Category: Speeches

Below is the text of the speech made by John Hutton in Brazil on September 2nd 2008.

Good morning.

I’d like to start by thanking the British Embassy for organising this event with the CBI and the CNI. For me, it seems only natural that Brazil and the UK work together on the issue of climate change. Brazil continues to play a leading role in pushing forward the climate change agenda internationally. And we in the UK are keen to build on this and to work with others to make the transition to a low carbon economy a reality across the globe.

Tackling climate change and ensuring energy security are, I believe to be, two of the greatest challenges that every country today now faces. Both are interrelated and both requiring global solutions. The work of CBI and others here today in Sao Paulo, convinces me even further that we need to work together to tackle these enormous challenges.

Because we cannot afford to wait.

The science is clear and beyond doubt. Human activity is causing changes to our climate. Do nothing and we threaten lives, economic growth and the standard of living of all of our citizens.

Nicholas Stern argued this point persuasively in his report for the UK government. Inaction will cost the equivalent of between 5-20% of global GDP. Taking early action to stabilise global emissions at an acceptable level will cost the equivalent of maybe 1-2% of global GDP. That’s the equivalent of being as rich in 2051 as otherwise would have been in 2050. Is that an unreasonable price to pay?

We can already see some of the economic and human costs associated with more extreme weather events. The occurrence of climate-related disasters in this region increased by 2.4 times during the periods 1970-1999 and 2000-2005, continuing the trend observed during the 1990s. Only 19% of these events have been economically quantified between 2000 and 2005, representing losses of almost $20 billion. In Brazil in 2001, I understand that a combination of increased energy demand and droughts affected hydroelectric supply, which amounted to a GDP reduction of 1.5%.

Brazil, as a leading economy, is right to take into account the potential costs to its economy and people. For this reason, I understand that a consortium of leading Brazilian institutions has embarked on Stern type study, looking at the economic costs as well as the opportunities of climate change here in Brazil. The UK government, as a friend and partner with Brazil, is happy to be supporting this initiative because we know how informative it was to our own thinking. Because we must all understand the economics as well as the science of climate change if we are to make the most cost effective interventions that can help achieve what I think should be our twin goals – firstly reducing green house gases to reduce the threat of climate change and secondly securing economic growth and prosperity in the future.

But climate change is not just a threat – there are countless opportunities as well. Opportunities for those countries in particular, those businesses and entrepreneurs who see that a high growth and low carbon economy are not incompatible. And there are opportunities too for those who move first, to deliver new technologies, create new jobs and drive economic growth.

Now of course some companies are looking to exploit new markets and technologies. Others are looking to become more energy efficient. Others are acting to enhance their corporate image and reputation, something which is increasingly central to the value of any brand or product.

But whatever drives these companies, the benefits of this work are huge.

Globally it is estimated that environmental industries will be worth $700bn by 2010 – equal to the size of the global aerospace industry.

While by 2050, the overall added value of the low carbon energy sector alone could be as high as $3 trillion per year worldwide.

Globally, a record $73 billion has been invested in green technologies this year. And of course green jobs also mean more jobs. This could employ more than 25 million people, creating a new generation of green collar jobs, spreading wealth and opportunity in countries across the world. A country with an energy mix containing 20% renewables can create twice as many jobs as a purely fossil fuel based economy. And we in this room all know the advantage that Brazil has in the renewables market.

Given the scale and urgency of our climate change challenge, the leadership of the global business community in this area can only increase in importance.

So how do we enable more businesses to seize these opportunities and help build our low carbon economies in the most cost-effective way possible?

Firstly, I believe Governments can help by creating the right incentives and frameworks to stimulate the deployment of new technologies. And at the heart of this work, there must be a commitment to competitive energy markets.

It is often very tempting in the face of high energy prices and the speed with which we need to decarbonise our economies, for governments to steer towards over-regulation, protectionism and away from market-based solutions.

But the transformation of global energy systems will require an enormous amount of investment in the decades ahead that in the end, in my view, only open, robust markets can deliver.

And as more and more countries compete for the people, finance and technology to make their own, low-carbon revolution a reality, we also know that the actions of government can make the critical difference between investors choosing to invest in one country over another.

So it is essential governments create the most stable, predictable and attractive regulatory environment to encourage companies to invest. And give investors the confidence and certainty to choose our markets as the right place to do green business. We can use the power of markets to provide the impetus for change and innovation – both of which will be needed to deal with the challenges that confront us all.

So this market-based approach applies not just to energy supplies but also to tackling climate change by cutting carbon emissions.

The UK is part of the EU Emissions Trading Scheme, which caps emissions from the electricity generating industry among others. We are making our 60% emissions reduction target for 2050 legally binding, and as the EU-ETS establishes a meaningful price for carbon, it will ensure the reductions are made in a cost-effective way. I believe the EU ETS is already starting to emerge as a model for carbon trading worldwide. UK/Brazil low carbon links

Secondly, we must build strong bilateral and multilateral relationships to share our expertise and help diversify energy sources, suppliers and transit routes.

Trade between our two countries began two centuries ago, when the UK Royal Navy helped to open up Brazilian ports.

In recent years, it has increased by more than 20% – totalling over £3 billion in 2007 – and matched by significant growth in bilateral investment.

The future development of low-carbon industries and solutions offers us even greater chances to build on this success.

An excellent recent example of business co-operation between our two countries has been the development of Clean Development Mechanism projects under the Kyoto Protocol.

Brazil has been a leading host country with over 290 CDM projects – a significant number involving UK companies.

Brazil is also a world leader in the generation of renewable energies such as hydro power and biofuels. And the UK is keen to learn from your knowledge and experience.

We have recently set measures aimed at delivering a ten-fold increase in our use of renewable energy by 2020.

And although we’re making substantial progress to grow our renewable energy sector, especially in the area of offshore wind generation, I think in the UK we need to go much further, much faster, and develop a range of renewable sources in the future.

By 2020 we’re aiming to source up to 10% of our road transport energy consumption from renewables – in line with the EU target.

We expect biofuels to play a big part in this. I believe there are huge opportunities in UK and EU markets for Brazilian biofuel.

Studies already show that Brazilian bioethanol can save up to 89% in greenhouse gas emissions when compared to fossil fuels. And your long-standing expertise in biofuel technology and as an ethanol exporter is invaluable.

There is also huge potential for co-operation between UK and Brazilian automotive companies in the design and delivery of flexfuel cars.

But first we need to gain agreement on sustainability issues to give business, government and individuals the certainty and confidence they need to act. Events such as the forthcoming international biofuels conference here in Sao Paulo will be critical to encourage international discussion and agreement in this area.

Facing up to the scale of the challenge presents the international community with immense opportunities. We are negotiating a new climate change agreement that will govern global emissions in the future to ensure we avoid the worst case scenarios of climate change. This is not an easy process – and alongside the DDA is an area of foreign policy today where a truly global effort is required to succeed.

This framework will not only have long-term environmental implications but, perhaps more importantly for those here today, it will form the basis of a long-term economic framework setting the planet on a low carbon path.

If we can achieve an ambitious global climate change deal next year in Copenhagen, we can move swiftly to a low carbon economy. An economy in which businesses like yours and ours can manage the risks and maximise the opportunities presented by a low carbon future.

We cannot be complacent. And we must recognise that there is no easy, cheap or risk free option before us. It will take a global mobilisation of leadership and resources. If we fail, the economic and social cots will be great.

As governments, businesses and individuals, we must act now to tackle climate change by reducing our carbon emissions, enhancing energy efficiency and adapting to some of the inevitable consequences of climate change. Consequences which will change our businesses, our livelihoods and lives.

But I would like to leave you with this final thought. We must see this as an opportunity – an opportunity for closer working, sharing of knowledge, expertise and technology. Making the investment now that will help secure our future prosperity, with economic security and, perhaps most importantly of all, continued progress in the fight against poverty and disadvantage across the globe.

Thank you very much indeed.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the CBI Public Services Forum on 16th May 2007.

Can I first of all thank the CBI for inviting me to come and talk with you this morning.

I very much welcome the commitment of the CBI to engage in the debate about public service reform.  For many years business organisations in the UK were not always fully involved in the debate about how we improve the quality of our public services.  That has now changed.  Businesses use and fund public services.  Education, transport and health systems make a critical difference to the competitiveness of the UK economy. And increasingly you are part of the solution – partnering with the public sector in the delivery of those services.  The creation of the CBI’s Public Services Strategy Board and this Public Services Forum reflects the tremendous growth of this new industry and a commitment on behalf of business in engaging fully in that debate. We welcome this involvement and participation.

This is probably the right time for us to reflect on what we have learnt from a decade in office – what has worked and what hasn’t worked – and for us to debate where the focus of public service reform needs to shift to meet the challenges of the coming decade.

There is no doubt in my mind that a continuing commitment to reforming our public services will be central to the Government’s agenda.  The reason for this is obvious.  Globalisation and demographic change necessitate an appropriate response from our public services so that we can help individuals and families realise the opportunities of the new world economy.  Without such a response, our society and our economy would be impoverished – the life chances of millions diminished.

I know there are some on the political margins who hope the coming political transition inside the Labour Party will open a window of opportunity to reverse our approach.  They will be disappointed.  The core of our reform programme – significant and sustained investment, choice, personalisation and empowerment for users, devolution to the front line, an open minded approach to who provides – is being built into the DNA of our public service infrastructure.

There is little doubt that this Government’s progress on public service reform can be described as a journey.  It is tempting for all of us when we look back to try and retrofit a neat story about our public service reforms.  In reality, whether in the public or private sector, you have to learn on the job. And themes do emerge over time.

There are four that stand out.

First, that investment in our public services – in people, technology, infrastructure – has been a necessary pre-condition for reform.  But on its own it is insufficient.  Many in my party wanted to believe that we would deliver service improvement simply by building more schools and hospitals and recruiting more staff.  Ten years on we recognise the incredible benefits that that investment has brought – I see it all the time in my own constituency and across the country – but we also recognise its limits. Money can not solve all of the problems we face.

Second, timelines are frustratingly long.  If ministers decide that something fundamental needs to change in the system today, in reality it often takes several years before the effects of that change start to flow through.  Then more time before it has widespread impact.  And for that reason alone, we should perhaps have started more of our reforms from Day 1.

Third, that part of the political and intellectual journey we have been on, is to realise that the development of social markets hold the key to reform.  This has been perhaps the most controversial and difficult of our reforms.  Opening up monopoly state provision to private and voluntary sector providers.  In the early days we believed that structural change was a distraction from raising educational standards or healthcare.  Eventually we came to understand that structural change and incentives also have an important role to play in raising standards; that you simply could not have one without the other.

And finally, it is clear that there are limits to central intervention, planning, targets, audit and inspection.  Self-sustaining reform – a built-in mechanism to drive continuous quality improvement – can only be achieved if individual users of public services become the drivers of performance in the system and local staff and institutions are empowered to respond to and help deliver those preferences.

And it is on this last point – about how we create a wider ownership for reform that I want to focus my remarks today.

It has become a familiar critique that despite substantial investment, recruitment of hundreds of thousands more staff and above average wage increases, that those who have to deliver public services feel insufficient ownership or responsibility for the reforms being implemented.

So, one of our most difficult tasks in this next phase of reform is how to share power, responsibility and accountability with staff and institutions to create a new momentum behind these reforms, one that is less reliant on central direction but balanced by new accountabilities to customers and an intolerance of failure.

