Category: Speeches

  • Stephen Timms – 1999 Speech at the Asian Business Development Forum Conference

    Stephen Timms – 1999 Speech at the Asian Business Development Forum Conference

    The speech made by Stephen Timms, the then Financial Secretary to the Treasury, in Leeds on 29 October 1999.

    I am grateful to you for your kindness in both inviting me and welcoming me here tonight. Tonight I want to say a few words about our aspirations for the British economy in the next century.

    Modern and decent

    1. But let me first put this in the context of the wider aims of our Government over the last two years. What we have embarked on is a twenty year programme to build a new Britain which will be modern and decent. Both of those things at the same time.
    2. Modern Britain will have an economy where the vital new stability has been locked in for good, beyond our past decades long record of boom and bust. We want thriving knowledge-based firms exploiting the know how, creativity and expertise of British people. We want to create the best environment in the world for electronic commerce. Higher levels of investment, in information technology, in infrastructure, in skills. Higher levels of productivity to catch up after decades with our competitors. We’ll have higher standards at school, have harnessed the potential of further and higher education, and provide high quality opportunities for our young people. As individuals and collectively we shall have confidence in the future.
    3. Decent Britain will be an inclusive society where everyone has the chance to play their full part. Over the twenty year period, child poverty will be eradicated. There will be help for those trapped on benefits or in poor housing or without a job, and those unable to work through disability or through caring for somebody else. We’ll have a health service which people will have confidence in. There will be decent standards for those at work. We’ll confront crime, anti-social behaviour and drug taking which cast a shadow over too many young lives. We want to entrench decent values – society pulling together, and with rights matched by responsibilities.
    4. So modern and decent – that’s where we want to be in the years ahead.

    The Business Community

    1. We want a thriving business community in Britain. Our enemy today is not competition – it is cartels. It is not profits – it is privilege. It is not markets – it is monopoly. We want to see more enterprise. More competition and more innovation too. We know – and you know too – that companies, indeed countries which fail to adapt, reform and lead get left behind.
    2. The businesses represented in this room have learnt that lesson.
    3. Businesses from the Asian community contribute £8 billion each and every year to the British economy. More importantly in my view, you epitomise the spirit of enterprise and the determination to succeed that is so vital if the British economy is to lead the way in the next century.
    4. I’ve seen this from close quarters. Green Street in East London marks the boundary of my constituency. 35 years ago when Ahmed Din, the first Asian trader opened his shop there, it was a drab and declining inner city shopping street. Today, I claim it is the most successful Asian shopping street in the country. It is a vibrant and exciting place, attracting shoppers from all over the UK and continental Europe, and it has been the determination, vision and commitment of Asian entrepreneurs in East London which has brought the transformation about.
    5. We – Government and businesses together – face a profound challenge in this country of ours. How to create a high investment, high productivity and high employment economy.

    Stability

    1. We start with stability. It is the precondition of success in the modern global economy. That’s why our first priority when we came to office was moving from the violent cycles of stop go that we had seen too often in the past, to an economy capable of sustained and steady growth.
    2. Now – 2 years later – with the Bank of England independent and the lowest interest rates and mortgages in decades, it is now clear that we have steered a course for stability in what have been troubled times for the world economy. The British economy is growing. Inflation is low and set to remain low. The public finances are under control. Employment is up by over 600,000 since the election. We have a record number of people in work and a record number of job vacancies too.
    3. So what we can rightly say now is that for the first time in a generation we have the prospect of sustained economic stability in Britain. But that is not enough. Our task now is to use this platform of stability to do what no government has tried to do before – to work with business in taking an unashamedly long term view about modernising the British economy.

    Modernisation

    1. We will do so in five ways.
    2. First, modernisation requires nothing less than a skills revolution. In today’s world it is no longer access to financial resources – capital – or to physical resources – iron and steel – that make or break a country.
    3. Now – as never before – our key asset is our human resources – it is labour that counts. Now on the verge of a new century, the challenge for government and business working together is to equip all of our people to succeed in the new knowledge economy.
    4. Hence our emphasis on education. The investment we are making not just in our schools, but in our colleges and universities too. In this new information age education can no longer end at the school gate. Lifelong learning is the only way in the modern world to keep Britain one step ahead of the rest.
    5. Second, modernisation means encouraging innovation and invention. That’s why last year we put an extra £1 billion into university science. And it’s why next year we’ll introduce a new tax cut for R&D that will become one of the best incentives for innovation anywhere in the industrialised world.
    6. It will help British companies to turn new British ideas into new British innovations, new British innovations into new British products and new British products into new British jobs.
    7. Third, we need more and better investment. For decades the UK has invested less than our competitors.
    8. We know in particular that businesses – if they are to grow- need help with investment. That is why the Treasury with Don Cruickshank, former head of Oftel, is working with the banks to look at how they might more effectively provide support, especially to smaller firms.
    9. Fourth, modernisation means a new emphasis on enterprise. Companies create wealth not governments. But what governments do or do not do can help or hinder that process. This Government wants to see a new culture of enterprise in Britain – where we have more people starting their own business, having a go, taking risks.
    10. Here the Asian community provides an example to the rest of Britain. The Asian community has placed real value and respect on entrepreneurship which has helped Asians to become a driving force particularly in small business development in Britain. Ethnic minorities, of which the Asian community forms a large part, account for twice as many business start-ups as their share of the population. And, as some of my fellow guests here tonight will testify, a number of these small businesses have been built up into some of largest companies in Britain today.
    11. We know that in the future jobs growth will come from a large number of small firms rather than a small number of large firms. That is why we have cut the rate of corporation tax to the lowest rate in our history, in Europe and in any major industrialised country so that those who create wealth keep more of it to reinvest in growth and jobs.
    12. That brings me to the fifth and final way that we are seeking to tackle the modernisation challenge our country faces: through a modern employment policy. One that matches rights with responsibilities. One that provides new opportunities for work. And one that through a reformed tax and benefit system makes work pay.
    13. When we came into office, four and a half million adults lived in households where nobody worked, double the level of 20 years ago.
    14. Nearly one in five children were growing up in households where no-one is working, twice the rate of France and four times the rate of Germany.
    15. And the reason that this issue of unemployment poses a massive challenge is that it is now the primary cause of poverty.
    16. 20 years ago, pensioners made up the largest section of those in poverty, today it is those living in workless, working age households.
    17. Simply compensating people for their poverty through benefits is not enough. The task must be to deal with the causes of poverty. And the best form of welfare is work.
    18. Our strategy has been to tackle the barriers that people face to getting into work – the lack of employment, the unemployment and poverty traps, the absence of necessary skills, even the absence of child care.
    19. Under the old system the tax system set a personal allowance that failed to ensure that work paid, and also made thousands pay tax even as they claimed benefits.
    20. In the new tax system working families will be guaranteed a minimum income, so that in future no-one in work should have to go to the benefits office to receive a living wage.
    21. These then are our radical approaches to modernising our economy. Our objectives are two-fold – to build an enterprise economy and a fair society. The two go together. All too often in the past they were viewed as antagonistic even irreconcilable objectives. That is not this Government’s view. Rather we believe that the one relies on the other. An enterprise economy is the route to jobs and prosperity. And a fair society where there are opportunities for all will help make our economy more competitive and productive. That means building an inclusive society where not only are there opportunities for all – regardless of class, of gender, or of race – but where success depends on merit and merit alone. Our ambition is to widen the winners circle in Britain. That is what modernisation means for our country.
    22. We want to see a Britain where there is economic stability; a Britain which is business-friendly; a Britain where public and private sectors, instead of working against one another, work with each other to create greater enterprise and greater fairness.
    23. The Government will play its part in modernising Britain so that we can be a leader in the knowledge economy.
    24. But so too must British business. Our challenge to business is this. Work with us. Use not just the skills of a few in your workforce, but invest in training and new technology for the many. Overcome with the Trade Unions the culture of us and them that can have no place in a modern knowledge-based economy that relies on the skills of the many not the few.
    25. The challenges are enormous but if we work together the prize is an enormous one too – a modern economy fit for the future, ready to offer employment opportunity and greater prosperity for all our people in the years ahead. It is a challenge that together we can meet.
  • Jacob Rees-Mogg – 2022 Comments on Report that Suggested Brexit Reduced UK Growth

    Jacob Rees-Mogg – 2022 Comments on Report that Suggested Brexit Reduced UK Growth

    Comments made by Jacob Rees-Mogg, the Conservative MP for North East Somerset, in the Daily Express on 22 December 2022.

    In a report gullibly swallowed by the remainiacs it models what would have happened to the UK economy had it remained in the European Union. It calls this a “doppelganger” method. Inevitably for such an organisation it produces a negative result. However, its methodology is not only flawed but absurd.

    Buried in the text is the admission that “the doppelganger grew a little faster than the UK before 2009” – an admission which makes the whole exercise valueless.

    Even more preposterously it claims that Brexit has a cost that existed even when the UK was in the EU. If our economy grew less quickly than it ought to have done when we were in why is Brexit responsible for our current level of growth?

