of enterprise and employment opportunity for all in today’s global economy – where new information technologies are transforming the way we communicate, educate, buy and sell – we must ensure that the opportunities of the new technologies are open to all.

You cannot build a knowledge-driven economy without a knowledge-driven society. Unless everyone in it has knowledge of these technologies and access to them, no economy will have the size and sophistication of markets nor the quality of skills base needed to succeed in this digital age.

So success in the Internet age depends upon an educated economy where the benefits flow not just to some but to all. And we must make sure that the opportunities of new technologies are shared in every community.

As a nation we could stand aside. We could have a society divided between information haves and information have nots. A society with a wired up superclass and an information underclass. An economy geared to the needs of some parts of Britain but not the whole of Britain.

Yet the blessings of new technology give us the means to break down the walls of division, and the barriers of isolation.

By putting the equipment, as well as the opportunity, directly into people’s hands, we can break down the barriers that prevent people realising their potential.

In schools, the extra investment this Government has made is already giving access to the Internet’s new world of knowledge to pupils in two in every three schools across Britain. By 2002 every school – rural and urban, rich and poor, north and south – all of our schools should be connected to that new world of knowledge.

But we are doing far more than simply invest in schools and colleges. We are establishing 1000 new information technology learning centres – in schools, colleges, libraries, in Internet cafes and on the high street.

And we are introducing measures to widen the use of information technology in homes, schools, business, the community – including new opportunities for people to attend free IT introductory learning courses. And making it possible for people to lease computers and software in the new century in the same way local libraries have loaned books in the last century.

Conclusion

In the new Britain we want more enterprise, more investment, better education and preparation for the future in every community. I want Britain to be a world leader in enterprise – and the opportunities and benefits of enterprise to be shared by all regions and all people.

And this is right for business. Business now needs new workers and the workers are right here in the areas left behind. There are new markets here too.

So this is the time to say to every corporate leader in our country, take a look at investing in our high unemployment areas. They offer business new choices, new recruits, and new markets. It is good for business and for growth.

I believe we can work together – Government, business leaders, and local communities – to deliver our aim of enterprise and employment opportunity open to all in every region, every town, every community in Britain.

The speech made by Gordon Brown, the then Chancellor of Exchequer, on 6 March 2000.

It is a pleasure to be in Sunderland today, where over one and half thousand people have moved into work under the new deal, and where the new regional development agency, one north east,  and the economic development team are creating an environment in which job opportunities are rising, more investment being generated, and new businesses created.

With me today are Lord Trotman, former chairman of Ford, who has been looking at our measures to promote enterprise and innovation. And David Irwin, the new head of the small business service – and most important of all local businessmen and women who are the bedrock of the economy.

This month’s budget will set new goals to build a stronger more prosperous more productive Britain.

My theme today is that we not only want to re-establish the work ethic in every community of Britain, but establish a dynamic business culture which opens enterprise not just to the few but to all.

Indeed I believe that in the global marketplace, Britain will best succeed in creating an economy with employment opportunity for all when we create an economy with enterprise open to all.

So in the budget we will promote, support, and encourage the development of that culture through our support for small businesses:

• first, by entrenching stability;
• second, by promoting competition;
• third, by a favourable tax environment and encouraging e-commerce;
• fourth, by encouraging new investment and being on small businesses side as they invest, export, and expand;
• fifth, by special measures in areas of need.

Creating the best environment for new business

There are now 1.3 million small businesses in Britain employing one or more people – around an extra 100 thousand since we came to power.

And the number of high growth start-ups has increased by more than 10 per cent since 1997.

But we want to do better.

Just as we are increasing jobs, we want to increase businesses.

Our policy of enterprise open to all seeks a larger number of small businesses.

Our aim must be to increase the number of growing, new businesses – businesses that will survive and expand rapidly to create new jobs and new opportunities throughout Britain.

I say to the small business community and to those people who want to start a new business, with the measures I am going to announce today, this government will be on your side if you’re starting up, growing, hiring, investing, innovating, exporting, going public.

At every stage, in every way, on your side as you move up the ladder of opportunity.Let me set out the measures we are taking.

First, stability

First, by our toughness, discipline and prudence, we can create the most favourable environment for long term capital investment and business development this country has seen.

Indeed, I want to create the most favourable environment of any of our competitor countries, including not only Europe and Japan, but America.

So our first priority is stability and steady growth.

One of our first steps after the election was to make the Bank of England independent, ensuring that interest rate decisions are taken in the best long-term interests of the economy, not for short-term political considerations.

As important as the creation of a new framework for monetary policy, has been the creation of a new fiscal policy framework, with our two strict fiscal rules to ensure sustainable public finances.

Already we are seeing the rewards of creating a British framework for monetary and fiscal stability. Over the last year and a half inflation has remained within 0.5 percentage points of the government’s target. Underlying inflation is 2.1 per cent – around its lowest level for over five years. And stability has brought the cost of borrowing down to half the levels of the early 1990s.

Second, competition

Second, the whole competitive environment needs to modernise for the new challenges of the economy.

Equality of opportunity does not exist in practice if small businesses or enterprising individuals are denied access to the marketplace and pushed aside by vested interests.

So in future we will be the champion of opening up competition and enterprise to all.

We are asking in every area what we can do to enhance competition and opportunity.

It is time to build on this government’s decision to create a new independent competition authority.

Our new competition act contains new powers to prohibit anti-competitive practices. New businesses and new entrants to markets will benefit from our reforms of the regulatory system.

The government will consider how to scrutinise regulatory bodies and review existing and proposed regulations to ensure that they are promoting – not impeding – new entrants and competitive forces.

For banking and financial services, the financial services authority will now, for the first time, be required to facilitate competition – with a new scrutiny role for the competition authorities – so helping small businesses get a better deal from financial services.

For the planning system, we are introducing a series of changes in planning guidelines that will, for the first time, facilitate the formation of hi-tech clusters – helping to foster dynamic new businesses.

For high tech businesses that need key skills, we will reform the rules on work permits and open them up to essential workers in information technologies and to entrepreneurs.

In sum, Britain open to competition, and at the leading edge of change. Nothing should stand in the way of greater competitiveness in every sector of every industry. There can be no return to the British disease of complacency or clinging to old fashioned attitudes – no protectionism, no misplaced sentimentality towards out-dated restrictive practices – that for too long have held back small businesses.

Third, tax and encouraging e-commerce

Third we seek not only to create the best environment with stability and competition, but the best tax environment for small businesses.

Let me say what we have already done on business tax. We have cut small business tax from 23p to 20p and introduced a new starting rate of tax for small companies of 10p in the pound. Every company making profits of up to 50,000 pounds will benefit.

As a result 270 thousand businesses will benefit from the 10 pence rate.

We have the lowest ever start up tax-rates for business.

And now we have a capital gains tax regime that is more generous to new investors. When we came to office we said we would cut long term capital gains tax to 20 pence after 5 years and to 10 pence after ten years.

In the forthcoming budget we intend to go even further to create the most favourable environment for long term capital investment Britain has seen. I said last November, we would look at cutting the long-term rate of capital gains tax – for example that it could be cut to 22 pence after the first three years, and 10 pence after the first five. Following our public consultation, final decisions will be announced in the budget.