You know only too well from the way you manage your own businesses, that there is ultimately a limit to how much you can achieve through imposing targets and practice on staff.  If those that work within your organisations do not believe in what you are saying and feel disconnected from the process of change, then change – real and sustained – simply won’t happen.

Forging a new relationship with staff will be important.  5.5 million people are now employed in the public sector.  They are a conduit for informing and shaping the national public debate about our public services.

There are those that think the root of this problem lies with too much top down central control and the imposition of targets that distort customer priorities.

There are those that think we have placed too much emphasis on structural change and reorganisation for its own sake.

There are those that think the so-called marketisation of our public services has eroded a public service ethos.

There are those that think the cause lies with our tone, our communication strategy or ‘narrative’.  If only we explained more clearly what we were trying to do, then ‘they would get it’.

And there are those that think it will always be like this and that we just need to accept that they will never be ‘on our side’.  Change disrupts comfortable patterns and established ways of doing things.

As ever, there’s no simple answer.  No straightforward solution.  I’m sure that there is more we need to do to engage effectively with staff.  Communicate where we are going and why.

But for me, what this challenge really reflects is a more fundamental question. ‘Who owns the responsibility for reform in our public services today?’

I don’t just mean the day to day implementation of today’s priorities but tomorrow’s innovation in patient care, welfare or teaching standards?

Because we believed strongly in the case for change, we drove it hard from the centre.  We ‘owned’ the challenge of change.  Both the problem and the answer.  We came to believe that policy makers and politicians in Westminster and Whitehall were meant to be the brain for every creative impulse across the system.  It delivered improvements and continues to do so.  But it comes with a price.  A stream of initiatives, targets and legislation in which staff often feel passive recipients; in which they have little influence or control.

But analyse any of the UK’s best performing companies and you will find few that are able to maintain high customer service standards, innovation and efficiency without creating that shared sense of ownership deep within the organisation that can ensure continued success.

So, if our challenge is to create a shared sense of ownership amongst both staff and customers for the future of public service reform, how we create it is equally critical.

And I am clear that it won’t be achieved by slowing down the pace of reform.  It won’t be achieved just through engaging more effectively with staff or communicating our message.

It will only be achieved through sharing the responsibility and accountability for change.  For as long as reform is seen simply as a dialogue between the national media and politicians, we will continue to detach local institutions and the people who work within them from owning the change that should be made.

That shared sense of ownership can only come if we at the centre are clearer about our national priorities and frame them increasingly in ways that reflect the outcomes that we want to achieve.

If we want to move to a system based on a shared sense of ownership then we will need to empower not only the customer but also the staff to bring about the changes they feel are necessary to respond to customer needs.

The mistake we must avoid is sharing power and responsibility without accountability.  That will never work.  Government can only step back if there’s a strong, responsive framework of accountability for individuals and organisations that fall short.

When we nationalised public services in the post-war era, it was based on a deal with public service professionals that said, ‘we will nationalise this service but we will give you the freedom to get on and manage’.  But there was a flaw. No one took responsibility for service failure. We had come to expect that public services would never be as good as those that could be paid for by people who could afford to opt out.

In 1997 many people within the public sector believed that we would go back to that post-war settlement – except this time with increased investment.

We did of course significantly increase investment.  But we also broke with the post-war past by creating new forms of accountability.  We set national targets and oversaw their delivery through one of the most expansive audit and inspection regimes in the world.  However necessary this shift, it prioritised accountability to the centre.  It underplayed the role of the consumer in shaping public services.  Or the importance of public preferences and choices in driving performance.  As such it meant the ‘ownership’ for change was ‘grabbed’ by the centre and left there.  And as the pace of reform intensified and more fundamental change advanced, the dynamic between employees and the political leadership of the country felt critical at best and passive at worst.

So if we share ownership for change, we must base a new settlement of accountability through two routes; firstly to match devolution of power with the use of payment by results funding systems; but secondly and crucially through enhancing, wherever possible and appropriate, the use of competition that allows the customer to influence public services through the choices they make.

If we can get this right, then public service reform will become more self-sustaining; driven not by central Government, but increasingly designed and championed by those operating within the public sector. Performance should no longer need to be managed through an overly engineered web of targets, audit and inspection.  Instead, accountability driven first hand by customers.

At the DWP our City Strategy seeks to capture these principles – offering local consortia of providers new funding and flexibilities in return for outcome-based payments. And David Freud’s report on our welfare system earlier this year, argued for a more effective market in welfare provision, rewarding providers proportionate to the value to the taxpayer of getting an individual into work and helping them to stay there.

With such an approach must come a re-balancing of welfare expenditure towards those who are most in need. A payment by results system – as we have tested out in the Employment Zones – could create incentives to develop programmes across the full spectrum of clients and avoid cherry-picking of the easiest clients to help by paying more to help those furthest from the labour market and facing the greatest barriers to work.   And critically, the centre will be able to step back as the system imbeds itself.

The same is increasingly true for education and health. At the heart of the public service reform programme in the NHS is the development of a more transparent payment by results system that incentivises output based performance. While in education we are developing and piloting models of “Contextual Value Added” – measuring the results of pupils against what might be expected based on previous attainment and factors relating to their background.

The potential power of such information is not just that it strengthens accountability and performance management – but when combined with greater contestability and choice, it can give the user of public services a strong mechanism to shape these services through the choices they make.

We need to put an end to the essentially passive relationship that has all too often characterised the nature of the interaction between the user of public services and the State that provides them.

A relationship that can be particularly damaging for those who need good quality public services the most – where poor outcomes can all too readily become accepted as all that can reasonably be expected.

Exercising choice over a provider or programme can be a powerful way of restoring a real sense of personal responsibility in the individual – enabling them to shape the service outcomes that they themselves want. Of course there are limits to choice – and we must always understand this. But that must not become an excuse for failing to extend the opportunity of choice to those most in need of our public services.

At its most simple, the ability to make an informed choice is still about getting the very basics of a service culture right within the public sector; choice about which channels to use to access services or booking a next-day appointment with a GP online. At its most complex, choice is about a deliberative process of engagement with a school about a child’s education.

Afterall, public services are there to give people a choice. The choice of a good education, good health and the chance to succeed in life – especially for people who could never afford to buy these services themselves.

Critically, over the past decade we have also learnt about the intrinsic benefits of managed competition as a way of strengthening accountability and shifting the ownership of change.  It is that process of competition and how we structure it that creates the dynamic for change – not necessarily whether competing services are delivered by the public, private or voluntary sectors.

I have always believed that strong public services are the best provider of opportunity that any society can have.

But ultimately our values can only be maintained in the decades ahead if we are prepared to continue radical reform. If we are serious about transforming people’s lives by making our public services accountable to the people they serve.

And if, in doing so, we hope to make the best possible use of the energy, expertise and commitment of public service professionals, then we must be prepared to see through the fundamental change we have begun.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the NAPF conference on 24th May 2007.

I’m grateful to Joanne and the NAPF for the opportunity to join you again at your annual conference – what is without doubt, the leading forum for occupational pension provision in Britain.

A year ago today, we published our White Paper on Pension Reform. It set out a new structure for the long-term future of the UK Pensions system based on the proposals of the Turner Commission.

At its heart a simpler, fairer and more generous state pension paid for by a higher State Pension Age; and a new system of personal accounts that will help more people to build these savings by extending the benefits of an occupational pension to those without good company schemes.

These proposals have laid the foundation for a consensus around a lasting pensions settlement that would meet the challenges set out so vividly by the Pensions Commission – rapid demographic change; chronic under-saving and the historical legacy of an overly complex system that delivers unfair outcomes with excessive means-testing. We need to sustain this consensus because this will be in the long term interests of our society and our economy.

Thanks to the leadership of the NAPF – along with many others – I believe the broad consensus around the main elements of our reforms is stronger than ever.

The Pensions Bill currently before Parliament is fixing the main elements of these reforms in legislation. The restoration of the earnings link will mean that by 2050 the Basic State Pension will be worth twice as much in real terms as it is today. And there are signs of political consensus too – with no votes against the Bill at its Third Reading in the Commons last month.

Thanks to the work of the new Pensions Regulator, most companies facing pension fund deficits now have, or are putting in place, comprehensive and affordable programmes to make good these shortfalls. Just last weekend, research from Aon consulting found that the UK’s largest pensions schemes are back in the black for the first time in more than five years.

And a range of surveys highlighted in this year’s NAPF Conference Magazine even suggest some signs of optimism and confidence returning. In March, the ACA found that while half of firms had reviewed their schemes in the last year, less than a fifth planned a review in the coming year; and Towers Perrin found that around half of employers surveyed saw their occupational pension schemes as having significant recruitment and retention benefits.

But my argument today is not that we have solved every problem connected with our pensions system. This is far from true. Real challenges remain.

Public confidence will not be restored overnight. Many employers are still finding that there is too much red tape in running good schemes. Overall participation in occupational schemes has been falling since the late 1960s.

My argument today is that if we get the next stage of reforms right – in particular around auto-enrolment and personal accounts – then we can embed a new savings culture in Britain – not one that competes with existing occupational pension provision – but actually builds on it, expanding its coverage and making occupational pensions the centrepiece of retirement saving in Britain for all.

Achieving this will depend on three things.

Firstly, the effectiveness of the new system of personal accounts in targeting this key group of moderate to low earners who do not have access to a good quality occupational pension.

Secondly, ensuring that personal accounts complement rather than compete with existing occupational schemes – and that we take steps to strengthen this existing provision; not weaken it.

And thirdly, the quality of information and guidance on which people can make savings decisions with greater confidence about how much they need to save to achieve the income in retirement they want.

I’d like to say a few words about each.

Firstly, personal accounts.

Last December we published our White Paper on Personal Accounts. It began a consultation on a number of important issues – and we will be responding formally to this consultation next month – along with our response to the report from the Work and Pensions Select Committee.

But what I can say today is we are determined to ensure that the accounts are designed as a no-frills occupational pension. Research shows that simplicity is a crucial design feature in reaching our target group of under-savers. Aside from keeping costs down, we know that too many options can be confusing – and the majority do not want to be taking decisions over the investment or administration of their savings.

We’re also clear that accounts must be independent of Government. That is why we are creating the Personal Accounts Delivery Authority to commission the infrastructure to deliver the scheme from the private sector. The delivery of the scheme will be a huge undertaking – one of the biggest challenges our pensions system has faced for many years.

Personal accounts will be the biggest step forward for workers seeking to build up a pension since National Insurance was introduced in the 1940s. But if we are to make them a success for the millions of people who currently aren’t saving for a pension, we must put in place measures to ensure they have the interests of future members at their heart.

It is protecting the interests of members that underpins our decision to establish the scheme as a trust-based occupational pension. As such they will face the very same level of regulation as all other trust-based occupational schemes.

A Board of Trustees will take ultimate responsibility for setting the strategic direction for the scheme from the collection of contributions to the investment of assets and payment of benefits. This will include deciding on the choice of funds and the strategy for the investment of the default fund; the appointment and management of external fund managers and ensuring that contributions are invested in the best interest of members.

This will be important in ensuring that personal accounts deliver for our target group. As we emphasised in our Personal Accounts White Paper, it is essential to the success of the scheme that members’ needs remain at the core of operational decision-making. Trustees are legally obliged to handle the scheme’s assets in the best interests of the beneficiaries. They must have a good level of knowledge and understanding of the law relating to pensions and trusts – the principles of funding and the investment of assets of occupational schemes.

