Category: Economy

The speech made by Gordon Brown, the then Chancellor of the Exchequer, in Oxford on 11 January 2000.

Introduction

I am delighted you have invited me to be here with you in Oxford this evening; privileged to have been asked to deliver this lecture in honour of the late Gilbert Murray; and honoured to pay tribute to the world-wide contribution of a movement for change.

From modest beginnings in 1942, the Oxford Committee for Famine Relief became a beacon for social idealism:

• championing freedom from hunger in the 50s and 60s;
• then the hungry for change campaign;
• its development and emergency work extended to more than 70 countries.
• now championing worldwide education for all.

Throughout………..a force for justice in every continent and every country where injustice needs to give way to justice.

Indeed, no British organisation has done more to make us aware of famine relief, of the sheer scale of human suffering, and our duties to the poorest.

Our duties to the 35,000 young children who will each day lose their fight for life because of diseases which can be prevented.

Our obligation to the 800 million men and women in avoidable poverty whose lives today are ruined by hunger and the constant struggle to survive.

Our responsibilities to alter the shamefully blighted existence of more than one billion of the world’s people, today unnecessarily and unfairly trapped in poverty.

And I want to take this opportunity to thank you for the contribution you offer, the service you give, the good you do, the difference you make.

And I am pleased that in the New Year’s Honours list there has been recognition of the quiet, unassuming and unostentatious but highly effective work of Joel Joffe, your Chairman, who throughout the years, from the time he defended Nelson Mandela to his Chairmanship of Oxfam, has been a force for good and change in our world.

Joel, Oxfam as a whole and in particular the late Professor Gilbert Murray, a founding spirit not only of Oxfam but of the League of Nations – whose life we remember and honour this evening – have all worked and acted on the principle that when some are poor, our whole society is impoverished; that when there is an injustice anywhere, it is a threat to justice everywhere; that what – as Martin Luther King said – selfish men tear down, selfless men and women must build anew.

And this is my theme tonight.

If in 1999 the world’s wealthiest governments finally woke up to the urgent need for debt relief in support of the poorest, this year 2000 we must set ourselves a new task: instead of the new vicious circle of debt, poverty and economic decline, we must seek to establish a new virtuous circle of debt relief, poverty reduction and economic development.

The burden of debt, poverty, and economic decline

In nearly three years as Chancellor, as I have visited Asia and Africa, I have seen much of both need and greed. I have had a new insight into the world as it is – and a glimpse also of the world as it can be, and I know we must help.

In Asia I have seen young children who, because of poverty, are destined to fail even before their life’s journey has begun – but my memory is not only of the pain I witnessed, but of the hope shining in their eyes, and I know we must help.

I have been to Africa and seen the unemployment of Soweto, a whole generation of young people denied the chance to earn a better life, yet young men and women who yearn to believe that their new political freedom can finally bring them freedom from want, and I know we must help.

And I have met and talked to Finance Ministers in Asia and Africa. From countries weighed down by the burdens of debt and the consequences of war, with hopes for reconstruction tragically dashed. I have seen too many poor countries forced to spend millions more in their debt interest payments than they are able to invest in the young, the sick, the undernourished and the poor.

John Kennedy once warned us that if a free society cannot help the many who are poor, it cannot save the few who are rich.

But I believe that we start our considerations from something more fundamental – our dependence upon each other.

Martin Luther King’s central insight was that we are each strands in an inescapable network of mutuality, together woven into a single garment of destiny. That we are not here as self-interested individuals sufficient unto ourselves, with no obligations to each other, but we are all part of a community bound together as citizens with shared needs, mutual responsibilities and linked destinies. Not only across our nation but also across our world, our fates and interests bound together.

Environmental disaster, nuclear proliferation, poverty, famine and disease cannot simply be shut off in one part of our world and ignored by the rest. And as individuals and nations we are dependent upon each other for our sustenance and livelihood.

Dr James Stockinger explained our mutual dependence most memorably when he wrote:

“It is the hands of others that grow the food we eat, sew the clothes we wear, build the homes we inhabit. It is the hands of others who tend us when we are sick and lift us up when we fall. It is the hands of others who bring us into this world and lower us into the grave.”

It is precisely because we depend on each other and understand that we have obligations to each other beyond our front doors and garden gates, responsibilities beyond the city wall, duties beyond our national borders that we are called on to feed the hungry, shelter the homeless and help the sick whoever they are and wherever they are.

In implementing the high ideals and public purpose which characterised the creation of the IMF and World Bank, the founders put it very well. As the American Secretary of the Treasury said at the very start of the opening session of the Bretton Woods Conference in 1944:

“Prosperity like peace is indivisible. We cannot afford to have it scattered here or there amongst the fortunate or enjoy it at the expense of others…..

“Prosperity has no fixed limits it is not a finite substance to be diminished by division. On the contrary the more of it that other nations enjoy the more each nation will have for itself.”

In short, prosperity to be sustained has to be shared. Prosperity and morality go hand in hand.

And as we embark on a technological revolution, we must resolve to include in the new opportunities the people and places that the world has too long forgotten. We must strive for a more global social inclusion.

The task we face today is as urgent, if not more than that faced by the founders of the IMF and World Bank more than half a century ago.

Our international goal, cutting in half the proportion of the world’s population living in absolute poverty by 2015, indeed demands a strategy under which debt relief and poverty relief can promote what is most important of all to the poorest countries – sustainable economic development.

The virtuous circle

To achieve our goals I suggest that we need to move beyond the economic and social assumptions of the past two decades and require a new understanding of what makes for sustainable economic development – how we break from the vicious circle of debt, poverty and economic decline and light up a virtuous circle of debt relief, poverty reduction and economic growth.

Those who argued that you could achieve growth and poverty reduction simply by cutting deficits, cutting spending or by introducing an appropriate exchange rate policy have been proved wrong. But so have those who argued that we should provide debt relief and aid with no conditions.

For debt reduction and aid on their own are just not enough. They could simply lead to millions of pounds flowing to prestige projects that do nothing to relieve poverty, or to corrupt regimes and to military excess that destroys rather than builds for a better future.

Only when combined with the right economic and social policies which are essential to sustainable economic development, can debt relief be the catalyst for the true release from poverty.

So what we need is a new approach that recognises the links that form the virtuous circle.

First, we need to deliver the enhanced debt relief.

Second, we need to build the link between debt relief and poverty reduction strategies.

Third, we need to create the new conditions for economic development – stability and a recognition of the roles of the public and private sector – that will allow the participation of all poor countries in the global economy.

And fourth, we recognise that – as at the heart of Oxfam’s campaign – education for all – is central. Because the creation and sustenance of human capital is both a means and an end for the virtuous circle of debt reduction, poverty alleviation and economic development.

First, the importance of debt relief

You can understand from what I have said why I see debt relief as both an economic and moral issue – an economic issue, because a mountain of inherited and hitherto immovable debt stands in the way of economic development in Africa and elsewhere and their full inclusion in world society.