Britain is now the place to start up, invest, grow and expand. By next year, the government will already have cut the average tax bill for these companies by more than 20 per cent, compared to the tax regime when the government came into office. This works out at a cut of 850 million pound in total.

And we are determined that Britain will lead in the next stage of the internet revolution. Our target is that within three years we want to become the world’s best environment for electronic commerce.

Today the internet is revolutionising our access to information – the way we communicate, educate, buy and sell – and from the acquisition and servicing of people to the management of stocks and supplies the internet is transforming the way we do business.

We are not only offering new incentives to high technology companies to lead the internet revolution, but helping existing companies move faster in going on-line.

I want internet costs in the UK to be as low as in the US. By 2002 and with companies now announcing new initiatives this will help us meet our aim of getting 1.5 million small and medium sized enterprises connected – with 1 million trading on-line. This will be backed up by a network of 100 advice centres – “one-stop-IT-shops” for small and medium-sized businesses which offer individually tailored consultancy and advice to help businesses get on-line.

And we are offering discounts for the electronic filing of tax returns:

• in April 2001-02, 50 pounds for either PAYE or VAT returns filed by small businesses over the internet -100 pounds for both PAYE and VAT;
• in April 2000-2001, 10 pounds for each income tax self assessment return filed by taxpayers over the internet.

Fourth, encouraging investment and being on small businesses’ side as they invest, export and expand.

We are creating for Britain an environment for new businesses, high tech business, start up businesses in which our government is on the side of the inventor, the innovator and the risk taker and prepared to share the risk.

We will shortly publish the report of Lord Trotman, former chairman of Ford on measures to encourage enterprise and innovation.

From all corners of the world I want Britain to be seen as the place to start up, invest, grow and expand.

In America the venture capital industry is highly developed. In Britain, I want new encouragement from the venture capital industry for the start up and early stage ventures, where equity will often be more appropriate than bank loans, but where the problem is not so much access to finance but finance on the right terms. And where there is as yet insufficient encouragement to invest.

In advance of the Budget we will examine how we can build on the new network of government- backed regionally based venture capital funds, nine in total, that are designed to encourage investment in early-stage, high technology companies, especially for amounts up to 500,000 pounds.

We are taking forward not only regional venture capital funds but also a auk high technology fund to help early-stage high-technology businesses – who have historically found it difficult to raise money for development. It will provide finance for investment in existing venture capital funds that specialise in the provision of equity-based finance for early stage high-technology firms.

And to foster the innovation on which future success depends, a new r&d tax credit will, from this April, mean that nearly a quarter of new investment in small and medium-sized business research and development is under-written even before a penny profit is made.

We have also been learning from the success of corporate venturing in the USA. Corporate venturing has been vital in silicon valley and elsewhere – providing small high tech firms with a strong capital base, better skills in marketing and management, and a greater market reach.

To promote corporate venturing, we are introducing a new tax incentive. To help the large companies sponsor the development of the small, large companies that invest in growing companies for a specified period will receive a tax relief of 20 per cent, underwriting one fifth of their investment. This 100 million pounds incentive can bring Britain additional investment of 500 million pounds every year.

But Britain needs a culture even more favourable to small business creation and development.

That is why we are setting up the new small business service. It will have three main tasks:

• acting as a voice for small business at the heart of government;
• simplifying and improving government support for small businesses;
• helping small businesses deal with regulation and ensuring small businesses’ interests are properly considered.

The government is determined that the small business service can offer a single electronic point of entry, for all small businesses – providing advice and information, backed up by new call centres.

To ensure this is possible, we are investing 10m from the invest to save budget and considering a further bid under the capital modernisation fund to help provide a single point of contact – putting small business support on-line.

In addition, we want to make it easier for businesses to register with Customs and Excise and the Inland Revenue. I am extremely pleased that David Irwin, the new chief executive of the small business service, can be with us here in Sunderland. He brings his experience as a businessman and entrepreneur here in the north east to the task of ensuring government is on the side of small businesses – not holding businesses back, but helping businesses go forward, grow, expand.

Fifth, special measures in areas of need.

Enterprise matters and we want to expand enterprise to peoples and places too often forgotten.

Inner cities and established industrial areas should be seen as new markets with competitive advantages – their strategic locations, their often untapped retail markets, and the potential of their workforce.

And so we want to put in place the right incentive structure to stimulate business-led growth in our inner cities and estates and encourage much bigger flows of private investment.

Our new Phoenix Fund will be a catalyst for harnessing the enterprise that is present – but often hidden – in our poorest communities:

• it will fund a new network of 1000 volunteer business mentors, to be up and running by April 2001.
• It will also fund the development of more ‘incubators’ – workspace where small businesses get accommodation and practical help from experienced managers.

We know that there are other gaps in the finance markets for the poorest communities. So new loan funds will help businesses get the finance they need. And help that will be linked to the training and support, that is often as important as the finance. Our new Phoenix Fund will start supporting these new loan funds from the Spring.

And we will work with the social investment task force, reporting in the autumn, to look at the next steps in this agenda.

This will include considering:

• tax incentives for investing in community development projects, like incubators, loan funds, and social enterprises;
• for the long term, constituting a permanent investment fund with a continuing remit to help fund a regular wave of new projects.

I want to see more resources in venture capital funds targeted at our high unemployment areas. The new social investment task force we have just set up will look into this.

We plan to learn from our experience with these initiatives – and from experience in the us – and to build on what we learn.

But if we are to encourage more inner city entrepreneurs, we also need to get better help to unemployed people wanting to start their own business.

So I can say that Tessa Jowell our employment minister plans that the new deal will offer help for long term unemployed to become self-employed and to start a business – for the over-50s, up to 3,000 pounds during the first year in business and in work.

And we are introducing measures to boost enterprise skills from school to adulthood.

Let me tell you how this and many other areas will benefit:

• we aim to double to 200,000 the number of pupils benefiting from enterprise courses in our schools;
• we are improving the national network which introduces schools to businesses and has them working together. We will link all 30,000 schools to the world of business;
• and we are trying to ensure pupils and teachers are given the opportunity for work experience and placements. Already six hundred thousand 14 to 16 year olds are benefiting from work experience and thirty thousand teachers are in work placements. And we are now working with business and the world of education to build on this, improving the quality of placements and experience;
• in addition, we are launching this spring a national campaign with the message that enterprise is open to all. Our business leaders – including Alan Sugar and Richard Branson – will run a series of enterprise events in schools and colleges.

Conclusion

In the new Britain we want more enterprise, more investment, better education and preparation for the future in every community. I want Britain to be a world leader in enterprise – and the opportunities and benefits of enterprise to be shared by all regions and all people.

I believe we can work together – government, business leaders, and local communities – to create the best environment for new business, creating new jobs and new opportunities open to all.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 5 April 2000.

I am delighted to join you today at the National Conference of the British Chambers of Commerce. Let me start by paying tribute to the work you do, the contribution you make, and the service you as local and regional Chambers of Commerce give in every part of the country.