We want the trustees to be highly-qualified experts in their field in order to make the best decisions possible for the millions of members and to retain the confidence of the public.

We know from the National Pensions Debate and from the examples of the consultation procedures of the National Institute for Clinical Excellence and the BBC Trust, just how important it is to involve members in the key decisions that will affect them. That’s why I’m keen for the Personal Accounts Delivery Authority to draw up an ambitious approach to deliberative consultation around the implementation of personal accounts and automatic enrolment.

We are making the system of Personal Accounts an occupational pension; because occupational pensions are the gold standard in pension provision. That’s why, in building personal accounts, we’re modelling the new scheme on what you do – as leaders in the field.

We want to follow the best practice of other occupational schemes in ensuring an appropriate degree of member representation whilst being mindful of the costs and practicalities of a scheme on the scale of personal accounts, with multiple employers and millions of members.

In taking this forward, our plan is to create a members’ panel along similar lines to the Thrift Savings Plan in the USA.

The Panel could nominate a proportion of the trustees and would be consulted by trustees on key decisions, providing them with access to the views of members, and a stronger sense of collective ownership.

Given the scale of personal accounts, I believe such an approach could be absolutely critical to the success of the scheme and to increasing confidence across the whole pensions industry.

Secondly, we need to go further in supporting existing occupational schemes.

We have always been clear that personal accounts are designed to complement, not compete with, existing occupational schemes. And the NAPF has played a pivotal role in helping us to ensure that this will be the case.

As a simple defined contribution scheme, with a limited amount of choice and a basic structure, personal accounts will not compete with existing high-quality occupational provision. And neither should they.

We’ve been clear that there will be no transfers into or out of personal accounts. There will be a simple self-certified scheme exemption test based around clear principles not heavy-handed regulation. And I can confirm today, that a similar approach will also apply to hybrid schemes. Rather than a complex series of specific tests, employers will be able to use their discretion to apply just one of the three simple high-level tests or an appropriate combination.

And, of course, there’s the annual contribution limit. I think it’s important to be clear that while the NAPF and others in the financial services and pensions industry have always felt that a cap of £5000 was simply too high, many others, especially those that are consumer-based, would prefer not to set a limit at all – concerned about placing a cap on people’s aspirations for their retirement and the need for flexibility for the consumer, so individuals can deposit inheritance sums or other windfalls.

This is a very difficult balance to strike and we are still looking carefully at how we can best meet these varying objectives. But I do not under-estimate the importance of getting this right and it will be an important part of our response to the consultation next month.

Strengthening existing provision is not just about ensuring that personal accounts remain focused on their target group. We must also revitalise the whole occupational pensions sector with reforms that will help all schemes.

From 2012, employers will automatically enrol their employees into personal accounts or into their own existing occupational pension scheme, as long at it meets the specified minimum standards. This simple but radical step will affect around 10 million employees in Britain, and will be vital in overcoming the barriers that prevent many people from making the decision to save. Around 1 million employees will be auto-enrolled into existing schemes as a result of our reforms.

Again we will look to support those good employers who offer higher contributions or benefits in meeting the costs of extending their scheme by permitting a short waiting period. And by allowing employers the flexibility to re-auto-enrol employees at set points in a way that suits their business, rather than on an individual basis.

I believe the NAPF’s own Quality Mark is also an important development in supporting existing schemes and valuable too in helping employers to communicate the benefits of good quality schemes. I know there are a number of issues that are still being worked through, in particular around the clarity of exactly what the mark would indicate but I’m keen to re-emphasise my support for the principle of the industry developing such a scheme.

Government does, however, need to be careful not to become part of the Governance chain and confer legal or technical status on it. Not least because the mark must never become a benchmark for future regulation such as raising the personal accounts minimums.

For our own part as Government, the Deregulatory Review represents a real opportunity to simplify the regulatory framework for all occupational schemes – to make running schemes easier; to lighten regulation and reduce bureaucracy. I’m serious about having a real debate here. There is nothing more frustrating for those of you engaged in running good quality schemes than feeling as if the system is working against you. But equally, our duty to protect the saver is also crucial.

As with the National Pensions Debate, people have to come to this debate prepared to achieve a consensus; and to compromise. But be clear about one thing. Now is the chance to make a real difference on this agenda. There is a genuine opportunity here for real change.

Thirdly and finally, information and guidance.

Embedding a new pensions savings culture will depend critically on being able to offer people the right information and guidance.

But the challenge is wider still. Because people don’t just want pensions advice, they want to talk about their money in general. That’s why the Generic Advice Review being led by Otto Thoresen is so important.

In developing Personal Accounts, we need to consider carefully the relationship between any generic advice service and the Personal Accounts board; and the appropriate protocols on which to base generic advice. Further, to consider who would monitor the advice provided and how any generic advice service could get the balance right between communicating the uncertainties inherent in pension saving and the simplicity that most people want in practice.

These are real challenges. But your PensionsForce project report today shows the appetite of savers for good quality information and advice. Funded by my Department’s Pensions Education Fund, since last September we’ve seen 1000 employees in over 70 meetings for employers of all sizes. This can be particularly important for women and many in small and medium sized companies who can tend to be bypassed by the traditional adviser community – as well as, of course, for workers who already have access to a workplace pension and employer contribution but who do not take full advantage of it.

And therein lies the ultimate challenge of embedding a new pensions savings culture in Britain. Enabling each and every individual to take control of their retirement planning; to make informed choices over their retirement provision and to save for that retirement with confidence.

The last year has seen tremendous progress in building a consensus on a new foundation for long-term savings. I am clear that in taking decisions on the next stage of legislation, we must now go further in not only maintaining our commitment to consensus – but actually deepening that consensus around the details of the Personal Accounts system. The coming year could be the most important of all in getting this right.

After 80 years at the heart of occupational pensions in Britain, I know I can count on the NAPF to work with us in rising to the challenge. And with it we can not only secure – but actually revitalise the workplace pension as the foundation for retirement savings for generations to come.

Below is the text of the speech made by John Hutton, the then Work and Pensions Secretary, on 14th June 2007.

Earlier today we launched the new Employer Skills Pledge. A public and voluntary commitment made by 150 leading employers to train all their staff to at least level 2 in the workplace. Recommended by Lord Leitch in his report last December, the pledge – backed by Government and including all central Government departments – will guarantee employers access to a skills broker through Train to Gain and embed a new partnership with business for improving skills in the workplace.

It will pave the way for the full Government Response to Lord Leitch’s report later this Summer – and mark the beginning of a radical step-up in the investment made in the skills of the British workforce.

If we are to reach our goals of a record 80% employment rate and the eradication of child poverty in Britain, it simply can not be done without taking action to raise the skills base of an economy where today there are 4.6 million people without qualifications and a further 1.5 million with qualifications below level 2; and where Leitch predicted that the demand for low skills is likely to continue falling with some 850,000 fewer low skilled jobs by 2020.

But in an increasingly globalised labour market, we can not conduct the debate about skills in a vacuum; we have to consider it also in the context of the dramatic changes in demography and in the global economy of which we are a part.

To consider the implications for our skills base of an ageing society – where in the UK today there are now more people over State Pension Age than children. And the question of how we develop a managed approach to migration – that will allow us to reap the benefits from the skills which migrants can bring, but which also helps more of our own people compete successfully for the growing number of jobs in the British economy.

Certainly our country is changing. New figures from the Office for National Statistics last week showed that foreign-born mothers accounted for 1 in 5 babies born in England and Wales last year, helping to put the birth rate at its highest for 26 years.

The debate around migration is often polarised and stark. The prospect of migration can provoke uncertainty and sometimes fear. People want security – and rightly so.

But deep down they know, too, that our future as a successful economy will depend on our ability to work through these changes, not turn away from them. We must be an open not a closed society. The same is true for our economy.

At a point when the integration of our communities has perhaps never been more important, it is absolutely right that we recognise the significance of the changes in our society.

But we also need to keep these changes in perspective. To be rational and clear in our assessment of the challenges facing both our society and our economy; and above all to find a way forward that promotes our values; that asks how we can best support every single Briton – regardless of background or origin – to make the greatest possible contribution to our society.

In doing this we first need to overcome a number of popular myths and misconceptions about migration. I think there are four that stand out.

First we need to be clear that migration is not a new phenomenon. As Europe boomed in the post-war era, so major European countries looked to migrants to satisfy unquenchable labour demand – first within what were to become EU countries, then in former colonies.

While immigration slowed in the 1970s and 1980s, it has subsequently increased dramatically – from half a million in 1998 to over 1.5 million a year in each of the three years up to 2005.

So migration is a long-standing global phenomenon. And Britain is no particular magnet for migrants. Between 1990 and 2005, the USA gained 15 million migrants. By contrast Spain and Germany each gained 4 million; the UK just 1.6 million.

Secondly, we should acknowledge that migration is actually a two-way process. Today an estimated 5.5 million UK nationals are taking advantage of the opportunities to live and work abroad – with the largest groups in Australia, Spain, USA, Canada and Ireland.

Thirdly, that Britain is not being populated by large numbers of migrating families. Rather this current wave of migration into Britain is markedly different from anything we have seen before. Unlike the migration to America at the beginning of the 20th Century, or to the UK in the middle of the 20th Century, this early 21st century migration is in essence transient – in that it is often characterised by people coming to work in the UK for short periods before they return home.

Since 2004, around 450,000 people have come from A8 accession countries to work in the UK. But rather than bringing their families to settle, as many as half of those economic migrants did not stay. They came to work and save money for themselves and their families.

Fourth and perhaps most significant of all is the myth that this temporary economic opportunism is a threat to British jobs. As the TUC acknowledged at their conference last year:

“If migrant workers are treated fairly and paid a decent wage, they represent no threat to the livelihoods of people who are already living and working in the UK.”

The economic benefits of migration are clear. Recent migration has had a positive impact on our economy – accounting for up to a fifth of economic growth between 2001 and 2005. With independent research showing that migrants are contributing more than their share of taxes, migrant workers are in fact making a net contribution to the exchequer. And the Bank of England concluded that overseas workers have played a significant role in boosting the pool of available labour and helping to ease labour shortages.

The Government’s decision to introduce a new points-based system is a radical and progressive approach to manage the flow of migrants coming to the UK. A case-by-case system to attract the brightest and best from across the world while being robust against attempted abuse.

This is absolutely the right decision for our economy. Together with the new Migration Advisory Committee – which will advise on skills and labour market shortages – we will help to ensure that migrants continue to fill the gaps in the labour market – increasing investment, innovation and entrepreneurship in the UK.

But we also know that migration brings real challenges too. First and foremost, we have to know who is coming and going in Britain. Managed migration has to mean exactly that. Next week the Government will be publishing its strategy to build stronger international alliances to manage migration. It will focus on strengthening our borders, ensuring and enforcing compliance with our immigration laws and facilitating quicker and easier legal migration for those we seek to attract.

Migration also creates new pressures on local services, on local schools, on hospitals and housing. Challenges for active labour market policies and welfare systems. For communities experiencing immigration for the first time.

As today’s report from the independent Commission for Integration and Cohesion highlights, we must go further in helping these communities to adapt to such change and in promoting and supporting local solutions to improving the integration of migrants within strong, resilient and cohesive local communities.