A moral issue, because unsustainable debt is a burden imposed from the past on the present, which is depriving millions of their chance of a future, preventing them breaking out of the vicious cycle of poverty, illiteracy and disease, preventing the investment in what is really necessary – the healing of the sick, the teaching of the children, and the advancement of economic opportunity for those denied it.

The exhibition on the history of debt – “In the Red” – that I have just opened at the Ashmolean highlights both the destructive impact of unsustainable debt but also shows the occasions in history where governments have recognised the need to forgive debt.
In 1997, when we came to power, only one country had passed its decision point in the heavily indebted poor countries initiative.

Indeed this time last year there was no G7 or governmental consensus for our call for deeper, wider and faster debt relief and how it would be delivered.

But spurred on and encouraged by Oxfam and other NGOs, agreement was reached at the Cologne summit in June on the principle of enhanced relief. And last autumn – at the annual meetings of the IMF and World Bank – agreement came on a new framework for financing that strategy.

And we agreed a millennium target not just for new qualifying criteria for enhanced debt relief but for the numbers of countries gaining debt relief, and for the actual amount of debt which will be wiped out, cutting the debts of the world’s poorest countries by 100 billion dollars. And we resolved that when a decision is agreed, countries get the benefits of debt relief immediately, and do not have to wait three years – three more years of misery.

The challenge now is to implement this enhanced relief.

Within a month, the first countries – Uganda, Bolivia and Mauritania – should start receiving funds from enhanced debt relief.

By April, our target is to have decisions to enable around ten countries, including Tanzania, Mozambique and Benin to receive relief.

By the end of 2000, our target is to have more than 25 countries receiving debt relief.

It was crucial that we concentrated first on getting and funding the international agreement on multilateral debt relief. That is worth 100 billion dollars and ensures that additional unilateral relief benefits the poor countries.

And I can say that Britain is the largest committed donor to the Trust Fund which finances the debt relief. And it was amongst the five countries that provided the additional $250 millions since October 1999 which allowed the initiative to proceed.

Having secured the international agreement and, critically, the agreement that money from debt relief must go to poverty relief, it was right for Britain to take an extra step, to eliminate the burden of all remaining bilateral debts owed to the government by the poorest nations that receive relief under the enhanced HIPC initiative. And let me explain to this audience that I mean all the debts – those treated under the HIPC initiative, known as pre cut-off debt and also post cut-off debt. And we will ensure that this relief is genuinely additional.

Just before Christmas – with David Bryer of Oxfam present at a seminar at no.11 – I met the Ugandan Financial Secretary and he told me not only that we were right to insist that debt relief led to poverty relief but the additional 100 per cent relief would enable every primary school child in Uganda to be educated in a classroom with a roof above their heads and halve the pupil/teacher ratio in Ugandan schools from the unacceptable 100-1 of today to 50-I in three years time.

For me this is the test of effective debt relief – schools with enough classrooms, classrooms with enough teachers and teachers and children with books to study with.

That is not just a promise from the Ugandan government ­ it is a condition of all countries receiving debt relief simply because we want to ensure that the money saved in all these countries goes to education, health, and poverty reduction not to corruption, bureaucracy or buying military arms.

So our pledge of 100 per cent debt relief is a pledge for a purpose. I hope it will encourage other creditor countries to follow this lead.

The nominal amount of this additional debt relief from Britain is £640 million due over the next 20 years. This is in addition to the cost of writing off debt under the enhanced HIPC initiative and our contributions to the World Bank Trust Fund and IMF Trust Fund. It brings our debt relief package, including past overseas development assistance loans, to a total of five billion pounds.

We have shown we are willing to go still further.

For countries weighed down by the double burden of debt and recovering from the ravages of war, we have proposed special post-conflict assistance. For countries disfigured by natural disasters, like Honduras and Nicaragua last year, we and others have proposed new arrangements. The special three year moratorium on debt interest to Paris Club creditors, and a Trust Fund to meet debt service payments to international financial institutions.

So in addition to the write-off of debt, we are prepared to take special action to tackle worsening economic and social conditions where we can.

Second, poverty relief

I believe that the last year has seen a major and decisive shift in international policy towards the needs of our poorest countries and citizens.

What you and other public spirited organisations have demanded over long years of campaigning – a shift from “structural adjustment” to “sustainable development” – has been agreed as a principle. And before I discuss the significance of its detail let me just summarise the extent of the change.

When, at the Annual Meetings of the IMF and World Bank in September 1999 the Interim and Development Committees met jointly for the first time to discuss poverty questions, they agreed – also for the first time – that the development of anti-poverty policy and economic policy will in future go hand in hand.

They agreed, for the first time, that civil society in the poorest countries will engage in and own their own poverty strategies. In other words, anti poverty strategies that will not only be country-driven but community driven – developed transparently with broad participation of civil society, key donors and regional institutions.

But most of all they agreed for the first time that both economic and social strategies must be clearly linked to the international development goals of halving world poverty by 2015 with measurable indicators to monitor progress.

So the IMF and the World Bank are now charged to demonstrate how macroeconomic reform, policies for sustainable development, and anti poverty programmes can together bring less poverty and more growth.

The key is the decision to transform the enhanced structural adjustment facility (ESAF) into the poverty reduction and growth facility (PRGF); for a joint framework for future IMF and World Bank concessional operations in low income countries; and the primary vehicle for closer World Bank-IMF collaboration in IDA (international development association) and ESAF/PRGF countries. And we must meet the challenge for change in culture and operations at the IMF and World Bank that this requires.

So our task from this year is to move from noble resolutions to detailed implementation, from agreement on change to delivering that change effectively.

Effective delivery requires policy measures and action in three key areas:

• first, measures to build skills and capacity of individuals in the governments and civil society of these countries to implement and participate in the process;
• second, a partnership with Oxfam and other NGOs on the ground, in as many countries as possible, to provide support and objective monitoring; and
• last vigilance in ensuring that resources are not wasted on unproductive expenditure.

For the poverty reduction strategies to be genuinely country-driven, and be developed transparently with the broad participation of civil society, many if not all of the countries receiving debt relief need to build the skills and capacity of their governments and society. I would therefore propose:

• first, an internationally co ordinated technical assistance programme of capacity building for the delivery of poverty reduction strategies in the countries that require it; and
• secondly, ensuring that all donor aid programmes in HIPCs and other poor countries, for whichever sector – health, education, infrastructure projects – provide support for and recognise the importance of capacity building and skills transfer.

This would be one of the most worthwhile investments in empowering the poorest to build a better future for themselves.

Clare Short has already demonstrated Britain’s commitment to capacity building. For the last two years we have helped countries in delivering their programmes through advice, technical assistance, sponsorship of forums. For example:

• a HIPC capacity building programme which enables secondment of experienced personnel from one HIPC country to another, recognising and sharing some of the unique skills and experience that can only be developed within countries that face these challenges everyday;
• in Uganda, help with putting in place a framework for consultation with the poorest sectors of society, which will ensure Uganda’s poverty reduction strategy reflects the realities of poor people’s lives;
• in Ghana and Malawi, support for the development of medium term expenditure frameworks which look systematically at government resource allocations.