Local Chambers of Commerce are not only voices for business and industry in every one of our country’s regions but you also represent the best of British values- our shared belief in hard work, in enterprise, in looking outwards to the world, and you speak up in particular for the hundreds of thousands of medium and small businesses of Britain that are the backbone of our economy.

And it is because I share your ambition, a theme of this conference, that Britain has the best competitive environment for business in the years ahead, that I want to discuss with you today the challenges ahead – how we equip ourselves to meet and master ever more fierce global competition and ever faster change – and the prize for our country – a Britain which with opportunity open to all is enterprising and fair, a Britain where – with higher productivity from all – there is prosperity for all.

Now our first two years as a government demanded that we establish the only sound platform for an enterprise culture in a global economy – economic stability.

In a global marketplace with its increased insecurities and indeed often volatility and instability national economic stability is at a premium, the precondition for all we can achieve, and no nation can secure the high levels of sustainable investment it needs without both monetary and fiscal stability together.

And it was to avoid the historic British problem – the violence of the repeated boom and bust cycles of the past – that we established the new monetary framework based on consistent rules – the symmetrical inflation target; settled well understood procedures – Bank independence; and openness and transparency. And side by side with it and as important, a new fiscal discipline with, again, clear and consistent rules – the golden rule for public spending; well understood procedures – our fiscal responsibility legislation; and a new openness and transparency.

I saw – as you saw – what damage inconsistent and ever changing rules, short- termist and politicised decision making procedures and a lack of openness did most recently in the late eighties and early nineties – the one million jobs lost in manufacturing, the one million businesses that went under, the two million jobs in total that disappeared.

I saw how difficult it was for businesses to plan ahead and make investments for the long term.

And I never want to return to those days when interest rates were above 10 per cent for four years nor do you or I want ever to rerun that day in 1992 when interest rates were 10 per cent when we started work, 12 per cent by 11 am, and by 3pm set to be 15 per cent.

So stability matters to me as it does to you. High inflation and instability hurts businesses as it hurts savers, those like the elderly on fixed and low incomes, and I understand what you understand, that a disciplined and prudent framework of stability is the indispensable foundation for economic success.

Already we are seeing the rewards of creating Bank of England independence and tough fiscal rules.

For the third year running inflation is in line with our target and inflation is at historically low levels. I can tell you that our target of 2.5 per cent will be met this year, next year and the year after that and our forecast is that the economy will grow steadily – by between 2.75 and 3.25 per cent this year, with growth forecast to be 2.25 – 2.75 per cent next year and the year after.

Long term interest rates – once 2 per cent or more above Germany’s – are now at the level of Germany’s, showing that people have confidence in a low inflation future for Britain, a platform from which businesses can now plan for the longer term with greater confidence.

But everybody knows it is not simply monetary stability that matters, but also fiscal stability.

And having imposed new fiscal disciplines we have cut borrowing by £40 billion in our first three years. And we are on course to meet our two strict fiscal rules.

It is because we sought to learn from the political mistakes of the last forty years that this government will maintain its prudent and tough approach. The figures I announced in the Budget mean that we will meet our fiscal rules over the cycle. Indeed that we will meet our fiscal rules even in the most cautious case, on the most cautious assumptions, including the most cautious view of trend growth at 2.25 per cent.

And as I announced in the Budget, I have decided to lock in a greater fiscal tightening next year and the year after than we promised in last year’s Budget and Pre-Budget Report.

We are therefore able to repay debt – last year 3 billion pounds, this year 12 billion pounds, next year 6 billion pounds, and the year after that 5 billion pounds.

And it is from this platform of monetary and fiscal discipline that you have been able to create 100,000 more small businesses employing people, from 1.2 million to 1.3 million, and create in total 800,000 more jobs, with last year 6 billion pounds more in business investment and 13 billion pounds more inward investment into the United Kingdom.

I can say that as a government we are determined to continue to back your efforts by maintaining our disciplined approach: in particular we must all be determined not to make the old British mistake of paying ourselves too much today at the cost of higher interest rates and fewer jobs tomorrow.

Now I understand your worries about the Euro – Sterling exchange rate and the pound’s strength in relation to the weak euro and I welcome the positive response of manufacturing which has increased productivity by more than 5 per cent over the past year.

By making investment allowances for business permanent, by introducing new allowances for any small and medium company adapting to new information technology by inaugurating this month a new R&D tax credit worth 150 million pounds, and by creating a one billion pound regional venture capital investment fund, this month’s Budget has sought to build upon Britain’s stability and Britain’s low corporation tax rates to support manufacturers and exporters. But the policies which I am sometimes asked by some to follow to bring the exchange rate down would risk the very outcome all of you want to avoid – a return to boom and bust.

Indeed I can tell you I am determined to avoid a repeat of the economic instability caused by the succession of ever-changing money targets as we saw in the early 1980s and the dual exchange rate and inflation targets of the late 1980s and early 1990s – when the then government chose in succession £M3, M1, then M0, then when this failed shadowing the Deutschmark, then the Exchange Rate Mechanism, as the economy moved from boom to bust.

The objective of British monetary policy today is clear and unambiguous – to meet a symmetric inflation target with inflation outcomes below target viewed just as seriously as outcomes above target. And it is this consistent long-term approach which is the foundation for stability and steady growth.

There are some who criticise the Bank of England and say inflation can only be controlled at the cost of growth and jobs. And there are of course those who say we should grow by ignoring inflation. But far from choking off recovery, pre-emptive action has allowed us both to meet our inflation target and sustain growth. And because this is what I want us to continue to do, we will support our monetary authorities in the difficult decisions they have to take to ensure that we meet the inflation target and sustain high and stable levels of growth and employment.

Employment opportunity for all

So building on this platform, I believe Britain can now set a new economic ambition, indeed an economic mission, for the next decade: a faster rise in productivity than our main competitors, as we close the productivity gap.

And for that to happen there is a second precondition – reinvigorating the work ethic in every community of our country.

For too long too many people had become accustomed to not working and to a benefits system that failed to make work pay and led to the ‘why work’ syndrome at a cost to the work ethic. For too long historic British virtues – hard work and self improvement – had been drowned out. For too long opportunities in our economy had become detached from responsibilities to take them up.

Now, because we expect everyone who can work to go to work and not sit at home on benefits, we are matching opportunity with responsibility. And with the help of your members who are signed up to the New Deal, youth unemployment is down 70 per cent and long term unemployment down 50 per cent. In the mid eighties as many as 500,000 young people were out of work. In 1997 the figure was 200,000. Now that we have reduced that figure to 50,000 we have a long way to go but already there are more people in work than ever before and unemployment is at its lowest for 20 years.

As I said in the Budget, we will extend the opportunities and the obligations of the New Deal to the long term adult unemployed. And with one million vacancies in every region of the economy our agenda demanding responsibility in return for the extension of opportunity will intensify in the years to come.

As we implement the report of Lord Grabiner QC, create new opportunities for the long term unemployed to work, take action to visit, telephone and coach long term unemployed men and women back into the jobs on offer and introduce tougher sanctions and penalties .

