Stephen Timms – 2000 Speech to the Entrepreneurial Economy Conference
The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 9 May 2000.
Introduction
Sir Peter and friends, I am delighted to be able to join you at this important conference.
The global economy is changing at a speed difficult for any of us to keep up with. As the Prime Minister has said, the wind of economic change has never blown through our economies with such force as it is doing today.
So this afternoon, I want to discuss the Government’s view of how we can equip ourselves to meet the challenges of this ever faster change – and achieve the prize of a modernised economy which, because opportunity and security are open to all, is both enterprising and fair.
Stability
After the election, our first economic objective was to achieve a new stability in the British economy. And we are now delivering a platform of stability and steady growth, with inflation low and the public finances under control.
We can illustrate the scale of what has been achieved with what is now a pretty impressive set of superlatives:
More people are now in work than ever before in our history. The rate of unemployment is at its lowest for 20 years and still falling and there are one million vacancies on offer across all parts of the UK.
And what is particularly important I think is the dramatic fall in youth unemployment. Across the country, it’s at its lowest level for 25 years. Everybody sees there are incalculable benefits of having so many young people familiar now with the habits and disciplines of having a job, when so many young people have been robbed of that for so long in the past.
We are investing now a bigger share of our national wealth than any major competitor in the European Union, and a bigger share even than the US.
Inflation in Britain has now been lower for longer than at any time in the past 30 years. And British inflation today is the lowest of any member of the European Union.
The state of the public finances is sound. In contrast to the deficit of £28 billion in 1997, this year we will make a debt repayment of £12 billion. So, the monetary and fiscal foundations we are building on are strong foundations. And we are determined to keep them that way.
But our prudence is not for its own sake. It’s for a purpose. And that purpose is well summed up by the four ambitions that Gordon Brown first set out last November for Britain to achieve in the coming decade:
our prosperity ambition: that we should be bridging the productivity gap with our competitors, after decades of lagging behind;
the full employment ambition: that we should achieve employment opportunity for all, and that we should have a higher proportion of people actually in jobs than we have ever managed before, and do so on a durable basis;
the education ambition: that for the first time, at least half of our school leavers should go on to study for a degree by the end of the decade;
and finally our antipoverty ambition: that we should halve the number of children living in poverty by 2010, on the way to the Prime Minister’s ambition of eradicating child poverty altogether within 20 years.
Four ambitions which I think are now attainable and which encapsulate our commitment to a modern and decent Britain where opportunity and security are not just for a few but for everybody.
In the past, enterprise was open to some but all too often it was a closed circle which excluded too many.
In the Britain we want – a Britain where there is opportunity for all, fairness to all, and responsibility accepted by all – we must have enterprise open to all as well.
Our economy will be so much stronger – and our society too – if we can release the dynamism, the creativity and the potential of all of our people.
The pace of reform has to match the pace of change. The societies which will prosper will be those that are open, flexible, and able to distinguish between fundamental values they must keep and policies they must adapt. Those that move too slowly, or are in hock to vested interests, reacting negatively to change, will quickly fall behind.
I want to outline today the three fundamental areas of reform we need to push through for success in our aims:
First, competition – creating the right competitive environment for business;
Second, by tackling the cultural barriers to enterprise; and
Third, by transforming the relationship between Government, business and our citizens.
First, creating the right competitive business environment.
We won’t achieve our aims if small businesses or enterprising individuals are denied access to the marketplace and pushed aside by vested interests. In future we need to be the champion of opening up competition, and so opening up enterprise to all. We have already rewritten our outdated framework of competition law.
We have given the Office of Fair Trading new powers and new money to police anti-competitive practices which damage businesses and consumers alike. And now we will be consulting on the next stage, withdrawing Ministers from the decision process on merger cases.
For banking, having accepted Don Cruickshank’s main recommendations, we will legislate to ensure the UK payments system is open to new competition.
In our capital markets to, we must ensure there are no barriers to competition and innovation, that there are no unnecessary constraints restricting investment decisions, and that investors have every opportunity and encouragement to back dynamic small and growing companies.
For the professions, the Office of Fair Trading has now set out a detailed remit to examine how best to ensure that the rules of professional bodies do not unnecessarily restrict or distort competition.
Tax
But more competition is not enough on its own. Almost by definition, an enterprise economy needs high levels of entrepreneurship and investment.
But at the moment, too few businesses in the UK realise their potential because there is not enough investment to capitalise on our entrepreneurial talent and to enable firms to seize the new growth opportunities.
That is why when we came into government we cut the long term rate of capital gains tax for business assets held for ten years or more.
This year, we very greatly extended the numbers who benefit from lower capital gains rates, shortening the business assets taper from 10 right back down to 4 years. That is a step change in the incentives for investment and a huge boost in particular for many small and medium sized businesses – and an equally huge boost to the incentives to set up new ones.
Two days after the Budget, I attended a breakfast meeting hosted by one of the larger accountancy firms. A senior tax partner there said the Budget had put him out of his old job because so many tax loopholes had been closed. But thanks to capital gains tax reform, he expects to have a new job – encouraging clients to invest more in enterprise and in their own future. I hope the accountants here today will feel the same. It’s the start of a new, proinvestment era and you have a key role to play in making a success of it. We have also radically widened the definition of business assets to include all shareholdings in unquoted companies and all employee shareholdings, encouraging more of those who are involved in the success of a business to invest in its future and to secure the rewards from their investments.
The Budget also recognised the important role share options can play, particularly for young, growing businesses which often don’t have enough cashflow to reward their employees fully in cash.