  • Rachel Reeves – 2022 Comments on Latest GDP Figures

    Rachel Reeves – 2022 Comments on Latest GDP Figures

    The comments made by Rachel Reeves, the Shadow Chancellor of the Exchequer, on 22 December 2022.

    GDP data has been revised down, leaving the UK with the worst growth in the G7 in the last quarter.

    The Tories have lost control of the economy and are leaving millions of working people paying the price.

    Only Labour has a proper plan to get our economy growing.

  • Gordon Brown – 1999 Speech to the UK Internet Summit

    Gordon Brown – 1999 Speech to the UK Internet Summit

    The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 28 October 1999.

    Can I first of all congratulate the New Statesman, one of the country’s oldest established journals founded in the days of the quill pen, for organising this, one of the first national conferences on the opportunities of the Internet.

    Thirty years ago this month the Internet was invented and the modern Internet was invented by a Britain. Today in Britain and throughout the world the Internet is revolutionising our access to information – the way we communicate, educate, buy and sell, and entertain ourselves – 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 determined that Britain lead in the next stage of the Internet revolution.

    Let me set this target of our Government – within three years we want to become the world’s best environment for electronic commerce.

    And today I want to set out how we plan to achieve this great ambition — how we plan to benefit from being part of the European Single Market of 390 million people, how we plan to employ our language, educational and communications strengths to grow with speed, how creativity and adaptability – our British talents – will be put to best use.

    Of course with 50 per cent of all people on the Internet, and 75 per cent of all Internet commerce, the US leads in the Internet. And if we examine why the US enjoys such an advantage it is not just because it has the largest domestic market, but because it leads in innovation, it has an economic culture which supports risk-taking and thus the introduction of new technologies, it has a better record of turning good ideas into businesses that succeed. Commercial links between business and universities bring a speedier commercial application of cutting edge technologies. Clusters, like Silicon Valley in California and Silicon Alley in New York, generate a wave of technological innovation.

    But we believe that in the next few years the rate of innovation will continue to accelerate.

    The rewards for uncovering lucrative ideas will be even greater.

    Whichever country is able to make use of inventions and innovations fastest will come out ahead.

    I want that country to be Britain.

    And I believe the UK can lead in Europe.

    Today, one in ten companies in the UK sell-online.

    One in four companies make purchases on-line.

    Over forty percent of households already have computers.

    Over ten million people are already on the Internet.

    And we have a number of key strengths and advantages:

    • our language. More than 80 per cent of web sites are in English;
    • our telecoms market. We lead the world in having a highly liberalised and competitive telecoms market;
    • our capital markets. London is one of the world’s leading financial centres, and can provide a good source of capital;
    • our willingness to embrace new technologies. Our strong track-record of early deployment of new technologies, including interactive digital TV, multi-media mobile communications and pervasive computers;
    •  our access to a market of 390 million people. Today 10 per cent use the web. By 2002 it is expected to be 35 per cent. Half of Europe is expected to be on-line by 2006. I want Britain to lead the world in getting people on-line.

    We recognise success will not come automatically.

    So I want to explain today the key building blocks we are putting in place for success:

    First, greater economic stability;

    Second, a more competitive environment including a new independent competition authority;

    Third, the right legislative framework for e-commerce;

    Fourth, fostering innovation;

    Fifth, transforming education;

    Sixth, widening access for all;

    Seventh, modernising government – a public sector willing to innovate.

    We will review progress every year in the Budget.

    Let me explain our policies in detail.

    The precondition for all else is of course macro-economic stability so that businesses and individuals are able to plan for the long term.

    In today’s global marketplace, national economies must be founded on a platform of monetary and fiscal stability.

    So we have put in place a new long term framework with clearly defined objectives: a symmetrical inflation target and a golden fiscal rule; new rules for delivering them – Bank of England independence and a Code of Fiscal Stability — and a new openness and transparency that builds confidence and trust.

    With these reforms and the record – the lowest inflation for over thirty years, and long term interest rates at historically low levels – I believe that Britain now has a sound and credible platform of stability from which to achieve steady growth.

    Second, competition

    But stability is not enough, the sharpest spur to innovation, efficiency and improvement is competition.

    Monopoly protects the privileged. Competition empowers the consumer. Competition promotes better services and better prices.

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

    That is why this Government is reviewing every barrier to competition in the emerging e-commerce market. Old monopolies and cosy cartels have no place in this new market.

    So, our new Competition Act for the first time prohibits all anti-competitive practices.

    So that competition will be encouraged for the long term needs of the economy and the public, we are making our competition authority – like the Bank of England – independent of political influence.

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

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

    So the forthcoming Utility Bill will place a new primary duty on the telecoms regulator to protect the interests of consumers through promoting competition.

    Already competition is forcing the price of Internet access down. BT are reviewing charges for Internet access. OFTEL will continue to ensure that competition drives down the cost of Internet access.

    And competition will be essential to promote innovation in the new generation of digital technology and broadband access.

    • first, 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, the best way of rolling out this technology;
    • secondly, broadband fixed wireless access can deliver fast and inexpensive broadband services. This would provide additional competition in the provision of broadband services. Having consulted on this the Radio Communications Agency of the DTI is reviewing the responses and an announcement will be made shortly.
    •  and thirdly, making available BT’s local loop to competitors widens access to the local network. Again, using competition to roll out new technology.

    And BT has now announced a an upgrade of their local network. This will promote the early introduction of high speed access to the Internet to homes and businesses across the UK.

    Third, the legislative framework

    The Internet economy needs the right legislative framework for electronic commerce, and Patricia Hewitt will say more about this later.

    The Electronic Communications Bill – which we will introduce this year – will not only recognise electronic signatures, but remove unnecessary legal obstacles that force people to use paper.

    And we are determined to advance the Internet not just by implementing the best British legal framework but also by pushing for the best European framework to encourage competition, innovation and e-commerce.

    Fourth, fostering innovation

    The Internet economy will need higher levels of private investment – not least in university science and commercial R and D, and in hi tech start ups and in skills.

    To modernise our science base, we have invested 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.

    The new R and D tax credit which we propose to next April for SMEs will mean that nearly a quarter of new investment is underwritten even before a penny profit is made.

    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.

    And 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 alliance in research and commerce.

    A new government backed regionally based Venture Capital Fund is being created to encourage investment in early-stage, high technology companies.

    And to encourage investment in new companies, we have cut small business tax from 23 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 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.

    Corporate venturing has been vital in Silicon Valley and elsewhere – providing smaller 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, we are considering new incentives to promote corporate venturing.

    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.

    Next week, I will be launching Techmark, a new market within the London Stock Exchange for companies whose success depends on innovation.

    And today with the publication of a new Treasury consultation document we are announcing new proposals for cutting through red tape for dynamic new high tech businesses – 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 be able, from next April, to benefit from the Government’s Enterprise Management Incentive Scheme. 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.

    Fifth, Transforming education

    Success in the Internet age depends upon an educated economy. The extra £19 billion our country is now investing in education is designed to 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 and 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 two years ago barely 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 32,000 schools connected to the Internet, with around 400,000 teachers computer-trained. We are well on track to achieve this target with over 20,000 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 pounds is making it possible for more teachers to have computers for home use.

    But we must go further. Next year we will double the money on IT in schools. We can now promise that by 2002 every school – rural and urban, rich and poor, north and south – all of our schools 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.

    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.

    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.

    Sixth, Wider access

    And we must make sure that the opportunities of new technologies are shared by everyone.

    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.

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

    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.

    Anyone left out of the new knowledge revolution will be left behind in the new knowledge economy.

    So in the last Budget, we allocated an additional half a billion pounds to the establishment of new ICT learning centres. Our target is a national network of 1,000 computer learning centres, one for every community in Britain. They will be in schools, colleges, libraries, in Internet cafes and on the high street.

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

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

    And we will pioneer 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.

    We aim to have 100,000 computers on loan by end 2001.

    So with our new University for Industry providing education in peoples 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.

    Seventh, modernising government

    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.

    The £2.5 billion Capital Modernisation Fund was set up to support capital investment to improve public services.

    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.

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

    The first round of the Invest to Save Budget funded a number of innovative projects, including an electronic one stop shop for land and property information which will help reduce house buying delays; a pilot scheme enabling applications for vehicle tax discs over the Internet; and an electronic catalogue enabling public bodies to order goods and services more cheaply and efficiently.

    Almost 500 bids were submitted in round 2. These are now being considered. The winners are likely to include:

    • projects increasing electronic access to services for individuals and business;
    • new websites giving the public increased access to information; and
    • projects facilitating electronic data exchange between public bodies.

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

    • 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;
    • file returns at Companies House; and
    • receive payments from government for the supply of goods and services.

    Looking to the future

    Britain is well known for its tolerance, its strong traditions of fair play, its decency. But it is also known for its history of being adaptable, being creative, and being outward looking. These are precisely the qualities that will help us lead in the new information revolution.

    If as a country we now master the challenges of change, this transformation from industrial age to information age has staggering potential to make us more educated, more enterprising and more prosperous.