Productivity

And with stability, the renewed importance we attach to work is the precondition for the next stage of our agenda – to bridge the productivity gap with our competitors by opening enterprise to all.

We have some of the greatest companies, some world class sectors, some global champions in whom we do and should take pride. But let us face facts. We have not enough of them and over the last 50 years, productivity growth in Britain has been just over two and a half per cent a year, compared to between three and a half per cent and four per cent among our main European competitors.

I believe that when we look at changes in Britain’s relative economic position over the last century, one of the causes is that there has not been enough competition, dynamism and entrepreneurship in many areas of our economy – and over decades politicians and governments must take our share of the blame. We have to set aside the old sterile battles that posed enterprise against fairness, public against private, management against workforces and deprived us of the national economic purpose we need.

Today we know that in a global economy greater competition at home is the key to greater competitiveness abroad. We know that it is the openness of the economy not its closed nature that is the driving force in productivity growth. And we know that it is the global reach of business, not protectionism, that is the key to dynamism and growth.

Global competition challenges us to innovate, to be better managers, to perform more competitively on the world stage.

So today I want to set out the next stage of our productivity push for the British economy -encouraging more competition, more innovation, more flexibility and more long term investment, sometimes by government getting out of the way.

Sometimes by government positively improving the competitive environment.

And meeting the productivity challenge – bridging the gap with our competitors – must be the priority over the next few years.

Only with rising productivity can we meet people’s long-term expectations for rising standards of living without causing inflation or unemployment.

There are of course those urging us to slow the pace of change or even to pause or turn back. But we cannot and must not slow the pace of economic reform.

Increasingly every good and every service will be exposed to ever more fierce and relentless global competition.

So we must work to remove all barriers to productivity in the economy – with a shared national effort to raise our game.

I want us not only to give more people the chance to turn their ideas into profitable businesses but to be able to say to business in every part of the country this government will be on your side if you’re starting up, growing, hiring, investing, innovating, exporting, going public. At every stage, in every way, on your side as you move up the ladder of opportunity.

In the last year we consulted widely with business and we set out in the Pre-Budget Report measures for radical reform in our capital labour and product markets to expand investment and productivity.

Your views have helped shape policy to raise investment and productivity across the UK.

The British Chamber of Commerce:

• asked for permanent capital allowances – that give greater certainty to businesses wanting to plan ahead and invest;
• proposed capital gains tax reform – removing the barriers to long term investment;
• suggested improvements in corporate venturing tax incentive – helping the large companies that invest in the development of the small;
• called for special help for small businesses as they invested for the future.

The CBI joined you in calling for new permanent capital allowances, reform of capital gains tax and welcomed the introduction of our new R&D tax credit. They also proposed new incentives for employee share ownership – to help small firms recruit and retain the best people.

The Federation of Small Business proposed new incentives to help small firms seize the opportunities of e-commerce and the Internet.

And in the Budget we took positive action in every one of these areas.

And we took action too on transport. Immediate new investment of 280 million pounds in transport, 250 million of it to a ring fenced fund for improving roads and public transport. And more important our 10 year plan to be published this summer which will set out our strategy for modernising transport infrastructure – building on our understanding that instead of the public sector fighting the private sector, public and private sectors can work together in the national interest.

Let me explain my pro-business reforms – first capital gains tax reform. When we came into government and cut the long term rate of capital gains tax for business assets held for ten years or more, capital gains had been fixed at 40 per cent for almost ten years.

Indeed the last government aligned the rate of capital gains tax with the top rate of tax.

You could have excused me for leaving capital gains tax rates as they were. But I decided that an enterprise economy needed new and better rewards for enterprise.

And so in the face of many other priorities – including the public services – I decided to devote substantial funds to radically cutting capital gains tax.

From tomorrow the new capital gains rates for business assets are being cut from 40 per cent to 35 per cent after one year; to 30 per cent after two years; to 20 per cent after three years; and so while for a decade capital gains have been taxed at 40 per cent or above, for investments of four years or more they will now be taxed at 10 per cent.

Having made these decisions I also looked at what I could do to recognize the importance of investors in small and medium sized businesses, and help business angels and I have redefined the help we will give to reward risk.

Today business investors who own between 5 per cent and 25 per cent of a new and growing business do not benefit from the 10p rate. From tomorrow their rate will be 10 per cent for all investments above 5 per cent held for four or more years.

I also wanted to recognize the importance we attach to the growing numbers of Britain’s unquoted companies. So for them all investments held for four years will benefit from the 10 per cent rate.

So stage by stage we are removing the tax barriers to enterprise and creating in Britain the best tax environment for business investment.

To encourage long term investment, the main rate of corporation tax cut has been cut from 33p to 30p, the lowest rate in the history of UK corporation tax, the lowest of all major industrialised countries.

We have cut small business corporation tax from 23p to 20p and introduced a new starting rate of tax for small companies of 10p in the pound. Every company making profits of up to 50,000 pounds will benefit.

Our new Enterprise Management Incentive scheme is tailor made for the new hi-tech companies. To motivate, recruit and reward Britain’s real risk takers, high tech firms recruiting essential personnel will be able to offer share option incentives of 100,000 pounds for up to 15 employees.

We are consulting on a set of proposals to resolve the treatment of employer national insurance in share options.

All of us recognised that innovation is the key to the future success of the new enterprise economy.

Because it is well understood that two thirds of growth is the result of innovation we decided on special new incentives to encourage and reward the inventor and the innovator.

Not only therefore have we allocated 150 million pounds to our new research and development tax credit, supporting nearly a quarter of new investment in small and medium-sized business research and development, but we are honouring the spirit of British invention, facilitating the exploitation of invention and encouraging the commercialisation of invention:

• an extra £1.4 billion in basic scientific research;
• from our University Challenge Fund seedcorn finance to commercialise inventions;
• to transfer technology from the science lab to the marketplace, new Institutes of Enterprise in every region;
• a new tax incentive to help the large companies sponsor the development of the small.

I want to make Britain the best environment for e-commerce and catch up with America as swiftly as possible. You asked us to help e-commerce develop in small and medium sized businesses.

We are introducing 100 per cent allowances for the next three years for any small business buying computers, or investing in e-commerce and new information technology.

And to promote the use of the Internet we will legislate for other tax cuts – a 100 pounds tax cut for electronic filing of tax and VAT returns, and a further 50 pounds tax cut for electronic filing for those paying the Working Families Tax Credit.

And of course the new Small Business Service – acting as a voice for small business at the heart of government; simplifying and improving government support for small businesses; and helping small businesses deal with regulation and ensuring small businesses’ interests are properly considered.

So we are introducing measures to promote investment, enterprise, and innovation.

The challenge for business is to take advantage of the new platform of stability and use these incentives to innovate, grow and expand – which will be particularly helpful to manufacturing and the regions.

The challenge for government is to build on these reforms.

Our productivity push will be stepped up in the coming year. So we will build on the measures we have already introduced with further reforms and incentives for the modernisation of our capital, product and labour markets, measures we will pursue in our constructive approach to Europe as well as in Britain. These will be set out in detail in this November’s Pre-Budget Report.