We can not make decisions on managing migration in isolation from these social factors.

Two years ago, when we made the decision on the 8 European Accession countries, business leaders were calling for us to open the labour market.

At the end of last year, when considering the question for Bulgaria and Romania, the economic imperative was not as strong while it was ever more important that we ensured our local authorities and public services could continue to manage the existing A8 migration. It is critical that we continue to balance these factors as we continue to make decisions on the best way to manage migration.

We know that many migrants are today working in what are traditionally seen as “hard to fill” – but predominantly low-skilled jobs. The question is – why are many of these jobs so hard to fill?

With 4.5 million people still on out-of-work benefits in the UK, the right response is not to get defensive; to retreat – or talk of pulling up the drawbridge on migrants. But rather to ask how we can raise our game in helping UK citizens to compete in today’s labour market?

We’ve made tremendous progress in helping people into work over the past decade. Yesterday’s labour market statistics marked ten years of progress – with a reduction in the claimant count of three quarters of a million and employment up by over 2.5 million; the best performance in the G8.

Helping individuals to acquire the skills, confidence and ambition to progress up the career ladder has to be a core ambition of a dynamic welfare system. The old “Labour Exchange” of the past – where labour seeking work met employers anxious to hire – must now become the skills exchange of the future.

Achieving this will mean finding a new place for skills at the heart of a renewed welfare contract for the 21st Century. A new approach to skills, based on a simpler, clearer and more coherent system of delivery – that meets the needs of both businesses and individuals.

The new Commission for Employment and Skills – led by Sir Michael Rake – will be at the forefront of this new approach. A demand-led skills system that will ensure that the skills employees develop are economically valuable – not just to get into work – but also, critically, to support sustained employment and progression through the workplace.

I want Jobcentre Plus to play a crucial new role in helping to ensure the maximum possible employer engagement at local level. That is why we will be establishing a series of Local Employment Partnerships whereby people claiming long-term benefits will receive job trials and mentoring from sponsoring employers – and at the end of the programme will be guaranteed a job interview.

Our ambition is for this to go sector-wide. And in a world where the premium on high skills is only set to increase, this must not be simply about helping people into low-skilled jobs.

It must also then be about the way that employers are helped to access and deliver the support that will enable employees to progress to middle and higher levels within their organisations.

Our welfare to work system must therefore raise its game. Training British workers for British jobs will be crucial not just for our future economic prosperity but also for our ambition of a fair society.

The growth in world trade presents all of our economies with huge opportunities, if we are prepared to take them. But to do so will mean we have to invest in all our people – in their skills and talents.

One part of this must be an earlier and more focused assessment of the skills needs of those out of work. The need to get action on early skills assessments is highlighted by the evidence on basic language training. A study of over 500 learners and 40 teachers carried out by the National Research and Development Centre found that the longer someone lives in the UK before taking ESOL courses, the slower their progress in learning the language.

And at the Centre for Employment, Language Training and Integration in Copenhagen, language training as part of Denmark’s Adult Vocational Training Programme combines modules of basic language training in the morning with vocational training in the afternoon. So in addition to a foundation of basic language skills, trainees also learn the sector specific vocabulary that will enable them to develop their trade.

With language skills so crucial to the integration of our society – and with a persistent ethnic minority employment rate gap of 14% – such interaction between skills and employment support could play a crucial role in helping us to build a fairer and more inclusive society, with employment opportunity for all and prosperity for Britain in a world of global opportunity.

To achieve our goal, we must stay true to our shared values – of solidarity and social justice – of security but liberty – with tolerance, understanding and respect of others. To embed the social partnership that says we are not merely individuals fighting in isolation from each other, but members of a community who depend on each other; who benefit from each other’s help; who recognise their obligations to each other.

There is no greater challenge facing us today. But equally, I believe, no greater prize within our grasp.

Below is the text of the speech made by John Hutton, the then Work and Pensions Secretary, to the Women’s Enterprise Project in Bethnal Green, London, on 28th February 2007.

On a day when the final report of the Equalities Review has brought the challenges of achieving true equality in Britain into ever sharper focus – I am grateful for the opportunity to join you to discuss the barriers that still too often prevent women in Britain’s ethnic minority communities from finding employment.

Ten years of progress in employment and welfare reform has made a real difference to Britain today. Record investment in Jobcentre Plus and the New Deal means there are now more people in work than ever before; over 2.5 million more than in 1997 and nearly a million fewer on benefits.

Ethnic minority communities have benefited from the progress we have made. Jobcentre Plus, for example, has helped nearly a quarter of a million people from ethnic minorities move into work over the last few years.

As today’s Equalities Review acknowledges, Britain now has more advanced and effective equality legislation than most other countries; our equality commissions and the forthcoming Commission for Equality and Human Rights represent a framework to tackle discrimination that is unrivalled in Europe. And in just the last three years, we have managed to cut the employment rate gap facing ethnic minorities by nearly 2 percentage points – including improvements for the vast majority of ethnic minority groups.

Yet despite this progress, the employment rate gap between ethnic minorities and the UK as a whole, still stands at around 15% – and a young British Asian women starting out in work today, will have to wait until her retirement before she can expect to see the employment rate for ethnic minorities at the same level as the UK average.

The employment rate for ethnic minorities in East London is less than 50%; and here in the borough of Tower Hamlets – where the percentage of ethnic minorities as a proportion of the working age population is the second highest of all local authority districts in Great Britain – the employment rate is less than a third.

And the rates for women are significantly worse. The unemployment rate for Black Caribbean women in Tower Hamlets, at 11%, is almost double that for Bradford. And across the five Olympic boroughs the employment rate for Pakistani and Bangladeshi women is less than 1 in 5.

We can not hope to have a socially cohesive society unless we are prepared to challenge these wide differentials in employment rates.

But these statistics are not just a scar on Britain’s society today; they are the enemy of Britain’s prosperity and progress for the future.

In London over the next 20 years, ethnic minorities are expected to account for around three-quarters of the growth in the potential workforce.

I do not believe we can have an economically competitive and skilled labour force in the future, if the lower employment rate of ethnic minorities today consigns many children – tomorrow’s workforce – to growing up in poverty. Because poverty is the breading ground for low aspiration and low achievement.

Today, that is the reality for over half of Black British children – and over two-thirds of Pakistani and Bangladeshi children. The question for all of us is whether we believe we can change the future for these communities and for the young people within them.

In fact – such are the barriers to equality in our society – even being in work doesn’t always necessarily mean escaping from poverty. When ethnic minorities on average earn a third less than their white counterparts; when Pakistani and Bangladeshi children in households with at least one earner are still statistically more likely to be in poverty than not; And when working Pakistani and Bangladeshi households are more likely to be in poverty than workless white households.

If we are going to succeed in changing the future, then we can start by challenging the myths and the misperceptions.

What Account 3 and the Women’s Enterprise Project are showing is that the old sterotypes are simply not true.

Many women from ethnic minorities want to work. Many husbands and fathers actually support them to do so.

Often the support offered by local organisations working at the heart of the community doesn’t just help the individual; it transforms opportunities for the whole family. Take, for example, the lady whose family was on benefits. But after training with Account 3 was able to get enough money to support her husband to train to do the Knowledge; and when he qualified they were able to go on and get their own flat. Later they set up their own business; the opportunities they were able to offer their children transformed in only a few years.

As is so often the case; success fuels further success. The achievements of one family inspire another – raising ambition across the community. And there is perhaps no greater example of this growing ambition than with those setting out in business on their own. Today the Women’s Enterprise Project is creating around 35 new businesses a year – working with more than a hundred women in the local community; enabling them to test out ideas in a safe environment and providing support well beyond the creation of the business itself.

The next generation are looking to push the bar even higher. We should encourage them to do so. An Equal Opportunities Commission report found that 90% of Bangladeshi girls surveyed did not agree that their parents would expect them to get married and have children rather than follow a career.

One respondent – a 16 year old Black Caribbean girl said:

“I intend to work hard and get the job I want. I also intend to be successful and to make me and my parents proud.”

The idea that success at work would make her parents proud says a lot about how wrong many people’s assumptions are about attitudes to work amongst minority communities.

In fact, in the Equal Opportunities Commission report, one in five young Pakistani and Bangladeshi women employees are now aiming to be their own boss, compared with only one in ten young white British women employees.

And of those in employment, Black Caribbean, Pakistani and Bangladeshi women under 35 are now more likely to aspire to senior positions when they have dependent children than white British women.

So it is about how best to support the fulfilment of this ambition – that I want to discuss with you today. And I’d like to offer a few thoughts about how we can start this discussion.

Firstly, I believe we need to make significant changes to the nature of the support on offer to help people from ethnic minorities move into work.

This is one of the principal reasons why I have asked David Freud to review our welfare system as part of the wider policy review process currently being led by the Prime Minister.

The hallmark of this Government’s welfare reforms has been our movement away from the passive one-size-fits-all benefit dependency of the past towards the creation of a more active approach tailored to the specific needs of individuals.

If we are to provide better help and support to those furthest from the labour market we have to build on this progress – moving further away from the traditional approach – based on what type of benefit someone is claiming – to one based on individual needs.

An approach that offers new and ever more tailored support in return for individuals taking up the responsibility to do all they can to help themselves.

We are now beginning to devote more resources in this way. But this doesn’t necessarily mean expanding State provision. Rather it means drawing on the expertise and contribution of providers in all sectors – whether public, private or voluntary.

It’s about providing greater flexibility for local community based organisations to work together to find local solutions. It means Government simplifying the existing myriad of short-term funding contracts, in favour of a clearer funding structure. It means moving towards providing more support for innovation with longer-term payments based on clear outcomes, and more flexibility for local organisations to determine the best approach to support for their people.

What does this mean for the hardest to help? It means exploring outcome-based funding to reward successful welfare to work providers – that places a higher priority on these groups; that offers providers greater rewards for helping those who are furthest from the labour market – including specific individuals or ethnic minority groups. Not just overcoming the barriers to finding work and then pulling up the drawbridge of support; but rather overcoming the barriers to staying in work and progressing within the workplace too.

It means recognising that the State is not always the best vehicle for providing support. That community organisations – like the Women’s Enterprise Project here in Bethnal Green – have a unique ability to build relationships and inspire trust – that goes far beyond what the State can sometimes do.

And there should be more room in our welfare system for local flexibility and freedom.

The City Strategy brings together a consortia of local stakeholders to improve the co-ordination and delivery of support for jobless people in key areas across the country – including in here in East London.

We believe that by freeing resources from Whitehall and giving power and responsibility to local communities, we will achieve better outcomes for local people. But this has to translate into results. And in many City Consortia areas – including in East London – that has to mean better employment outcomes for ethnic minorities, and especially for women.

Through this partnership-based approach, together with improvements in training and skills – such as the increased emphasis on English language training for benefit recipients we announced earlier this month – I believe that we can offer new and unparalleled support to help people from ethnic minorities acquire the skills and expertise to realise their ambitions in the workplace.

But our success will depend equally on women who are out of the labour market actually taking up the opportunities available to them – with the same ambition and commitment that we see showcased by groups like the Women’s Enterprise Project on a daily basis.

Of course, also fundamental to our success will be whether we can deliver a step change in tackling workplace discrimination.

Analysis suggests that potentially up to half of the ethnic minority employment gap could be explained by employer behaviour.