But Britain, other donors and the IMF and World Bank cannot work effectively alone. So second we need a partnership with NGOs such as Oxfam who have a greater presence in the countries and often a keener insight into the daily challenges faced.

You can provide vital assistance in creating stronger civil society and providing an independent and objective monitor of progress – both of the results and of the integrity of the process. This is crucial particularly for the early cases that will come up in the next few months as they will set the examples of best practice. In order to make the best use of resources, I would urge that all the NGOs adopt countries to work with on implementing the poverty reduction strategies.

And lastly, if anti-poverty strategies are to work and secure the resources they need, we need to be far more vigilant in ensuring that resources are not wasted in unproductive expenditure, particularly on destructive military purchases.

This is not just an obligation on the part of the recipients of debt relief but also on the part of lenders and exporters of richer nations who benefit from this expenditure.

We require a new resolve from poor countries to pursue anti poverty strategies, to be more transparent, and as I will suggest, to follow certain codes and principles in macro economic and social policy. These obligations require great effort and will on the part of the poorest nations. The least we can do from our position of wealth, is fulfil an obligation not to benefit from burdening these countries further.

While we were pursuing agreement on the HIPC initiative, Britain banned export credits for unproductive expenditure in the forty one highly indebted poor countries for a two year period and did so unilaterally. This ban has now expired. But the problems faced by these countries as we all know will take much longer to resolve. It is right that we announce today that Britain will, once again unilaterally, extend this ban to help ensure these countries are released from poverty.

But HIPCs are of course not the only poor countries in the world. There are others as poor and, while they do not have a historic debt burden, can ill afford to take on new burdens of commercial loans for unproductive expenditure. We will therefore also widen the ban to all countries defined by the World Bank as “IDA only” – poor countries who can only borrow from the world bank on highly concessional terms – currently a further 22 countries.

Britain’s export credits will only support productive enterprise that assist social and economic development and thus reduce poverty. Britain’s ban will of course only fully achieve its aim if it is applied by all exporting countries. Just as our pledge to unilaterally write off all debts due from HIPCs was a pledge with a purpose – to call on others to follow – so is this pledge. I urge all countries to ban export credits for unproductive expenditure in all IDA only countries and join us in banishing forever the spectre of unproductive unpayable debt.

Third: conditions for economic development

But if we are to break from the cycle of debt poverty and decline, we must see the central importance of economic development – and the necessity of new approaches to securing it.

We must restore to the heart of economic policy the high ideals and public purpose which made us seek for every country from 1945 the highest sustainable levels of growth and employment.

Let us remind ourselves that in macro-economic policy our aim is not only to control inflation, important as that is, but based on a platform of stability to pursue policies for growth and employment for all countries which will increase living standards, including improved health and education.

And let us remind ourselves that we seek equitable development which ensures all groups in society, not just those at the top, enjoy the fruits of development; we seek sustainable development which includes preserving natural resources and maintaining a healthy environment; and we seek democratic development in which citizens participate in making the decisions that affect their lives, and countries and communities have ownership of the policies.

In the years to come we must build anew our understanding of the relationship between democracy, equality, environmental protection and growth.

In other words, we need to move beyond the Washington consensus of the 1980s, a creature of its times which narrowed our growth and employment objectives. Which assumed by liberalising, deregulating, privatising and getting prices right, private markets would allocate resources efficiently for growth. This has proved inadequate for the insecurities and challenges of globalisation.

We need to find a new 2000 paradigm. The new consensus cannot be a Washington consensus, but as we have recognised in the poverty reduction strategies, countries must claim ownership and make it a part of their national consensus.

Let me set out what the key elements of this new paradigm might be

• First, it must recognise the critical role of the public sector as well as the private;
• Second, macro economic stability is an essential condition to growth and all countries need to follow clear policy codes and principles to ensure this;
• Third, it is vital for their development that the poorest countries participate in the flow of capital, technology and ideas in the global economy but in a manner that benefits rather than harms them; and
• Fourth, we need to recognise that sustainable economic growth and social justice are totally interdependent.

First, the new paradigm needs to recognise the role of governments and the public sector. The public sector is an investor in human capital and also in science, research and technology where benefits to society often outweigh benefits to individual entrepreneurs. But critically governments also have the role of ensuring the right macro economic conditions, the right corruption free institutional and regulatory framework, the right framework for competition, and a sound financial system to underpin growth, employment and equity.

Without governments ensuring a robust financial system, effective competition and the protection of consumers it is difficult to mobilise savings or allocate capital efficiently.

The original Washington consensus grew in the context of highly regulated and protected financial systems in need of deregulation. But, as the Asian crisis has shown, it is but one thing to eliminate regulations that restrict competition. It is also necessary to create regulations to ensure competition – and proper prudential behaviour.

The issue is not, as posed in the 80s, regulation versus deregulation: it is achieving the correct balance of regulation and deregulation to ensure financial systems work better. The new paradigm is not about how government can be pushed aside – but how the right kind of government can be an essential complement to markets.

Second, the new paradigm need to recognise the importance of macroeconomic stability. For every country, today’s rich and today’s poor, macroeconomic stability is not an option but an essential pre-condition of economic success. Indeed, in the new global marketplace there is a new premium on economic stability.

Any nation state operating in a global economy which relies on or seeks to achieve investment flows from round the world now knows that the punishment for getting things wrong is greater than ever, the rewards for getting it right better than ever.

Good macroeconomic policy includes in my view:

• clear rules for monetary and fiscal policy that can allow for flexibility to respond to shocks; and
• a fiscal policy that allows automatic stabilisers to operate

I believe that the way forward is for each and every country, rich and poor, developed and developing, to adopt and apply codes of conduct or plans for stability in monetary, fiscal, corporate and also critically social policy, founded on agreed ground rules of the game which each country can adopt and apply.

That is why the UK pressed for and secured agreement that there should be internationally agreed codes for transparency in monetary and fiscal policy. Take the monetary policy code for example, which was agreed at the annual IMF/World Bank meetings last year. It sets out that we should each announce our targets, identify responsibility for achieving these objectives, and for reporting and explaining monetary policy decisions. The code of monetary policy makes it clear that countries should provide a complete picture of usable central bank reserves, including any forward liabilities, foreign currency liabilities of the public sector and commercial banks and indicators of the health of the financial sectors.

But these new principles need to go beyond public policy. In the corporate sector, for example, we also need an international standard of best practice in corporate governance, and for financial institutions and regulators. The OECD has now finalised its code of good practice in corporate governance.

I think it is also true that the UK has taken the lead in pressing the IMF to develop the social dimension to its work in all countries. The IMF and World Bank need to ensure and we need to monitor with international surveillance that the burden of adjustment is not placed on the poor and most vulnerable. The Asian crisis demonstrated the devastating impact that economic shocks can have on the most vulnerable sections of society and highlighted the need to ensure adequate social provision. Building on the codes of good practice in fiscal policy, monetary policy and corporate governance, the UK has stressed the need to identify and disseminate principles and good practice in social policy. Following discussion at the development committee in April 1999, this work has been taken forward by the World Bank and the UN. In his statement to the Board of Governors of the Fund on 28 September 1999, the Managing Director of the Fund explicitly highlighted the vital relationship between growth and social development.