    We require both an industry sufficiently alive to the opportunities — and a public willing to adapt. I believe that with the changes I propose Britain will be ready to meet this challenge.

  • Gordon Brown – 1999 Speech at the Mais Lecture on Full Employment

    Gordon Brown – 1999 Speech at the Mais Lecture on Full Employment

    The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 19 October 1999.

    INTRODUCTION

    My first words from the Treasury, as I became Chancellor and announced the independence of the Bank of England, were to reaffirm, for this Government, our commitment to the goal first set out in 1944 of high and stable levels of growth and employment.

    Now in this Mais Lecture – which has been, from time to time, a platform for politicians of all parties to reflect, to analyse and – as is the case with us politicians – often to get things wrong, I will seek to detail the conditions in our times under which the high ideals and public purpose contained in this economic goal of 1944 can be achieved.

    Full employment – defined as in 1944 as ‘high and stable levels of employment’ – was a reality for the twenty years after the Second World War. But rising unemployment in the 1970’s was followed in the 1980s by unemployment rising to above 3 million, beyond its peak in the 1930s. As recently as 1997, 20 per cent of working age households – one in five- had no one in work.

    Some believe that full employment can be restored only by a return to macroeconomic fine tuning. Others believe that in the new more open economy governments cannot hope to meet the 1944 objectives. I reject both the dogma of insisting on old ways and the defeatism of abandoning the objectives.

    So since 1997 the new Government has been putting in place a new framework to deliver the objectives of high and stable levels of growth and employment. And as I said in New York last month there are four conditions which must all be met – and met together – if we are to deliver in our generation those objectives of 1944:

    • first: stability – a pro-active monetary policy and prudent fiscal policy to deliver the necessary platform of stability;
    • second: employability – a strengthening of the programme to move the unemployed from welfare to work;
    • third: productivity – a commitment to high quality long term investment in science and innovation, new technology and skills;
    • fourth: responsibility – avoiding short termism in pay and wage bargaining across the private and public sectors, and building a shared sense of national purpose.

    I will show that these conditions – requirements for stability, employability, productivity and responsibility – are and have always been the necessary conditions for full employment.

    The first condition, stability, is needed to ensure a sustainable high demand for labour. The second , employability, promotes a sustainable high supply of labour. The third, raising productivity, provides a sustainable basis for rising living standards. And the fourth, responsibility in bargaining, ensures a sustainable basis for combining full employment with low inflation.

    And I will show that the failure to meet these conditions led to persistently high unemployment in Britain in recent decades. And I will demonstrate how by putting these conditions in place we are restoring the goal of full employment for the next century.

    THE 1944 WHITE PAPER

    If we start with that famous 1944 White Paper, we see that the government of the time was clear that if full employment was to be sustained all these conditions – stability, employability, productivity and responsibility – had to be in place.

    While the 1944 White Paper asserted the need for active macroeconomic policy – to balance supply and demand, it also recognised there was no long run gain by trading lower unemployment for higher inflation. Indeed, the 1944 White Paper included an explicit requirement for stability. And I quote: “action taken by the government to maintain expenditure will be fruitless unless wages and prices are kept reasonably stable. This is of vital importance to any employment policy”.

    As important for future generations, was the White Paper’s recognition that macro-economic action was a necessary but not sufficient condition for full employment and that policies for stability had to be accompanied by policies for employability, productivity and responsibility, not least in pay.

    The 1944 White Paper stated that “it would be a disaster if the intention of the government to maintain total expenditure were interpreted as exonerating the citizen from the duty of fending for himself and resulted in a weakening of personal enterprise”. It required that ‘ every individual must exercise to the full his own initiative in adapting himself to changing circumstances. The government….. will also seek to prevent mobility of labour being impeded…” and said “workers must be ready and able to move freely between one occupation and another.”

    And the 1944 vision was explicit about responsibility in pay, saying ‘if we are to operate with success a policy for maintaining a high and stable level of employment, it will be essential that employers and workers should exercise moderation in wages matters’.

    So while that White Paper is remembered for its commitment to pro-active monetary and fiscal policy, it should also be remembered for its emphasis on employability, productivity and responsibility not least in pay. And the evidence suggests that it was the accumulating failure – cycle by cycle – to meet not just one but all four of these conditions together that led to the rise of unemployment from the late 1960s onwards.

    First the post war years.

    The 1945 Government was resolved that Britain never would return to the unemployment of the 1930s. Indeed over the first two decades it seemed that it was possible to sustain both low inflation and low unemployment, a period many have called a golden age for the British economy.

    But we all now accept that a more detailed historical examination reveals that successive governments left unaddressed underlying long -term weaknesses. Once price and capital controls were dismantled, these weaknesses began to be revealed in low productivity and recurrent balance of payments difficulties.

    Governments repeatedly attempted to address these problems – through policies to enhance employability, productivity and responsibility. Indeed, the theme of the 1960s was a productivity revolution to be achieved through national planning, of the 70s a social contract which would responsibly resolve distributional conflicts, of the 80s deregulation which would “set the economy free”.

    Supply side action to improve productivity, included the NEDC, the national plan, regional plans, the IRC, and later the NEB – all attempts to harness new technology to the productivity challenge and secure high growth.

    Supply side action to enhance employability on the labour market ranged from selective employment taxes to trade union reforms.

    But the swift succession of improvisations to control pay – which ranged from guiding lights and pay pauses, to latterly “severe restraint” and the social contract – showed just how elusive was the shared purpose necessary for pay responsibility to work.

    In their desire to maintain the 1944 objectives, even as supply side action failed, governments resorted to attempting to control the economic cycle through doses of reflation.

    And every time the economy grew from the fifties onwards, a familiar pattern of events unfolded – a pattern we characterise as the British disease of stop go – rising consumption unsupported by sufficient investment, growing bottlenecks and balance of payments problems as the Sterling fixed exchange rate link came under pressure – and then monetary and fiscal retrenchment as growth in the economy had to be reined back.

    Unemployment around 300,000 in the mid fifties rose to over half a million in the late sixties and 1 million by the late seventies, and with hindsight we can conclude that at no time in this period was Britain meeting all the conditions judged in 1944 to be necessary for full employment.

    • despite the promise of stability, no credible institutional arrangements were put in place to deliver that stability;
    • despite talk of rights and responsibilities in the labour market no serious reform of the Welfare State was instituted, even though – from the late 1960s onwards – growing global competition and new technologies were transforming our labour markets;
    • despite repeated expressions of concern about our productivity gap, no long term strategy for tackling it ever succeeded;
    • while pay restraint was a central issue for most of the period, the initiatives that were introduced to ensure pay responsibility were invariably short term and were not underpinned by a broadly based consensus that resolved the difficult issues.

    Each time governments sought to restore the shared, long-term purpose of 1945, they found it more – not less – difficult and attempts to do so descended into a mixture of exhortation- like the “I’m backing Britain campaign”- and a British version of corporatism — vested interests cooking up compromises in smoke filled rooms in London, far removed from the workplaces where such agreements would have to be sustained. The national consensus -which Mr Wilson sought around his national plan, Mr Heath sought around low inflation, Mr Callaghan sought around the social contract- broke down in a series of divisive conflicts – state versus market, capital versus labour, public versus private.

    And the more governments failed on pay, productivity and industrial relations, the more they fell back on short-term ‘Fine tuning’ in a doomed attempt to square the circle and deliver higher living standards and jobs despite sluggish productivity growth: problems massively compounded by the collapse of the Bretton Woods system of fixed exchange rates and the 1973 oil shock.

    So the golden age gave way to the era of boom and bust. With each successive cycle, a clear pattern developed. Unsustainable growth, leading to stagnation, and cycle by cycle to ever higher levels of inflation and unemployment. Inflation rising from 3 per cent in the late fifties to 9 per cent in the early seventies and more than 20 per cent by 1975. Unemployment, ratcheted up every cycle and doubling over the period.

    What began in 1944 as a comprehensive long term strategy for growth and employment built on a commitment to stability, employability, productivity and responsibility had by the 70s descended into short termism and rising unemployment.

    Quite simply governments could not deliver growth and employment through a macro- policy designed to exploit a supposed short-term trade off between higher inflation and lower unemployment.

    A crude version of the 1944 policy- using macro policy to expand demand and micro policy to control inflation – simply could not work.

    And it was this insight that the 1979 government seized upon with what they termed a medium term financial strategy to return Britain to economic stability.

    But the they went further than simply arguing that ‘fine tuning ‘ was the problem. For them the very idea that dynamic economies required active governments was the problem.

    As they stated, their policies reflected a neo liberal view of the state:

    • first, the application of rigid monetary targets to control inflation— choosing in succession £M3, M1, then M0 , then when they failed shadowing the Deutschmark, then the Exchange Rate Mechanism as the chosen instrument for monetary control;
    • second, a belief in deregulation as the key to employability – in the absence of an active labour market policy or an active, reformed Welfare State;
    • third, as the route to higher productivity, again deregulation alone in capital and product markets – a philosophy of “the best government as the least government”;
    • fourth, the rejection of consensus.

