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  • Stephen Timms – 2000 Speech at the Joint Association of British Insurers and British Venture Capital

    Stephen Timms – 2000 Speech at the Joint Association of British Insurers and British Venture Capital

    The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 29 February 2000.

    Introduction

    Thank you for inviting me to speak, and for organising this conference, on what is an extremely important issue for our economy.

    Let me just first set this in the context of the government’s wider aims.

    My favourite way to explain what this Government is trying to do is that we are building a new Britain which will be modern and decent – fair and enterprising – both of those things at the same time.

    The first economic priority after the election was to achieve a new stability in the UK economy after decades of boom and bust. That has been achieved in a remarkable way, so our focus now is on locking in that hard won stability, and building on it for the future. It gives us the chance to express a new optimism about the future, and so the Chancellor set out at the Pre-Budget Report in November four new ambitions for Britain in the coming decade which encapsulate what we are trying to do:

    • That we should be closing the gap with our competitors on productivity after years of slipping behind;
    • That we should have a higher proportion of the workforce in employment than in the past, and keep it like that. Actually, we already have more people in work than ever in our history, but we want to achieve the highest proportion and on a durable basis;
    • That for the first time over half of our school leavers should go on to study for a degree;
    • That we should halve the number of children living in poverty, on the way to the Prime Minister’s target of eradicating poverty altogether within 20 years.

    The Chancellor this morning, speaking in my area in East London, set out more of his thinking along those lines as he prepares for the budget in three weeks time.

    Institutional investors have a key role to play in making all this happen, providing the finance so that our high-growth businesses can become world-class businesses.

    I want to speak briefly about the key building blocks we are putting in place, building on this new foundation of stability, to create a new culture of enterprise and entrepreneurship; where institutional investors can flourish and contribute – with private equity and in other ways – to the changes we are working to achieve.

    Competition

    The first building block is the most pro-competition policy in the world. Greater competition at home is the key to greater competitiveness abroad. So we are asking in every area what we can do to enhance competition and opportunity. We are building on the decision to create a new independent competition authority with our new Competition Act which contains new powers to prohibit anti-competitive practices.

    For cartels and anti-competitive behaviour, the Office of Fair Trading will be given new investigative resources and trust-busting weapons, including the power to impose fines of up to 30 per cent of turnover.

    For banking and financial services, the Financial Services Authority will now, for the first time, be required to facilitate competition – with a new scrutiny role for the competition authorities.

    For the regulatory system, the government will consider how to scrutinise regulatory bodies and review existing and proposed regulations to ensure that they are promoting – not impeding – new entrants and new investment, and the joint work by BVCA, ABI and NAPF will feed into this process.

    In sum, Britain is open to competition, and at the leading edge of change. And nothing should stand in the way of greater competition in every sector of every industry.

    A more favourable tax environment

    A higher degree of enterprise calls for higher levels of investment and entrepreneurship. So our second building block is the best tax environment for investors in start-ups and high tech businesses, with improved rewards from enterprise and wealth creation. On tax a great deal is being done:

    • On business tax, we have already cut small business tax from 23p to 20p and introduced a new starting rate of tax for small companies of 10p in the pound. Every company making profits of up to 50,000 pounds will benefit.
    • Corporation tax has been cut from 33 to 30 per cent. To encourage and reward new business investment, we have cut the long-term rate of capital gains tax from 40p to 10p. We have proposed a cut in the taper so that those investing for five years will pay only 10p and for three years only 22p. Final decisions – following our public consultation – will be announced in the Budget.
    • A new R&D tax credit will, from this April, also mean that nearly a quarter of new investment in small and medium-sized business research and development is under-written even before a penny profit is made.
    • The Budget will introduce a new tax incentive to promote corporate venturing too. Large companies investing in growing companies for a specified period will receive a tax relief of 20 per cent, underwriting one fifth of their investment. This 100 million pounds incentive can bring Britain additional investment of 500 million pounds every year.
    • We need to encourage those who already have a successful track record to play a key role in building up small high-risk companies. We recognise the significant role stock-options have to play here and we are currently looking at the role of employer NICs charges which we know is causing concern particularly in the entrepreneurial community.
    • We are introducing a new targeted tax cut for people with skills and talent who are prepared to move from safe, secure jobs to risk time, effort and savings to create wealth in a more challenging environment. From next year, a third approved option scheme, the Enterprise Management Incentive, will enable growing enterprises to offer their key employees tax-advantaged options over shares up to £100,000.