However, for many developing countries the poor quality of data on social spending, social indicators, and social protection arrangements is a key constraint on effective policy design and implementation. Clearly we need a strengthened social data standard.

Let us not forget that when we talk of codes of conduct we are talking about the conditions in which international investment flows can benefit the poorest in the poor countries not about how they can benefit investors. Transparency will discourage waste, corruption and increase the accountability of governments to civil society.

The transparency and clarity of these codes will help ensure that investors can differentiate between the performance of countries – hence prevent some of the indiscriminate contagion that we saw destabilise the international financial system 18 months ago. And by building the confidence of investors they will prevent the exclusion and discrimination of investors against the poorest countries.

So the third element of the new paradigm is the recognition that in order to grow out of poverty, the poorest countries must participate fully in the global economic system, but under conditions in which they get their fair share of the benefits. Without access to the flows of technology, ideas and capital that are revolutionising our world, the poorest nations will be permanently excluded from the prospect of prosperity.

To complete the virtuous circle of debt relief, poverty relief and economic development, our aim in 2000 must be to ensure greater private as well as public investment in Africa and the poorest developing countries and also their share of the benefits of trade.

Now there will be critics of globalisation who say that the poorest countries can never benefit. There is indeed a real debate about capital liberalisation. For it is true that without a proper framework for development, capital liberalisation can destabilise.

Yet this is precisely why the codes of conduct are essential – codes which Britain has argued for so hard and which the international community have now accepted. If capital liberalisation happened without the right macro-economic policies and financial regulation, then short term flows could destabilise that country. So we need measures to encourage the introduction of sound and transparent economic policies, good financial regulation and corporate behaviour – exactly what codes of conduct intend to offer and why codes of conduct are in the interests of the poorest countries as they seek to benefit from participating in the international economic system.

Of course the precise terms for a country’s capital account liberalisation need to be scrutinised, and there is a great deal of work on relationships between private lenders and public sector borrowers both in normal times and in times when crises arise. But the codes of conduct are the new building blocks for economic growth in developing countries.

But to ensure that poorer nations genuinely benefit from the global economic system, there are also obligations on the richer countries to create a fair playing field.

I believe this first is in ensuring a more stable international financial system particularly for weaker economies who can be easily destabilised. That is why Britain proposed last autumn bringing together the IMF, the World Bank and key regulatory authorities in a new permanent committee for global financial regulation charged with delivering the global objective of a stable financial system.

The Financial Stability Forum has now been established. The forum’s work will make co-operation between international institutions and national regulators a fact of international financial life. I believe in time it can become the world’s early warning system for regional and global financial market risk.

The second obligation, I believe, is helping the least developed countries promote greater productive foreign direct investment. At present only 3 per cent of foreign direct investment goes to low income countries and only 1 per cent goes to the highly indebted poor countries.

Direct investment into productive enterprise should bring not just capital, but transfer skills and technology and encourage best international business practice. Where domestic capital markets are not well developed, it can also be a more stable flow of inward investment than portfolio investment in stock markets. We need to consider creating an effective forum for investment in Africa which would discuss the current barriers to investment perceived by potential investors, propose reforms and encourage business investors in the continent.

Thirdly, we have an obligation to recognise that growth and trade are the key to tackling poverty and our approach to trade should be informed by a progressive internationalism.

So the test for trade talks will be whether developing countries benefit.

Social principles which we support are there to benefit the poorest countries. Any attempt by developed countries to erect new protectionism should be resisted.

We must take further steps to increase market access for the least developed countries. The UK’s proposal, for example, is for zero tariffs to be applied to all goods.

Trade talks would achieve more if openness prevails and this requires new ways of working by the international organisations as well as the individual countries. I believe there is now a strong case for looking at reforms to improve the accountability and operations of the WTO, just as we are working to improve the IMF and World Bank.

It is vital to make progress in the WTO. This must be done in a way that reflects the needs and views of the developing countries, and enables them to participate fully in the discussions and have ownership of the final agreement.

Fourth and central to the new paradigm is the recognition that economic growth and social justice are totally interdependent. The experience of so many countries has shown that growth is not sustainable if large sections of their communities live in extreme poverty. Because even if market prices are correct, an economy cannot respond adequately and in a flexible manner to market forces without the human capital, institutions and basic infrastructure necessary for growth.

Indeed one of the main reasons private investors in Africa quote for not investing in the continent is insufficient skilled labour. They are telling us that education and the creation of human capital are as important as controlling inflation.

Fourth, social investment and education

So I come last in a list of areas for action to social investment particularly in education. Not because it is the least important but because, as I hope I have made clear, it is the most important.

The new approach I have outlined today rests on two central ideas –

• first, social justice is vital to economic progress; and
• second, economic reform requires the support, participation and trust of the populations. In other words, there should not just be country ownership but community ownership.
• It is here that education, empowering people for their future, putting opportunity directly in their hands, is critical.

Oxfam rightly calls education the single most powerful weapon against poverty. Children – as I have said before – are 20 per cent of the population 100 per cent of our future. And instead of developing some of the potential of some of the people, future economic growth depends upon developing all of the potential of all. What we want for our own children we want for all our children.

Universal primary education across the world is a basic human right for all children. But equally significantly it is the absolute precondition for progress in development and reduction of poverty. Countries cannot develop properly if only elites are educated.

So the development case for education, the case for investing in primary education, is unanswerable. It is essential to the creation of an economy which has the flexibility to respond to market forces; it helps people to become more productive, and to earn more income; it leads to improvements in health, nutrition and child mortality. People are able to transform their own lives and society, and they acquire the basic skills of literacy and numeracy, as well as the capacity to utilise knowledge and information.

Let us remember the commitments we have all made.

Not just fifty years ago, when the universal declaration of human rights proclaimed free and compulsory education to be a basic human right.

But successively in international declarations:

The 1990 world conference on education for all which set the target of ensuring universal access to, and completion of, primary education by the year 2000.

The 1990 world summit for children – signed by all but two of the world’s governments which reaffirmed the right to an education as a legally binding obligation.

The 1995 world summit for social development which said that by 2005 we would achieve universal access to basic education and completion of primary education by at least 80 per cent of primary- school-age children, and close the gender gap in primary and secondary school education

The 1999 convention on the rights of the child which reaffirmed that we would reduce by half the number of people living in extreme poverty by 2015; have universal primary education before 2015; gender equality in primary and secondary education by 2005.

But as we all know there have been too many grandiose statements, too little development and implementation.

900 million people over the age of 15 are illiterate – one sixth of the world’s population.

And today 130 million children do not attend primary school – 21 per cent of the primary age population.

Two-thirds of these are girls. A gross denial of their right to education and to develop their full potential. Especially when we know that women with as little as four years of education are more likely to choose to have smaller, healthier families.