    The clearest intellectual statement of the new position was Nigel Lawson’s Mais Lecture in 1984. Its central thesis was that the proper role of macro-economic and micro-economic policy “is precisely the opposite of that assigned to it by the conventional postwar wisdom”.

    The conquest of inflation, not the pursuit of unemployment, should be the objective of macro-economic policy. The creation of conditions conducive to growth and employment, not the suppression of price rises, should be the objective of micro-economic policy.

    On one point, arguing against a crude version of the 1944 policy- using macro policy to expand demand and micro policy to control inflation – he drew the right lesson from the failures of previous decades .

    But far from tackling the boom-bust cycle endemic to the British economy, the early 1980s and 90s saw two of the deepest recessions since 1945. And even at the peak of growth in 1988, unemployment was still over 2 million. Before it rose again to 3 million in 1993.

    As the late eighties boom showed the Government eventually relapsed into the very short termism it had come into government to reverse. Just as the fine tuners had in the 1970s given way to the monetarists, so now monetarism lapsed into fine tuning.

    By the mid 1990s, the British economy was set to repeat the familiar cycle of stop go that had been seen over the past 20 years. By 1997 there were strong inflationary pressures in the system. Consumer spending was growing at an unsustainable rate and inflation was set to rise sharply above target; there was a large structural deficit on the public finances. Public Sector Net Borrowing stood at £28 billion.

    THE NEW ECONOMIC FRAMEWORK

    So against a background of mounting uncertainty and then instability in the global economy, we set about establishing a new economic framework to achieve the four conditions for high and stable levels of growth and employment to promote new policies for stability, employability, productivity and responsibility.

    We started by recognising we had to achieve these 1944 objectives in a radically different context – integrated global capital markets, greater international competition , and a premium on skills and innovation as the key to competitive advantage.

    A PLATFORM OF STABILITY

    The first condition is a platform of economic stability built around explicit objectives for low and stable inflation and sound public finances – in our case an inflation target and a golden rule- along with a commitment to openness and transparency.
    The new post- monetarist economics is built upon four propositions:

    • because there is no long term trade off between inflation and unemployment, demand management alone cannot deliver high and stable levels of employment;
    • in an open economy rigid monetary rules that assume a fixed relationship between money and inflation do not produce reliable targets for policy;
    • the discretion necessary for effective economic policy is possible only within a framework that commands market credibility and public trust;
    • that credibility depends upon clearly defined long-term policy objectives, maximum openness and transparency, and clear and accountable divisions of responsibility.

    Let me review each proposition one by one.

    A few decades ago many economists believed that tolerating higher inflation would allow higher long-term growth and employment.

    Indeed, for a time after 1945, it did – as I have said – appear possible to “fine-tune” in this way – to trade a little more inflation for a little less unemployment – exploiting what economists call the Phillips curve.

    But the immediate post war perio presented a very special case – an economy recovering from war that was experiencing rapid growth within a rigid system of price and capital controls. We now know that even at this time ‘Fine tuning ‘ merely suppressed inflationary pressures by causing balance of payments deficits.

    And by the 1960s and 1970s, when governments tried to lower unemployment by stimulating demand , they faced not only balance of payments crises but stagflation as both inflation and unemployment rose together.

    Milton Friedman argued in his 1968 American Economic Association Presidential Lecture that the long term effect of trying to buy less unemployment with more inflation is simply to ratchet up both.

    And here in Britain conclusive evidence for this proposition came in the 1980s experience of high inflation and high unemployment occurring together.

    So because there is no long term trade off between inflation and unemployment, demand management alone cannot deliver high and stable levels of employment.

    Friedman was right in this part of his diagnosis: we have to reject short termist dashes for growth. But the experience of these years also points to the solution.

    My conclusion is that because there is no long term trade off between inflation and unemployment delivering full employment requires a focus on not just one but on all the levers of economic policy.

    The second proposition in the new post- monetarist economics is that applying rigid monetary targets in a world of open and liberalised financial markets cannot secure stability.

    Here experience shows that while Friedman’s diagnosis was right his prescription was wrong.

    Fixed intermediate monetary targets assume a stable demand for money and therefore a predictable relationship between money and inflation.

    But since the 1970s, global capital flows, financial deregulation and changing technology have brought such volatility in the demand for money that across the world fixed monetary regimes have proved unworkable.

    So why, even as monetary targets failed, did the British Government persist in pursuing them? Why even as they failed was their answer more of the same?

    The answer is that they felt the only way to be credible was by meeting fixed monetary rules.

    And when one target failed they chose not to question the idea of intermediate targeting but to find a new variable to target, hence the bewildering succession of monetary targets from £M3 to M0 , then shadowing the Deutschmark, then the Exchange Rate Mechanism as the chosen instrument for monetary control.

    As with fine tuning, the rigid application of fixed monetary targets was based on the experience of sheltered national economies and on apparently stable and predictable relationships which have broken down in modern liberalised global markets.

    And yet the more they failed, the more policymakers felt they had to tie their hands, first by adding even more monetary targets and then by switching to exchange rate targets. But having staked their anti-inflationary credentials on following these rules, the government – and the economy – paid a heavy price. The price was recession, unemployment – and increasing public mistrust in the capacity of British institutions to deliver the goals they set.

    What conclusion can be drawn from all this?

    Governments are in theory free to run the economy as they see fit. They have, in theory, unfettered discretion.

    And it is not only the fact that they have this unfettered discretion but the suspicion they might abuse it that leads to market distrust and thus to higher long term interest rates.

    That is why governments have sought to limit their discretion through rules.

    The monetarist error was to tie policy to flawed intermediate policy rules governing the relationship between money demand and inflation.

    But the alternative should not be a return to discretion without rules, to a crude version of ‘fine tuning’.

    The answer is not no rules, but the right rules.

    The post monetarist path to stability requires the discipline of a long term institutional framework.

    So my second proposition- that in a world of open capital markets fixed monetary targets buy neither credibility nor stability – leads directly to my third.

    The third proposition is that in this open economy the discretion necessary for effective economic policy is possible only within a framework that commands market credibility and public trust.

    Let me explain what I mean when I talk of the new monetary discipline: in the new open economy subject to instantaneous and massive flows of capital the penalties for failure are ever more heavy and the rewards for success are even greater.

    Governments which lack credibility-which are pursuing policies which are not seen to be sustainable- are punished not only more swiftly than in the past but more severely and at a greater cost to their future credibility.

    The British experience of the 1990s is a case in point. It shows that once targets are breached it is hard to rebuild credibility by setting new targets.

    Credibility, once lost, is hard to regain.

    The economy then pays the price in higher long term interest rates and slower growth.

    On the other hand governments which pursue, and are judged by the markets to be pursuing sound monetary and fiscal policies, can attract inflows of investment capital more quickly, in greater volume and at a lower cost than even ten years ago.

    The gain is even greater than that. If governments are judged to be pursuing sound, long-term policies, then they will also be trusted to do what is essential- to respond flexibly to the unexpected economic events.

    That inevitably arise in an increasingly integrated but more volatile global economy.

    So in the era of global capital markets, it is only within a credible framework that governments will command the trust they need to exercise the flexibility they require.

    This leads to my fourth proposition – a credible framework means working within clearly defined long-term policy objectives, maximum openness and transparency, and clear and accountable divisions of responsibility.

    It is essential that governments set objectives that are clearly defined and against which their performance can be judged.

    That is why we have introduced clear fiscal rules, defined explicitly for the economic cycle.

    That is why, also, we have a clearly defined inflation target. Let me say why it is so important that our inflation target is a symmetrical target. Just as there is no gain in attempting to trade higher inflation for higher employment, so there is no advantage in aiming for ever lower inflation if it is at the expense of growth and jobs.

    If the target was not symmetric – for example, if in the UK case it was 2_ per cent or less rather than 2.5 per cent – policy-makers might have an incentive to reduce inflation well below target at the cost of output and jobs. Instead a symmetrical target means that deviations below target are treated in the same way as deviations above the target.

    But to be credible, the monetary and fiscal framework must also be open, transparent and accountable.

    The greater the degree of secrecy the greater the suspicion that the truth is being obscured and the books cooked.

    But the greater the degree of transparency— the more information that is published on why decisions are made and the more the safeguards against the manipulation of information – the less likely is it that investors will be suspicious of the government’s intentions.

    That openness needs to be underpinned by accountability and responsibility.

    So public trust can be built only on a foundation of credible institutions, clear objectives, and a proper institutional framework. The flaw in the previous Government’s economic policy was not just the failure of monetary targets. It was that the “medium-term financial strategy” had no credible foundation – it was neither consistent in objectives, nor transparent in its operation, nor underpinned by credible institutional reforms .

    Failure led, after 1992, to some reform. The inflation target was an important step forward. But it was ambiguously defined and it was not underpinned by anything other than an improvised and still highly personalised institutional framework. Minutes of meetings between the Bank of England and the Chancellor were published, but they could not allay the suspicion that policy was being manipulated for political ends. In fact despite the then government’s commitment to an inflation target of 2.5 per cent or less, financial market expectations of inflation 10 years ahead were not 2.5 per cent or less but 4.3 per cent in April 1997, and never below 4 per cent for the whole period. Long term interest rates remained 1.7 percent higher in Britain than in Germany.