First competition policy.

Having made the Competition Authority independent and having accepted the main Cruickshank recommendations on banking we will now examine how we can further promote the best competitive environment.

For the professions, the Office of Fair Trading has now set out a detailed remit to examine how best to ensure that the rules of professional bodies do not unnecessarily restrict or distort competition.

I can report today that the remit is to look at:

• rules which restrict entry to certain professions and legal restrictions on the ability of individuals who do not have specified qualifications from offering certain services;
• rules on the conduct of regulated professionals such as restrictions or prohibitions on advertising or price competition;
• and legal requirements which require third parties to use qualified professionals for certain transactions.

For the regulatory system, the government will now consider how to scrutinize regulatory bodies and review existing and proposed regulations to ensure that they are promoting – not impeding – new entrants and competitive forces.

For the planning system, we are not only introducing a series of changes in planning guidelines that will, for the first time, facilitate the formation of hi-tech clusters – helping to foster dynamic new businesses – but we are now ready to examine further necessary improvements.

For the utilities, we will for the first time explicitly require the regulators to promote competition, so that we can continue to get the best deal for domestic and business consumers.

And so we can ensure new entrants get the best deal and that small business is not pushed around by vested interests, the Office of Fair Trading is being given new investigative resources and trust-busting weapons, including the power to impose fines of up to 30 per cent of turnover.

Second greater flexibility and adaptability in the labour market.

Because we recognise that people will have to change jobs more often, that skills are at a premium, that reform has been needed from the 1980s onwards to create more flexibility, we will introduce further reforms to make our labour markets more dynamic and raise standards in education.

Having put new grants for books equipment and staff directly in the hands of head teachers, David Blunkett has indicated that there will be new tests and targets for 12-14 year olds, and new measures to deal with failing schools.

And to back up our extension of Educational Maintenance Allowances we now will encourage more young people from 14 to gain work experience and launch a staying on campaign.

We are investing in new opportunities for small business employees to benefit from learning direct.

Work permits will allow key workers in it areas to be employed in our country.

And to make labour markets work better by giving employees more share in success, the all employee shareholding scheme -coming in this week – will offer the best incentives for employee shareholding we have seen.

While our capital markets are among the best in the world. We must ensure there are no barriers to competition and innovation, that there are no closed circles, that there are no unnecessary constraints restricting investment decisions, and that investors have every opportunity and encouragement to back dynamic small and growing companies.

Our proposed regional venture capital investment funds were unveiled this week by the head of the Small Business Service.

Institutional investors have a vital role to play, controlling around 45 per cent of quoted equity investments. That is why I have asked Mr Paul Myners to head a review of institutional investment.

I can report today that he will look at:

• whether regulatory provisions have unintended effects on investment decision-making;
• how pension funds make their investment decisions, and the role of professional advisers;
• how institutional investors’ results and charges are reported;
• and the incentive effects of the methods used to assess fund performance.

He will report back to me in time for the next Budget.

In sum, making for a Britain open to competition, and at the leading edge of change.

Finally, we must work together in the months ahead to tackle the cultural barriers to enterprise.

I want young people in every area of the country to see that enterprise is genuinely open to all.

And I feel strongly that all of us have a role to play in building this new enterprise culture in every community.

I am very pleased to see the British Chambers of Commerce forming a unique partnership with the CBI and Institute of Directors for the National Enterprise Campaign to be launched on 11 May.

The business ambassadors ready to go into our schools, colleges and communities – 250 ambassadors initially and a target of 1000 by the end of 2001 – will become role models for a new generation of entrepreneurs.

And the new nationwide campaign will build on the steps business and government are already taking to boost enterprise skills from school to adulthood:

Let me tell you that we aim to double the number of pupils benefiting from enterprise courses in our schools;

by improving the national network which introduces schools to businesses we will link all 30,000 schools to the world of business;

and by ensuring pupils and teachers are given the opportunity for work experience and placements – with already six hundred thousand 14 to 16 year olds benefiting from work experience and thirty thousand teachers in work placement – we are now working with business and the world of education to build on this, improving the quality of placements and experience.

New businesses need advice and mentoring. So working with the Prince’s Trust and others, we are building a national network of mentors to help businesses starting in the poorest areas. And we are offering new management scholarships – aimed specifically at entrepreneurs from high unemployment areas.

And Stephen Byers and I will host a major UK-US conference later this year which will bring together leading US and UK entrepreneurs and representatives of leading companies and capital providers to look at further ways we can develop a more entrepreneurial and enterprise focussed economy in the UK.

Stage by stage we are moving from the Britain where enterprise was often seen as a closed circle for the few, to a Britain where enterprise will be open to all.

Opening enterprise to all means locking in the economic stability we are building and creating the most aggressively pro-competition policy in the world.

Opening enterprise to all means being on the side of business as you grow, invest, and seek equity and it means – from school lessons in commerce to new encouragement for the over 50s – opening up every area in the country to enterprise, in some areas replacing the old dependency culture with a new enterprise culture.

Conclusion

So let me conclude.

Now with the lowest corporate tax rates for businesses ever, the lowest ever capital gains tax rates for long term investors, the lowest basic income tax rate – at 22 pence – for 70 years, I believe we are making Britain the place for companies to start, to invest, to grow and to expand.

But only with higher productivity, more enterprise and greater innovation can we meet all the challenges ahead.

My vision is of a Britain where there is not stop go and boom bust but economic stability; a Britain which is business-friendly, and where there is enterprise, opportunity for all; a Britain which rewards the innovator and risk-taker and encourages a new generation of entrepreneurs, a Britain which because opportunity is open to all is enterprising and fair.

And I believe we can achieve most by working not in isolation from each other but government, business leaders, and local communities working together, setting aside the old conflict, mobilising the great British qualities, our belief in hard work, enterprise creativity and fair play, and being open and outward looking to Europe and the world….the best and surest route to prosperity for all.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, at the London School of Economics on 8 May 2000.

Tonight I want to set out our economic and social goals for our country, to detail the long-term strategy we are pursuing to implement them and – as we complete our third year in Government – to review the progress we are making and the next steps – in the coming spending review and beyond – that we intend to take.

To achieve our objectives in a new economy that simultaneously offers greater opportunity and yet threatens greater insecurity, we require a fresh understanding of the rights and responsibilities of the citizen and the reach and role of Government.

For only with a credible and radical view of citizenship as responsible citizenship, and a new view of the state as the enabling state can we fulfill our historic mission as a Government: building a Britain where there is security and opportunity, not just for the privileged few but for all.

Such objectives were, in my view, at the centre of James Meade’s work which we honour with this lecture this evening . His life’s work was to show that in a modern economy efficiency and equality, far from being incompatible, were necessary allies. To achieve these, he sought a modern and fair relationship between individuals, markets and Government. Like us, he wanted to achieve high growth without inflation; he led the way in seeing full employment as efficient and fair; and he saw the best – not just the most basic – public services especially in health and education as the key to security and equal opportunity for all .