Understanding the web of issues, constraints and power relationships that affect the schooling of girls – within families, communities, schools, cultures and societies, and within governments – is essential if practical solutions are to be defined, shared and implemented.

We must work together, with the international organisations, other governments and NGOs, to explore the strategies.

And not only raising enrolment levels but retaining children in school is critical when we know that in south Asia, sub-Saharan Africa, Latin America and the Caribbean where only two thirds of the children who start primary school reach the fifth year of primary education.

For the majority of children from poor households, primary education is the one chance they will have to acquire basic literacy, numeracy and some essential life skills to enhance their chances of a sustainable livelihood.

And as we embark on an information revolution, we have at our disposal new tools such as the internet and distance learning.

We have a chance this year to make education for all a strategy that works. As you know there are important dates.

There will be:

• the first ever meeting of education ministers from the G8 countries;
• in April 2000, the education community from developing countries meets in Dakar to review progress on education for all in the 1990s; and
• in November, the Commonwealth Education Ministers meet in Nova Scotia.

We are preparing now for these meetings. Our priorities will be to increase the focus on universal primary education; to work with developing countries to identify workable strategies; to seek a co-ordinated approach bringing together work at national and international level; and to continue to address factors constraining the equal participation of girls and boys in schools.

As Oxfam has said the old ways have failed, and we need to refocus the use of resources.

What then is the way forward to achieve the improvements in education so urgently needed?

There has been some progress. In Uganda, spending on education has trebled in five years. Primary school enrolment is 90 per cent in Zimbabwe and Botswana. The enrolment of girls remains low in Pakistan, but is high in Bangladesh.

So we must now spread best practice.

First there needs to be a sustained commitment by developing countries to education. For example, the poverty reduction strategies developed by heavily indebted countries must, I believe, make education a central plank. That would put education at the heart of national and aid budgets and ensure transparent monitoring of delivery. Once again, ownership by the countries of the policy is the key to its success.

Second we need to shift from the project based to the sector wide approach Oxfam has proposed. Educational, and indeed other aid is too often used to support isolated projects. In Tanzania there are 30 donors, 1000 projects, 2000 aid missions. Greater coherence is needed. All aid and concessional lending from donors, World Bank and Regional Development Banks need to be based on the agreed poverty reduction strategies and be co ordinated under an agreed framework. This poses real challenges to both donors and recipients.

For donors it means no special pleading for projects that “fly their national flag”. For recipient countries it means strengthening their institutions so they can take the lead in co-ordinating and targeting the aid. These challenges are worth facing because it is the only way in which we can ensure the effective targeting of funds.

Third, we need to focus, as I have mentioned before, on tackling the skills shortages which limit economic growth. These skills shortages are at all levels of the economy – from high-level policy analysis skills needed to drive forward development, to the practical skills needed to exploit new technologies.

To meet this need we have established a major new programme of assistance and support. Over the next two financial years, twenty five million pounds will be available under the Department for International Development’s skills for development programme.

This programme is designed to help countries stimulate the entrepreneurial skills essential for economic growth and to develop new approaches to skills development.

Let me give one example of how the programme is working in practice – matching skills to work.

In Chennai in India we have been supporting the “colleges without walls” programme – informal learning organisations which are working with the poor and unemployed to help them acquire the skills which have been identified by local employers. So far, 85 per cent of trainees have found work with local employers.

Lastly, I would like to emphasise that we must continue to provide more financial aid for education. The Department for International Development currently have commitments of £800 million to education, of which around three quarters is for basic education. Of the total of £800m, approximately £300 million has been committed since 1997, which represents a dramatic increase for this sector. And we are on target to meet the Prime Minister’s 1997 Denver commitment to increase by 50 percent our aid to Africa for primary education, primary healthcare, and sanitation by 2000. This represents an extra £360 million of aid to Africa.

We all recognise that the economic development and the escape from poverty requires increased flows of aid from rich nations to underpin the development of human capital and basic infrastructure. In Britain’s case, the Department for International Development will receive over £1.5 billion extra in the comprehensive spending review over three years, taking its budget to more than £3 billion in 2001-02 – a real terms increase of 28 per cent.

Conclusion

The task we all face is awesome. Recent estimates show that for Africa, where currently nearly 50 per cent of the population live below $1 a day, growth rates in GDP/capita will need to reach some 6 per cent per year for the poverty target to be reached. Yet between 1990 and 1997 growth in GDP/capita in Africa was minus 0.7 per cent per year.

In 1999 the world’s richest nations finally accepted their obligations to the word’s poorest peoples.

But we can and must do more.

We need a world economy working for everyone everywhere.

Tom Paine’s message of the 1780s is even more relevant as we begin a new millennium. “We have it in our power to begin the world anew”.

The task for 2000 will be to transform good will into monumental change.

Because no one can be happy living in an oasis of wealth where there is a desert of poverty, I want ours to become the generation who lifted the scar of poverty and hopelessness from the worlds soul.

And I am optimistic.

Why? Because not just a few, but millions feel, however distantly, the pain of all those in need.

Why optimism? Because across the world there are millions of people of conscience and of belief in something bigger than themselves.

Why optimism? Because there are millions more who know that now as never before, we in this generation have – within our power if we choose to use it – the means to eliminate abject poverty.

And who want to realise that ancient dream that we become truly one moral universe, in which by the strong helping the weak, all of us become stronger.

So ours is a call to action to all men and women full of idealism irrespective of political party.

A call to action to all, full of campaigning vigour, irrespective of age.

A call to all people of conviction and faith, irrespective of religious denomination.

A call to action as new as the debt crisis, but it is as old as the call of Isaiah to ‘undo the heavy burdens and let the oppressed go free’.

We will not reach our goal today or tomorrow. Perhaps not in this generation.

But the quest for prosperity round the world is the greatest challenge and greatest moral imperative of our times.

This is indeed an age of possibility as we chart the world of tomorrow.

It is not a time to look backwards but to plan ahead.

I want this generation to be remembered for seizing the opportunities not missing them, for making us masters of our destiny, not victims of fate.

In this new age, I believe our generation can achieve a new way forward. Here in January 2000 we are all making a start on a journey of hope and renewal and we must and will complete our path.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 16 February 2000.

Britain can enter a new year of challenge with more optimism than for many years.

If in the twentieth century Britain suffered relative economic decline, the twenty first century can be one of economic renewal, where the challenge for Britain is to build on the best chance for stable long term prosperity we have had for generations.

My optimism is rooted in my belief that we are rediscovering our essential strengths as a nation.

We are rediscovering the strength to take the tough decisions to build a framework of fiscal and monetary stability.

While the need for stability was taken for granted in our nineteenth century economic heyday the pressures of twentieth century politics pushed successive governments off course.

We have now, as a country, found a new resolution to take the tough decisions and entrenched it with the independence of the Bank of England and our new rules and code for fiscal stability. Britain now has the foundation of stability on which to build.

We are not only rediscovering our commitment to toughness in economic management but, even more important, our commitment to the work-ethic.