    This has changed significantly in the last two years, long term inflation expectations have fallen from 4.3 per cent to 2.4 per cent, a figure consistent with the government’s inflation target; the differential between British and German long term interest rates has fallen from 1.7 per cent, to just 0.2 percentage points.

    I believe the explanation for this improvement lies in the immediate and decisive steps that our new Government took in May 1997 -to set clear monetary and fiscal objectives, to put in place orderly procedures including a new division of responsibility between the Treasury and an independent central bank, and to insist on the maximum openness and transparency.

    Contrary to Nigel Lawson’s distinction between the roles of macro economic and micro economic policy as set out in his 1984 lecture, we recognise that the role of a macro economic policy is not simply to bear down on inflation but by creating a platform of stability to promote growth and employment; and that an active supply side policy is necessary not only to improve productivity and employment, but to make it possible to sustain low inflation alongside high and stable levels of growth and employment. In other words, macroeconomic and microeconomic policy are both essential – working together – to growth and employment.

    In short we have sought to learn the lessons of the postwar years and build a new platform of stability. Making the Bank of England independent was and is only one of the institutional reforms that form our new post monetarist approach to economic policy.

    First, clear long term policy objectives:

    • a pre-announced and symmetrical inflation target;
    • and strict fiscal rules to ensure sustainable public finances.

    Second, well understood procedural rules:

    • a clear remit for the Monetary Policy Committee of the Bank of England to meet the inflation target set by government supported by the open letter system and the Code for Fiscal Stability;
    • and effective co-ordination between fiscal and monetary policy – including the presence of the Treasury representative at the Monetary Policy Committee meetings.

    Third, openness and transparency to keep markets properly informed, ensuring that institutions, objectives and the means of achieving the objectives are seen to be credible:

    • publication of the minutes and votes of Monetary Policy Committee meetings;
    • and transparency in fiscal policy including the independent auditing of key fiscal assumptions.

    It is the same search for stability in an open economy that has led to European Monetary Union.

    And at the global level, the same lessons are being learned. In Washington last month, the IMF agreed a new framework of codes and standards, new economic disciplines for openness and transparency to be accepted and implemented by all countries which participate in the international financial system. These codes and standards – including fiscal, financial and monetary policy – will require that countries set out clear long term objectives, put in place proper procedures, and promote the openness and transparency necessary to keep markets informed.

    With the reforms we have already made in Britain, I believe that we have now – for the first time in this generation – a sound and credible platform for long term stability for the British economy.

    We will not make the old mistake of relaxing our fiscal discipline the moment the economy starts to grow. The same tough grip will continue.

    The Monetary Policy Committee will be and must continue to be vigilant and forward-looking in its decisions, as we build a culture of low inflation that delivers stability and steady growth.

    We will not repeat the mistake of the late 80s. Those who today are arguing that economic stability comes by opposing necessary changes in interest rates and by avoiding the tough decisions necessary to meet the inflation target would risk returning to the boom and bust of the past. We can achieve high and stable levels of employment and meet our inflation target. Indeed we will not achieve and sustain full employment for the long term by failing to meet our inflation target.

    This credible platform of stability, built from the solid foundations I have just described, allows people to plan and invest for the long-term. This is our first condition for full employment.

    WELFARE TO WORK

    The second condition for full employment is an active labour market policy matching rights and responsibilities.

    The idea of a fixed natural rate of unemployment consistent with stable inflation was discredited by the evidence of the 1980s.

    For even when the economy was growing at an unsustainable pace— above 5 per cent in 1988-, in all regions of the country there were high levels of vacancies including vacancies for the unskilled alongside high unemployment.

    How did this happen? Part of the explanation was the ‘scarring’ effect on skills and employability inflicted by the deep and long recession of the 80s.

    Partly also the mismatch between the skills and expectations of redundant manufacturing workers – and the new jobs in service industries.

    Partly the failure to reform the Welfare State especially its unemployment and poverty traps which, for many, meant work did not pay.

    So there was a rise in what, in the 1980s, economists termed ‘the non accelerating inflation rate of unemployment’ or the NAIRU.

    Whether measured by the relationship between wage inflation and unemployment —as Phillips stressed in the 1950s —–or vacancies and unemployment as Beveridge had highlighted in the 1940s —- Britain had clearly seen a dramatic structural deterioration in the UK labour market. The same level of wage pressure or vacancies existed alongside much higher levels of unemployment than in the past.

    So the new government has taken a decisively different approach to employment policy over the past two years aimed at reducing the NAIRU.

    All our reforms are designed for the modern dynamic labour market, now being transformed by the new information technologies. We recognise that people will have to change jobs more often, that skills are at a premium and that reform was needed in the 1980s to create more flexibility.

    The New Deal which offers opportunities to work but demands obligations to do so is the first comprehensive approach to long term unemployment. Designed to reengage the unemployed with the labour market, it addresses both the scarring effect of unemployment and the mismatch between jobs and skills. The Working Families Tax Credit and associated reforms that integrate tax and benefit are, for the first time, making work pay more than benefits, and our educational reforms including lifelong learning ,the university for industry, individual learning accounts and our computers for all initiative will tackle skill deficiencies.

    The last 2 years have brought record levels of employment and sharp falls in youth and long term unemployment – early signs that our policies are having an impact. But with still 1.2 million claimant unemployed and others excluded from the labour market – even at a time when there are around one million vacancies spread throughout all areas of the country -there is much more to do. The Working Families Tax Credit is now being extended to new employment credits for the disabled and for those over fifty. And as the New Deal extends its scope from the under- 25s to the long term unemployed opportunities to work and obligations to work will be extended together.

    The more our welfare to work reforms allow the long-term unemployed to re-enter the active labour market, the more it will be possible to reduce unemployment without increasing inflationary pressures. And the more our tax and benefit reforms remove unnecessary barriers to work, and the more our structural reforms promote the skills for work, the more it is possible to envisage long-term increases in employment, without the fuelling of inflationary pressures.

    PRODUCTIVITY

    Next our third condition : only with rising productivity can we meet peoples long-term expectations for rising standards of living without causing inflation or unemployment.

    It is important to be clear about the relationship between productivity, employment and living standards.

    Low productivity can exist side by side with low unemployment if people accept that living standards are not going to rise -as happened to the United States in the 1980s.

    But rising productivity can exist side by side with high unemployment if we pay ourselves more than the economy can afford. If people demand short term rewards which cannot be justified by economy-wide productivity growth, the result is first inflation and then the loss of jobs. That has been the historic British problem – repeated bouts of wage inflation unmatched by productivity growth leading in the end to higher unemployment.

    Indeed between 1950 and 1996 productivity growth in Britain was only 2.6 per cent a year compared to 3.7 per cent and 3.9 per cent in France and Germany.

    But if we can now achieve rising productivity, bridging the gap with our competitors, high levels of employment and rising living standards can go together.

    Britain cannot assume that the new information technologies will automatically bring the higher productivity growth now seen in the United States. So we must work through a new agenda that involves a shared national effort to raise our game.

    Policies to encourage higher productivity will be the theme of the Government’s Pre-Budget Report on the 9th of November.

    While 30 years ago governments responded to the productivity challenge with top-down plans, and grant aid primarily for physical investment, today the productivity agenda is more complex and more challenging. So we are developing new and radical policies for the modernisation of capital and product markets, the encouragement of innovation and an enterprise culture open to all, as well as the building of a modern skills base.

    RESPONSIBILITY IN PAY-SETTING

    I come now to our fourth and final condition for full employment -responsibility, not least in pay, and by responsibility I mean, as I have stressed throughout this lecture, a willingness to put the long term above the short term, a willingness to build a shared common purpose.

    To succeed we must all be long termists now.

    The reality of the more complex and flexible labour markets of Britain today is that pay decisions are dictated not by the few in smoke filled rooms but made by millions of employees and employers across the country.

    And the more that we are all persuaded to take a long-term view of what the economy can afford, the more jobs we will create, the more we can keep inflation under control so interest rates can be as low as possible.

    The Bank of England have to meet an inflation target of 2.5 per cent. The target has to be met. Unacceptably high wage rises will not therefore lead to higher inflation but higher interest rates. It is in no one’s interest if today’s pay rise threatens to become tomorrow’s mortgage rise.

    The worst form of short-termism would be to pay ourselves more today at the cost of higher interest rates tomorrow, fewer jobs the next year and lower living standards in the years to come.

    So wage responsibility – to rescue a useful phrase from a woeful context- is a price worth paying to achieve jobs now and prosperity in the long term. It is moderation for a purpose.

    But responsibility means not just responsibility in pay but building a shared commitment to achieve all the conditions necessary for full employment – in other words to work together as a country to promote stability employability and higher productivity too.

    It is undeniable that the shared economic purpose of 1945 broke down in fifty years of endless and sterile divisions between capital and labour, between state and market and between public and private sectors, denying Britain the national direction it needed.

