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  • HISTORIC PRESS RELEASE : UK submits Annual Economic Report to European Commission [December 2001]

    HISTORIC PRESS RELEASE : UK submits Annual Economic Report to European Commission [December 2001]

    The press release issued by HM Treasury on 20 December 2001.

    The Treasury today published, and submitted to the European Commission, the UK’s 2001 Convergence Programme, “Maintaining Economic Stability”.  This is the fourth annual update to the UK Convergence Programme published in line with the EU Stability and Growth Pact.

    The programme, which provides information on economic and fiscal developments in the UK, is submitted to the ECOFIN Council and the European Commission in line with Article 7 of Council Regulation (EC) No 1466/97 of the Stability and Growth Pact, for the purposes of the multilateral surveillance procedure under Articles 99 and 104 of the Treaty establishing the European Community (ex Articles 103 and 104c).

    Following submission to the Council and the Commission, the 2001 update of the UK programme will be examined by the Commission, as will updates of Stability and Convergence Programmes submitted by the other 14 Member States of the European Union.  Following the Commission’s examination, the ECOFIN Council will deliver its opinion on the programme.

  • Gordon Brown – 2001 Speech to the Press Club in Washington

    Gordon Brown – 2001 Speech to the Press Club in Washington

    The speech made by Gordon Brown, the then Chancellor of the Exchequer, in Washington, the United States, on 17 December 2001.

    Let me first on behalf of Tony Blair and the entire UK Government, which has been proud to be America’s first and strongest ally from the first moment the planes struck the World Trade Centre and the Pentagon, salute the courage of America in face of tragedy: your bravery and resilience in the most testing of times.

    America has shown by the actions of all its people that while buildings can be destroyed, values are indestructible; while hearts are broken, hope is unbreakable; and while lives have ended, the cause of liberty never dies.

    The war that together we are fighting against terrorism – not as a war for territory but as a war for values – we will win.  Of that I am confident. But the question I want to address today is how we will win the peace.

    This is not the first time the world has faced this question – so fundamental and far-reaching.  In the 1940s, after the greatest of wars, visionaries in America and elsewhere looked ahead to a new world and – in their day and for their times — built a new world order.

    And what they sought to create was not simply a new military and political settlement that guaranteed peace but also new rules and institutions for a new international economic and social order that would guarantee prosperity.

    Coming to America from Europe – the beneficiary of that post 1945 American generosity – I can testify to the greatness of the achievement.  Indeed such was its scale that one of the architects of the new order – Dean Acheson – recalled that he had been present at the creation.

    In the truest sense they fought on after victory.  They understood that, tempting as it might be, a retreat into isolationism was neither possible nor desirable.  And what they achieved as they fought their day’s greatest evil – totalitarianism – is what we must seek to achieve as we fight today’s greatest evil – terrorism.

    I want to urge that together we form a new global alliance for prosperity that starts from the shared needs, common interests and linked destinies of developed and developing worlds working together.

    I want to describe how America’s post-Second World War achievement in what we now call the Marshall Plan should be our inspiration in this post-cold war world — not just for the reconstruction of Afghanistan but for the entire developing world.

    The plan proposed by US Secretary of State George Marshall transferred one per cent of national income every year, for four years, from America to Europe – in total the equivalent in today’s money of 75 billion dollars – not as an act of charity, but as a frank recognition that, like peace, prosperity was indivisible; that to be sustained it had to be shared; and that to achieve this goal would require a new public purpose and international action on a massive scale.

    Marshall and his colleagues also understood that the challenge extended far wider than the war-torn countries and was about more than temporary aid;  that by combining historic American compassion with enlightened self interest not only did they advance the spread of prosperity but the spread of democracy too.  Indeed by identifying undemocratic as well as unstable regimes as a problem – and the attainment of democratic reform as well as economic reform as a solution – the world could best move forward.

    This is what George Marshall meant when, in his great Harvard speech, he articulated his great, unifying vision for a global fight, not against one country or one ideology, but against “hunger, poverty, desperation and chaos”.

    And this is why he proposed to transfer resources on such a scale: not merely to secure “a working economy in the world” but, even more important, to “permit the emergence of political and social conditions in which free institutions can exist”.

    These were George Marshall’s fundamental aims in 1947, and his vision resonated across the decades that followed – defining the very character of the next half century, defining the very essence of global cooperation.

    And they ring with relevance in our own time too.

    Just as the urgent needs of Greece and Turkey provided the catalyst for the Marshall Plan, today’s plans for global reconstruction are precipitated by a specific challenge – that of Afghanistan and Pakistan.

    Like our predecessors, we understand that national safety and global reconstruction are inextricably linked.  Like them we see the need for a new economic leadership – a comprehensive plan that goes beyond temporary relief to wholesale economic and social development. Like them we see the need for a new global economic and social order grounded in both rights and responsibilities accepted by all. Like theirs, our proposals call on the poorest countries themselves to rise to the challenge.

    But while there are parallels between our time and 50 years ago no historical analogies can ever be exact.  Far more so than in Marshall’s time, our interdependence means that what happens to the poorest citizen in the poorest country can directly affect the richest citizen in the richest country. And while the Marshall Plan deserves an honoured place in our history its remedies cannot be blindly or rigidly applied to efforts to solve the challenges of today and the future.

    The Marshall Plan was constructed in a post-war world of distinct national economies in need of rebuilding.  Our job is now, in a more interdependent world, to help build – for the first time – market economies for a wholly different environment of open not sheltered economies, international not national capital markets, and global not local competition.

    And 50 years on we not only see more clearly our interdependence but the gap between what technology enables us to do – abolish poverty – and the reality of 110 million children without schooling, 7 million avoidable child deaths each year and 1 billion of our citizens in poverty.

    It is for these reasons that the whole international community – the IMF, World Bank, the UN and each of our countries – has solemnly committed to the most ambitious development goals for 2015: to halve world poverty, cut child mortality by two thirds and guarantee every child primary education.

    Our plan is this:  developing countries must pursue corruption-free policies for stability, for opening up trade and for creating a favourable environment for investment.  In return, we should be prepared to increase by 50 billion a year in the years to 2015 vitally needed funds to achieve these agreed millennium development goals.

    The development funding I propose is not aid in the traditional sense to compensate for poverty, but new investment in the future to address the causes of poverty.  In the last 50 years the Marshall Plan’s European model could not be applied wholesale to developing countries because neither the economic foundations nor the necessary open, transparent and accountable systems for managing the public sector were properly in place to prevent corruption and waste.  And too often we saw development funding as short term charity aid, charity for being poor, instead of for a higher and more substantial purpose – long term investment tied to tackling the underlying roots of poverty and promoting sustainable growth.

    Indeed the proposal I am making today will work only if we see development assistance in this light:  more effective in-country use of funds to help countries invest and compete; the multi-national pooling of budgets and the proper monitoring of their use to achieve the greatest cost effectiveness of new investment; untying aid so maximising its efficiency in diminishing poverty; and development funding conditional on pursuing agreed goals for social and economic development.

    Indeed our proposals are designed to create the best environment for private investment to take off and flourish by increasing funds for investment in health and education – not typically areas in which private capital flows but areas in which public investment is necessary to create an environment in which private investment can flourish.

    Our vision of the way forward — akin to Marshall’s challenge to rich and poor countries alike — is that by each meeting their obligations for change all countries can benefit.

    For the poorest countries: new responsibilities – to pursue transparent corruption free policies for stability and the attraction of private investment – and new opportunities – with access to increased trade and development supported by a transfer of resources from rich to poor for investment in health and education.