With our new deal, the work ethic is being reestablished in every part of Britain. And we are stage by stage building it into the culture of our society, with radical programmes of reform in education and welfare to work.

And we are also discovering – and this is my theme today – new ways of harnessing our innate creativity and adaptability as a people.

At every point in our industrial history our greatest successes have been built on the creative genius of our people and the willingness to adapt and change. This is true not only of the inventive skills – from the steam engine to jet engine – which made Britain the home of the first industrial revolution but also of the pioneering work of Babbage and Turing that made possible the computer and information revolution.

Now that the future is knowledge-based – e-shaped, if you like – we can already see the qualities needed for success: those countries that will succeed will be those that can best unleash the potential of their people by drawing on the qualities of creativity, flexibility and adaptability, the work ethic and of course an open and outward looking approach to the world.

So, I believe Britain to be well-placed to lead in this new world and I want to suggest today a number of measures that can help us succeed.

But let us remember the challenge we must surmount. For today, just one in ten companies in the UK sell on-line.

Just one in four companies make purchases on-line.

Just over forty per cent of households already have computers.

Around ten million people – less than 20 per cent – use the Internet.

We must do better and start doing better now, this year.

I recognise success for the future will not come automatically. And much of our success will come from government getting out of the way and releasing the energies of the British people. But I also want today to draw attention to how, through applying British values – our creativity, openness, and willingness to adapt – we will bring into play the critical ingredients for success.

First, measures to create a knowledge economy – through the encouragement of competition, innovation and new business development – not least measures that need to be backed up by a willingness in the public sector to innovate.

And second, measures to create a knowledge society through transforming education and widening access for all, drawing on the long-standing British commitment to fair play and opportunity for all.

1. The knowledge economy

First, measures to create for Britain a strong knowledge economy.

The sharpest spur to innovation, efficiency and improvement is competition.

The new economy of the next decade will need more competition, more entrepreneurship, more flexibility and more long-term investment.

And Britain is well-placed to rediscover the genius for creativity and invention that was displayed so clearly in the industrial revolution.

Indeed, our creative talents that are flourishing today in design, communications and software serve us well for the next stage of the e-commerce revolution.

The Government is now reviewing every barrier to competition in the emerging e-commerce market and seeking to remove them.

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

Our new Competition Act not only makes our competition authority independent but also for the first time prohibits all anti-competitive practices.

And we are now reviewing the rules of professional associations to ensure there are no unfair barriers to entry holding back the new economy.

It is critical to ensure that the price of telephone use is not a barrier to greater Internet use, or leads to a divide between IT-haves and IT-have nots.

Affordable high speed access to the Internet for both businesses and consumers is key to the future growth of e-commerce in the UK. This requires the right infrastructure for the different forms of access, delivered within a competitive environment. So I am encouraged by a number of developments in this area.

One of the inhibitors to greater use of the Internet in the UK has been expensive telephone charges. But industry is responding to competitive pressures and consumer demands. BT recently announced proposals for a series of Internet pricing packages allowing unmetered Internet access. This was followed on Monday by an announcement from TeleWest that they will offer unlimited access to the web – 24 hours a day, 7 days a week – for 10 pounds a month. Other companies are likely to make similar announcements soon. So very soon, just as you can in the U.S., you will be able to surf the net without worrying about the cost of each extra minute.

And Oftel have announced new pricing arrangements so that Internet service providers can choose how to price their calls. This should further enhance the competitive pressures that are pushing down the cost of Internet access in the UK.

Equally important to cost is the availability of high-speed access – broadband access – to the Internet. The upgrading and unbundling of BT’s local loop is a welcome and major step forward in this area.

In the spring BT will be rolling out ADSL – bringing high-speed Internet access to homes and businesses across the country. But this must be done within a competitive environment to ensure broadband access is affordable. To promote competition, Oftel will ensure that other operators are able to provide their own broadband services over BT’s local loop by July 2001- if not before. Indeed, I know that Oftel believe this timetable can be improved. Let the industry be in no doubt that I stand full square behind Oftel in these aims. We will not allow any foot-dragging here.

We are also actively promoting other forms of broadband access, again ensuring these are delivered with a competitive and innovative environment.

Britain is at the forefront of the new third generation technology that will revolutionise the mobile phone – allowing access to data up to two hundred times faster than through existing mobile phones. The new spectrum auction – the auctioning of five licenses, one of which will be reserved for a new entrant into the market – is designed to maximise competition. There have been 13 applications to participate in this auction.

And we are looking to rapidly roll out fixed wireless technologies. Last May, Michael Wills and subsequently in January Patricia Hewitt set out the Government’s plans to make radio spectrum licences available for new broadband fixed wireless access services. The first of these will be available in the Summer. And we will be ensuring that these licenses are allocated within a competitive environment.

I encourage the industry to think creatively and come forward with innovative proposals for the use of this exciting technology. This should provide an early alternative to fixed line access and is especially good news for small businesses.

These are welcome and exciting developments but I remain concerned about the competitive disadvantage that British businesses face in this area. I want to see a quick roll out of the necessary infrastructure, and competition to drive down prices further, so that the costs in the UK for both business and consumers are comparable to those in the U.S. I know that Oftel share this desire.

I met with David Edmonds, the Director General of Oftel, yesterday to discuss developments, and to emphasis the strong support that Oftel have from me and others in Government. We discussed how important it is for the competitiveness of the UK economy that urgent progress is made. I know that David firmly shares my strong belief that delivering low cost Internet access is one of the single most important things we can do to promote the knowledge economy. It is our aim that the cost of using the Internet in the UK will be as low as in the U.S. by end 2002. This is our challenge to the industry – a challenge our country needs met, a challenge we will continuously monitor in detail and if not being met will prompt us into further action.

But we must do more than simply create this new competitive environment.

I have said I want British creativity and inventiveness and enterprise to flourish in the new knowledge economy.

So we must also create an environment more favourable to the high investment, high skill, hi tech and high wage economy we want to create for Britain.

The measures that will release what I sometimes call the British genius for invention and enterprise will include incentives that encourage new investment and more innovation; the transfer of technology – with, overall, a more favourable commercial environment and tax regime.

A goal for Britain is to lead the way in the interactive content industry, which will be one of the biggest drivers of growth in the new economy. Just as Hollywood brought together, for the film industry of the 1930s, the finance and management skills, together with writing, acting, design and creative talents, so too we could bring together finance, management and technical and creative skills in the interactive content industry. With the benefits of the English language and our indigenous talents Britain is well placed to lead the world. So we will now examine detailed measures to promote this.

Let me set out some of the measures that will assist this and growth in high technology industry.

First, to build on Britain’s genius for scientific invention by modernising our science and technology base, we are investing in an innovative 700 million pound public-private partnership with the Wellcome Trust and the awards that have already been made include, for example, support for an advanced technology institute in the University of Surrey.

Second, 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.

Third, we have created a new University Challenge Fund to help universities commercialise their inventions and help university based companies transform British inventions into British-made products. These are seed venture capital funds to allow universities to demonstrate the feasibility of research outputs with commercial potential.