    That measure reflects our recognition that nearly a quarter of all UK business failures are thought to be directly attributable to poor management practice. For Britain to succeed in the knowledge driven economy we need to raise our game. We want to take steps to ensure that our smaller firms can recruit and nurture the best talent, rewarding the real risk takers who are creating wealth and jobs.

    Venture Capital

    Turning to private equity and venture capital – the particular interest of this conference – we want new encouragement from the venture capital industry and from institutional investors for investment in start up and early stage ventures. The problem here is not so much access to finance but finance on the right terms.

    We have already the best developed venture capital market in the Europe, and we are the focal point for US investors looking for access to Europe’s growth companies.

    Our venture-backed growth companies are proven job-creators. Between 1993 and 1997, employment in VC-backed companies rose by 24 per cent compared with one per cent for the economy as a whole.

    BVCA’s own survey of the economic impact of venture capital showed that VC-backed companies now account for 2 million jobs in the UK, or 10 per cent of the private sector workforce.

    Venture-backed growth companies are also proven sound investments, as the record of overseas investment demonstrates. The last speaker (Anne Glover) also showed that returns to early-stage investments are increasing.

    In 1998, overseas sources provide three times as much finance for VC-backed companies as UK sources. Overseas pension funds are now the largest single source of funding for our VC-backed firms, and overseas banks are the second largest source. I was in Cambridge a few weeks ago and the venture capital specialists I met there made the point that there was a very high level of interest from elsewhere in Europe in venture investment in start up firms there.

    UK pension funds invest less than one percent of their money in venture capital. In the US, the comparable figure is closer to six per cent. And in 1998, UK insurance companies represented only 3 per cent – £152 million – of money raised by the UK venture capital industry.

    We cannot – neither would we want to – make UK insurance funds invest more, but I would encourage them to look very carefully at all their options and make sure they are alive to the opportunities around.

    Last year, following a speech by the Prime Minister, three leading consulting actuaries and benefits consultants (Bacon and Woodrow, William M Mercer and Watson Wyatt Partners) welcomed the Government’s call for a more enterprising approach to the investment of institutional assets. They considered that the time had come for some institutional investors to put more emphasis on other opportunities, particularly unquoted securities. We will shortly be discussing with the actuaries concerned what the response has been.

    To help institutional investors take the leap to invest in early-stage venture capital, we are taking forward a UK High-Technology Fund and nine Regional Venture Capital Funds to invest in early-stage high growth businesses which have historically found it difficult to raise finance. The funds will be run by experienced fund managers and will complement existing market provision, using public resources in partnership with private sector funds to address recognised gaps in the market. And all the funds will invest on a wholly commercial basis, expecting robust commercial returns.

    Making Britain the knowledge capital of the world

    The third building block for our enterprise Britain open to all is to make Britain the knowledge capital of the world.

    Knowledge is the key to future business success. Our future competitiveness and prosperity will be directly related to our creativity, our imagination and our knowledge base. That puts a great premium on education and skills. I have visited a number of our universities in recent weeks ­ Cambridge, Oxford, Warwick, Newcastle, Durham, Sheffield ­ to have a look at what they are doing to commercialise the superb research which is being undertaken by them and I have been heartened by what I have seen.

    That premium on education and skills in the modern economy is exactly why we are pushing through huge educational reform, investing an extra 19 billion pounds in education – so that everyone has the opportunity to master the skills and technologies of the new information age.

    In 1997, barely one in ten schools was connected to the Internet. Now, two thirds are – the most in any G7 country. The number of primary schools connected has gone up four fold in the last year. By 2002, every school will be connected.

    And this year, we are working to raise education levels amongst adults: a whole network of adult learning centres is being created; incentives are being provided to upgrade skills; and a new University for Industry which uses internet and digital TV technology will be bringing education into the home and workplace.

    These reforms will help in the next stage of the technological revolution which we are determined to lead.