    For the richest countries: new responsibilities – to open our markets to reform our international institutions and to transfer resources – and yet new opportunities too – increased trade and a globalisation that works in the public interest.

    In future no country genuinely committed to pro-stability, pro-trade and pro-investment policies should be denied the chance of progress through the lack of basic investment in education, health and the basic infrastructure for economic development.

    And this is our answer to globalisation and to the critics of globalisation.

    Some critics say the issue is whether we should have globalisation or not.  In fact, the issue is whether we manage globalisation well or badly, fairly or unfairly.

    Globalisation can be for the people or against the people.  Poorly managed, globalisation can create a vicious circle of poverty, widening inequality and increasing resentment. Managed wisely it can lift millions out of deprivation and become the high road to a more just and inclusive global economy.

    Our answer to anti-globalisation campaigners – as I will demonstrate today – is that we shall not retreat from globalisation.

    Instead we will advance social justice on a global scale – and we will do so with greater global cooperation not less, and with stronger, not weaker, international institutions.

    We will best help the poor not by opting out or by cutting cooperation across the world, but by strengthening that cooperation, modernising our international rules and radically reforming the institutions of economic cooperation to meet the new challenges.

    Rules of the game for the global economy

    So what are the building blocks for putting this new alliance for prosperity in place?

    The first is the most basic: the pursuit by developing countries of corruption free, pro-stability policies building their capacity to compete and improving the terms on which they participate in the global economy.

    Round the world the importance of monetary regimes that ensure low inflation is now well understood. There is a greater consensus now than ever before that there is no long term trade off between inflation and growth or unemployment and that without control of inflation long term growth is impossible.

    But building from that basic understanding, we need to do more to ensure stability in a new world of ever more rapid financial flows.

    Developing countries who need capital most are at the same time the most vulnerable to the judgments of global financial markets.

    We know that capital is more likely to move to environments which are stable and least likely to stay in environments which are or become unstable.  And such flows today are quicker than ever they have been before.   So for every country, rich or poor, macroeconomic stability is not an option but an essential pre-condition of economic success.

    And I have become convinced that it is in the interests of stability – and of preventing crises in developing and emerging market countries – that we seek a new rules-based system — a reformed system of economic governance under which each country, rich and poor, adopts and operates agreed codes and standards for fiscal and monetary policy and for corporate governance.

    Clear transparent procedures for monetary and fiscal decisions include presenting a full factual picture of the national accounts, usable central bank reserves, foreign currency borrowings, and indicators of the health of the financial sectors. Such openness – and a willingness to be monitored for it – would improve macroeconomic stability, deter corruption, provide to markets the flow of specific country- by-country information necessary to engender greater investor confidence and reduce the likelihood of contagion. Operating such codes can also support countries along the way to liberalisation of their capital markets, offering them a route map to avoid destabilising and speculative inflows.

    Just as I believe that – over time – the implementation of codes and standards should be a condition for IMF and World Bank support, so too I believe that the international community should offer direct assistance, transitional help and – in some specific and difficult cases – compensation for the early implementation of such codes.

    And where countries do operate transparent and effective policies, the IMF’s contingent credit line facility should play a far more proactive role in helping member countries strengthen their financial position, guard against contagion and thus avoid crises.

    So these codes are not incidental to the financial architecture for the new global economy: they are the financial architecture for the new global economy, as we move from a global economy which has simply let crises happen to one where we work to diminish their likelihood.

    Our capacity to prevent crises is enhanced not just by the operation of codes and standards – and the offer of proportionate help to countries who adopt them – but also by rigorous surveillance, effective international early warning procedures and a more consistent engagement by the private sector.

    The new architecture must therefore involve an enhanced role and authority for the IMF, monitoring and reporting on the operation of codes and standards, and my proposal is that we make the IMF’s surveillance and monitoring functions independent of the inter-governmental decisions about financial support for crisis resolution.

    Alongside greater independence for the IMF, the capacity to prevent crises would be improved by expanding the work of the financial stability forum – which brings together the combined expertise of the IMF and key regulatory authorities – as an international early warning system to tackle national financial sector problems which have international repercussions.

    Where governments discharge their responsibilities for transparency and subject themselves to surveillance, then commensurately increased responsibilities by the private sector should include a willingness to participate in ongoing dialogue with their host countries to identify problems early and develop cooperative solutions for restoring stability.

    Where crises do occur, better crisis resolution procedures should involve private creditors, with improved arrangements for the use of standstills and more effective international bankruptcy procedures.

    Investment

    Open, transparent and accountable national policies, internationally monitored, are the foundation for monetary and fiscal stability. But to ensure the long term investment necessary for growth and development we must do far more.

    Rich and poor countries must work together to make investment itself more attractive to both domestic and foreign lenders and find better ways for public and private sectors to cooperate to raise investment levels.

    Experience from the 80s onwards has moved us on from the assumption that just by liberalising, deregulating, privatising and simply getting prices right, growth and employment would inevitably follow – a set of assumptions that has proved inadequate to meet the emerging challenges of globalisation in for example Asia where public investment has played a catalytic role in securing growth.

    In the new paradigm low inflation and fiscal stability are necessary but not sufficient conditions for securing employment and growth. The new paradigm recognises other drivers of growth in:

    • The pursuit of competition and not just privatisation,
    • The importance of public as well as private investment not least in education,
    • And the need for sound laws and proper financial supervision as well as liberalisation including a route map sequencing the liberalisation of capital markets.

    Indeed the country owned poverty reduction strategies  – imaginatively led by Horst Köhler at the IMF and Jim Wolfensohn at the World Bank – are now correctly focusing on creating the right domestic conditions for investment and have highlighted the contribution of public investment to development in infrastructure, sound laws of contract and legal processes that deter corruption, and an educated and healthy workforce.

    The challenge is immense:  while in the last decade foreign direct investment flows across national boundaries, including to and between developing countries, have increased fourfold – dwarfing aid – the poorest and least developed countries languish under a double handicap – insufficient foreign investment and inadequate domestically generated savings, with the result that investment per head is in Africa less than 50 dollars a year.

    I believe that in return for developing countries implementing codes and standards, there can and should be a new engagement by business as reliable and long term partners in economic development.

    Indeed where developing countries guarantee transparency and proper legal and financial systems that deter corruption, the developed world and business should work together to raise levels of investment.  One way forward is joint investment forums.  These councils would bring public and private sectors together, examine the current barriers to investment and discuss in the light of regional conditions how developing countries can secure higher levels of business investment and take the first steps in the international marketplace through intra-regional trade.

    And companies investing in developing countries should seek to answer one of the main fears of anti-globalisation campaigners: that where there is no cross border corporate accountability large companies can often seem more powerful than the elected governments of the countries in which they operate.  One way forward is adopting the OECD international standards of best practice for corporate responsibility and advancing both the global compact – introduced by Kofi Annan in 1999 – and the global reporting initiative under which multinationals assess their impact on developing countries.

    Trade

    The third building block is progress on trade.  We know that developing countries that are open and trade have seen faster growth rates than closed economies. Indeed it is a matter of record that in the last half century no country has managed to lift itself out of poverty without participating in the global economy.

    Full trade liberalisation could lift at least 300 million out of poverty by 2015. Even diminishing by 50 per cent protectionist tariffs in agriculture and in industrial goods and services would boost the worlds yearly income by nearly 400 billion, a boost to growth of 1.4 per cent. And while developing countries would gain the most – an estimated $150 billion a year – all countries and regions stand to benefit.