The precondition – of high employment, higher living standards and strong public services – is economic stability. And it is by building on a platform of stability and by meeting our national economic goals that we can realise security and equal opportunity not just for those born to privilege but for all:

our prosperity goal – in place of our historic under-performance against other countries, a faster rise in productivity than our competitors, as we close the productivity gap;

our full employment goal – in contrast to years of high unemployment, that we have employment opportunity for all, a higher percentage of people in work than ever before;

our education goal – instead of lagging behind other countries and suffering huge disparities in our educational attainments, we ensure educational opportunity for all. Aiming for 50 per cent of people going into higher education for the first time in our history, and as close as possible to 100 per cent of young people with computer skills;

our anti-poverty goal – in contrast to the rise in inequality and poverty seen over recent decades, that we ensure every child has the best start in life as we halve child poverty in ten years and end it within twenty;

and in addition, the public services goal. Instead of our inheritance, inadequate public services which failed to guarantee opportunity or security for all, we invest for the future in strong public services there when people need them.

Not only the scale of our ambitions for the coming decade but Britain’s legacy of economic under-performance, social division and rising inequality required us in 1997 to reject the short-term, quick fix in favour of a consistent, long-term strategy. So we have never pretended that Britain’s problems could be solved overnight, or that they could be resolved without the need for tough decisions.

Indeed, we will not waiver and must remain single-minded in focussing on our long-term challenges: whether it is reforming labour, capital and product markets to bridge the productivity gap or modernising delivery of public services to achieve our health, education, and anti-poverty gaols

The last few decades teach us to reject the short-termism of flawed quick fixes – policy lurches in face of short-term difficulties – rather than taking the tough decisions to achieve our long-term economic and social aims. It is not by populist quick fixes or gesture politics but by maintaining stability and seeing through long-term modernisation and principled reforms that we will achieve our goals for full employment, prosperity and social justice.

And we recognise most of all – and this is my theme tonight – that our goals cannot be achieved by the old methods of old left or old right.

Indeed, fundamentally, they require a new, modern understanding of the duties of citizenship and the role and limits of Government.

We reject the old left command and control view of Government which mistakenly equated public ownership and a public bureaucracy with the public interest, argued that full employment could be achieved simply by old-style demand management, and suggests that the only answer to poverty is compensating the poor for their situation rather than tackling the underlying causes.

This old and misguided view of the state – irrelevant for a global economy – was accompanied by a failure to place sufficient emphasis on personal responsibility. I believe instead that our determination to combat social and economic injustice should be matched, not by insisting on rights without responsibilities, but by asserting the responsibility of the individual.

So an out-of-date view of the relationship between individual and state led in the 80’s to the right-wing attack on collective provision: their exclusive reliance on markets , their rejection as evil of any kind of state intervention, and the crude dogma of a self-interested individualism which denied there was such a thing as a society.

For the right, the best Government is the least Government. Yet abandoning established responsibilities of Government – saying that there is nothing Government can do – did not improve our productivity performance, but instead led to more people out of work and a cycle of poor skills, worklessness and deprivation.

That has been the legacy of absentee Government and it was to, step by step, tackle these problems of economic inefficiency and social injustice that a new Government was needed and given a mandate in 1997.

That was – and remains – our task, a strong economy and a fairer society, but to do so we require a better understanding of the duties of citizenship and the role and limits of Government.

I believe that as advocates of economic and social renewal, we should reclaim both the ethic of personal responsibility as we stress obligations as well as opportunities, and affirm the ethic of fairness, as we root out economic injustice.

Take our goal of full employment. We know it cannot be achieved by the old right ways – of leaving it wholly to market forces – nor by the old left methods – simply by pulling the macroeconomic levers without tackling underlying structural weaknesses, not least the need for rights and responsibilities in the labour market

And just as we support, in the New Deal, new opportunities for employment but new obligations to seize them, so too elsewhere we support responsibilities accompanying rights:

new opportunities for already an extra 100,000 higher education students, but in our new system of student finance new obligations to contribute when earnings are higher;
new help for mothers – a £300 pound maternity grant in the year their babies are born, but a new responsibility that health checks for the baby are met;
new help for teenagers – with educational maintenance allowances available in return for staying on at school and seeking higher qualifications;
new help for adult learning, a break from the old system of levies or simply doing nothing, with an Individual Learning Account for initially I million adults to which Government contributes but the individual contributes too.
And with the growth of personal responsibility, we seek the growth of corporate responsibility too:

new opportunities in the financial service industries but in return a new requirement from financial services companies for openness and transparency;
for the environment, new incentives for heavy energy users matched by a responsibility, in the climate change levy, to deliver environmental improvements;
and in the global economy, a new responsibility on Governments to be transparent, to be accountable and to agree a dialogue and partnership with the private sector – and in return greater responsibilities on the private sector to contribute to crisis prevention and crisis resolution.

So whether it be individual or corporate responsibility, our call is for a responsible citizenship.

And we understand what the right fails to acknowledge, that there is a public interest in growth, employment, fairness and the best public services, but understand too that this public interest can best be advanced not by allowing the public sector to become a vested interest, but often by the public sector ceasing to be controller or owner and becoming partner, catalyst, sponsor, coordinator. Action that empowers rather than directs.

So our call is not for big Government but better Government, what we might call an enabling state.

And underlying all this is our understanding of the changed world in which we live – a period of great technological advance and opportunity, but also a period of unprecedented restructuring and insecurity – and the reform this necessitates in the relationships between individuals, markets, and Government.

More than ever, we need to help equip people to cope with the insecurities that ever faster change brings.

More than ever, we need to remove the old barriers and let everyone move ahead.

In the new economy where capital and companies are mobile, we must ensure that we offer the right environment and help for business to succeed in every part of Britain, and ensure that we have the right competitive environment, the key to competitiveness abroad.

So in the new economy, the role for Government is neither to obstruct change nor to passively abdicate responsibility for managing the consequences of change that affect working people, but instead equip people and companies to meet and master change.

So it is on this basis – an enabling Government encouraging responsible citizenship in pursuit of opportunity and security for all – that we will continue to take the tough long term decisions on the side of Britain’s hard-working majority – in the spending review, in drawing up the next election manifesto and beyond.

First, stability

The first objective national Governments must have, in a global marketplace, is to maximise economic stability. We have learnt that monetary and fiscal stability is a necessary pre-condition for national economic success. For in a global economy, funds will flow to those countries whose policies inspire confidence. And investors punish mistakes more quickly and more severely than in the past.

Both the old Keynesian fine-tuning, and the rigid application of fixed monetary targets, were policies designed for sheltered national economies and based on apparently stable and predictable relationships which have now broken down in our modern, liberalised and global capital markets.

So our policy has been to set for a global economy a new long-term framework for monetary and fiscal policy that can command new confidence. Its essence is that long-term, open and transparent decision-making procedures which command credibility provide a better route to stability than fixed monetary or exchange rate rules.

That is why, when we came into power in Britain in May 1997, we put in place a radically different monetary framework based on imposing consistent rules – the symmetrical inflation target; settled and well understood procedures – with Bank of England independence; and openness and transparency.