    Britain and the British people can now move beyond these outdated conflicts.

    Building a consensus around the need for stability, employability, productivity and responsibility we can define a new a shared economic purpose for our country.

    The conditions for full employment can be met. And the surest way is that the whole country is determined to meet them.

  • Gavin Barwell – 2022 Comments on Smaller Economy Due to Brexit (Baron Barwell)

    Gavin Barwell – 2022 Comments on Smaller Economy Due to Brexit (Baron Barwell)

    The comments made by Gavin Barwell, Lord Barwell, on Twitter on 21 December 2022.

    The latest estimate suggests our economy is 5.5% smaller as a result of Brexit. My former colleagues don’t want to talk about this (nor do Labour), but it explains something else they don’t like: the high tax burden – tax revenues would be £40 billion higher.

    It’s important to acknowledge this is only an estimate – we’re trying to compare what’s happened with what might have happened had we remained. We can’t know the latter for sure, but that doesn’t mean we can’t produce good estimates, @JohnSpringford, who produced this estimate, has tweeted a thread of his own this morning explaining the assumptions behind this estimate and responding to Brexiteer critiques of them.

    Note that some of the impact was immediate after the referendum decision (ie it would have happened whatever version of Brexit we went for); whereas some happened after we left the transition period (ie it was the result of the particular version of Brexit Johnson chose).

    To give an idea of the scale of the impact, the March 2022 Budget raised taxes by £46 billion. In broad order of magnitude terms, these tax rises would not have been necessary if we had remained in the EU.

    Our politicians can’t go on ignoring this economic self-harm forever. That doesn’t mean we have to rejoin, but it does mean we need to reduce the very damaging barriers to trade that we have introduced with our nearest neighbours. It is clear now that was an act of self-harm.

  • Stephen Timms – 1999 Speech at the Proshare Conference

    Stephen Timms – 1999 Speech at the Proshare Conference

    The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 25 November 1999.

    I’m delighted to able to speak at this conference of Proshare which as an organisation has done so much to advance employee share ownership in an imaginative, progressive and effective way.

    Modern and decent

    Let me first put our aims for the new all employee share plan this in the context of the Government’s wider aims.

    What we have embarked on is a twenty year programme to build a new Britain which will be modern and decent. Both of those things at the same time.

    Modern Britain will have an economy where the vital new stability has been locked in for good, beyond our past decades long record of boom and bust. We want thriving knowledge-based firms exploiting the know how, creativity and expertise of British people. We want to create the best environment in the world for electronic commerce. Higher levels of investment, in information technology, in infrastructure, in skills. Higher levels of productivity to catch up after decades with our competitors. We’ll have higher standards at school, have harnessed the potential of further and higher education, and provide high quality opportunities for our young people. As individuals and collectively we shall have confidence in the future.

    Decent Britain will be an inclusive society where everyone has the chance to play their full part. Over the twenty year period, child poverty will be eradicated. There will be help for those trapped on benefits or in poor housing or without a job, and those unable to work through disability or through caring for somebody else. We’ll have a health service which people will have confidence in. There will be decent standards for those at work. We’ll confront crime, anti-social behaviour and drug taking which cast a shadow over too many young lives. We want to entrench decent values – society pulling together, and with rights matched by responsibilities.

    So modern and decent – that’s where we want to be in the years ahead. And it is my view that the new all employee share plan is exactly the type of initiative we need to take forward both strands of that commitment.

    Promoting an enterprise culture

    Make no mistake, employee share ownership is about to take a big step forward in the UK and, when it does, we shall be taking a big step towards our goals. One of our key priorities, as I have said, is to raise the levels of productivity in British industry, stubbornly stuck significantly behind those of France, Germany, the US, Japan. Another of our priorities is to give everyone a stake in the success of the economy, so that everyone can benefit from Britain’s growing prosperity. And increasingly, people recognise how much boosting employee share ownership will contribute to those two aims.

    When Gordon Brown, the Chancellor, stood up two weeks ago and presented the Pre-Budget Report, he laid out four new ambitions for the next decade: that over half of all our school-leavers go on to degrees; a higher percentage of people in work than ever before; child poverty reduced by half; and that we should be catching up on productivity with our competitors.

    We know that if we are to meet the productivity challenge, Britain needs to promote innovative thinking and enterprise. We need to encourage our workforce to think like entrepreneurs and to recognise the challenges of a competitive market place. We want them to think more like owners and to see the benefit of making their company successful. We want people to recognise that they have a part to play in our economy and a contribution to make to Britain’s growth.

    We believe that only by pursuing both enterprise and fairness together – enterprise and fairness for all – can we equip Britain for the future and secure rising living standards for all. So we want all employees to enjoy the rewards of success, not just the privileged few. Where people generate growth they should also benefit from it. Where they are working with their companies to become more efficient and to become more productive, they should also reap their reward.

    This is why employee share ownership is so important to this Government. And this is why we want to encourage more companies to offer all their employees a stake in their business.

    Employee shareholders have a direct interest in the performance of their company and a real stake in its success. Research in both the US and the UK shows there is a clear link between employee share ownership and improvements in productivity. Over time, employees have an incentive to contribute more actively to the development of the business. And if the majority of employees have an ownership stake, then individual efforts become mutually reinforcing.

    Employee shareholders also feel a greater commitment to their company which helps the company recruit and retain employees and improves its return from investment in employee skills and training. Employee shareholders better understand the risks faced by the business, which in turn can lead to greater pay responsibility.

    The role of the new plan

    Our target is to double the number of companies offering all-employee share ownership schemes. We want widespread employee ownership and long term shareholding by employees, and to encourage the new enterprise culture of team work in which everyone contributes and benefits from success.

    The plan will be an important step towards meeting that target.

    But we recognise that we need to encourage both companies and employees to take up the new plan if we are going to change the culture in the workplace. So we have devised a plan that is the most generous all employee plan ever introduced into the UK. One that offers significant tax benefits to both employees and companies. And one that will appeal to small as well as to large companies by offering a range of different features.

    The process

    We decided early on that we would not achieve the type of change we want to see just by tweaking the existing schemes. We want a plan which will meet our objectives and be attractive to all employees and companies.

    To help us achieve this, an Advisory Group, made up of representatives from leading share scheme practitioners, companies, academics and trade union members, have worked with the Inland Revenue in the development of the new plan. Two members of that group (Graham Rowlands Hempel and David Tuch) are speaking here today and I would like to thank them – and all their colleagues as well – for the tremendous commitment and support that they have given to this work.

    We are also listening to companies directly though the focus groups led by ProShare, who have organised today’s conference. Up to 60 companies have participated in these groups, which must be something of a record ­ even for New Labour! Again, many thanks to all of you who have given your time to attend meetings and to write to us. Your input has been extremely valuable and is reflected in the features of the plan which will have been outlined today.

    This initiative is an excellent example of how this Government is bringing private and public sectors together to create policies which work well in practice.

    Buying shares

    Let me outline some of the key features of the new plan.

    First, employees for the first time will be able to buy shares in their company out of their pre tax salary. Employees will immediately have a stake in the company – they will become “owners” from day one.

    Of course, holding shares is risky, unlike the one way bet of an option – employees will need to understand this when they decide to buy shares and employers will need to communicate this carefully to their employees. We are currently considering ways that the Revenue can help in this process.

    There are also features of the new plan to help reduce this risk. Because they buy shares out of the pre-tax salary employees are in effect always buying shares at a discount. Employers who offer matching shares to their employees add to that cushion, as indeed do employers who provide shares over a 12 month period based on the most favourable price.

    And we have set limits within the plan which should mean that no-one overreaches themselves and uses more of their salary to buy shares than is advisable.

    The second revolutionary feature reflects the fact that many companies have told us that they want employees to demonstrate their commitment to the company by buying shares. They also want to reward this by matching these with additional shares. Before now this has not been easy to achieve for everyone. The new plan will change this significantly and as a result many companies will for the first time want to set up a plan.

    Rewarding performance

    Other companies have told us that they have been put off from having a plan in the past because they would have to give shares to all their employees, regardless of their performance or their commitment to staying with the company. So our third innovation in the new plan is that companies can now award shares on a performance basis, if they want to. They can also take back shares awarded to employees who decide not to stay with them.
    Rewarding performance in this way will help companies to create a more competitive environment within their business. This in turn will lead to greater efficiencies and more innovation. But again, all this must be done on a basis that is fair to employees. It will be up to companies to choose any performance measure that suit their business, as long as these are objective and fair. Companies must be open with their workforce about how performance will be measured. Indeed this is how any modern, successful business should treat its employees if it is going to get the best from them.

    Smaller companies

    I want to say a few words about smaller companies. Our aim is to increase the number of companies who offer shares to all their employees. To achieve this, we need to encourage and help companies setting up their first plan. Many of these will be the smaller quoted and unquoted companies.

    Our fourth innovation is for these companies – the new plan can now be a very simple plan if this is what you want. It has also been designed so that you can set up a plan which can develop as the company grows.