Fourth, to help universities gain management expertise to commercialise inventions and to help transfer technology from the science lab to the market place, the Government is creating new Institutes of Enterprise. Indeed, we are keen that British universities build trans-Atlantic and trans-European alliances in research and commerce, such as we have initiated with the MIT/Cambridge link up.

There are a number of examples of existing and planned link-ups between UK and U.S. universities. For example, Warwick University with Carnegie-Mellon University in Pittsburgh; Heriot-Watt University is currently involved in discussions with Michigan concerning the development of a Scottish centre of engineering excellence at Rosyth; and Imperial College has formal links with both Georgia Tech and Emory University in Atlanta.

We recognise that UK universities are keen to establish such U.S. link-ups. And we are looking at how to promote these link ups. And while most government effort on science exploitation has in the past focussed on the academic “push”, we will consider how we can meet the challenge by encouraging an industry “pull” – examining the case for incentives for business/science collaboration with an emphasis, as in ‘smart’, on getting business to take a closer interest in exploitation opportunities in universities.

Fifth, I want new encouragement for the venture capital industry and especially for the start up and early stage ventures, where equity is more appropriate than bank loans, but 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. The DTI published bidding guidance before Christmas and they have now received 21 intentions to bid. I would now urge potential investors to look seriously at investing in the regional venture capital funds.

We are also taking forward a UK High Technology Fund to help early-stage high-technology businesses – who have historically found it difficult to raise money for development. It will be a fund-of-funds, providing finance for investment in existing venture capital funds that specialise in the provision of equity-based finance for early stage high-technology firms. Funds are currently being raised from institutional investors and the fund manager is making significant progress towards meeting the target of 125 million pounds.

And sixth, tax reforms are designed to encourage investment in new companies. 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.

Corporation Tax has been cut from 33 to 30 per cent, and to encourage and reward new business investment, we have cut the long-term rate of Capital Gains Tax from 40p to 10p. We have proposed a cut in the taper so that anyone investing for five years will pay only 10p and for three years only 22p.

We are also freeing high tech start-ups from unnecessary regulation to allow quicker access to finance. Our proposals could save months, in an area where this can make the difference between business failure and business success.

These new companies will also be able, from this April, to benefit from the Government’s Enterprise Management Incentive Scheme, tailor made for the new Internet and hi tech company. To recruit top managers for smaller high risk companies, we are offering tax relief for key employees on stock options worth up to 100,000 pounds.

Seventh, a new tax incentive to promote corporate venturing. 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. So 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 pound incentive can bring Britain additional investment of 500 million pounds every year.

The City of London is one of the largest financial centres in the world and this month alone a number of UK Internet start-ups have found financial backing. But we need to do more to build on the strengths of our capital markets. That is why we have encouraged Techmark, a new market within the London Stock Exchange for companies whose success depends on innovation, and the arrival of NASDAQ in Britain.

I am planning to host a major UK-U.S. conference later this year which will bring together leading U.S. & 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 which can grasp the opportunities new technological developments can offer.

Businesses and individuals are responding to new technologies and the new challenges of the Internet age. Government must do the same.

Just as businesses have used the Internet to refocus their activities on the customer – supplying new services, when, where, and how the customer wants them – Government needs to do the same.

So we are restructuring our public services, from taxation to procurement, from health to our legal systems – organising Government in new, innovative and more flexible ways.

I can announce that we are undertaking a cross-cutting spending review to look at all aspects of Government and e-commerce. This will be headed by Andrew Smith and Patricia Hewitt and will ensure that as one element of our ambition to make the UK the best place in which to do e-commerce we make this the best e-government in the world.

The Internet presents a great opportunity to enhance the interaction between people and Government. As Bill Gates recently pointed out, this new technology is making Government more democratic.

The 2.5 billion pound Capital Modernisation Fund was set up to support capital investment to improve public services. Projects which this has funded include:

– 1.1 million pound for an integrated single electronic procurement system across government to support electronic tendering – this could save 10 million pound a year;

– 18 million pound for an IT job matching scheme – a sophisticated IT system to match job seekers to employers online;

– 30 million pound for cross-departmental IT linkages between the Criminal Justice Departments to promote joint working and reduce paper;

– 2.8 million pound for the Driving Standards Agency for hand held computers for driving examiners to record test results in the car and transmit results to allow the automated issue of driving licences; and

– 12 million pound to provide a global network of British information and services abroad – one-stop shop information kiosks built on interactive websites.

And we have introduced the new 230 million pound Invest to Save Budget – funding innovative ways of delivering services:

– testing the scope for delivering a range of employment service and benefits agency services through a call centre, accessible by telephone, fax, e-mail – or through an Internet website;

– two pilots testing the feasibility of allowing drivers to apply for vehicle tax discs by electronic means; and

– a pilot developing and testing a new IT system, providing detailed information on local authority enforcement functions through a single point of contact.

By 2002, our aim is that the public will on-line be able to:

– book driving and theory tests;

– look for work and be matched to jobs;

– submit self-assessment tax returns and get information and advice about benefits;

– apply for training loans and student support, all on-line.

Businesses will on-line be able to:

– complete VAT registrations and make VAT returns;

– submit PAYE returns and other forms;

– file returns at Companies House; and

– receive payments from Government for the supply of goods and services.

And today I can announce the discounts for the filing of tax returns over the Internet. We will offer discounts to encourage electronic filing and payment:

– in April 2000-2001, 10 pounds for each income tax self assessment return filed by taxpayers over the Internet.

– 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;

We are also looking to modernise Government in a number of other ways. For example:

– liberalising Government data; and

– stretching targets for electronic procurement.

How Government, as the largest single agent in the economy, buys goods and services is a key driver of private sector behaviour. That is why we have set targets for Government procurement. And we are considering whether we can go further.

As an early step to make sure Government information is fully exploited, I can announce that the new national statistics website is to be launched in April – offering an extended range of data from across Government free of charge, demonstrating our commitment to ensure that data is widely available and easy to access.

And with our Invest to Save and Capital Modernisation Funds we are rapidly moving forward the e-government agenda. But I want to make sure that we give the best incentives and encouragement to departments and officials to exploit new technologies and the opportunities e-commerce presents to the full. So today, by ring-fencing some of the ISB and CMF monies explicitly for electronic Government ideas, I am launching an e-challenge fund. This will give incentives to Government departments and agencies to identify e-commerce opportunities in their areas.

2. The knowledge society

Now I turn to the knowledge society.

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.

The extra 19 billion pound our country is now investing in education will help give everyone the opportunity to master the skills and technologies of the new information age.

Today we are pushing through huge educational reform. We are introducing early learning; a new focus on basic skills in primary schools; restructuring teachers’ pay to reward good performance; zero tolerance of failing schools; expansion of further and higher education through an extra 800,000 students by 2002.

When we came to power in 1997, around one in ten of our schools were linked to the Internet.