Side by side with this and as important, a radically improved fiscal discipline with, again, clear and consistent rules – the golden rule for public spending; well understood procedures – our fiscal responsibility legislation; and here, too, a new openness and transparency.

Already we are seeing the rewards of creating Bank of England independence and new fiscal rules.

And it is because we sought to learn from the political mistakes of the last forty years that this Government will maintain its prudent and tough approach. So we must all be determined not to make the old British mistake of paying ourselves too much today at the cost of higher interest rates and fewer jobs tomorrow.

I understand the great difficulties that the current fall in the euro is causing for British industry, particularly in manufacturing.

Such a euro-sterling exchange rate cannot be justified by any view of long-term economic fundamentals. But manufacturers who have suffered from the old boom and bust – and the short-term policy lurches which all too often went wrong – would also reject a return to the short- term quick fix which would put at risk the long-term stability which is the foundation for steady growth, investment and job creation.

Raising our productivity

Stability is a necessary pre-condition to deliver our objectives for growth and employment, but it is not sufficient. An economy cannot fly on only one wing. Supply side or microeconomic reform is also essential to raising our productivity.

Some people argue that Governments working with business cannot improve the productivity levels of the economy. I reject this pessimistic view. Of course it is businesses that create wealth, and managers and workforces that create jobs and higher output, but Governments must ensure that the environment within which wealth is created is one that favours competition, not monopoly or vested interests, and that the economy has properly functioning labour, capital and product markets.

And fifty years of economic history from 1945 – marred by a succession of sterile and self-defeating conflicts between state and market, managements and workforces, public and private sectors – taught us the need for national economic purpose , for an end to short-termism and the need for all – industry, the financial community, and Government – to take a long term view:

industry, by investing for the long term;
the financial community, by refusing to resort to the short-termism and stop-go attitudes which have bedevilled us since the war;
and Government, by not only ensuring lasting stability but taking seriously its responsibilities to remove the barriers to productivity and growth.

So while 30 years ago, Governments responded to the productivity challenge with top-down plans, and tax incentives and grants primarily for physical investment, today it is a more complex role for Government – the encouragement of competition, the modernisation of capital and labour markets, and the encouragement of innovation and an enterprise culture open to all, so that British industry-manufacturing and services can close our productivity gap and deliver higher profits, investment employment and growth

First, we are removing the tax barriers to enterprise and creating in Britain the best tax environment for business investment – we have cut small companies? tax from 23p to 20p, introduced a new 10p rate of corporation tax for small companies, and radical reforms to capital gains tax. While for a decade capital gains have been taxed at 40 per cent or above, they will now be taxed at 10 per cent for investments of four years or more .

Second, new incentives to encourage and reward the inventor and the innovator – we are investing an extra £1.4 billion in basic scientific research, and have put in place a new R&D tax credit; our University Challenge Fund is providing finance to commercialise inventions; and to transfer technology from the science lab to the marketplace, we have new Institutes of Enterprise.

And these measures are of special importance to manufacturing, which will secure the biggest benefit from permanent capital allowances, the new R&D tax credit, the 100 per cent allowance for introducing new technology; and the regional funds and the doubling of modern apprenticeships.

Third, because we recognise the sharpest spur to innovation, efficiency and improvement is competition, we are removing the barriers to competition. We have rewritten this country’s out-dated framework of competition law. We have given the Office of Fair Trading new powers and new money to police anti-competitive practices which damage businesses and consumers alike. And now we will be consulting on the next stage, withdrawing ministers from the decision process on merger cases.

Our productivity push will be stepped up in the coming year. We will build on the measures we have already introduced with further reforms and incentives for the modernisation of our capital markets, product markets and labour markets. These will be set out in detail in this November’s Pre-Budget Report.

We are examining how we can further promote the best competitive environment for industry and consumers alike.

For the professions, the Office of Fair Trading is now working through a detailed remit to examine how best to ensure that the rules of professional bodies do not unnecessarily restrict or distort competition.

For banking, having accepted the main Cruickshank recommendations, we will legislate to ensure the UK payments system is open to new competition.

In our capital markets, we must ensure there are no barriers to competition and innovation, that there are no unnecessary constraints restricting investment decisions, and that investors have every opportunity and encouragement to back dynamic small and growing companies in manufacturing and services in all our regions.

Not city and industry working against each other, nor the old battles between private and public sector but city industry and Government together playing their part in promoting industrial growth.

That is why, following the Cruickshank Report, I have asked Mr Paul Myners to head a review of institutional investment to cover all these issues. Institutional investors have a vital role to play, controlling around 45 per cent of quoted equity investments and Mr Myners will report back to me in time for action in the next budget.

In this way we are removing the old barriers of under-investment and neglect that for too long have held our regions back. Working with the new Regional Development Agencies and the Small Business Service, our aim is balanced economic development across all the regions and nations of the United Kingdom – a modern regional policy supporting local innovation, more investment and improved infrastructure.

Having launched a network of regional venture capital investment funds – with a target of one billion pounds – John Prescott and I will, in the Comprehensive Spending Review, announce further measures to strengthen the work of the Regional Development Agencies.

I want Britain to be a world leader in enterprise – and by moving from a Britain where enterprise was confined to a closed circle of the few to a Britain where enterprise is open to all, I want, as this week we launch the National Enterprise Campaign, the opportunities and benefits of enterprise to be shared by all regions and all people. I believe Government, business leaders, and local communities can now work together to achieve this aim.

Employment

When the Government came to power in 1997, we put the restoration of the work ethic at the centre of our social and economic policy, our aim, for the next decade, employment opportunity for all with a higher proportion of people in employment than ever before.

To help achieve this, we are building a new and modernised welfare state, one that in addition to its traditional and necessary function of giving security to those who cannot work, promotes work, makes work pay and gives people the skills they need to get better jobs.

In the last 20 years, unemployment has been the primary cause of poverty in Britain today.

Simply compensating people for their poverty through benefits is not enough, the task must be to deal with the causes of poverty. And the best form of welfare is work. So we have put in place a long-term strategy to help those sections of the population excluded for too long:

the young unemployed;
the long term unemployed;
lone parents;
and the disabled who can work.

Already over 400,000 young people have joined the New Deal and almost 200,000 have found jobs – the vast majority sustained jobs. A further 120,000 have gained valuable experience on New Deal options. And over 70,000 employers have signed up to the New Deal. Since the election, long-term youth unemployment has halved.

And because we have succeeded in this Parliament in removing the old barriers to employing the young, from April next year we will extend the opportunities and the obligations of the New Deal to the long-term adult unemployed – with four options of work, work-based training, work experience including in the voluntary sector, and self-employment. But no fifth option, no staying at home on benefit doing nothing.

The relationship we are forging between rights and responsibilities is firmly rooted in both economic opportunity and individual responsibility.

Instead of being left to draw benefit at a Social Security office, the unemployed who are able to work will sign up to seek work, with the long -term unemployed offered the help of a personal employment adviser.