    Our target is that within three years we want to become the world’s best environment for e-commerce. This is a huge challenge for everyone: Government needs to put in place the right framework and lead by example; individuals need to get skilled; and business needs to be confident and sufficiently ambitious to grasp the new opportunities.

    Conclusion

    There is a great deal at stake in getting all of this right. But we are optimistic.

    We have started with a foundation of a new stability which we are determined to lock in. The building blocks we are putting in place now for an enterprise Britain open for all – in competition, in investment and enterprise and in the knowledge economy – those building blocks will help British investors and entrepreneurs make the most of the challenges ahead.

    Thank you for the contribution you are making, and let’s work together to make this a success for all our people.

  • HISTORIC PRESS RELEASE : IMF applauds UK´s “Impressive” Economic Performance [March 2000]

    HISTORIC PRESS RELEASE : IMF applauds UK´s “Impressive” Economic Performance [March 2000]

    The press release issued by HM Treasury on 3 March 2000.

    “The performance of the UK economy continues to be impressive” and macroeconomic prospects “remain good” according to the latest assessment by experts from the International Monetary Fund.

    At a discussion in Washington on 1 March, the IMF’s Board of Directors concluded that the Government was on course to deliver its central economic objective of high and stable levels of growth and employment. The IMF assessment says that “real growth has been strong…and both unemployment and inflation have declined steadily”.

    The Directors’ assessment was that “the authorities’ policy frameworks and their track record of skilful policy management would be conducive to a continuation of sustained growth and low inflation”

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

    “I welcome the IMF’s report on the UK economy. It clearly supports the Government’s new framework for economic policy, and our prudent and cautious approach to managing the public finances, and the efforts we are making to promote enterprise and fairness in this country.”

    The UK has been championing transparency and openness in the IMF’s scrutiny of countries’ economic policies and performance. This transparency is a key element in avoiding future international crises. Today’s publication marks a further step forward by the UK. We are publishing for the first time the IMF’s report on the UK in full, along with the record of the IMF Board discussion of the report, and the UK’s statement in response to the report. The Chancellor welcomed these new publications, saying;

    “The publication of the IMF’s report on the UK economy clearly demonstrates our commitment to open up the IMF’s scrutiny process. Today marks an important step forward by the UK in economic policy making, by making available clear independent information on policy that is an essential part of the new international financial architecture.”

    Other points the IMF Directors have made include:

    • praise for the “effectiveness of the inflation targeting framework in the United Kingdom”, and in particular “the forward-looking, transparent and pre-emptive approach.” They added that “the transparency of the UK monetary framework is already among the highest internationally”.
    • a welcome for “the efficiency gains and improved public resource allocation arising from the strengthened fiscal framework”.
    • They “praised the authorities for focussing long term policies toward achieving greater equity and strengthening productivity.”
    • praise for the Government’s policies to move people off welfare and into work, and to make work pay. They note the Government’s welfare and labour market reforms “were aimed at strengthening incentives to work, particularly among jobless households.”
  • Gordon Brown – 2000 Pre-Budget Speech in Sunderland

    Gordon Brown – 2000 Pre-Budget Speech in Sunderland

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

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

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

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

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

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

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

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

    Creating the best environment for new business

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

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

    But we want to do better.

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

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

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

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

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

    First, stability

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

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

    So our first priority is stability and steady growth.

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

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

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

    Second, competition

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

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

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

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

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

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

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

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

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

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

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

    Third, tax and encouraging e-commerce

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Fifth, special measures in areas of need.

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

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

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

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

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

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

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

    This will include considering:

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

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

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

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

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

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

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

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

    Conclusion

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

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

  • HISTORIC PRESS RELEASE : Leading in the Small Business Revolution [March 2000]

    HISTORIC PRESS RELEASE : Leading in the Small Business Revolution [March 2000]

    The press release issued by HM Treasury on 6 March 2000.

    Proposals to revolutionise Government services for small business through use of the Internet were set out today by the Chancellor Gordon Brown.

    The Chancellor was in Sunderland talking to local business people on the second leg of his Pre-Budget tour. He was accompanied by David Irwin, Head of the Small Business Service, in his first day in post and Lord Trotman, the former Chairman and Chief Executive of the Ford Motor Company, who has been reviewing the small business measures already introduced.