Currently, Black Caribbean, Pakistani and Bangladeshi women are more likely to be graduates than white British women and men. Yet Pakistani female graduates are over four times more likely to be unemployed than white female graduates. And those in work are less likely to reach senior positions than white British women – despite being more highly qualified.

We need to understand more clearly the factors that are driving this discrimination.

Alongside Trevor Phillips’ Equalities Review, my Department is today publishing a new research report which for the first time presents clear evidence of a Muslim employment gap. It analyses the probability of being in employment based on different combinations of ethnic and religious group. It finds that for women, Muslims of all ethnic backgrounds – whether Pakistani, Bangladeshi, Indian or even White – face a higher employment penalty than any other religious group. It’s even the case that a White Muslim, faces a higher employment penalty than a Pakistani of no religion. The analysis also suggests that Muslim men of all ethnic backgrounds face similar employment penalties.

Of course, there will be those who suggest this is simply a cultural issue.  And this may play a part in the calculations of the employment penalty. There is some evidence in the Equalities Review today that some people don’t aspire to enter the labour market.

But we also know that such generalisations are a poor excuse for avoiding the fundamental problems of inequality and discrimination. Or for ignoring the other constraints that ethnic minorities often face – such as lack of access to childcare.

We simply can not afford to ignore the very real possibility that specific discrimination based on religious practice could be an important part of the challenge we face in breaking down barriers to work for Britain’s ethnic minorities.

The Equal Opportunities Commission report, for example, found that compared with their white counterparts, working Black Caribbean, Pakistani and Bangladeshi women under 35 are three times more likely to be asked about plans for marriage and children at job interviews; much more likely to experience negative attitudes because of their religious dress and 50% more likely to have difficulty finding a job.

It is vital that we work together to better understand and address this problem. Whatever the underlying causes, this employment gap is entrenching deprivation in Muslim communities and can only exacerbate the social tensions and alienation that we all want to tackle.

There are many forms of ethnic, religious and cultural discrimination – some long entrenched, others are newer and worrying trends. We have to find a way to work with business to eliminate this discrimination – whatever religious or ethnic guise it takes.

Since the 2001 amendment to the Race Relations Act, public authorities have a statutory duty to take proactive steps to eliminate unlawful racial discrimination and to promote equality of opportunity and good race relations.

As Trevor Phillips has argued today, we must now build on this to ensure that our partners do more to promote equality and to highlight the importance of tackling racial discrimination in the workplace.

But we should be absolutely clear about one thing. This is not about positive discrimination or quotas. It can not be onerous on business; the argument is rather about the increasingly crucial value that promoting equality brings to business, not the costs it imposes. It’s about Government leading from the front and asking those supplying Government to adopt the same principles.

We must also go further in changing the way we address equality issues across Government. Replacing the silos of individual departments with a new cross-Government commitment that better co-ordinates Government action on equality issues.

As part of this we need to re-shape the Ethnic Minority Employment Task Force to make it a more pro-active strategic body, focusing on specific measurable objectives. Earlier this month, the Employment Minister Jim Murphy wrote to all Task Force members to propose a more focused set of priorities around procurement and employer engagement – including tackling employer discrimination, not just in recruitment to the workplace but also in progression through it.

I have today asked Jim and the Task Force to report back to me with a set of specific and practical proposals in these areas – ahead of a Ministerial summit in May. In doing so, I want them to consider the specific issues around discrimination based on religious practice. And to consider the issues of how best to promote and support aspiration – including addressing concerns such as affordable childcare.

I want them to draw on the recommendations of the forthcoming reports from the Business Commission and from David Freud’s review of our welfare system. And to engage with both business and ethnic minority communities augmenting the membership of the group as necessary to achieve a much greater representation from ethnic minority communities – with leading ethnic minority men and women drawn from both the business and voluntary sector.

I want to spend the rest of the time this morning listening to you – to hear your perspective on the challenges we face in breaking down barriers to work – and tackling inequality and discrimination in the workplace.

So let me just conclude by saying that too often people have believed these problems are so engrained in our society that they can never be overcome.

The French author and playwright Honore de Balzac, once wrote:

“Equality may perhaps be a right, but no power on earth can ever turn it into a fact.”

Today we are entitled to be more optimistic. There is a power on earth that can turn equality into a fact. It is the strength of our collective ambition as a society. The progressive force for good that says someone’s origins – whether ethnic background or social class – need no longer determine their destiny. I have no doubt that the vast majority of people in Britain share this belief in fairness and equality. That is one more reason to believe that together, we can change the future.

Below is the text of the speech made by John Hutton, the then Work and Pensions Secretary, on 16th January 2006.

I’m grateful to David and the Work Foundation for hosting today’s event. It’s very appropriate that a speech about the future of welfare should be here at an organisation focused on work. Because ensuring people have the right to work is a fundamental responsibility of any modern Government. It’s a central tenet of Beveridge’s original Welfare State. And it’s the foundation upon which the Labour Party itself was built.

The challenge we face now in Government, is to find the best way of ensuring that this fundamental right can be exercised within an economy that is changing more rapidly and profoundly than at any time since the industrial revolution. To meet this challenge we do not need a big state with more and more centralised bureaucracy. Instead, we need an enabling state – one that empowers local institutions to develop local solutions. Where we mobilise the resources not just of the public sector; but of the private and voluntary sectors as well in a new drive to extend opportunity and prosperity.

When Keir Hardie led the fight against unemployment in the early years of the 20th Century it was not State benefits that he sought – but the opportunity and the support to work. He knew that with work would come autonomy, dignity and self-fulfilment. And that through work, the Labour movement could achieve its ultimate goal – to tackle poverty and build aspiration for every member of our society.

Forty years on, the welfare state – designed by William Beveridge, created by Clement Attlee’s government – recognised the right to enter the world of work as fundamental to forging a decent society by allowing people to exercise personal responsibility to support themselves and their families.

Beveridge’s welfare state was envisaged as an active, empowering force. It sought to provide government help to slay the Five Giants – want, disease, squalor, ignorance and idleness – through universal health and education, decent housing, and a benefit system that would provide security for those who could not work with help in finding a job for those who could.

Beveridge did not think that security from his five giants could be provided by the State alone. Personal responsibility – empowered by government action – was key to how security could be provided in each area.

Want was to be defeated by providing security when sickness, unemployment and retirement meant an end to earnings. But to have this security people had to work and contribute through their National Insurance.

Disease was to be defeated by the NHS. That organisation would be free – but the part played by the individual would be to maintain their own health.

Ignorance was to be defeated by the extension of secondary schooling to all. The State and churches would provide the schools – but ignorance could only be overcome when children and adults did the hard work at school.

Squalor was to be defeated by a combination of council housing and house-proud tenants. If the tenants failed to look after the housing they would reduce their own environments back to squalor. Again, collective provision of housing would be important but the family had to play their role in lifting themselves out of hardship.

Idleness was to be defeated by a combination of full employment and people being prepared to work. The provisions in Beveridge’s plan for unemployment benefit were clear. The task of the unemployed person was to keep themselves “fit for service”. Beveridge assumed that the work ethic would be reinforced by the benefits system and that the individual unemployed person would be prepared to work if they had the opportunity to do so. By combining effective management of the economy with individual effort, people would have greater security against idleness – but only if they played their part in taking work when it was made available.

So from education and health to unemployment benefit and welfare – the Beveridge plan had security at its heart – but with work as the main driver.

And since the main pillars of our modern welfare state were established, there have been huge strides forward. Our society is fairer. Opportunities as well as prosperity have been more widely distributed. People live longer and healthier lives. More people are benefiting from a University education. None of these advances would have been secured without the political courage and determination of previous generations of Labour politicians. But in all these areas, it is the need of today’s society, the rising aspirations of this generation that we have to respond to. And the bar is going up not down.

Our predecessors – Hardie, Atlee, Wilson, Callaghan – would have been horrified to see how the notion of personal responsibility gradually became obscured over the decades as parts of our welfare system trapped people between the twin vices of benefit dependency and poverty. Once inside the benefits system, it was often difficult to get out. People were frequently better off on benefit than in work. There was little help on offer to acquire new skills.

In particular, the legacy of Thatcher’s Britain was one of passive benefit dependency as a means of managing industrial decline. In a world where discrimination already scarred the lives of many disabled people and older workers – we saw millions of people written off onto benefit – with no expectation of a return to work. While Britain got steadily healthier as a nation, the numbers on Incapacity Benefit trebled between 1979 and 1997. The number of people claiming unemployment benefits rose by 50 per cent whilst the number claiming lone parent and incapacity benefits more than trebled. Overall, by 1997 there were 3 million more on benefits than in 1979.

And with benefit dependency came poverty. By the mid-to-late 1990s, the UK suffered higher child poverty than nearly all the other European nations. Over a period of 20 years, the proportion of children in relative poverty had more than doubled and by 1997, one in every three babies born in Britain was born poor. By 1997, nearly six million adults in this country were dependent on benefits to survive.

Far from indicating the success of welfare policies, these figures reveal their most abject failure. Because as we all know, the best form of welfare comes from the security of having a decent, well-paid job. Not from the myth that being on benefit alone can provide this level of security.

Even if our economy could support keeping people on ever higher benefits with little expected in return, which it demonstrably cannot – where would be the value in that? Worklessness can decimate and demoralise families and entire communities.

The clear link between benefit dependency and poverty is shown by the simple fact that half of the most severe pockets of deprivation in the country are contained within the hundred parliamentary constituencies with the highest numbers of incapacity benefit claimants.

So by creating a welfare state where rights properly match responsibilities we have the potential to end the ignominy of a system that can trap people in benefit dependency rather than helping them into work. While the solutions we apply may be different to those of 1945, New Labour is seeking a modern reflection of the true nature of the original Beveridge and Attlee reforms. A system of welfare built on the solid foundations that Beveridge laid down, but delivered in new ways that reflect the needs of our modern society. To restore the original Beveridge ethos of the welfare state as an enabler – empowering people to fulfil their potential, their hopes and their expectations. As the Prime Minister said on Saturday, empowerment is the theme running through this Government’s whole reform programme.

We have already taken great steps to replace the one-size-fits-all world of benefit dependency with an active service where tailored support to help people back into work is matched by the obligation for people to do everything possible to help themselves. Adopting a more individual approach is vital to the New Deal which has taken us far beyond the concept of the traditional labour exchange where employers looking for labourers were simply brought together with men and women looking for work.

In today’s labour market the acquisition and updating of skills are essential pre-requisites for success. It is estimated that by 2012 over two-thirds of all new jobs will require qualifications at or above level 3. So it is not just labour that employers are looking for – it’s skills.

And because of the decisions we have made on the economy and the reforms we have already delivered, including making work pay, we are today making good progress in tackling these real challenges. There are more people in jobs than ever before; 2.3 million more than in 1997. With almost three-quarters of the working age population in work, our employment rate is the highest of the G8 countries. And youth unemployment has fallen dramatically – with long-term youth unemployment down 90% since 1997. The numbers on benefit have fallen by around a million.

By supporting people in work and providing financial security for those who can’t work, we have lifted 2.1 million children and 1.9 million pensioners out of absolute poverty since 1997.

And we’ve tackled discrimination – with last year’s Disability Discrimination Act completing the most far-reaching programme of disability rights legislation that any European country has put in place. When we came to office, despite 14 previous attempts to produce legislation, only the most blatant forms of direct discrimination against disabled people had been outlawed and there was no protection at all for disabled employees of small firms or for disabled pupils and students.