    We recognise that smaller companies, particularly unquoted ones, face more obstacles in setting up plans and, like all businesses, have to look carefully at the costs. That is why the new plan contains a number of innovative features aimed at smaller and unquoted companies. In addition we are looking closely, again with the help of the Advisory Group and the industry generally, at ways in which Government can give more help.

    The internet gives us a tremendous opportunity to revolutionise the way that we can help companies set up plans and reduce the burdens on business of providing information to us. Next year we will have available on the net, and therefore free of charge, a set of draft rules that any company can take away and use to set up a plan.

    Conclusion

    We want to hear your views on the new plan. Many of you have said that you find it difficult to comment, not knowing what is going to happen to the existing schemes. I appreciate this. But as we have said all along, we need to be sure that the new plan will deliver the changes that we want to see happen, before we make any decisions on the existing schemes. Your input into the process so far has helped enormously in shaping the new plan. Just as we want to get the new plan right, we want to make the right decision on the existing schemes.

    From what we have heard already, we think the new plan will be very successful. These developments herald a dramatic change in the way many businesses operate, and point towards a new era of partnership between employees, shareholders and managers. They are a key building block for Britain’s future prosperity, for the modern and decent Britain we are working for. Join with us in promoting employee share ownership, so that we can make the most of the benefits which are on offer.

    Thank you.

  • Andrew Smith – 1999 Speech to the Best Value Conference

    Andrew Smith – 1999 Speech to the Best Value Conference

    The speech made by Andrew Smith, the then Chief Secretary to the Treasury, on 22 November 1999.

    Thank you for coming to this conference today. Having been a councillor myself in Oxford for 11 years and my wife having been one for 12 years for the Blackbird Leys estate in Oxford where we live, I can tell you local government has loomed large in my life. I’ve seen it at its best and I’ve seen it at its not so good. I believe in it and I want to make it better.

    So today I want to outline to you why Best Value is a core element of this Government’s modernisation programme, why Best Value demonstrates our commitment to building a new relationship built on partnership between Central and local government.

    Britain’s public services are crucial to the fabric of our country. Time and again, people make clear just how highly they value services such as education, health care and public transport. Indeed our commitment to public services was a key reason why we were elected into office and we expect in the future to be judged on our programme for their reform.

    Modern, efficient public services lie at the very heart of a productive and fair society. That is why improving public sector productivity was central to the productivity strategy set out two weeks ago by Gordon Brown in the Pre-Budget Report.

    We believe in our public services and we believe in the people who deliver them. And precisely because we believe in them, we think there’s a real sense of urgency in making the changes necessary for them to progress.

    That is why the next three years see the biggest ever investment in our schools and health services. Not just one year. But the year after that and the year after that as well. And at the same time we are maintaining a prudent fiscal policy. We will not put into jeopardy the platform of stability which has been created through tough discipline both in fiscal and monetary policy.

    This new investment is a testament to our faith in public services. But while more money is a necessary condition of success, it is not a sufficient one. Public services must also dramatically improve their productivity, efficiency and performance. Service users and taxpayers have a right to expect that their hard-earned money is not only being spent on the right things but is also delivering value for money, that what is available is being used to best effect

    So since the election, we have initiated the most radical reform programme in public services in 50 years. More money is coming on line. Our job now is to make that money work, for the taxpayer and the service users.

    We are modernising public services to ensure that they reflect real needs and deliver what people really want. The challenges of change in the modern world are immense. The technological revolution is changing the way consumers buy and the way we work. New markets and services are created daily. Public services must embrace that change too. We do our banking over the phone or the Internet so we expect to be able to pay our Council tax in similarly convenient ways. Business information lines are increasingly accessible 24 hours a day and we expect local authority information services to be equally convenient.

    There has already been progress and our public services are steadily improving and those responsible deserve our thanks and praise. We want to see high quality services not just in a few exceptional councils but everywhere. We want to see every council aspiring to Beacon status. We want to reward excellence and crack down on failure.

    By doing so we can tackle the variations in performance to bring all standards up to those presently achieved by best. Differences between performance are too marked. For example, a joint Audit Commission and Social Services Inspectorate report covering 29 local authorities found that the cost of home care varied from £7 an hour to £15 an hour. Highlighting and acting on these sorts of differences will help us spread more effective and efficient practice throughout Government.

    Of course, our modernising agenda is not only for local government. We are focusing on concrete improvements and service delivery through every layer of government, setting up new mechanisms for delivering progress and new machinery for monitoring it. That is why we have set ourselves tough output and efficiency targets through Public Service Agreements. Agreements that say in return for extra investment, we want genuine improvements in our public services.

    These targets are being monitored closely to ensure that services are brought up towards the level of the best and that the best is made even better. We will report on progress against these targets in the spring of next year.

    We have also set up a £2.5 billion Capital Modernisation Fund to support innovative capital projects which will further improve the quality of our public services.

    We’ve allocated £430 million to modernise Accident and Emergency departments, giving patients better access to primary care. There’s £170 million to improve security in local communities to help our fight against crime.

    And we have established a new advisory panel – the Public Services Productivity Panel – of outside experts drawn from the private sector. Leading businessmen and women, bringing to the public sector experience of managing change in large complex organisations.

    We are also acting on the need for modernisation in procurement.

    The Government is the largest buyer of goods and services in the country. Our procurement budget totals around £13 billion a year. So there is a lot at stake.

    Following the report by Peter Gershon, the Managing Director of Marconi, into public procurement, we’re streamlining its procurement processes by creating the Office of Government Commerce. This should deliver over £1 billion of efficiency savings over the next three years.

    So our commitment to modernising government is a commitment across the board and it is a commitment for the long term. And Best Value is our commitment to genuine service improvements in local services on the ground where it matters.

    Our focus now is on what really counts – what people get for what we put in. As with Public Service Agreements, the Best Value regime ensures that we focus our efforts on what makes a difference in people’s lives: for example, housing and benefits services, services for the elderly, services for our children.

    Councils need constantly to look for ways of enhancing the service they offer their clients and customers, and to adapt to their changing needs and expectations if we’re honest not something which has not always been a sufficiently high priority in the public sector.

    Best Value is designed to encourage innovation and innovative delivery mechanisms. We need to challenge the tradition which so often in the public sector tilts the risk/reward balance towards the risk averse. There may be something in the nature of public service that tilts the risk/reward balance towards the risk averse. On the one hand, successful initiatives don’t offer material rewards for public sector employees which are available to their private sector counterparts. On the other, a failed approach carries the risk, rightly, of a searching public examination. It is little wonder that public services for years have been run with the goal rather more of avoiding mistakes than trying something new and ambitious. We need to work together to change this into a new culture which encourages the social entrepreneurs which will give us the innovations we need.

    Best Value encourages partnerships with communities by ensuring that community strategies and corporate mission statements are reflected in the review programme. I know that Beverly Hughes will be saying more about this later.

    It’s important to recognise, as we do, that imposing one set of structures from the centre simply will not work. Public services are delivered locally, so they need to be shaped locally, to meet local needs. That is why Best Value is flexible, always focusing on what works best.

    Best Value also allows a marrying of local and of national priorities. Local priorities which are set through local indicators in consultation with service users and local communities; alongside national priorities set by government departments.

    Finally, Best Value recognises the importance of accountability, with review programmes published in annual local performance plans. A new dimension to public accountability, providing local people and communities with a basis for demanding improvements where they are most needed.

    Big steps forward have of course already been taken to prepare for Best Value’s introduction in April. I thank you for all the work that you have done on that. It is great that we have got this far, so quickly. But we need to ensure that small district councils are fully signed up to this programme of reform as well as larger ones.

    We also need to recognise that 1st April 2000 is only the beginning; Implementing Best Value is a major challenge for local authorities in the months and years beyond us.

    But if we change the mindset, devolve ownership of Best Value from managers through to local staff, and again through to the public, the potential rewards will be immense: The best councils will get greater powers – more freedoms and flexibilities to manage the way they see best. The best schools will see lighter touch inspection. Local authorities will have more ability to push forward their case for resources.

    We will be exploring with local government in next year’s Spending Review whether we can reach a new agreement: more and better outputs in return for more freedoms in the way you deliver services on the ground. I think that there is a huge prize for both central and local government and for the wider community.

    Of course these reward for success will not come overnight. Rights need to be earned and trust needs to be built even deeper. But with commitment and dedication, I believe it will happen.

    Our modernising programme of renewal and reform is ambitious and it is demanding. We will be driving it forward year on year. But it is a programme that has the ability and the vision to change the way our public services are run and used for the good of everyone. Best value does offer the best future for local government and all of those it serves. I thank you for the contributions you are making.

  • Stephen Timms – 1999 Speech at the Launch of the CBI Report on Corporate Venturing

    Stephen Timms – 1999 Speech at the Launch of the CBI Report on Corporate Venturing

    The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 11 November 1999.