    The Chancellor said that he was determined that:

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

    As a pledge to delivering these aims the Chancellor has already allocated £10 million to the Small Business Service from the Invest to Save Budget to develop a user-friendly electronic gateway between business and government.

    To further help small business, the Chancellor said he was considering two bids for funds from the Capital Modernisation Fund. These projects are:

    • for the Small Business Service to provide information and advice via the Internet and through a call centre. It will create a cutting edge service to business through link-ups the speed of service; and
    • for the Inland Revenue/Customs & Excise to create the ‘e-tax adviser.’ An electronic gateway would allow businesses to register as a company with Inland Revenue and Customs and Excise and register for VAT. It will be easier for business to find and follow regulations, provide a two-way service so business can access data as well as submitting forms and the service will be available anytime and anywhere.

    The Treasury is now working with these Departments on the details of their bids to ensure the most effective service will be provided to small businesses.

  • Stephen Timms – 2000 Speech at First Tuesday

    Stephen Timms – 2000 Speech at First Tuesday

    The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 7 March 2000.

    Introduction

    Thank you for inviting me to join you this evening.

    Let me just say at the outset that I’m excited about First Tuesday. I was in Silicon Valley last September and visited the MIT/Stanford Venture Lab which is also a public forum where entrepreneurs, managers and investors come to swap ideas and learn from each other. I impressed upon them on that occasion the opportunities for investment in the UK today, but the creative energy in that forum was unmistakable and I asked my officials what was happening here in the UK. They told me: First Tuesday. So I am delighted finally to be here.

    Just yesterday I visited Cambridge University Entrepreneurs, run by students, which has just announced the winners of its business plan competition. They had four times as many entries as they allowed for. The winners have already had individual mentoring from top industry figures, and now they are going to receive start up funding. There is a real sea change with a new enthusiasm for entrepreneurship, and tonight, I want to talk about our hopes for the knowledge economy. But first, let me put that in the context of our wider aims.

    A good way to explain what this Government is trying to do is that we want to build a new Britain which will be modern and decent – both of those things at the same time. A dynamic and enterprising economy, but one where every person has the chance to play their full part and nobody is left out.

    The first economic priority after the election was to achieve stability in the UK economy after decades of boom and bust. That has been achieved in a remarkable way, so our focus now is on locking in that hard won stability, and building on it for the future. New stability gives us the chance to express a new optimism about our future, and so Gordon Brown set out at the Pre-Budget Report in November four new ambitions for Britain in this coming decade which encapsulate our commitment to a modern and decent Britain:

    1. That we should be closing the gap with our competitors on productivity after years of slipping behind;

    2. That we should have a higher proportion of the workforce in employment, and keep it like that. Actually, we already have more people in work than ever in our history, but we want to achieve the highest proportion and do so on a durable basis;

    3. That for the first time over half of our school leavers should go on to study for a degree; and

    4. That we should halve the number of children living in poverty, on the way to the Prime Minister’s target of eradicating child poverty altogether within 20 years.

    Four ambitions for a modern and decent Britain. And, as the Chancellor spellt out in his speech about the Internet a couple of weeks ago, this industry has a vital role to play.

    Some say we have become obsessed with the knowledge economy and the Internet. But the truth is that immense strategic opportunities lie ahead of us in Britain. For example, we are leading the mobile Internet revolution. We are at the forefront of 3rd Generation Wireless development, as the current auction is demonstrating. It would be utter folly to let these opportunities pass us by and we are not going to do that.

    So this year we are focusing on putting in place three building blocks to create the most competitive, enterprising and fair knowledge economy in the world.

    Competition

    The first building block is the most pro-competition policy in the world because that is the sharpest spur to innovation, efficiency and improvement. We are reviewing every barrier to competition in the emerging e-commerce market and seeking to remove them:

    We are building on the decision to create a new independent competition authority with the Competition Act which came into force last week with its new powers to prohibit anti-competitive practices;

    For banking and financial services, the Financial Services Authority will now, for the first time, be required to facilitate competition – with a new scrutiny role for the competition authorities;

    And for the telecommunications industry, we are squarely behind OFTEL in its promotion of competition, to ensure the price of telephone calls is not a barrier to greater Internet use or to the future growth of UK e-commerce. Last month the Chancellor challenged the industry to get the cost of using the net down to US levels by end-2002. It is good to see the industry already taking up that challenge, in the recent announcements by Alta Vista and NTL.