Last year’s Act fulfilled our manifesto commitment to deliver enforceable and comprehensive civil rights for disabled people and represented a major landmark on the road to a world in which disabled people can be empowered to live independently, fully recognised and respected as equal members of society.

Our New Deal for Disabled People has seen nearly 75,000 job entries since its launch in 2001 – with 200,000 disabled people helped into work through our total package of New Deal programmes.

And we’ve developed new approaches – such as the cutting-edge Pathways to Work pilots – which bring together Jobcentre Plus, the Health service, GPs and employers to improve the package of support we offer to people on Incapacity Benefit.

In the first year of the pilots the number of recorded job entries for people with a health condition or disability had almost doubled compared with the same period the year before.

Yet massive challenges remain.

The need for Britain to compete in the ever-changing global economy means it is essential we do more to get everyone who is able to work to do so. Global trade is doubling every decade – China’s trade doubling every three years. The economies of developed nations that can not adapt to the pace of change risk falling further and further behind.

Maximising employment is equally essential for Britain to cope with the demographic challenge of a nation where people are living longer and healthier lives. By the late 2020s, nearly half of the adult population will be over 50. Over the next forty years or so, the numbers of pensioners will increase by 50%. Originally there were ten people of working age for every pensioner. Now there are four for every one pensioner; By 2050, two of working age for every one in retirement. Unemployment levels for people over 50 are relatively low, but economic inactivity rates are high and many people leave work early because of ill health. The economic consequences of these trends could be serious unless we take action now.

It is for those reasons that we have set ourselves the aspiration of working towards an 80% employment rate – reducing the numbers on sickness benefit by one million, and getting one million more older people and 300,000 extra lone parents into work.

To do that we must extend the principles of active, tailored welfare across the entire welfare state – providing help and support to the key groups that remain left behind.

Incapacity benefit remains one of the greatest barriers to social justice in Britain today. While 80-90 per cent of people coming onto the benefit expect to get back to work – many never do. After two years on the benefit, someone is more likely to die or retire than to find a new job. This is just not good enough.

Our industrial heartlands remain scarred by the Tory legacy of shuffling people off the unemployment lists onto a life of sickness benefit.

Yet the problem is now changing as the nature of our working lives change. As many people seek to balance busy lives which are becoming less physically demanding but more stressful, support that was originally envisaged for people with industrial injuries after long years of manual labour now often goes to people who have quit their office work or profession due to mental health problems.

Indeed, a third of new claimants now cite mental health problems as the main reason for coming onto the benefit, compared to a fifth in 1997.

So the problem is spreading to new areas and new groups of people – there are more incapacity benefit claimants in the South East than the North East, and 40 per cent of claimants are women.

Put simply, rather than the traditional stereotype of male workers off with a bad back, people coming onto incapacity benefit today are increasingly likely to be women or people suffering from stress.

For all claimants, it is the passive system itself that traps people in poverty.

Nothing expected of claimants, and little support is offered.

The gateway to the benefit poorly managed, with some claimants receiving IB before even passing the medical test;

There are perverse incentives to stay on the benefit – you get paid more the longer you claim;

And those who try to plan their return to work through volunteering and training run the risk of proving themselves capable of work and losing their entitlement;

Even the name of the benefit sends a signal that a person is incapable – that there is nothing that can be done

We cannot allow that to continue.

The proposals I will publish later this month will set out the details of a new benefit system for new claimants, the essential elements of which will be in place by 2008. The new benefit will be placed on a new concept of measuring and building up each individual’s capacity rather than writing them off as incapable.

The green paper will introduce new measures to help those on the existing benefit back to work – we must not abandon those who have been failed by the current system.

Let me be clear about one thing. This is not about forcing people to work when they do not have the capacity to do so. I believe that the mis-treatment of disabled people typical of the last century – and still too often the case today – is one of the last great emancipation issues of our time. This Government has pioneered both legislation and support to tackle this. Matching rights with responsibilities will not mean doing anything to undermine this.

But equally – when people do have the capacity to work they have the right to expect support to achieve this and not to be written off onto benefits. Helping disabled people and others with health conditions is in fact fundamental to our ability to take the next step in our pursuit of true equality – to change attitudes in society.

Our Pathways to Work pilots have given us the platform, but we need to aim even higher. The largely voluntary approach of Pathways has been a success, but it is not enough on its own to reach our goal. That is why the increased support we offer to people seeking to get back in the workplace must be matched by increased obligations. A “something for something” approach demands that state help is matched by increased responsibility on the part of claimants to take advantage of the support programmes government can offer.

Radically changing incapacity benefit is critical to giving more opportunity to those trapped by the current system, but the green paper will also seek to do more for other key groups who still face barriers to accessing the benefits that work can bring.

We will set out proposals to do more to help lone parents balance their need to care for their children with the huge benefit to their family that a job can bring.

We will bring forward measures to do more to help older people overcome the barriers to work which make their employment rates significantly lower than the population as a whole.

And we will reform housing benefit so it better promotes personal responsibility and does not hold people back from working.

It will be important to consult fully on these changes, yet we must move forward as swiftly as we can. That is why I intend to bring forward legislation in this session to set in motion the changes we need to make.

I very much hope that all of you here will join with us in examining our proposals over the coming months – sharing with us your expertise and working with us to turn these aspirations into reality.

With these welfare reforms we can harness the power of modern advances in health and employment support and foster a society of genuine equal rights and opportunities for all. We can build a lasting legacy for the future of our children and grandchildren. And we can deliver an active Welfare State that doesn’t simply cushion people from the effects of poverty and unemployment – but prevents these conditions from occurring in the first place and gives them the support they need to rebuild their lives when they do.

Our proposals will set a new direction of travel for our welfare system. They must provide opportunity as well as security. They must promote full employment and the right to work. They must enhance personal responsibility – not undermine it. And we should bring together the public, private and voluntary sector in a new mission to transform some of Britain’s most disadvantaged communities.

That, I believe, is a modern vision of which William Beveridge and generations of progressive politicians that have gone before us, would have been justifiably proud.

Below is the text of the speech made by John Hutton, the then Work and Pensions Secretary, to the Work Foundation Pensions Conference on 7th February 2006.

I’m grateful to Will and the Work Foundation for the opportunity to join you this morning. And I’m very pleased that the Work Foundation is holding this Pensions Conference – because ultimately the opportunity to work will underpin any successful pensions policy and it must play a central role in the way that our society responds to the challenges we face today.

Since 1997 we’ve taken decisive measures to address the most immediate and serious problems that we have faced since coming into office.

Through the Winter Fuel Payment, free TV licenses and a 7% real terms increase in the Basic State Pension, we’ve helped all pensioners. And by targeting resources through the Minimum Income Guarantee and then the Pension Credit, we’ve ensured help for the poorest pensioners; that never again will they have to suffer the indignity of living on as little as £69 a week – a shameful legacy of pensioner poverty to which we must never return. Today we are spending almost £11 billion extra each year on pensioners with almost half of this spending going to the poorest third. And we’ve succeeded in helping nearly 2 million pensioners escape from the poverty line – with figures from the Institute for Fiscal Studies showing that we are now in an almost unprecedented position where pensioners are no more likely to be poor than any other group in society.

The Pension Protection Fund and the new Pensions Regulator are helping to respond to the problems experienced by defined benefit occupational pensions – and acting to boost security for scheme members. The Financial Assistance Scheme offers the prospect of help for those who have lost the most in the past. And the introduction of the Sandler suite and Stakeholder Pensions have been important steps in facilitating low cost private savings.

But we must now go further to build a system that will enable us to meet two significant challenges. Firstly, unprecedented demographic changes where there will soon be more people over 80 than under 5; and secondly, the extent of under-saving, which the Pensions Commission calculated as leaving nearly 10 million people not saving enough for their retirement.

Work is key to meeting both of these challenges. If we are to support an ever-ageing population successfully we need all those who are willing and able to work to do so. That’s why our Welfare Reform Green Paper last month set out to meet our ambition of an 80% employment rate – including encouraging and supporting an extra 1 million older workers into the workplace. And, as the Pensions Commission concluded, a major expansion of workplace savings must be fundamental to meeting the problem of undersaving – perhaps now the biggest issue we face as we look to the future.

You’ve heard from Lord Turner already this morning. His report at the end of last year marked a major new phase in the debate we are now having about the long term future of our pensions system. We believe that the framework of proposals and options set out in the Pensions Commission report is the right basis for this debate – the analysis is comprehensive and thorough; the recommendations radical and far-reaching. It provides us now with an opportunity to build consensus on the direction of travel we should take.

And that consensus is crucial. If we are to lay the foundations for a lasting pensions settlement, we need a system that allows people to plan with confidence – one that will stand the test of time and not be pulled apart by successive Governments. We need to take difficult long-term decisions with not just cross-party support – but underpinned by an enduring national consensus. Because when it comes to pensions, almost by definition, we have to build for the long term.

That is why we are engaging in a National Pensions Debate – reaching into every section of our community – from business and industry to individuals of all ages and backgrounds; and in all parts of the country.

We all face a challenge here. Business and industry must facilitate workplace saving. Government must determine the right role for the State in providing a basic pension, in regulating the savings market and correcting inequalities. Individuals must plan their retirement saving. And as citizens, we must all be involved in deciding the trade-offs and making the choices that are inescapable if we are to succeed in laying the foundations for a new pensions settlement.

In the coming weeks we will be addressing all these issues in the build-up to a National Pensions Day. Later this month there will be regional events in Southampton and Manchester. Industry, Government and, I hope the main political parties, will come together on Tuesday 28th February for an examination of alternatives to Lord Turner’s National Pensions Savings Scheme – in which the industry have responded to the challenge laid down by my colleague Stephen Timms, the Minister for Pension Reform – to design a better model for personal accounts and deliver a simple, portable and flexible product that can enable people to save at low cost.

And in March I will use a series of speeches and events to set out some thoughts on the role of the State, the challenge for employers, questions of affordability, the options for improving the position of women’s pensions; and the trade-offs and balances that we are going to have to strike to achieve a long-term solution which meets my five tests of personal responsibility, fairness, affordability, simplicity and sustainability.

All this activity will culminate with the National Pensions Day – on Saturday 18th March – an innovative consultation taking place simultaneously in 6 cities – Birmingham, Newcastle, Glasgow, Swansea, Belfast and London. Over 1000 people will come together to consider the choices and options resulting from Lord Turner’s report – to build the platform for a nationwide consensus on which we will build our Spring White Paper and ultimately the legislation that will deliver a long-term solution to the Pensions challenge.

I would like to use the remainder of my time this morning to address one of the most difficult issues which will need to be at the heart of that nationwide consensus – namely the length of working lives and the question of the State Pension Age.

In his report, Lord Turner suggested that the State Pension Age should rise broadly in proportion to the increase in life expectancy.

Certainly there is a growing recognition that working longer is going to have to be part of the solution. But the idea of having to work longer is an emotive subject – we’ve all seen the scare stories and the newspaper headlines.

We’re not alone in grappling with this question – the ageing population is a truly global phenomenon for all of the developed economies. In the US the pension age has already started increasing and will reach 67 in 2027; it’s increasing in Japan from 60 to 65. And it has recently been increased in 6 EU countries including Austria, Slovakia and the Czech Republic. I do not believe the UK can remain immune to this process of change.