I can report to you that 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, there will be over 23,000 schools connected to the Internet, with training in computers open to 400,000 teachers. We are well on track to achieve this target with over 15,000 schools already on-line. Our IT strategy is allowing, for the first time, teachers and head teachers to share experience and good practice techniques over the web.

New help worth 20 million pound is making it possible for more teachers to have computers for home use.

But we must go further. This year we are doubling the money on IT in schools. 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. And parts of the national curriculum will be taught through software accessed on the Internet, motivating all pupils.

But we are doing far more than simply invest in schools and colleges.

In the last Budget, we allocated an additional half a billion pound to the establishment of new ICT learning centres and accompanying measures to widen use of ICT in homes, schools, business, the community.

Altogether, the Government is providing 1.7 billion pound for the national IT strategy – including support from the New Opportunities Fund. To 2001-2002, this comprises:

– over 650 million pound for schools in England, plus 62 million pound in Scotland (Wales and Northern Ireland not yet known);

– 230 million pound for teacher training in ICT;

– 20 million pound for librarian training in ICT;

– 50 million pound for digitisation of library content;

– 200 million pound for ICT infrastructure in libraries (contributing to the ICT learning centres);

– 470 million pound from the Capital Modernisation Fund for up to 1000 learning centres across the UK.

A whole new network of computer learning with one purpose only, that the whole of Britain is equipped for the information age.

So everyone will have the chance to succeed in the new economy. We are delivering individual learning accounts. A million men and women can receive 150 pounds to set up their own individual learning accounts – putting the power to plan and prepare for their own careers in their own hands. Next year any adult with an individual learning account will be able to claim a discount of 20 per cent, an additional grant of up to 100 pounds, on the cost of their learning.

For all adults signing up to improve on their basic computer literacy, there will be a discount of 80 per cent on course fees.

The Internet not only brings home the need for lifelong learning but also enables lifelong learning to be brought into every home.

The University for Industry will use the latest technology, including the Internet, to do in the 90s for lifelong learning what in the 70s the Open University did through TV for university learning – to bring education and training into the home and the workplace.

So with our new university, individual learning accounts, and with help with computers and computer literacy, the Government is embarked upon the biggest public education programme on offer in our history – opening up new opportunities for millions of people.

In Sweden the biggest single measure that increased the number of families with computers and the Internet was the tax incentive we are introducing in Britain.

To bring more computers into more British homes, we have made it possible for employees to be able to borrow computers from their companies as a tax free benefit.

And we now expect the number of people doing so to rise to 300,000 over the next two to three years.
But we need to do more.

In our poorest communities, the facts are that people are left out.

While three quarters in work use a computer, only one third out of work.

Of those working, half have a computer at home. Of those not working, only 21 per cent.

Of the lowest skilled and lowest income, only 18 per cent have a computer.

And only 3 per cent of the poorest households are on the Internet.

Only one fifth of those out of work have been on an open computer course.

So, in the Budget and beyond, to widen access to ICT and to ensure that there is no group of information have-nots, we will consider further action in the following areas.

First, we are making opportunities available for an extra 50,000 people to attend IT introductory learning courses. These will be available free – including to the unemployed, the low paid, the disabled and single parents. And we are considering how we can expand this.

Second, we will see how quickly we can expand to all areas of need computer learning centres

In the last Budget, we set a target for a national network of 1000 computer learning centres, one for every community in Britain – in schools, colleges, libraries, in Internet cafes and on the high street. We are well on course.

And here, new forms of providing access are being introduced – as libraries pioneer easier access – including drop-in centres in shopping locations.

Two sets of pilots have already started – one in September 1999, the other in January. And the first large tranche of centres will be announced in September, for which DfEE has just invited bids. New forms of provision are being tested, including a mobile ICT learning centre attached to a travelling circus around Birmingham. In Sheffield, the Citinet will link community-based ICT learning infrastructure and the University for Industry.

It is only right and fair that we start with the most deprived communities in the country, and make sure that they are equipped for the computer age.

Third, Learning Direct – the new University for Industry – will be the next stage in computer learning .

ICT learning centres will offer links into Learn Direct. And individual learners will be encouraged to move from taster and basic ICT courses to more advanced ICT and other courses offered by Learn Direct.

And fourth, people who need them should have computers available in their homes as well as at computer learning centres.

And we will do this by loans.

So, we are already pioneering a system under which poorer individuals – sometimes through local partnerships – will be able to lease computers and software in the new century in the same way local libraries have loaned books in the last century.

And in April we will be able to announce those partnerships across the country that will deliver the first tranche of our 100,000 computers on loan to poorer families.

And public provision will not only include hardware and software, but also connectivity and advanced online and offline learner support.

Taken together, these measures – new courses, new computers, new computer centres – will mean that every unemployed person will be offered a computer training course free of charge, and at a later stage the chance to graduate to the University for Industry courses.

And we will extend this beyond those who are registered as unemployed. Helping the single parent back to work by giving them skills – as well as information about work – is vital. The new computer courses put opportunity directly in their hands and will increase employability. So in addition to the registered unemployed, every single parent on benefit will be offered this course free of charge as part of the extension of opportunities to them.

We believe that in total one million can benefit by the end of 2002

So, with our new University for Industry providing education in people’s homes, with one million individual learning accounts that can finance computer courses, with help to loan computers and use them in computer learning centres, Britain is now embarking upon the biggest public education programme on offer in our history – opening up new opportunities for millions of people.

Imagine it, every child in every school in every community given access through computers and the Internet to the greatest libraries and museums in the world.

Imagine it, the 45 year old redundant worker in my part of the world – who has the courage and opportunity to go on an IT course and who acquires new skills and gets a new job.

Imagine it, the disabled person, house-bound, but now free – able to work from home through their personal computer.

All based on the understanding that in the new economy the more individual talent we nurture the more economic growth and prosperity we will achieve.

Looking to the future

So we are determined to catch up and lead.

That is why I have today set out policies to secure rapid development of broadband access, to broaden our commitment to ICT in education, to bridge the digital divide, and to encourage the development of new high tech companies specialising in the Internet measures that could help Britain lead the way.

And I believe that over time we can, if we achieve these changes, catch up and then surpass the U.S in these key areas.

We can be optimistic about Britain’s future because, building on British qualities that value work and self improvement, we have one of the strongest national commitments to education and investment in the most modern educational technology.

We can be optimistic because within one of the largest marketplaces anywhere – the single market in Europe – we have a great opportunity for Britain to do business and to make it a springboard into the rest of the world.

We can be optimistic because, through our pioneering and innovative private-public partnership, we can release new energy to build both a knowledge economy and a knowledge society.

We can be optimistic because we have the indigenous talent in all the relevant industries to make Britain the centre for a new Hollywood of the creative interactive content industry.

We can be optimistic because we are now ready to lead the way in bridging the digital divide, leaving no one, no community, no area out.

In short, we can be optimistic because we are determined to build from lasting British values and a commitment to opportunity for all the efficient economy and fair society from which future success will be best guaranteed.

British values and the British people ready to rise to and surmount the newest challenges ahead.

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.