    Finally, we are promoting a competitive environment for broadband access. BT is rolling out ADSL from the Spring, and OFTEL is ensuring that other operators can provide their own broadband services over BT’s local loop by July 2001 at the latest. In 1987, working for a start up company, I wrote a book about commercial broadband applications and its great to see these things starting to happen.
    Finally, we are looking to roll out rapidly fixed wireless technology, with the first licence available this summer.

    A more favourable tax environment

    For a higher degree of enterprise we need higher levels of investment and entrepreneurship. So our second building block is the best tax environment for investors in start-ups and high tech businesses, with improved rewards from enterprise and wealth creation.

    Corporation tax has been cut from 33 to 30 per cent. And to encourage and reward new business investment, we have cut the long-term rate of capital gains tax from 40p to 10p. We have proposed a cut in the taper so that those investing for five years will pay only 10p and for three years only 22p. Final decisions will be announced in the Budget in two weeks time;

    For the people with the skills and talent who are prepared to move from safe jobs to risk time, effort and savings to create wealth in a more challenging environment, we are also introducing a new targeted tax cut from next year. The Enterprise Management Incentive will enable growing enterprises to offer their key employees tax-advantaged options over shares up to £100,000. I know a number of start-ups have been thinking about using this scheme and I would encourage others to do so;

    We also recognise the significant role stock-options have to play here and we are currently looking at the role of employer NICs charges which we know is causing concern particularly in the entrepreneurial community.

    We want new encouragement for the venture capital industry and especially for the start up and early stage ventures, where equity is more appropriate than bank loans, but where there is insufficient encouragement to invest. Our new network of nine Government-backed regional venture capital funds, and our UK High Technology Fund which is a fund-of-funds, will both help early stage high-technology businesses.

    Making Britain the knowledge capital of the world

    The third building block for our knowledge economy open to all is to make Britain the knowledge capital of the world.

    Knowledge is the key to future business success and productivity. That puts a great premium on education and skills. I have visited a number of our universities in recent weeks – Cambridge, Oxford, Warwick, Newcastle, Durham, Sheffield – to have a look at what they are doing to commercialise the superb research which is being undertaken by them and I have been heartened by what I have seen.

    That premium on education and skills in the knowledge economy is exactly why we are pushing through huge educational reform, investing an extra £19 billion in education – so that everyone from our school children to the unemployed and low paid have the opportunity to master the skills and technologies of the new information age.

    That way we can make sure the opportunities of the new technologies are open to all, and that Britain has the size and sophistication of markets – and the quality of skills base – needed to succeed.

    Conclusion

    Our target is that within three years we want to become the world’s best environment for e-commerce. This is a huge challenge for everyone – government, business and individuals. But we are optimistic.

    We have started with a foundation of a new stability which we are determined to lock in. The building blocks we are putting in place now for a knowledge economy open for all – in competition, in investment and enterprise and in skills – those are the building blocks to help us make the most of the challenges ahead.

    Thank you for the contribution you are making and good luck for the future. Let’s work together to make this a success for all our people.

  • HISTORIC PRESS RELEASE : Lord Grabiner´s report on the informal economy [March 2000]

    HISTORIC PRESS RELEASE : Lord Grabiner´s report on the informal economy [March 2000]

    The press release issued by HM Treasury on 9 March 2000.

    New measures to help people move from the hidden economy into legitimate work – and tough new powers to detect and punish offenders who refuse to do so – are the main recommendations of Lord Grabiner QC’s report on the informal economy published today.

    The report suggests that every year billions of pounds have been lost to the informal economy. The report estimates that 120,000 are working while ‘signing on’ at a cost of nearly half a billion pounds to the taxpayer.

    Chancellor Gordon Brown welcomed the report saying:

    “Lord Grabiner’s report suggests that for years billions of pounds have been lost to the informal economy every year, leaving honest, hard working taxpayers, who play by the rules, footing the bill for those who either don’t pay the taxes they owe or claim benefit while they are working.