    That is why we strongly welcome the WTO agreement in Doha to launch a new trade round focused on development. And in the next phase we must take forward the agreements to open up trade in agriculture, build the capacity of developing countries to participate more effectively in the negotiations and open up greater access to medicines.

    Indeed all developed countries should offer access to all but military products from the least developed countries and by banning export credit guarantees for unproductive expenditure discourage and diminish the diversion to arms expenditure of resources needed for education and health.

    Financing development

    Progress on trade could be worth 150 billion dollars a year to the poorest countries, three times the development aid they receive today. So in addition to policies for stability and investment, new policies for open trade are fundamental building blocks of the new alliance for progress.

    But there cannot be a solution to the urgent problems of poverty the poorest countries face without a fourth reform: a substantial increase in development funds for investment in the very least developed countries.

    By insisting on dissociating aid from the award of contracts, gains to anti-poverty programmes can be as high as 25 per cent; more effective in-country use of aid can secure further resources for anti poverty work; and better collaboration among donors – pooling of budgets, monitoring of their use to achieve economies of scale and hence greater cost effectiveness and targeting of aid – can also maximise the efficiency of aid in diminishing poverty.

    Most of all we must move from providing short term aid just to compensate for poverty to a higher and more sustainable purpose, that of aid as long term investment to tackle the causes of poverty by promoting growth.

    The Zedillo Report, whose authors included several prominent Americans, costed meeting the Millennium Development Goals at a total of $50 billion a year, including $20 billion for anti-poverty programmes and nearly $10 billion for education. To meet this challenge my proposal involves the creation of a new international development trust fund which builds on the existing achievements of the World Bank and the IMF but goes further by seeking to address the sheer lack of investment from which the poorest countries suffer.

    From the fund, countries operating the poverty reduction strategies can draw investment support and it might be overseen by a new joint implementation committee of the World Bank, IMF and possibly member countries.  To minimise bureaucracy its resources distributed through the existing mechanisms used in the poverty reduction strategies.

    Because we must never return to the unsustainable burdens of debt of the 80s and 90s, the very poorest and most vulnerable countries should receive investment help for poverty reduction in the form primarily of grants to partner their soft IDA loans. All other low income countries should be offered interest free loans.  Some beneficiaries will be countries with millions of poor but today classified as middle income countries. Here assistance should be in the form of interest reduced loans, conditional upon implementing agreed poverty reduction strategies and reforms with a national monitoring process including civil society.

    In recent months proposals have been made for new and innovative ways to meet this funding gap – the Tobin Tax, arms tax, an airline fuel tax, IMF special drawing rights.  The European commission is examining the Tobin Tax and we are open to investigating other proposals in addition to our suggested development fund.

    But in today’s world every international initiative relies ultimately on approval by national governments and their peoples. And it comes down, in the end, to the duties national governments – especially the richest national governments – recognise and are prepared to discharge.

    There are many proposals that have been put forward.  We are open to a discussion of their effectiveness.  But if we are to move with the urgency that the scale of today’s suffering demands, we must each as national governments, be bold and recognize the duties of the richest parts of the developed world to the poorest and least developed parts of the same world.

    Through richer countries making a long term commitment of increased resources for development for, say, 30 years and with national governments offering a guarantee, either through callable reserves or appropriate collateral as security, it is possible to lever up these contributions to meet our target for extra funds now.

    In this way, each year 50 billions dollars more could be available to the poorest countries for investing in economic development.

    These proposals are challenging but they are achievable.

    The international community has already made a commitment to raising the level of overseas development assistance to 0.7 per cent of GDP.   And in Britain since 1997 we have increased the aid budget of the Department for International Development to 3.6 billion pounds – a 45 per cent increase by 2004.  And we are committed to making substantial additional progress.

    Today I am challenging each country to accept their responsibility to play their part and to go further than they have been prepared to go in the past. And it is right that there now be a full debate in the IMF, World Bank and the United Nations as we prepare for next spring’s Financing for Development Conference at Monterrey.

    Conclusion

    Marshall’s plan was investment for a purpose for a Europe rebuilt.  He summoned forth a new alliance for prosperity between rich and poor countries that, for his time, played a vital part in winning the peace.

    So too today – summoning up the spirit of Marshall – the new plan I suggest for developing countries is investment for a purpose, so that they can play their part in a peaceful world.

    By each meeting their obligations for change all can benefit.

    First, the obligations on developing countries: to end corruption, put in place stable economic policies, to invite investment, to meet their commitment to community ownership of their poverty reduction strategies and to ensure resources go to fighting poverty including education and health.

    Second, the obligations on business to engage with the development challenge and not to walk away, including participating in business investment forums and playing their part in preventing and resolving economic crises.

    Third, the obligations on the world community as a whole  – international institutions – to reform systems to ensure greater transparency and openness, to open up trade and the opportunities for faster development and to focus on priorities that meet the international development targets.

    Fourth, the obligations on the richest governments to the poorest of the world – our commitment to tackling the inequalities through a substantial and decisive transfer of resources; not aid that entrenches dependency but investment that empowers development – investment money that is, in the truest sense of the world, increasing the capacity of the poorest countries.

    A $50 billion a year investment fund that invites applications for health, education and anti poverty work will help build the capacity of the poorest countries to compete and engage. And is the high road to a more just and inclusive global economy.

    Our answer to anti-globalisation protestors is that, in the spirit of Marshall, we shall not retreat from globalisation.  Rather, we will advance social justice on a global scale, as today’s global alliance for peace is transformed into tomorrow’s global alliance for prosperity.

    Since September 11th, President Bush, your government, your armed forces and your people have led a great and global effort worthy of America’s history and its ideals.

    With steadfast resolve we work together to win the war against terrorism.  Now, in the great tradition of Truman, Marshall, and that earlier generation, let us also resolve to fight on after victory. Let us together seize our moment of opportunity to win the peace.

    In the words of Victor Hugo:

    “The future has many names
    For the weak it is unattainable
    For the fearful it is unknown
    For the bold it is opportunity”

    This can be our permanent memorial to those whose lives have been lost – that, in remembrance of them, we build the world anew.

    Let it be our generation that takes up the challenge and discharges our duty to remove the scar of poverty and hopelessness from the worlds soul.

    Let it be our generation that shows those who suffer in the bleakest places of the world that we can light a candle of hope which, radiating outwards, can cut through the darkness and shame of injustice and emblazen across the world a message of confidence and faith in the future.

  • HISTORIC PRESS RELEASE : HM Treasury acts against Money Laundering risks in Nauru [December 2001]

    HISTORIC PRESS RELEASE : HM Treasury acts against Money Laundering risks in Nauru [December 2001]

    The press release issued by HM Treasury on 14 December 2001.

    The Financial Action Task Force (FATF) has agreed that its members will implement countermeasures against Nauru to ensure that member countries? financial systems are protected from the risk of money laundering.

    HM Treasury has fully supported the work of the FATF in assessing the recent legislation passed by the Nauruan authorities on 28 August 2001, and concurs with the FATF’s assessment that the legislation leaves money laundering risks unaddressed.

    All UK businesses, within and beyond the financial sector, should therefore be aware that there is a significant risk that any transaction with Nauru may involve money laundering. Businesses and individuals in the UK should exercise caution when entering into business relations with Nauru domiciled persons and entities, to guard against the risk that they may be involved in money laundering.

    The UK will in the next week be issuing specific guidance to financial institutions through the Joint Money Laundering Steering Group. This guidance will warn UK financial institutions to take additional measures to ensure that transactions involving Nauru domiciled institutions and persons are fully scrutinised. Unless there is convincing evidence that the transaction is legitimate in nature, the presumption should be that the institution will make a suspicious transaction report to the National Criminal Intelligence Service (NCIS) on all Nauru connected transactions.