What matters of course is the effective retirement age – and it’s worth just dispelling a few myths. Although the State Pension Age is a strong signal and determinant of the length of working lives – it’s not the same as a retirement age. Many retire before the State Pension Age – and increasingly others choose to work beyond it.

Our Age Positive Campaign has influenced employers by promoting the business case for age-diverse workforces and this year will see the introduction of legislation which, for the first time, will give people the right to challenge age discrimination in the workplace. A new default retirement age will mean that employers can no longer force an employee to retire before 65, without objective justification. And in 2011 we will undertake an evidence-based review which will consider the abolition of the default retirement age altogether.

What’s striking when we look at effective retirement ages is that there has been a seismic shift in the balance between the proportions of life spent in work and retirement. In 1950, the average male retired at 67 and could expect to spend 10.8 years in retirement. Today he retires on average 3 years earlier – at 64 – but can expect to spend a further 20 years in retirement. Growth in life expectancy at 65 also shows no sign of slowing down. Every year between 1975 and 2005 it grew by 3 months for men and 2 months for women. By contrast between 1950 and 1975 the annual improvement had been of slightly more than half a month for men and less than a month and a half for women.

As unpopular as it may be to talk about working longer – the simple fact is that if we aren’t prepared to consider the option of increasing the state pension age, we will simply pass an ever greater burden onto our children and grandchildren.

Of course there are concerns about the impact of this on sections of the community. There are issues that have to be worked through – but in principle it would be irresponsible for us now not to at least contemplate some redressing of this balance between work and retirement.

Looking at the data and available research on current retirement patterns, I think three things really stand out.

Firstly, with a third of men outside the labour market by the age of 60, for many the debate is not about working beyond 65 but actually having the opportunity to work up to the State Pension Age. There are 8.8 million people aged between 50 and the State Pension Age in private households in Britain. Of these, 2.6 million – nearly 30% – are not working. And 1.4 million are claiming sickness and disability benefits.

Secondly, while life expectancy has risen across the country, it can vary considerably between more and less deprived areas. For example, in the local authority with the highest life expectancy at birth, namely Kensington and Chelsea, average male life expectancy is 11.5 years higher than in the local authority with the lowest, Glasgow.

And thirdly, flexibility is key. A recent research study has found that for 50-69 year olds, most of those in work wanted to carry on working and half of those who were retired would have worked for longer if there had been part-time or flexible work options available.

So what does this mean for pensions policy. Let me suggest a few thoughts.

Firstly, with half of those on Incapacity Benefits aged over 50, last month’s welfare reforms have a crucial role to play in meeting the pensions challenge and in helping those who can and want to work to do so. And of course, the Green Paper also included other important measures to help older workers – with an extension of New Deal 25+ to those aged 50-59; improved back-to-work support for JSA claimants and their dependent partners who are over 50; and more work with employers to extend flexible working opportunities to older workers.

Secondly, we can not look at pensions policy in isolation from wider policy on health and education. While I’m committed to looking at whether there are ways within the pensions system in which we could address inequalities in life expectancy – this would come at a cost of additional complexity and we have to ask whether the pension system could and should address these problems. There is strong evidence that differences in life expectancy are driven by differences in health and education. We’re already working towards a significant reduction in mortality rates by 2010 and a reduction of at least 10% in the gap between the fifth of areas with the lowest life expectancy at birth and the population as a whole. Tackling pensioner poverty today has been our top priority. Tackling it tomorrow – means that pension reform can not be conducted in isolation from whatever measures are necessary to address inequality in life expectancy.

Thirdly – and finally – we need to do all we can to ensure greater flexibility. The 2004 Pensions Act is helping to achieve this flexibility with more generous options for delaying taking up the State Pension and the tax change coming in this April will allow people to take up their occupational pension while continuing to work for the same employer.

These measures combined with the age discrimination legislation I mentioned earlier, will give employees greater flexibility to plan a gradual move from full-time work to retirement. But we can and should look at whether there are other ways to increase this flexibility further. For example, looking at whether there are workable ways to make State Pension Deferral more flexible such as the Pensions Commission proposal to allow people the option of deferring some of their State Pension rather than all of it.

My view is that some increase in the State Pension Age from 2020 is now inevitable. But any rise will only be acceptable to people if it comes as part of a package to improve pension provision in other key areas that Lord Turner’s report addresses. And we must keep in mind that the State Pension Age is a fairly blunt tool for changing effective retirement ages. It can only be one part of the policy response. It needs to be accompanied by tailored support to help people back into work; by greater flexibility to help people plan a gradual move that breaks the cliff-edge between work and retirement. And it can not be considered in isolation from our health and education policies which must support our welfare priorities of tackling poverty and eliminating disadvantage.

Ultimately, increasing the effective retirement age can only be achieved when it is underpinned by a broad consensus about whatever long term pensions settlement we need for the future. One that meets our goals of promoting greater personal saving as well as reducing financial hardship in retirement.

Public attitudes are absolutely crucial – but they must be shaped by the reality of the challenges we face. Any change needs to be seen less as an imposition that forces people to change their behaviour and more as a reflection of the new expectations of individuals and communities in a changing society.

That’s why we are having this National Pensions Debate. I look forward to hearing your thoughts this morning and over the coming weeks. Together we can build that enduring consensus and ensure that we take the right long-term decisions to deliver a lasting pensions settlement for our children and grandchildren – and for the generations to come.

Below is the text of the speech made by John Hutton, the then Work and Pensions Secretary, to the Foreign Policy Centre on 14th February 2006.

The Foreign Policy Centre has established itself at the leading edge of the debate on the future of Europe – so it’s very fitting that they should be hosting this event.

The EU is a union of values, of solidarity between nations and people. It’s a common market in which we trade – but it’s also a common political space in which we live together as citizens.

After the destruction of two World Wars, Europe has enjoyed 60 years of peace, prosperity and progress. A remarkable achievement and one of which it should be justifiably proud. Throughout this – reconstruction and economic growth have gone hand-in-hand with a strong and caring social dimension. And rightly so.

Economic growth and social justice are mutually reinforcing. A fair society and a strong economy are not opposites but outcomes that are inextricably linked together.

But today demographic change and globalisation present Europe with new social and economic challenges.

Rapid demographic change – fuelled by modern advances in healthcare and rising life expectancy – means that the demands on the EU’s welfare systems will be greater than ever before. All of this at a time when the number of people of working age able to support the dependent population will continue to decline.

Over the first 50 years of the 21st Century the dependency ratio in the old EU15 will nearly double – while the average increase in public expenditure on pensions will be 30%. And similar trends will apply to the now enlarged EU25.

Indeed, over the next 25 years the working age population of the EU will fall by 7% while the population aged 65 and over will increase by over 50%. And it is not just our society that is changing. Our economies are changing too.

Globalisation is irrevocably changing the international marketplace. World trade in goods is doubling every decade – and China’s exports to Europe doubling every three years. Twenty years ago just 10% of manufactured goods came from developing and emerging countries – by 2020 it will be 50%.

China’s growth has averaged 9.5% over the past two decades and its wage costs are still just 5% of those of the European Union. But we are not simply competing in low skilled low wage mass production manufacturing.

India’s biotechnology sector will increase fivefold in just the next five years. And China has trebled its spending on research and development in the last five. With 4 million graduates a year from China’s and India’s universities – global competition means high skilled, value added goods too.

Europe’s future success will therefore hinge on its ability to develop policies and institutions that embrace this change, but which are also underpinned by the enduring values that have shaped the union.

We used the UK’s Presidency of the EU last year –to stress that we had to move beyond the old arguments that you were either in favour of the Social Model in its entirety or against it altogether. These were false choices that had bedevilled the debate about the future of the EU.

When European Heads of State met at Hampton Court they agreed that Europe must reform and modernise its policies in order to preserve its values.

And it is only by remarrying these values of our Social Europe with the economic realities of the modern world that we can achieve a modern knowledge-based economy. One that’s underpinned by greater social inclusion – so that the poorest do not once again lose out in the face of social and economic change.

The Lisbon Agenda was launched in 2000 with the 10 year objective of “making Europe the most competitive place to do business in the world.” At its heart was an employment target of 70%. Its achievement will be critical – for individuals; for families and communities; for wealth creation; for economic competitiveness and social justice; for both the Social and the Economic Europe.

But at 63.3%, the EU employment rate increased only half a per cent in the first five years of the Lisbon timeframe. And with 18 million Europeans unemployed and one in every three of working age deemed economically inactive – Europe must reform and reform quickly.

To turn this around, in a climate of ever greater global competition, I believe that Europe needs to address three critical issues. First – improving the skills of its workforce; Second being more supportive to entrepreneurship and innovation as the engines of growth in a global market; and third, achieving greater flexibility – stripping away unnecessary centrist regulation and enabling member states to adopt tailored flexible welfare policies that focus on the specific needs of individuals and which provide the kind of security that enables active inclusion, with work for those who can and security for those who can’t.

I’d like to say just a few words about each.

Firstly skills.

Employment is the key to social protection. But skills are the way to unlock social progression.

In today’s labour market the acquisition and updating of skills are the absolute essential pre-requisites for success.

Skills drive economic growth by improving both productivity and employment. They determine our capacity to innovate and they hold the key to reducing social disparities.

By 2015, China is likely to have become the third largest economy in the world –contributing nearly a fifth of global output. In order to maintain and improve its growth, Europe will need to manage the resulting structural change effectively, allowing workers to shift to more productive and profitable sectors.

Higher skills levels are essential to achieve this overall shift to a modern knowledge-based economy. Here in the UK, it is already estimated that by 2012 over two-thirds of all new jobs will require qualifications at or above level 3.

Most occupations already require higher levels of skills than in the past. Once, IT skills were a specialism – today they are increasingly a core requirement for many jobs.

It means there’s a high premium on transferable skills – the tools that will, for example, enable people to respond to new opportunities by changing career mid-way through their life.

But even if we achieve this shift in skills – Europe can not sit back. Global competition is not going to be a race to the bottom – far from it. India now produces more science graduates than Europe. And only yesterday, the front page of the Financial Times reported the Chancellor of Oxford University planning the first of several recruitment drives to India and China.

So to compete in the global market-place and harness the opportunities that this presents – Europe must build a world class skills base. But skills, while essential, will not be enough on their own. We must also create the right conditions for innovation and entrepreneurship.

India and China are crucibles of innovation – unconstrained by legacy practices and able to introduce new technologies and systems relatively easily.

China has already established itself as a pre-eminent manufacturer of standards based products. And with, for example, the EVD (Enhanced Versatile Disc) as a potential successor to the DVD, China is driving standards and innovation in a highly skilled technology market.

It’s also drawing in global capital with over $1.2 billion invested into Chinese ventures in 2004. 11% of today’s world stock of foreign direct investment is now located in China. Venture capital and private equity firms are helping Chinese enterprises tap into innovative practices, global commercial and capital markets.

But whereas much of China’s success has been driven by foreign direct investment – India has focused on providing a more nurturing environment for its own home-grown entrepreneurs.

In contrast to China, India has begun to back away from micro-managing its economy – ceding its monopoly over long-distance phone services for example, cutting some tariffs and opening a number of industries to private investment, including investment from abroad.

As a consequence, entrepreneurship and free enterprise are flourishing. In a recent survey of leading Asian companies, India registered a higher average score than any other country in the region, including China.