    “His clear and comprehensive strategy, based on opportunities tied to new obligations is designed to tackle the informal economy with a package of new rights and new responsibilities. It proposes incentives to encourage people into legitimate work – and tough new penalties for those who fail to do so and continue to defraud the rest of us.

    “The government is delivering more opportunities than ever before to work. Vacancies are at record levels and step by step we are removing the barriers to employment. But just as there are more opportunities, so too we believe new obligations.

    “Defrauding the benefit system, means defrauding the poor and preventing us getting the resources to those in need. We would be failing in our obligation to those who need the benefits system if we allowed people to defraud it.

    “I welcome Lord Grabiner’s report and in the Budget will announce in detail how we will implement his recommendations.”

    The report, “The Informal Economy”, proposes new measures to tackle the hidden economy whilst at the same time making clear that some people get trapped in the informal economy because they are not aware of the legitimate opportunities that are available.

    Lord Grabiner concludes that the Government should introduce new ways to tackle for those who persist in the hidden economy: including:

    • new legislation to introduce a new statutory offence of fraudulently evading income tax, to be tried in the magistrates’ court;
    • subjecting people, suspected of working while signing on, to additional requirements by requiring them to sign on more frequently and at unpredictable times;
    • as in the USA, a ‘two strikes and you are out’ approach – for the first time, removing people’s right to claim benefit for a specified time if they have been convicted twice; and
    • giving investigators the power to trace suspects by making routine ‘reverse searches’ of the telephone directory.

    Among his other 17 recommendations, Lord Grabiner proposes incentives to encourage people into legitimate work including recommendations to:

    •  set up an anonymous, confidential telephone line to advise those in the hidden economy about how they can put their affairs in order, and how the tax and benefit rules apply to them;
    • build on the help that is given to people who start out in self-employment and extend recent changes to make it easier for people claiming means-tested benefits to leave benefit and take up legitimate jobs; and
    • launch a new advertising drive to publicise the incentives available for people to join the legitimate economy, including the Working Families Tax Credit, and the punishment they will face if they stay in the informal economy.
  • HISTORIC PRESS RELEASE : Stephen Timms opens first Annual Westminster Ethnic Minority Business Exhibition [March 2000]

    HISTORIC PRESS RELEASE : Stephen Timms opens first Annual Westminster Ethnic Minority Business Exhibition [March 2000]

    The press release issued by HM Treasury on 8 March 2000.

    Financial Secretary to the Treasury Stephen Timms today opened Westminster’s first annual ethnic minority business exhibition.

    Mr Timms was visiting the Exhibition in London as part of pre-budget tour being carried out by Gordon Brown and his Treasury Ministers to take advice on the shape of the Government’s employment and enterprise initiatives for the years to come.

    Speaking at the Exhibition Mr Timms said:

    “We want to see not only the work ethic reinvigorated in every community of Britain but a dynamic business culture which encourages enterprise open to all. That is the message we want to spread – enterprise expanded to people and places too often forgotten in the past.

    “We know that more than one third of all unemployed people in London come from ethnic minorities. But we also know ethnic minority businesses already play a leading role in everyday business life across the country. Businesses from the ethnic minority communities contribute well over £8 billion each and every year to the British economy.

    “I have seen in other parts of London and across the country during my regional tours the contribution ethnic minority businesses are making. We know, for example, that the rate of business start-ups per head is higher in the ethnic minority communities than in the wider community. With more people in work today then ever before we now have a great opportunity to make sure the benefits of enterprise and rising prosperity and spread wider. That’s why this business exhibition is so important for Westminster.”

  • HISTORIC PRESS RELEASE : Andrew Smith sets out benefits of Public Private Partnerships – Treasury paper projects extra £20 billion investment in public services [March 2000]

    HISTORIC PRESS RELEASE : Andrew Smith sets out benefits of Public Private Partnerships – Treasury paper projects extra £20 billion investment in public services [March 2000]

    The press release issued by HM Treasury on 15 March 2000.

    A new Treasury paper published today by Chief Secretary Andrew Smith projects a £20 billion expansion of the Government’s Public Private Partnership (PPP) programme over the next three years.