In Britain, unlike any other comparable countries, unemployment among lone parents is over 50 per cent. Starting nationally from next April, lone parents with children over five will attend work-focused interviews to find out about the new choices on offer: the choice to train for work with a new cash payment of £15 a week on top of benefits for training; the choice of a few hours work a week, with the first £20 of earnings allowed with no reduction in benefit; the choice of part-time work with a guaranteed £155 for 16 hours of work, or the choice of full-time work on a guaranteed £214 a week; and on every rung of this ladder of opportunity there will be help with child care.

Our aim is to create a ladder of opportunity with Government on the side of working people as they seek and find jobs, and in many cases consider self employment and starting a business. And to sustain our goal of full employment, Government needs to ensure work pays.

When this Government came to power, with no minimum wage in place and the tax and benefits system unreformed, many of those without work faced an unemployment trap, where work paid less than benefits, and the low-paid in work faced a poverty trap which meant that they faced marginal tax and benefit rates of 80, 90 or even over 100 per cent.

To tackle this, we needed to combine a sensible and prudent minimum wage with a generous and fair system of in-work support.

And all the measures we have introduced – the 10p tax rate, the 22p basic rate, reform of National Insurance, the children’s tax credit and the most important innovation, the Working Families Tax Credit, are the building blocks of this strategy.

Already, over 1 million people are receiving the Working Families Tax Credit which means that every working family with someone working full-time is guaranteed a minimum income of over 200 pounds a week today, and £214 a week from April next year.

And as a result of all these measures, the family on half average earnings will be £2,600 a year better off in real terms in 2001 compared to 1997 – a rise in living standards of 20 per cent this year alone – the biggest improvement in living standards for a generation.

So while the old tax system simply set a personal allowance that failed to ensure that work paid, and also made thousands pay tax even as they claimed benefits, we are putting in place a new more progressive system that encourages and rewards work.

Instead of a tax system that has rates from 40 per cent to 0 per cent, we now have a tax and benefits system with rates from 40 per cent to 10 per cent and then to as low as -200 per cent at earnings of around £60 a week – for every £ people earn, up to £2 paid in WFTC.

Our next step is to extend the principle of the WFTC. Of course, barriers to work across the workforce are different for different groups- for families with children, those without children, older workers and single people.

From 2003, we will introduce an employment tax credit, paid through the wage packet, available to households without children as well as households with children.

As a first step, we began this April with an employment credit with a minimum income guarantee for over 50’s returning to work.

Full employment is not just about the right to work, but, where there are jobs, the responsibility and the requirement to work. So, as we extend opportunities to those who are out of work, we will extend the responsibility to take up the work on offer. The informal or hidden economy is now draining billions of pounds in fraudulent benefit claims and unpaid taxes.

This loss of revenues, this incidence of fraud, this waste of resources, cannot be allowed to continue and especially when there are jobs that benefit claimants could take. That is why we are implementing the report of Lord Grabiner QC. I can confirm we will legislate to tackle benefit fraud and we will take powers in the Finance Bill for a new statutory offence of fraudulent tax evasion. This will enable the Inland Revenue to prosecute in the Magistrates? Court those who evade their responsibilities.

Education

New opportunities matched by responsibilities are also at the heart of our education policy too. By the end of the coming decade, our goal is not the old 10 per cent of the Sixties, or 20 per cent of the Eighties, but more than 50 per cent of young people entering higher education.

In addition to the investment in higher standards in schools colleges and universities, let me emphasise that we make equal opportunity count by the creation for lifelong learning of Individual Learning Accounts and the University for Industry and the extension of educational maintenance allowances of up to 40 pounds a week in our highest unemployment communities. Higher rates of staying on in education are our aim and in return for young people pursuing higher qualifications, we provide new cash support. Once again the enabling state. In schools, encouraging and rewarding effort.

Child poverty

Our goal is that every child has the best possible start in life – ending child poverty in twenty years and halving it in ten years.

And it is because the scale of the injustice over the last 20 years was so great that we have already taken action to lift 1.2 million children out of poverty and are investing in a new Sure Start programme to give the youngest children in the poorest areas a far better start in life.

In the Child Poverty Action Group lecture next week, I will set out new measures to fight the war against child poverty, showing how we plan to tackle social injustice and extend opportunity in new ways.

First, we recognise the war against child poverty cannot be won by Government and parents alone. It depends on engaging the voluntary community and charitable sector and in both our Sure Start programmes and the Children’s Fund we will devolve power from the national and local Government to community-based organisations

And second, we match new opportunities with new responsibilities – new help for mothers when their babies are born, but a new responsibility that vital health checks for children are undertaken.

Pensioners

Just as we have a long-term strategy to tackle child poverty and have made a start, so too pensioner poverty. As a result of the measures introduced since 1997, we will be spending £6.5 billion more over the Parliament supporting pensioners. We are spending more than we would have spent if we had simply restored the earnings link. And we are spending it in a fairer way – helping the poorest most.

As I said in the Budget, based on forecast rates of inflation, we expect the basic state pension rise in April 2001 to be over 2 pounds for single pensioners and over 3 pounds for couples.

All pensioners benefit from the new winter fuel allowance – raised to £150 for the coming winter – and measures like free TV licenses for the over 75’s and the new minimum income guarantee have helped the poorest pensioners the most.

So our first priority was to tackle pensioner poverty. And, taking these measures together, I million pensioners will be up to £20 a week better off since 1997.

The next stage is to ensure that pensioners are not penalised for their thrift, and therefore to do more for pensioners with modest occupational pensions and small savings.

And later in the year, Alistair Darling will be consulting on a measure for the next Parliament – the new pensioners credit. This will do more for those with modest occupational pensions and savings who should not be penalised for having worked hard all their lives and saved for their retirement.

Spending review

In all these initiatives to meet our productivity, employment, education and anti-poverty goals, our approach is driven by a desire to match opportunity and security and it is underpinned by reform

This approach is at the heart of this year’s spending review as we build public services that make people more secure, something that is even more important in today’s world of rapid economic uncertainty and change.

In the last spending review, we recognised that to achieve these objectives both the role of Government and the management of spending and investment has to change, as we broke from the annual cycle that was short-termist and wasteful. In this review we extend these reforms, further matching new investment with further modernisation.

With our focus on results, we are breaking down the old incrementalism that concentrated on inputs and not results.

With our commitment to cross cutting reviews and decisions to target public spending on our priority policy areas, we are breaking down the crude departmentalism that led to duplication and waste.

With the doubling of public investment, we are breaking from the old focus on consumption alone, as instead we seek to equip Britain for the future.

And with our public private partnerships extended, we are ending the old public private split.

This prudent approach is for a purpose to ensure that department by department, we implement our commitment to extending opportunity for all, investing in our future and creating a fairer Britain.

Already we have shown our commitment to the NHS with the largest ever sustained increase in NHS funding and the intensive review of the NHS which the Prime Minister is leading .

I am convinced that with tough decisions, we can also meet our priorities not just in health but in our other key priorities including additional money for education, criminal justice, transport and tackling social exclusion, in return for reform.

Conclusion

So we are determined to stay the course of reform and modernisation to achieve these ends.

The way forward is through an enabling Government which encourages responsible citizenship and aims for security and equal opportunities for all – the key to lasting change in our country and a stronger fairer Britain.