If Europe is to renew itself in this age of global competition, we too must nurture the spirit of entrepreneurship from the classroom to the boardroom. We must support innovation with investment in science and infrastructure; and provide the right incentives to make Europe a centre of excellence for research and development.

Europe needs a dynamic and competitive economy based on open markets. The EU must combine the economic strength of the Member States in a single open European market for the benefit of all of us – to allow us to trade freely with each other – and to ensure the European business is well placed to compete in the rest of the world.

So it is by embracing global market forces and product market competition that we can combine economic efficiency with the delivery of our social justice goals. But here too, flexibility is going to be key.

For all China’s rapid growth it is still in the process of freeing itself from substantial legal and regulatory constraints. It was only at the turn of the century that domestic companies were finally granted the same constitutional protections that foreign businesses have enjoyed since the early 1980s.

Currently, although there are already over 60 foreign banks operating in China, they only hold 1.4% of banking assets. Next year, the financial sector will be opened to the full participation of foreign banks.

China will need to manage its own transition as it moves towards greater liberalisation. To manage the transition of workers from state-owned companies in a flexible labour market where there are almost no restrictions on hiring and firing and no major mandatory benefits. And to manage an urban-rural divide that sees for example, per capita GDP in Shanghai at roughly eight times that of some of the provinces.

As China develops greater flexibility – Europe must be careful not to move in the opposite direction.

More than 50% of significant new regulations that impact on UK business now emanate from the EU. Too often in the past, I think the EU has given the impression of regulating first and asking about the impact later. Better regulation does not mean dismantling social standards or cutting health and safety in the workplace. It does mean finding more effective ways to deliver those standards so that they do not place unnecessary burdens on business. So that they don’t drag as an anchor on innovation and productivity.

In all of these areas there has been some progress, with important steps forward during the UK Presidency, when – as Chancellor of the Duchy of Lancaster – I had the pleasure of being the Minister charged with overseeing the better regulation drive. The European Commission under the leadership of President Barosso has shown a genuine determination to change the regulatory culture in Europe, with the decision announced in September to withdraw 68 legislative proposals under its broader initiative to cut red tape. And last October a new Communication on Simplification, repealing, codifying, recasting or modifying up to 1400 legal Acts – a clear signal of intent.

But we shouldn’t pretend that we are there yet – in truth, we’ve got a very long way still to go. We must do more to modernise our internal institutions. To have the confidence to remove unnecessary regulation, to peel back bureaucracy and champion a global, outward-looking, competitive Europe.

But above all, a modern flexible welfare state is crucial in progressing economic reform in Europe.

A Government’s duty to its citizens used to be seen as compensating them through state hand-outs – to lift their incomes above a poverty level. That was perhaps the original deal between Government and individuals – and at the time, a major social advance. Government offered blanket benefit payments to those out of work. There was an understanding and an expectation that those unemployed would try to get back to work but there was limited support or incentives to do so. We must carry on providing this support – but we need to go very much further.

Since 1997, through record investment in the New Deal and Jobcentre Plus – the Labour Government has sought to move the welfare state here in Britain from a passive one-size fits all model to a more pro-active service which tailors support more to the specific needs of each individual.

We have sought to open the door to greater social mobility. Through the National Minimum Wage and tax credits, we created clear incentives to work by making work pay. And by creating an active, enabling welfare state that matched rights with responsibilities, we offered people the opportunity to help lift themselves out of poverty for good, rather than merely trying to ameliorate their condition from within the benefits system.

There are now 2.3 million more people in work; 1 million fewer people on benefits. And 2 million children and almost 2 million pensioners have been helped to escape from living on the poverty line.

The flexibility which has underpinned this approach is central to the reforms of Incapacity Benefit set out in last month’s Green Paper. As well as benefit reform, this included a more flexible tailored approached to welfare delivery – focused on harnessing the resources and expertise of the public, private and voluntary sectors in waging a war on the now remaining pockets of deprivation – areas of the country heavily correlated with the largest numbers on benefit.

Across the EU, each Member State is unique – with its own traditions, institutions and practices. But all are underpinned by shared values – solidarity, mutuality and the ambition to allow everyone to develop their true potential and make their full contribution to society.

We must all find our own way to make this transition in welfare support from the original State benefit hand-out to this new flexible approach where communities are empowered to develop local solutions to address the impact of global change on their own local areas.

But in the years ahead all the nations of Europe must ensure that rights-based and equality-driven European laws and directives do not impede this flexibility needed to achieve our social justice goals.

Too often in the past, Europe has seen labour market flexibility as being somehow the enemy of social justice. It is not.

Modern social policy is not about regulation and job protection in a way that may save some jobs today at the expense of many jobs tomorrow.

Today flexibility can promote a progressive agenda. It can provide the means by which people move between jobs rather than into unemployment or inactivity. It provides the mechanism by which people can receive tailored help to acquire new skills as the fastest route back into employment. And it can provide the opportunity for new and previously excluded groups to enter the workplace and make their full contribution to society.

Today’s labour market – with its flexible hours and part-time options means that working mothers and single parents can now find a way to work whilst meeting their family commitments. Europe must have the resilience not to be tempted into shaping, for example, a Working Time Directive around the old outdated stereotypes of white, male industrial workers. Removing the opt-out would be a truly regressive step. An old-style inflexible policy, stifling opportunity and widening social injustice rather than tackling it.

And we neither should we be fooled into thinking that an inflexible Working Time Directive is about ensuring safety in the workplace. Because if that were true, you would expect nations like Britain, which remains committed to the opt-out, to have amongst the worst health and safety records in the European Union. In fact we have the best.

Europe will be left behind if it insists on maintaining rigid labour markets and one-size-fits-all regulations. Uniformity is now the enemy of progress; Flexibility the key to achieving true equality of opportunity – enabling people to make the best of their lives by offering them tailored choices rather than imposing rigid one-size-fits-all solutions.

As in the past – a successful Economic Europe will depend on a successful Social Europe. A Europe that balances rapid change with proper support for people through the State and together in wider society. A Europe which doesn’t just provide hand-outs but a hand-up to enable people to lift themselves out of dependency and not to fall back. A Europe which invests in skills, rewards innovation and balances regulation with flexibility.

I’m an optimist – I believe we can achieve this. And in doing so, we can harness the opportunities presented to us by the advances in technology and healthcare that underpin the challenges of globalisation and demographic change. Challenges now that offer the chance not just to revive our economic performance – but actually to achieve our ultimate social policy goal; the eradication of poverty and the creation of true equality of opportunity for all citizens within the European Union.

Below is the text of the speech made by John Hutton, the then Work and Pensions Secretary, to the Scope Disability Summit on 9th March 2006.

I’m grateful to Tony and Rachel for the opportunity to join you today and I want to assure you of this government’s commitment to working with you to achieve a Britain free from disablism.

Clement Atlee’s Labour government founded the welfare state not just to protect people, but to empower them. Labour’s Alf Morris, now Lord Morris, led the first drive to change legislation and outlaw discrimination. And last year, through the Disability Discrimination Act, this Labour government completed the most far-reaching programme of disability rights legislation that any European country has so far put in place.

At every stage we have worked to push the agenda forward; to listen to you and to work with you in leading the struggle to root out discrimination and break down the barriers faced by disabled people in our society.

But for all the progress we have made; we still need to achieve a lasting step-change in attitudes towards disabled people. Where meeting the needs of disabled people is seen not as a burden but as an opportunity; where institutional disablism is seen not as an inevitable part of the culture of our country but as a fundamental barrier to our success; And where disabled people themselves must never be consigned to accepting second best but empowered and supported to achieve full equality of opportunity and genuine independence and respect within our society.

So I want to pay tribute to the work of Scope and the DRC for their excellent recent campaigns that have raised awareness to change attitudes – promoting the positive image of disabled people.

Today’s Disablism Audit shows just how important – and how real – those challenges are, despite the legislative progress we have already made.

Disabled people are more than twice as likely to have no educational qualifications as non-disabled people. They are over three times as likely to be economically inactive and when they are in work, they earn less on average than their peers. Indeed, around a third of young disabled people actually expect by age 30 to be earning less than non-disabled people of their own age.

And on the day that annual figures are released showing the extent of poverty across Britain, it is telling that disabled people are more likely to be trapped in poverty than non-disabled people; and a quarter of all children living in poverty have long-term sick or disabled parents.

We simply cannot accept these outcomes.

So this government is taking steps to tackle institutional discrimination and promote independent living – giving disabled people choice, empowerment and freedom through more joined-up and individualised service delivery.

We have set up the Office for Disability Issues to co-ordinate and drive forwards our work to deliver substantive equality for disabled people.

It will create a new national forum which will enable the views of disabled people to be heard by policymakers at the highest level; and ensure that disabled people really are at the heart of public policy – able to influence the development of policies and service delivery that will affect every aspect of their lives.

The Office for Disability Issues is also working to test practical new ways of delivering services such as through the piloting of “individual budgets”. And it will champion a genuinely “joined up” approach to delivering disability equality right across government. Because disabled people, just like everyone else, don’t divide their lives into separate silos – and we can’t properly tailor our services to meet their needs if we do.

Because it is, we believe, ultimately by tailoring support to, and empowering, individuals that we can achieve our ambition of true equality. And nowhere is this more true than in supporting people to get into work. That is why we are determined to build on the success of the New Deal, which has helped nearly a quarter of a million disabled people to find work.

We will now roll out the hugely successful Pathways to Work scheme across the entire country – so that all disabled people claiming Incapacity Benefit can benefit from extra help and support.

Over the last few years – thanks to the New Deal for Disabled People – the employment rate of disabled people has risen twice as much as for the population as a whole.

Our proposals in the Welfare Reform Green Paper are underpinned by clear principles. The development of a modern active welfare state that responds to individual need, balances rights with responsibilities and invests for the long term. That provides work for those who can but security for those who can’t.

We recognise the sensitivity and importance of getting the changes right, which is why we want to work with you to ensure that we take a fair and equitable approach.

I am grateful to those of you who have already engaged with the current consultation on our Green Paper and I strongly encourage those of you who have not yet done so to contribute your views.

But today I am going further than that – because as part of the ongoing consultation Margaret Hodge has written to Bert Massie and agreed that we will work with the DRC to develop a “prototype” disability equality impact assessment on our proposals for reform of Incapacity Benefit.

I hope very much that you will all feel able to work with Bert in contributing your expertise to this process – and helping us to ensure that when delivered, the package of support and the newly designed system meets the goals we have set for it – enabling all disabled people to fulfil their aspirations in the workplace. That is very much what we want to do.

It’s vital too that we collect evidence about the life chances of disabled people – about the extent of what we are achieving and how much more there is for us to do. That’s why the Government’s Office for Disability Issues is working with disabled people and their representative organisations on ways of measuring progress towards our goal of a fully inclusive Britain. And I expect the ODI to address this in their first Annual Report to the Prime Minister this Summer.

Because we are committed to developing, though consultation, a set of outcome-based indicators to measure progress towards our goal of achieving substantive equality for disabled people by 2025.

So let us measure our progress and let us do this systematically; let us celebrate what we have achieved and let us use that as the catalyst to go further.

Because if we work together we can achieve that step change in attitudes – so people come to view disablism as every bit as corrosive and intolerable as any other form of prejudice and discrimination.

A truly fair society of equal rights and opportunities for all is our goal. With your help, support and encouragement I believe it is a goal we can achieve.