    Any other business who believes that they may be involved in a transaction that gives them cause for concern should similarly make a report to NCIS.

  • HISTORIC PRESS RELEASE : An Independent and Accountable FSA [December 2001]

    HISTORIC PRESS RELEASE : An Independent and Accountable FSA [December 2001]

    The press release issued by HM Treasury on 13 December 2001.

    Chancellor Gordon Brown today announced how he will ensure that the Financial Services Authority, now operating under its full powers, is properly accountable to the Government, to Parliament and to the wider public.

    Gordon Brown, said:

    “As the independent regulator of financial services, it is vital that the FSA is fully accountable in order to maintain confidence in financial services.  Setting up a single financial regulator has great advantages for business and for consumers. The FSA is independent of government, but it is important that the FSA and its Board can be called to account by both the Government and Parliament, and fully recognises the interests of all its stakeholders.

    I am therefore setting out today how I propose to use my legislative powers so that we can all be satisfied that the FSA is meeting its objectives and that the accountability process works as effectively as possible.

    Now that the FSA has assumed its full powers, I and the Chairman of the FSA have set out explicitly how the FSA will keep the Government informed of regulatory cases with serious and wider implications.”

    Sir Howard Davies, Chairman of the FSA, welcoming the letter from the Chancellor, said:

    “We attach great importance to being an open, transparent and accountable regulator. The Chancellor’s letter sets out clearly in public the respective roles and responsibilities of the FSA and the Government and how we will account for our actions to the public and Parliament.”

    The Government’s  powers within the Financial Services and Markets Act enable it to:

    • direct the FSA to cover particular issues in its public Annual Report, including its own performance;
    • establish whether the FSA is providing value for money;
    •  periodically review the secondary legislation which the FSA operates under and the boundaries of regulation;
    •  launch a statutory inquiry into possible serious regulatory failure.
  • HISTORIC PRESS RELEASE : Tackling Child Poverty – Press Conference given by the Chancellor of the Exchequer [December 2001]

    HISTORIC PRESS RELEASE : Tackling Child Poverty – Press Conference given by the Chancellor of the Exchequer [December 2001]

    The press release issued by HM Treasury on 13 December 2001.

    Speaking at a press conference today to launch ?Tackling Child Poverty: Giving Every Child the Best Possible Start in Life?, a new consultation document setting out the Government’s strategy to tackle child poverty, Chancellor of the Exchequer Gordon Brown, said:

    “Child poverty is a scar on Britain’s soul and an affront to our sense of decency as a nation.

    Halving child poverty in ten years and abolishing it in a generation – as Tony Blair has pledged – is not just a moral issue, but a litmus test for any political party and a challenge for every person in Britain.

    Every child deserves the best possible start in life.  For too long in the past families with children missed out, both financially and on growing up in a secure environment, with wider opportunities to develop.

    Tackling child poverty and disadvantage is not about providing either more money or better public services; it is about the necessity of both.  As Government supports parents, in turn it is right that parents fulfill their responsibilities too.  We cannot tackle poverty from the centre of Government alone, but must do so with our valued partners in the voluntary, community and faith sectors.  These sectors have a unique role in reaching local communities and needs on the ground.

    Today at Downing Street faith groups, community leaders and leading charities gathered to discuss how together we can win on the war against child poverty.

    This unique gathering has come together because they recognise – as I believe the country recognises – that together we must ensure that no child is left behind.

    Children are not only our single biggest investment in the future – but measures to tackle child poverty are the best anti-vandalism, anti-crime, anti-delinquency policies we can pursue.

    And if every child is to have the best start in life, we will need to do more to cut child poverty.

    Money matters, but the battle cannot be won by money alone.

    Today we are setting out measures to raise family incomes through our new tax credits with a commitment to improving public services and supporting parenting. We are demonstrating our determination to engage not just national Government, but local communities, the voluntary sector and faith groups who must play their part as well.

    Our measures start from our faith in the family and in responsibilities matched to rights as the bedrocks of a stable and healthy society.

    And at the heart of our approach is integrating payments for child support into a new and seamless system, where for the first time, all child support is paid to the mother, the best way, according to all the evidence, to tackle child poverty.

    For twenty years, the living standards of families with children fell behind the rest of the population. By the mid 1990s, the average income for households with children was around 30 per cent lower than for those without children.

    Our new Child Tax Credit will build on the tax cuts we have already delivered for families. And every family needs extra support at key times, in particular, after the birth of a child. So to help ease the pressure on new parents, our reforms – raising maternity pay matched to new paternity pay – are making it easier for mothers to make the choice to stay at home after their child is born – and for much longer than previously.

    Reform also means we should match new opportunities we offer families with the responsibilities we expect of them.

    All parents – must accept their responsibilities for their children.

    That obligation does not end if the relationship between the parents should come to an end. Parenthood is for life, and financial responsibility for children should and will continue until adulthood.

    Where parents live apart, the best arrangements for children are when both accept financial responsibility for their children. But if one parent fails to discharge his or her duties, we will not stand aside.

    We’ve doubled the number of absent fathers paying their maintenance in full since we came to power. Our latest reforms will do more to ensure all children receive at least some of the money collected on their behalf and we have strengthened the sanctions for those who fail to comply.

    Responsibility for children lies with parents, but government can encourage good parenting. Already we have provided £1 million to establish the National Family and Parenting Institute. We have funded Parentline, so parents can receive support from volunteers who are parents themselves.

    And we will be increasing help to the marriage and relationship support services.

    Vulnerable parents need special help. The children of teenage mothers are in turn more likely to be teenage mothers themselves. Their children are more likely to be underweight and to face worse outcomes in later life. We can and will break this cycle.

    As we have said, the Government believes that, if they cannot live in parental home, mothers under 18 should be accommodated in supported housing rather than housed alone and isolated with their babies.?

    Giving children a good start in life requires not only cash help and parental support but also good schools, good health services, and good public services.

    In addition, our new children’s fund is designed to support the innovative and make it commonplace, to turn local successes into country-wide triumphs. It is Government money to back local and volunteer initiatives to tackle child poverty with the emphasis on prevention, not simply coping with failure. Faith-based organizations are being encouraged to apply.

    So our approach combines rights and responsibilities to the best interests of children, a families first policy which provides support for all families; gives an extra helping hand when families need it most; and offers additional support for those who need it most; and involves all of us accepting our responsibilities – as parents, neighbours, citizens and community leaders.

    We ask the whole country to join the crusade to end child poverty and ensure all children have the best possible start in life.”

  • HISTORIC PRESS RELEASE : Tackling Child Poverty – Giving every child the best start in life [December 2001]

    HISTORIC PRESS RELEASE : Tackling Child Poverty – Giving every child the best start in life [December 2001]

    The press release issued by HM Treasury on 13 December 2001.

    The Government’s commitment to giving every child the best start in life, will require further action to improve both incomes and services, the Chancellor Gordon Brown stressed today as he launched a new strategy paper on tackling child poverty. At the same event, Education Secretary, Estelle Morris was able to announce a £10 million boost to the Sure Start programme to help make existing services more accessible to those that need them.

    They were speaking at a seminar at Number 11 Downing Street attended by Ministerial colleagues, religious leaders, key community groups and charitable organizations. Those also attending include Work and Pensions Secretary Alistair Darling, Home Office Minister John Denham, as well as the Archbishop of Canterbury, the Chief Rabbi and the Archbishop of Westminster.