    Mr Smith was launching “Public Private Partnerships : The Government’s Approach” – the Government’s strategy to increase investment in the public sector to provide better services and better value for money – during a visit to Lewisham Docklands Light Railway station in South East London.

    The paper sets out how the Government plans an expanded PPP programme which will add to the £12 billion deals already signed or re-structured deals by this Government, by securing:

    £8 billion to modernise the tube;
    an estimated £1 billion to modernise UK’s Air traffic control infrastructure;
    more than 60 new education projects nationally;
    25 new health projects nationally; and
    12 other new transport projects nationally;

    The document “Public Private Partnerships : The Government’s Approach” also sets out for the first time the Government’s objectives for PPPs and the underlying principles which are central to the way in which Government goes about developing new partnerships with the private sector.

    It shows how the Government has modernised the PPP system by eliminating the obstacles it inherited to deliver an expanded programme, better value for money for the taxpayer and a better deal for staff in the public sector.

    Mr Smith said that this capital investment would focus on the Government’s priority areas of health, education and transport and hailed it as a cornerstone of the Government’s modernisation programme.

    He said:

    “Public private partnerships are making a major contribution to the renewal and modernisation of Britain’s public services with better schools and hospitals, and huge investment in public transport.

    “Between 1992 and 1997 no PFI hospital deals were signed. Yet in this Government’s first two years we have signed 35 major hospital projects and, including deals in the pipeline there are a total of 100 health projects in the programme. This represents the largest investment in new hospital facilities since the NHS was established.

    “On average, privately financed projects are delivering savings of 17 per cent compared to public sector alternatives – this represents savings of £2 billion on a £12 billion programme.

    “That is why we want to build on our achievements to date. Over the next three years we expect to sign contracts for projects with an estimated capital value of a further £20 billion. That will bring to £32 billion the level of capital investment this Government has earmarked for PPPs since May 1997.

    “In launching this document today I am looking to the future and outlining a prospectus for partnerships. This will be seen as a blueprint to the opportunities and challenges associated with different types of partnership arrangements. Above all it demonstrates how PPPs will deliver real improvements to public services, for the benefit of customers, local communities and the country as a whole.”

    Deputy Prime Minister John Prescott said :

    “PPPs can harness the best of the private and the public sectors to modernise Britain – and ensure real improvements to our public services and infrastructure. This has been clear to me for many years.

    “With PPPs, we can build new hospitals and new schools and improve our transport system, ensuring the private sector achieves best value for the taxpayer. At the same time, they can safeguard the public interest and protect staff – providing better quality services and giving modern Britain the infrastructure it needs.”

    Public private partnerships help deliver the quality public services. By harnessing the disciplines, incentives, skills and expertise which private sector firms have developed in the course of their normal everyday business, they allow Government to deliver more services, to a higher standard, and more quickly than would be possible with the public sector alone.

  • HISTORIC PRESS RELEASE : Andrew Smith and Ian McCartney launch blueprint for IT Public Private Partnership Contracts [March 2000]

    HISTORIC PRESS RELEASE : Andrew Smith and Ian McCartney launch blueprint for IT Public Private Partnership Contracts [March 2000]

    The press release issued by HM Treasury on 28 March 2000.

    A platform for spreading best practice amongst Public Private Partnership (PPP) practitioners involved in drawing up IT contracts was announced today by Chief Secretary Andrew Smith and Cabinet Office Minister Ian McCartney.

    This platform takes the form of new guidance for IT PPP deals which builds on the development and success of previous Treasury Taskforce standard contract guidance across all public services. The guidance is expected to further improve deal flow, reduce the costs of tendering and avoid the pitfalls of the past when poorly drafted contracts led to the demise of some IT projects. The guidance sets out recommendations not only for contract drafting, but also for improving the project management of IT PPP deals.

    Launching the guidance, Andrew Smith said:

    “This is an important step forward in ensuring that project and risk management for IT contracts is undertaken rigorously. The document emphasises the need for strong risk handling strategies and formalises the pre-contract risk review process which has been carried out to date by the Treasury Taskforce on significant projects.

    “I expect the adoption of the standard approach set out in the guidance to produce substantial savings and result in greater value for money for the public sector.”