    Introduction

    1. Thank you for inviting me to speak to you today. Over the past two and a half years this Government has started to build a new Britain which we want to be modern and decent – a new enterprise economy open to all the talents. That’s why the Chancellor set out on Tuesday as ambitions for the next decade the goals that we should have productivity moving closer to our major competitors, a larger proportion of people in work, halve the number of children in poverty, and for the first time over half of our school leavers should go on to study for a degree.
    2. For too long British investment has been too low, productivity increases too slow, the potential of new markets, new technologies and new skills too often squandered. I want that to change and for corporate venturing to fulfil its potential in the new Britain, promoting long term investment across British businesses. 

    The report

    1. The CBI/Natwest report into corporate venturing is a timely piece of research – highlighting the important benefits that corporate venturing can bring.
    2. Compared to the US, corporate venturing in this country barely skims the surface of the investment pond. When I was in Silicon Valley, in September, I met Stephen Nachtsheim, the Vice President for Corporate Business of Intel. He told me that Intel had invested over $3 billion dollars in more than 250 companies – most of them start-ups – some working from the owners’ garage. Corporate venturing is having a big impact on they way Intel does business and is as integral to their corporate strategy.
    3. Case studies in the report show that companies outside the US have also benefited from corporate venturing. Reuters, the information service provider, is helping to reshape its business through corporate venturing. 3M is using corporate venturing as a part of its growth strategy for the continued generation of new ideas, products and technologies.
    4. But examples like these outside the US are scarce. The report says, many large firms still don’t really know what corporate venturing is. And that worries me.
    5. We are in an era where business is changing dramatically, where the difference between business success and failure is the speed at which new technologies are adopted. British business is missing out on the benefits of corporate venturing.
    6. For example, in 1997, Intel conducted virtually no business on the Internet. In 1998, their Internet business had risen to 20 per cent thanks to corporate venturing. And this year they expect to carry out a staggering 50 per cent of all their business over the World Wide Web. It is becoming ever more noticeable that in the relentless competition of today’s global markets, large Goliaths of industry who cannot defeat the quicker Davids join them instead – creating innovative strategic partnerships – or symbiotic relationships as Patricia Hewitt called it – to the benefit of both firms. 

    PBR measures

    1. Enterprising attitudes are necessary in both established firms and new businesses. We need an enterprising culture which reflects the attitudes across society – attitudes to risk, reward and failure, and wealth creation.
    2. In the 1999 Budget we set out our intentions for a new tax incentive to promote corporate venturing. Following consultation, Gordon Brown announced on Tuesday in the Pre-Budget Report that we will provide an up-front corporation tax relief of 20 per cent for all large companies that invest in growing companies for over 3 years. This underwrites one fifth of their investment and takes into account the needs of Britain’s small high-tech firms.
    3. But we don’t just want companies to invest through corporate venturing once, we want them to become serial corporate venturers. Your report drew some interesting conclusion about the success of corporate venturing. 80 per cent of alliances were still going forward. 50 per cent of firms had gone on to undertake further partnerships.
    4. So our measures go further.
    5. To encourage serial corporate venturing, if a corporate venturer sells its investment at a profit and reinvests again through corporate venturing, it can defer the corporation tax charge on the gain.
    6. This incentive could be worth up to £100 million if businesses rise to the challenge and invest £500 million through corporate venturing .
    7. A thriving enterprise economy calls for a larger number of small businesses. That is why the Pre-Budget Report contained a number of new incentives for small businesses – the backbone of our economy. But we know that investments in smaller higher-risk trading companies are more risky. That is why as part of the corporate venturing tax relief we are providing a capital write-off against income for investments that do not work. Depending on the loss, a corporate venturer will be able to get additional relief of up to £24 for every £100 it has invested.
    8. These tax relief measures provide strong financial incentives to undertake corporate venturing. But, I agree with Patricia that corporate venturing is about more than money. So we will continue to work with the Department of Trade and Industry, developing further non-tax measures to help create a corporate venturing culture.
    9. Your research found that 38 per cent found partners through informal Networks. While I was in Silicon Valley I went to a meeting of the MIT/Stanford Venture Lab. This is a public forum where entrepreneurs, managers and investors can meet and learn about the small firms. I hope the CBI’s programme of regional seminars following this report will start the ball rolling in the UK. But we also need to look at other ways of encouraging dialogue between established companies and new firms.
    10. We need to take corporate venturing into the boardrooms of the largest corporates and into the workshops and laboratories of our smallest firms. We must get the message across that corporate venturing can provide finance, support and technical expertise to turn innovative talent into commercial success.

    Conclusion

    1. Corporate venturing has been a mainstream in the US economy since the 1960s and has had a big impact on the shape of their economy. Let us now grasp this opportunity to make corporate venturing a success for British businesses as well.
    2. Thank you.
  • Stephen Timms – 1999 Speech at Launch of Management Consultancy Best Practice Statement

    Stephen Timms – 1999 Speech at Launch of Management Consultancy Best Practice Statement

    The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 10 November 1999.

    Introduction

    1. I am delighted to launch this Statement of best practice working relationships between Government and the key consultancy associations. The Statement is a clear demonstration of this Government’s intention to work more closely and more effectively with its suppliers. I would particularly like to welcome the three parties who have worked so hard together to get this far: The Management Consultancies Association (represented by Chris Harrison, Vice Chairman), The Institute of Management Consultancy (represented by Richard Popple – President) and the Treasury’s Procurement Group (represented by Mike Burt).

    Procurement

    1. Improving procurement is part and parcel of this Government’s wider modernisation programme for the public services. Central Government is the largest buyer of goods and services in the country. Our procurement budget totals £13 billion, and that includes half a billion pounds a year spent on consultancies. So there is a lot at stake.
    2. The need for change has been given new urgency by the rapidly changing nature of the public sector’s relationship with the private sector.
    3. The Government’s dealings with the private sector have increased both in number and in complexity so the Government’s procurement activity has also become more complex.
    4. Take for example the enormous investment process that is now underway in IT. Or the opportunities posed by the Internet and electronic commerce, for organising Government activities in new, innovative and more effective ways. All of these changes demand a new emphasis on professional procurement and a new approach to it too.
    5. The private sector recognised long ago that procurement processes and procedures were central to the strategic planning and policy of any organisation. The public sector should be no different. Indeed without change in the public sector there will continue to be adverse consequences for the private sector, not least for the suppliers and consultancies with whom we do business.
    6. The problems in Whitehall’s approach to the procurement of committee projects and our procurement are well-known – poor projects definitions, poor project management, poor contract management and poor management of suppliers.
    7. We have also had some nasty surprises. There have been a number of major projects both in fields such as construction and IT which quite frankly have simply gone wrong. They raised the question as to whether the public sector had the professional skills required to define and manage major capital projects of this sort.

    Office of Government Commerce

    1. That’s why towards the end of last year we asked Peter Gershon, Managing Director of GEC Marconi to conduct a review of the structure of procurement and to tell whether we had the organisation, the skills, the processes and procedures that would see us into the next Millennium. His report which we endorsed in July, provides a recipe for swift progress.
    2. The report recommended the setting-up of the Office of Government Commerce which will, on the principle of subsidiarity, support departments by doing things centrally that are best done centrally, while leaving individual units freedom to pursue their individual interests locally where it is clearly best to do so.
    3. The Office of Government Commerce will be responsible for defining the electronic procurement agenda. It will oversee the management of supplier relations and it will be a source of project management skill which will be world class and which it will make available to departments. It will be a single source of authoritative guidance and will manage up the skills available across Whitehall. 

    Best Practice Statement

    1. This Statement is one of the first practical demonstrations of this Government’s commitment to improving its relations with its suppliers, as set out in Peter Gershon’s procurement review. It also puts into practical effect the call by the Modernising Government White Paper for modern and effective Government business. This is the first statement of its kind and I believe can be the model for other expressions of best practice relationships.
    2. It is a clear expression of how client departments and consultants should work together to achieve a mutually beneficial relationship and outcome. It sets out the best practice standards which should be adopted at every stage of the procurement and delivery of the contract. It reflects the real need for both sides of the contract to put behind them the confrontational and adversarial approaches which have too often been a feature of past working relationships and which deliver neither value for money nor the best results for either side, nor ultimately for the taxpayer.
    3. I bring a good deal of conviction to the task of commending the Statement because of my experience of working as a management consultant. I knew well the potential for management consultancy to make an enormous contribution to problem solving in a creative way – but also how much achieving that potential is dependent on a good relationship between client and consultant.
    4. We have developed the Statement with other Government Departments, the Management Consultancies Association and Institute of Management Consultancy on behalf of their members. But if it is to have real impact, its principles must be disseminated to everyone in Government involved in procuring consultancy services and to every consultant employed to deliver those requirements. And I look to everyone present here today to play their part in making this happen. We also recognise the need for its adoption and application to be monitored and fed back to those who will be responsible for reviewing, amending and refining the statement. So we will be putting in place the means for achieving this
    5. Working together with business has been a key theme of this Government. This Statement clearly demonstrates those values. Consultancies, the Government and the taxpayer all stand to gain. With your support, we can ensure that the Statement delivers tangible results, becoming the “yardstick” for modern procurement practices across the UK.
    6. Thank you.