    Gordon Brown said:

    “Every child and young person deserves the best possible start in life.  For too long in the past families with children missed out, both financially and on growing up in a secure environment, with wider opportunities to develop.  This Government is determined to put families first and to abolish the scourge of child poverty forever.

    Tackling child poverty and disadvantage is not about providing either more money or better public services; it is about the necessity of both.  As Government supports parents, in turn it is right that parents fulfil their responsibilities too.  We cannot tackle poverty from the centre of Government alone, but must do so with our valued partners in the voluntary, community and faith sectors.  These sectors have a unique role in reaching local communities and needs on the ground.  I am delighted to meet with our partners today and look forward to taking this partnership even further forward.  Together we can ensure that no child is left behind.”

    Estelle Morris, Secretary of State for Education and Skills said:

    “Tackling child poverty means working across Government to improve the services families depend on and increase the incomes they receive. We are determined to work in partnership with local communities, the statutory and voluntary sectors, to deliver the services that parents want and children need.

    Sure Start has an important role to play in improving the life chances of young children in disadvantaged areas. It makes a tremendous difference to young children’s learning and development and provides a flying start rather than leaving children trapped in social disadvantage.

    Building on the progress we have already made, I am delighted today to be able to announce a £10 million programme over the next two years to build the lessons of Sure Start into our core services to benefit more children.”

    The £10 million pilots will cover a range of activities to meet local needs including:

    • training up parents in the community to be part of home-visiting teams who provide support and advice to parents-to-be and new parents;
    • schemes to encourage people from disadvantaged areas to take up training and jobs in health and childcare to fill vacancies in their own communities; and
    • re-shaping of health services away from routine visiting to provide more coherent and responsive services for new mothers and mothers-to-be.

    These pilots will focus on developing a culture of prevention and adapting existing services to make them more accessible to the families who most need them. This £10 million is being made available for a number of pilots over the next two years out of the resources allocated to Sure Start as part of the last Spending Review.

    Today’s paper “Tackling child poverty: giving every child the best possible start in life” sets out the Government’s approach to tackling child poverty, with four key strands:

    • providing more support for family finances
    • giving priority to children’s services, especially health and education
    • offering support to parenting for life
    • pursuing a partnership with the voluntary and community sectors.

    The paper sets out the context for policy decisions to come in the Budget and Spending Review of 2002 and the years to follow.  It welcomes others’ views.

  • Dawn Primarolo – 2001 Speech to the British-Swiss Chamber of Commerce

    Dawn Primarolo – 2001 Speech to the British-Swiss Chamber of Commerce

    The speech made by Dawn Primarolo, the then Paymaster General, on 12 December 2001.

    Ladies and Gentlemen,

    I am delighted to be here in Zurich today and very pleased to have the opportunity to address such a distinguished audience. I know that the British-Swiss Chamber of Commerce plays an important role in developing the commercial relationships between our two countries And I applaud the success of your efforts not only in relation to trade but also in promoting friendship and understanding between the British and Swiss peoples. The value of that contribution is fully recognised by the British government and I am confident that your work will continue to strengthen the ties that we are here to celebrate.

    The United Kingdom and Switzerland have a particular affinity as world leaders in banking and international finance. We often find ourselves in competition in the market. But we share a common understanding of the elements that have to be in place to enable our banking and financial sector to develop and prosper.

    Both of our countries have enjoyed a long period of stability in our political structures. And that stability provides an essential foundation for economic prosperity and growth. It has reinforced the attractions of our two countries to international investors and has enabled us to offer a firm base for stable and successful banking businesses.

    As you know, I am here primarily on inter-governmental business and to meet the leaders of the Swiss banking community. And I am grateful to all those that I have met for making their time available to me.

    As the minister responsible for business taxation within Her Majesty’s Treasury, I want to take this opportunity to say a few opening words about our approach to business taxation and then to spend some time on what I see primarily as a banking industry issue.

    The year ahead looks set to be fuller than most of developments in the area of corporate taxation. On the European front, we have the promise of the Commission’s conference on company taxation; and a number of initiatives that they have recently announced in such areas as transfer pricing and cross border loss relief. The Commission has set out its priorities and there will be no shortage of issues to discuss under the Spanish and Danish presidencies. And, of course, my own work, as Chair of the Code of Conduct Group, will continue as we tie together the strands in the tax package for the end of 2002.

    In the UK, we see economic reform as the priority for the European Union and taxation as an issue under that umbrella. In Brussels, there is some danger that discussion on taxation takes on a life of its own. We need to guard against that and against the danger of introspection.

    In our domestic economy, we have continued to work towards a more neutral system of business taxation. But we have also seen it as a responsibility of government to intervene in areas where there has been significant market failure. And to take action where we believe there is an opportunity to bring about change that will help us achieve higher, sustainable levels of economic growth.

    For example, we are currently consulting with business on a range of improvements to our corporate tax system. Among them is a proposal to extend to large companies the system of tax credits for research and development that we successfully introduced for small and medium sized companies.

    Research and development, with its spill-over benefits into the wider economy, is essential to sustainable growth. And the Chancellor of the Exchequer, Gordon Brown, has already signalled our conviction that there should be wider support across the European Union, for a higher level of commitment to research and development spending to raise the quality and volume of the r&d carried out in Europe.

    There are many challenges ahead in the process of economic reform and changes in taxation can undoubtedly contribute to the better fulfilment of the objectives set at Stockholm and Lisbon.

    But let me return to the banking industry and, in particular, to the subject of private banking.

    I am particularly pleased to have had the opportunity yesterday and today, to meet representatives of the private banking businesses based in Switzerland and to enter into a dialogue with them.

    I have spent only 24 hours here but, with grateful thanks to my hosts, I already feel that I have a much better understanding of the private banking sector. And a better appreciation of the factors that contribute to a successful relationship between the banker and his client and, therefore, to a successful private banking business.

    It is not simply the efficiency and service levels of the bank itself or the returns on the funds invested. Both of these are important, but to be successful the private banker has to offer more than that.

    There has to be mutual trust. There has to be respect and confidence. And, from the banker, there has to be a sense of obligation – obligation that is more deeply rooted than the simple obligation of a deposit-taker to its depositors. It is these qualities that differentiate the private bank from the mass market provider.

    And underpinning all of this is reputation. Without reputation, at home and abroad, there is no prospect of building a successful private banking business.

    I want to stop with reputation for a moment. Politicians and private bankers. We both rely to an enormous extent on our reputations. In politics, a reputation can be lost irretrievably by a careless word or act, by an omission, by a failure to see that the world has moved on. And through the continual public gaze of media attention.

    Governments of every shade of opinion, around the world, and the individual politicians within them have become increasingly aware of the pressures of public interest and have had to respond to them. The media reflect the public desire to know and it is a brave or foolish politician who tries simply to put up barriers to it.

    Increasingly, we are pressed for greater transparency – in our lives and in our decision-making. And most of us would have to agree, that transparency is essential in a democratic society.

    But these are not pressures that are unique to politicians. I think that it would be fair to say that most of us in this room feel the demands for greater openness and more transparency in the different facets of our everyday lives.

    Within financial services, investors are looking for greater transparency and improved information when financial products are sold; and so are the regulators that serve them. And when it comes to fees, commissions and charges, investors and regulators are looking for that same openness and transparency. We can all point to situations where transparency has been lacking , investors misled and products mis-sold.

    Transparency has a cost. It has a cost for politicians as well as for bankers. But it is a cost that we have both to accept. Because without transparency in what we do and how we do it, without the ability to withstand scrutiny, there is no reputation. And without reputation, neither politician nor banker can stay in business for long.