    The publication of this specific guidance document for the IT Public Private Partnership sector is just one of the initiatives that the Government is currently undertaking to improve the strength of Government IT projects generally.

    Ian McCartney, Minister of State at the Cabinet Office who is sponsor for the Government’s current review of the handling of major IT projects, said of the guidance:

    “This Government is determined that our IT systems deliver first-class services and good value for money. Suppliers share responsibility for ensuring that projects deliver the promised service benefits and come in on time. A successful procurement process is fundamental to the success of these complex but vital projects. The guidance we are announcing today is just one part of a comprehensive package of measures to ensure that we implement systems successfully and maximise the benefits of IT to the public.”

    The Taskforce IT guidance has also received the full backing of the National Audit Office (NAO), the Government spending watchdog. Assistant Auditor General, Jeremy Colman, of the National Audit Office, said:

    “The new guidance perceptively reflects the key lessons learned from the first generation of PFI projects in the IT sector, many of which have been identified in our own reports. The onus is now on government departments and the IT industry to implement the guidance and improve the prospects of delivering projects to time, cost and functionality.”

    The guidance sets out how to manage the procurement and contract stages of IT deals and gives advice on the handling of risk. The guidance also gives recommendations for approaching major software developments. It has been prepared after an extensive consultation process with public and private sector managers of IT projects, as well as financiers.

    It is expected that the publication of the guidance will encourage more financiers to support IT PPP deals, as the document provides answers to some of the bankability problems posed to date in this sector.

  • HISTORIC PRESS RELEASE : Private sector appointments aid modernising of the Royal Mint [March 2000]

    HISTORIC PRESS RELEASE : Private sector appointments aid modernising of the Royal Mint [March 2000]

    The press release issued by HM Treasury on 30 March 2000.

    A new shareholder panel of private sector managers and analysts, and the appointment of two new non-executive directors will bring greater private sector expertise into the running of the Royal Mint, Economic Secretary, Melanie Johnson, said today.

    Welcoming the announcement, Miss Johnson said:

    “These appointments are a key element in our programme of reform for the Royal Mint.

    “The new shareholder panel will inject greater private sector expertise into the Mint and provide a more rigorous shareholder discipline. The appointment of two new non-executive directors will enhance the commercial expertise on the Mint’s Board.

    “I am delighted to announce that John Dean, Hugh Beevor and Stephen Dawson have all agreed to become members of the new Royal Mint shareholder panel, and that Jan Smith and David Stark have agreed to become Royal Mint non-executive directors.

    “We are very fortunate that five such high quality individuals have agreed to work with us in taking forward our programme of reform at the Royal Mint.

    “The shareholder panel is an important innovation in the Government’s approach to managing public sector assets. We will be reviewing its operation after two years in part to see what lessons can be learned for other bodies in the public sector.”

    Shareholder Panel

    John Dean of Warburg Dillon Read – an investment analyst experienced in the smaller engineering companies sector. He was again ranked first in the 1999 Reuters survey of UK smaller engineering companies analysts. As part of his experience in the City, Mr Dean has considerable regional experience having worked as an engineering firms analyst in the traditional manufacturing areas of the North East and the West Midlands.

    Hugh Beevor, formerly of Blue Circle Industries PLC has extensive experience of managing the relationship between a parent company and its subsidiaries. He was a main board director at Blue Circle with responsibility for 12 building materials companies. He is currently a governor of the Institute of Development Studies.

    Stephen Dawson of ECI Ventures Ltd is managing director of a successful venture capital company, with over 20 years experience of investing in growth companies and turnarounds.

    Non-Executive Directors

    Jan Smith, formerly of the RAC, First Direct and Mazda Cars (UK) Ltd, now with her own consultancy has extensive business experience and a particular expertise in marketing. Her track record includes responsibility for the marketing launch of First Direct and the rebranding of the RAC where she was a member of the executive operating committee.

    David Stark – formerly of Tomkins PLC and now of Chairman of Glentay Ltd served on the Board of Tomkins for 11 years. He is a qualified engineer and at Tomkins was responsible for 29 of the group’s companies, including all their European engineering companies and associated worldwide distribution companies. He is a member of the Competition Commission.