    Coming out of September 11th, I think that all of us have had some re-assessments to make. We have had to look again at what is really important to us and what isn’t. Where our obligations lie and to whom. And above all, how we need to act to be worthy of our reputations. The last few months have been a time of action but they have also been a time for reflection.

    Terrorism is a serious crime. And there can have been few crimes more serious than those carried out in Washington and New York on September 11th.. We rightly take action to strengthen our hand against those within our societies that would seek to damage or destroy them and against those who provide the terrorists with the financial means to do so.

    But these are not the only threats that we face. And this is not the only kind of crime against which we need to strengthen our laws.

    It is easy to turn our backs on other forms of crime, particularly those forms of crime that are much less dramatic, involve no violence against the person and that apparently have no victims. But financial crime is crime none the less.

    When the crime is tax evasion, it shifts the burden from the evader to the honest citizen. And the victims are all of those – all of us who – pay more as a result, or who go without the services that additional tax revenues would have funded.

    I just want to pause here a moment. And to put down some points about taxation, tax competition and tax evasion. Because some of the things that I have read recently make me think there is scope for misunderstanding here in Switzerland and I don’t want there to be any misunderstanding.

    Bruno Spinner, the Swiss ambassador to London, recently summarised the EU and OECD action against harmful tax competition as “…high tax countries… resisting the outflows of capital to countries which impose only modest taxes, or none at all…”.

    I do not share his analysis.

    I have already said a few words about our approach to taxation in the United Kingdom and our views on taxation in the wider context of economic reform in Europe.

    There was a time when the UK taxed investment income at 98% in the hands of wealthy individuals. The highest marginal rate is now 40%. And the present government has provided many opportunities for tax-favoured investment to encourage savings and a strong and dynamic economy. We have also introduced major capital gains tax changes that give entrepreneurs and investors alike the potential to realise their gains at an effective tax rate of 10%. The UK is not a high-taxing country for individuals.

    Nor is it a high tax country for the corporate sector. We have brought down the headline rates of corporation tax to unprecedented low levels. And we are in the process, as I have explained, of simplifying and modernising the system to provide a more consistent and coherent framework. A system that will allow more structural flexibility to companies than they have ever enjoyed before.

    By global standards, the UK is an attractive place to invest. And we, as a government, are proud of our ability to attract, year in, year out, more inward direct investment than any other country in the world except the US.

    So let’s be clear. The harmful tax competition agenda, from a UK perspective, is not a protectionist agenda. It is aimed at levelling the playing field and opening up markets and opportunities to truly global competition.

    Like the Swiss government, we are committed to tax competition. To fair tax competition. And to the sovereignty of the state in tax matters.

    We respect the right – the absolute right – of sovereign states to tax their citizens as they wish. And we do not stand in their way.

    And we expect, in return, that other sovereign states will not stand in our way. Or prejudice our ability to tax our citizens, our residents, in accordance with the laws that our parliament has passed.

    Like the Swiss government, we have a democratic mandate and our taxation system derives its validity from that mandate. We tax our citizens, our residents, on their world-wide income at their marginal rate and give them credit for foreign taxes suffered. There is nothing radical or new in that approach. It is not unusual as a way of taxing individuals and we believe that it is fair.

    Within any society there are, of course, those who want to make sure that they pay as little as possible to the state in taxation. And while they stay within the law, that is their right.

    But there are unfortunately some who want to pay even less than that. And choosing not to report income is one way, albeit a rather crude way, that some of those individuals seek to side-step their obligation to pay tax.

    This is tax evasion. In the UK, as in many countries, it is a criminal offence. Those who evade tax take advantage of government spending on health or education, roads or railways, power or policing. But don’t want to pay towards it.

    Within the European Union, we have joined the fight against this kind of crime. Against tax evasion. We have agreed, without discrimination, to share information freely, openly and automatically between our revenue authorities about cross border flows of interest to those who are resident in our countries. Subject to all the stringent rules and safeguards that prevent the wider use of that information. And, in doing so, we have committed to making it more difficult for individuals who want to evade their responsibilities towards their neighbours and fellow citizens.

    We would like Switzerland to join us in that project.

    I spoke a few minutes ago about the need for relationships built on trust. On confidence. On a sense of obligation. To be successful in private banking.

    I also spoke about transparency and indeed the increasing demand for transparency from both the public and the regulators.

    And I spoke about reputation, which underpins everything else, whether you are a politician or a banker.

    Switzerland has enjoyed an enviable reputation for its banking business. And many Swiss banks have emerged to become banks of truly international standing.

    When I stand back and reflect on that reputation, I have no doubt as to its strength today. And no doubt about the quality of what has been built on it. Or how its strength is nurtured through bonds of trust, respect and confidence and through the sense of obligation that I referred to earlier.

    And I find it difficult to believe that a reputation and a business as strong as this can be balanced so precariously on the pin-point of banking secrecy.

    I think that Swiss banking is stronger and better than that. And I have become more convinced of that the more of its leaders I have met. And I hope that they will have the confidence to see their reputation burnished by a greater transparency rather than cloaked by an over-attachment to secrecy.

    In the UK, banking and financial services are among our most important industries. And we, like the Swiss, started off by being sceptical of a proposal that looked as if it would only damage those industries without achieving its objective. But we worked with the proposal and, with the increasing help and understanding of other member states, it was refashioned into something more logical and more effective. And something that we are confident will not damage the City even though there will be some additional costs.

    We concluded that we could and should take up the responsibility to join a project to help our neighbours. And ask others to work with us and to join the fight against tax evasion.

    If we had turned our back instead, we would surely have lost our reputation and, in time, we would have lost what had been built on top of it as well.

    These are uncertain times. The global economy has been strong but we have entered a period in which none of us can look to the future without some shadow of recent events passing across our minds.

    We have learned, or perhaps re-learned, the strength that can come from acting together. Nation with nation. Voluntarily. Sharing a common goal. Even where the threat is not, initially, a threat directed at us.

    The bond between the Swiss and the British people is strong. The bond between Swiss and British businesses is strong. And we can celebrate that. And if we value it as well, we can and must continue to work together towards common, achievable goals that will reinforce and strengthen our economic and cultural relations.

    Thank you.

  • HISTORIC PRESS RELEASE : Consumer and Industry to benefit from changes to Banking, Mortgage and General Insurance Regime [December 2001]

    HISTORIC PRESS RELEASE : Consumer and Industry to benefit from changes to Banking, Mortgage and General Insurance Regime [December 2001]

    The press release issued by HM Treasury on 12 December 2001.

    A better deal for consumers across a range of financial services together with a streamlining of regulation which will benefit business was announced today by Economic Secretary Ruth Kelly.

    She set out the good progress made by the banks in implementing the recommendations of DeAnne Julius’s Review Group aimed at improving services to bank customers. Ruth Kelly also announced that the FSA is to regulate mortgage advice, a move called for by the Julius Group, consumer groups and industry, and, in parallel, the sale of general insurance products. These measures will ensure that a coherent regulatory framework exists.

    The measures set out today will:

    • Benefit millions of consumers by regularising standards and providing safeguards and minimum standards of mortgage advice;
    • Benefit banking customers through easier account switching and clearer account information;
    • Streamline and simplify regulation for mortgage advice and general insurance advice;
    • Allow brokers to compete for insurance business in other EU countries.

    Ruth Kelly said:

    “Buying a mortgage is the biggest financial decision of most people’s lives, they need to get it right and high quality understandable advice is crucial. Regulation will ensure a high standard of advice is available across the board to the large number of people, 1.2 million in 2000, who take out mortgages every year. In the rare and unfortunate cases where things go wrong the Financial Ombudsman will be the single body for handling customer complaints.

    “DeAnne’s review highlighted areas where improvements should be made to benefit banking customers. There has been a very constructive response with the majority of the recommendations being accepted by industry. The measures being taken forward will benefit customers, for example through making account switching easier and stimulating competition in personal banking.

    “The Julius Review group argued that mortgage advice should be regulated, echoing the sentiments of many consumer groups and industry. We have listened to these views and after reviewing the policy believe regulation will bring benefits to both consumers and businesses.”

    DeAnne Julius commented:

    “I am delighted with the Government’s decision to regulate mortgage advice. This was supported unanimously by our Review Group, because we felt it would help both consumer and mortgage providers. I am also pleased that the banks have agreed to take on board the majority of our recommendations for changes in their self-regulatory codes. With the new cleaner process for code review I am hopeful that in due course those changes they have not yet accepted will also find favour.”

    Ruth Kelly added:

    “Many of the 12,500 UK mortgage brokers also sell general insurance. In order to maintain a consistent and streamlined approach, the sale of general insurance products will be regulated by the FSA. Brokers who deal in two or more lines of regulated business will deal with a single regulator, not several, and will be able to compete in European markets. Additionally the Government will look at insurance sold as part of a package with another product – for example, travel or extended warranty – to consider the implications of the new regime for them.”

    “Today’s measures will benefit industry by simplifying and streamlining regulation.  The watchword in developing the new frameworks will be proportionality.  We and the FSA will be working closely with the industry and others to design a regime that understands the market, and is targeted precisely at maximising benefit to the consumer, and not loading industry and ultimately the consumer with unnecessary costs.”

    “I am grateful to GISC and MCCB for all the hard work they have put in to raising standards in their respective industries. Today’s announcement is in no way a criticism of what both bodies have achieved. I hope that they will both be able to work closely with the FSA to ensure a seamless transition to the new regime.”

    The timing and details for the implementation of regulation will be discussed with industry. It is anticipated that regulation for both mortgage and the sale of general insurance products will come into force simultaneously, following consultation by the FSA.

  • HISTORIC PRESS RELEASE : IMF Report on UK Economic Performance [December 2001]

    HISTORIC PRESS RELEASE : IMF Report on UK Economic Performance [December 2001]

    The press release issued by HM Treasury on 11 December 2001.

    The “remarkable performance” of the UK economy “owes much to the government’s strong policy framework”, report the International Monetary Fund today. Concluding their recent examination of the UK economy, the IMF say that “the symmetric inflation targeting framework has enabled the Monetary Policy Committee (MPC) to respond promptly to demand shocks, including the recent global slowdown”, while “fiscal policy should continue to meet the high standards of prudence and predictability that have characterised it over the last few years.”

    Commenting on the projections in last month’s PBR, the IMF say that GDP growth at 2-2½% in 2002 “is only slightly above [the IMF’s] central forecast”.  Moreover, the “cyclically-adjusted overall deficits of about 1 percent of GDP over the medium term would not compromise the strong underlying fiscal position achieved in the late 1990s”.

    The IMF conclude that “the budget and pre-budget reports, as well as the frequent consultations between the government and the public, in many respects set an international standard of best practice,” and support “the strengthening of the UK’s anti-money laundering rules, which are considered, in many respects, an international model.”

    The IMF endorses many of the structural reforms the government has embarked on to raise growth in the UK, and describe the government’s strategy in this area as “appropriate”.  Overall they conclude that “the track record of sound policy design and implementation in recent years bodes well for continued success in a more uncertain world economy.”

    Commenting on the IMF’s statement, the Chancellor, Gordon Brown, said:

    “I welcome this confirmation from the IMF that our prudent approach to economic policy leaves us better placed to withstand the ups and downs of the world economy. According to the IMF, the UK will grow faster than any other G7 country this year.

    I also welcome the IMF’s support for the structural reform agenda we are pursuing to raise long term economic growth in the UK and improve productivity, which will mean rising living standards for all.  As the IMF say, this agenda ‘should continue to be pursued vigorously.”

  • Gordon Brown – 2001 Speech on Enterprise and the Regions

    Gordon Brown – 2001 Speech on Enterprise and the Regions

    The speech made by Gordon Brown, the then Chancellor of the Exchequer, in Manchester on 29 January 2001.

    Introduction

    It is a pleasure to be here in Manchester this morning.

    For two centuries Manchester and the North West have been a world wide centre for manufacturing strength. This region led in the 19th Century and now it can lead again.

    And let me say how pleased I am to be speaking here at UMIST. Founded early in the nineteenth century by the business community of Manchester, it enters the Twenty First Century a leading centre for scientific research, its links with business stronger than ever – promoting growth, jobs and opportunity for the North West region and beyond.

    Today I want to show how in the North West and the other regions of our country, the high ideals and public purpose contained in the economic goal of 1944 can be achieved.

    Full employment – defined as in 1944 as ‘high and stable levels of employment’ – was a reality for the country as a whole for twenty years after the Second World War.

    But not only did rising unemployment in the 1970’s and beyond undermine these goals but so too did persistently higher unemployment in our regions

    As recently as 1997, one in five working age households had no one in work in seven of our twelve regions and nations.

    Some believe that full employment can be achieved only by a return to macroeconomic fine tuning.

    Others believe that in the new more open economy governments cannot hope to meet the 1944 objectives.

    I reject both the dogma of insisting on old ways and the defeatism of abandoning the objectives. But to achieve full employment in all the regions is a large and ever present challenge and demands new approaches not the old ways.

    So since 1997 the new Government has been putting in place a new framework to deliver our growth and employment objectives.

    Last year I set down four objectives:

    – first: stability – a pro-active monetary policy and prudent fiscal policy to deliver the necessary platform of stability;

    – second: employability – a strengthening of the programme to move the unemployed from welfare to work;

    – third: productivity – a commitment to high quality long term investment in science and innovation, new technology and skills;

    – fourth: responsibility – avoiding short termism in pay and wage bargaining across the private and public sectors, and building a shared sense of national purpose.

    These conditions – requirements for stability, employability, productivity and responsibility – are and have always been the necessary conditions for full employment.

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

    But there is a fifth condition I wish to discuss in detail today – the need for regionally balanced growth, essential if there is to be opportunity for all in all regions.

    Now the first generation of regional and urban policies – starting in the thirties – amounted essentially to ambulance work – first aid measures, urgently needed assistance and relief in areas of high unemployment.

    The second generation of regional policies came in the sixties when then the emphasis was on large capital grants and tax incentives for regions anxious to encourage mobile capital into our regions as inward investment.

    Now we are entering a third generation of regional policies inaugurated by Stephen Byers, David Blunkett and John Prescott, where we concentrate on indigenous measures – strengthening, within the regions, the essential building blocks of self generating growth. And on tackling the imbalances that prevent economic strength:

    – first, bridging the investment and enterprise gap;

    – second, bridging the skills gap;

    – third, bridging the technology gap, including support for e-commerce;

    – fourth, bridging the employment gap.

    Indeed, as these challenges suggest, now, as the economy starts to strengthen, is the perfect time to think not in a short termist way about our economic future but to think and plan long term; and to bring together strategic plans for our future.

    And I want to suggest that with the creation of the new regional development agencies – for which I believe John Prescott deserves our congratulations – we are not only recognising the many regional centres in Britain today and giving them new strength and powers. But we are creating, at a regional level, the economic policy instruments of the future: the measures that will foster innovation, develop the skills for the twenty first century economy, build a strong enterprise culture open to all and help us lead in the digital revolution and ensure all of us benefit fully from our participation in Europe.

    But the emphasis is not simply on local needs but on local initiative. Our reforms show that we are entering an era in which national government, instead of directing, enables powerful regional and local initiatives to work, where Britain becomes as it should be – a Britain of nations and regions where there are many and not just one centre of initiative and energy for our country.

    With regional development agencies and the flexibilities we are offering them there is for the first time both a shared understanding of the challenges the region faces and a strategic means of meeting them.
    Investment and enterprise

    In our Pre Budget consultation we welcome further proposals for encouraging enterprise in high unemployment areas.

    The 2001 Budget – and our future plans will continue this Government’s policies to offer greater incentives to business, remove unacceptable barriers that prevent people with enterprise getting on and, from the classroom to the boardroom, widen and deepen the spirit of enterprise in Britain.

    The Government’s ambition is to make opportunity for all the foundation of a more dynamic enterprise economy, breaking free of the old dependency culture in high unemployment areas.

    In an enterprise Budget we will consider extending capital gains tax relief and the 10p rate.

    In an enterprise Budget we will consider extending our R and D tax credit by examining proposals to do so from the CBI, EEF and others interested in improving Britain’s R and D effort.

    In an enterprise Budget we will consult on new reliefs for corporation tax including for intellectual property.

    As we move to an enterprise Budget we will consult on capital gains tax relief for the sale of substantial shareholdings.

    As we move to an enterprise Budget we are considering improvements in our enterprise management incentive scheme, the share options we offer new and dynamic companies.

    As we move to an enterprise Budget we will consider new incentives for urban renewal and inner city development.

    And an enterprise Budget means measures to encourage an enterprise culture in high unemployment areas where the greatest need is not more benefit offices but more businesses as we move from a dependency culture based on entitlements to a dynamic business culture based on enterprise.

    Instead of acquiescing in the old giro culture – simply paying benefits to compensate people for their social exclusion – we must back success rather than accept failure. And to do that we must extend fiscal and other financial incentives that open up economic and business opportunity in high unemployment areas, and encourage and reward new enterprise.

    If we are to achieve higher start-up rates in high unemployment areas, economic stability is critically important to business confidence, as we found in the early nineties when the recession not only destroyed existing businesses but discouraged new ones.

    So in the Budget our aim is to create the stronger enterprise culture that America enjoys, reduce the costs of business failure and address the sharp regional and local divergences in small business creation.

    Behind the creation of regional development agencies is our view that the way forward is one of empowering local people with skills and confidence.

    Indeed, our old cities and estates should be seen as new markets with competitive advantages – their strategic locations, their often untapped retail markets, and the potential of their workforce.

    And so it is right to put in place the best possible incentive structure to stimulate business-led growth as well as much bigger flows of private investment.

    So, to meet the challenge of increasing private investment in high unemployment areas by one billion pounds, we will now consult before the Budget on targeted tax incentives in four areas – cuts in stamp duty, reduced business rates, changes in capital gains tax and a new community investment tax credit.

    But changing our culture to one that favours enterprise in every area needs not just incentives but a real shift in attitudes too. And that will come about quickest if it starts, not in the boardroom, but in our schools.

    I want every young person to hear about business and enterprise in school; every college student to be made aware of the opportunities in business; every teacher to be able to communicate the virtues and potential of business and enterprise.

    I want businessmen and women to visit our schools and talk to their enterprise classes; I want every student to have a quality experience of working in a local business before they leave school. I want management training scholarships to be available even in the poorest areas and I want every community to see business leaders as role models.

    Regional coordination and accountability

    But let me say something more on our proposals for regional co-ordination – which will form our next five years’ programme for economic growth in our country – and the central role we see for regional development agencies as the strategic leaders of economic policies in the regions – in employment, skills, innovation and regeneration.

    The New Deal has already brought into being new partnerships between companies, the world of education and training, and the employment service.

    Regional approaches to the delivery of the New Deal and to training will become ever more important.

    The enterprise centres mean companies, universities and government must work together.

    The regional approach to venture capital funds, coordinated by the regional development agencies and the small business service, again requires business and government to work in partnership.

    To benefit fully from the university for industry, companies, educational authorities, schools and colleges themselves will want to form new partnerships.

    And local government – casting aside any idea that it should look inwards – must, as it looks outwards, be involved in all these initiatives.

    And we are ensuring the resources and flexibilities that regional development agencies need, but in return we are demanding strenuous targets be met in skills, innovation, business creation, new technology and employment. This is the new regional policy – locally sensitive and locally delivered, local people meeting local needs through local agencies.

    At every regional level, businesses, local authorities and the world of education will want to work together on their bids for funds and resources, and at the same time to make their case not just in Britain but abroad.

    And in making this happen the new local and regional centres of initiative in this country will show that leadership in Britain can come from every regional capital as much as from London itself.

    But as we develop regional policies that are locally generated and managed there has to be local and regional accountability too.

    Scotland Wales and Northern Ireland moved from 1997 to elected bodies. The Manifesto on which this Government was elected set out the options for elected regional government in England where there is popular consent for it.

    As we expand regional institutions – regional government offices, regional development agencies – so too we must expand regional accountability.

    John Prescott and I believe that in the consideration of new and better regional systems of accountability we need a greater role for both the House of Commons and the regional chambers.

    I hope that the regional chambers established in every region will hold annual hearings to examine the RDAS”’ annual reports and review progress against their published strategies – and report back on their findings. We should ensure they have the resources to meet this duty.

    By extending the scope for region by region initiatives and by complimenting these with greater accountability at a regional level and through the select committee system in the Commons, we are improving our ability to ensure that regionally set objectives are met.

    Combined with our national economic policy measures for stability, productivity, skills and responsibility, the third generation regional policy that I am describing is in my view the route to full employment in each region, that is employment opportunity for each region’s citizens.

    More than that, these are the means by which Britain is becoming a Britain of regions and nations with a new dynamism and where for locally generated initiatives we learn anew from each other, and where our diversity can become a source not only of new energy but of national strength.

    So our new development agencies both make sense of regional sentiment and respond to the challenges of the next millennium.

    Regions building new strengths from the ground upwards.

    Regions not looking in on themselves but looking outwards to the challenges of the global economy.

    Regions in which we make the connections so that schools and colleges, companies and local authorities work in a coordinated way for the same objectives – addressing inequalities within our regions.

    Conclusion

    I believe what is happening in each region today is showing the growing vitality of a new Britain, where there are new local and regional centres of initiative leading Britain.

    We are moving away from the old Britain of subjects where people had to look upwards to a Whitehall bureaucracy for their solutions – to a Britain of citizens where region to region, locality to locality we are ourselves in charge and where it is up to us.

    And where as a result Britain becomes stronger as each nation and region learns from another.

    In so many areas of our national life individual regions are leading the way.

    And what a strong country we can be when we are enriched by the different cultures and centres of initiative which together make up Britain.

    We are indeed stronger together, weaker apart.

    So, this morning I have suggested how we can strengthen our regional and national economy.

    I have said we must rediscover the national purpose that allows us to break from the old conflicts which have divided us.

    I look forward to a Britain in which instead of public versus private, state versus market, management versus workers, we have public and private, government and markets, employers and managers and workforces working together for the high levels of growth and employment we need for long term prosperity.

    I have pointed the way to full employment in this region in our generation.

    It is a challenge for all of us, a challenge that together we can meet and surmount.