Now, Enterprise Management Incentives will enable companies with gross assets less than 15 million pounds to recruit and retain their 15 key employees, with tax advantaged shares options worth up to 100,000 pounds, normally without any Income Tax or National Insurance charge.
And I have been asked by the Chancellor to conduct a consultation on a technical solution to the tax treatment of share options in unapproved schemes, and I?m moving quickly to fulfil his request, and, I hope, to resolve quickly the serious technical problem that currently exists.
Taken together, our measures are the biggest boost for employee shareholding our country has ever seen, a boost for enterprise and a boost for security and fairness as well.
And now – with the lowest corporate tax rates for businesses ever; the lowest ever capital gains tax rates for long term investors; and – at 22 pence – the lowest basic income tax rate for 70 years – bit by bit we are making Britain the place for companies to start, to invest, to grow and to expand.
Cultural barriers to enterprise
The second key area of reform is to break down all the entrenched cultural barriers to enterprise.
Not only must the work ethic be reinvigorated in every community of Britain but there needs to be a dynamic business culture which encourages enterprise open to all.
When we were elected in 1997, we put the restoration of the work ethic at the centre of our social and economic policy.
The role for government today is to remove the barriers to work and let everyone move ahead. To ensure that we give everyone the chance to contribute to the enterprise economy, if they can.
So we are building a new and modernised welfare state – one that in addition to its traditional and necessary function of giving security to those who cannot work, promotes work, makes work pay and give people the skills they needed to get better jobs – matching new opportunities with new responsibilities for the unemployed to take up the opportunities.
And already, over 400,000 young people have joined our New Deal programme and almost 200,000 have found jobs- the vast majority sustained jobs. Now we are extending the opportunities and obligations to the long term adult unemployed as well.
The rewards of work are being raised for working families as well. Already over one million people are receiving the Working Families Tax Credit, guaranteeing every working family with some one working full time a minimum weekly income of over 200 pounds today, and 214 pounds from next April.
And we want to see this new culture of enterprise extend to every part of the country, so that in places where in the past it was assumed that you would never get a job, in the future people will be starting their own enterprises and making a success of them for their own benefit and for the benefit of their communities.
Education
Rights and responsibilities are at the heart of our education programme too.
In an economy where there is an increasing premium on skills and where people need to be properly equipped to cope with change, we will devote more resources to education, including IT, so that everyone – at all ages – can move ahead.
So we have extended nursery education, reoriented our primary school system around numeracy and literacy, with startlingly good results, doubled the annual capital spending on schools, and committed resources for an extra 800,000 people in further and higher education by 2002.
And to close the digital divide we are investing 1.7 billion pounds in our national IT strategy. Connecting all schools and libraries through the National Grid for Learning and providing. money for teacher and librarian training. Offering cheap PCs to low-income families. And creating up to 1000 IT Learning Centres to enable disadvantaged communities across the country to acquire basic ICT skills.
Our £1.7 billion investment will deliver a new network of computer learning with a single purpose: that the whole of Britain is equipped for the information age. So that the opportunities of the new technologies are shared by everyone.
For people in work, our proposals for a million Individual Learning Accounts and a University for Industry recognise that people should not only upgrade their skills throughout life but they should be encouraged to take responsibility for doing so.
Our University for Industry will use the latest technology, including the Internet, to do in this decade for lifelong learning what in the 1970s the Open University did for university learning.
Enterprise Insight
Finally, we want young people in every area of the country to see that enterprise really is open to them.
Every one of us here has a role to play in building this new enterprise culture.
In two days time, on the 11th of May, the Prime Minister will be launching a business led national enterprise campaign, together with the British Chambers of Commerce, the CBI and the Institute of Directors.
The campaign, under the name Enterprise Insight, will raise awareness about the role and value of business and enterprise, with a national network of businesses ambassadors – including Reuben Singh, Alan Sugar, Richard Branson and others – who will take part in young people’s forums, roadshows, seminars and media events throughout the country.
Please get involved in what ever way you can.
The new campaign will build on the steps business and government are already taking to boost enterprise skills nationwide, from school to adulthood.
Government
The third and final area for reform is Government itself.
Some say in these heady times of change that government is a defunct piece of machinery which no longer has any relevance to the way a modern economy is run.
Certainly the winds of change challenge government to reform as much as any business or individual.
That’s why, last month, the Prime Minister proposed a challenging target for Government – to offer all services online by 2005.
We need to transform relationships between government and citizen by delivering services on-line. And we need to do it quickly.
We also need to transform policy-making by managing government online.
The first step is to develop a clear strategy. So Andrew Smith, my colleague as Chief Secretary to the Treasury, and Patricia Hewitt, as our eminister, are heading a crosscutting spending review to look at all aspects of Government and e-commerce.
We want businesses and people to be able to access government anywhere and anytime.
From a computer. A mobile device. A TV. A kiosk in a post office or in a shopping centre.
The Small Business Service, headed by David Irwin who is next on the programme, will offer a single electronic point of entry, for all small businesses – providing advice and information, backed up by new call centres.
The challenge to us is to make government content, and government services, available across all our networks – wired and wireless – to all the devices.
But as well as reforming the ways of government, perhaps even more importantly, government must articulate the case for reform by allying it to a purpose for the reform; to a vision of the future; to the values that underpin it. That’s how political direction and leadership can exert their own beneficial modernising influence.
Conclusion
So we have begun with a new platform of stability and we are determined to maintain it. And with these three key areas of reform – for a more competitive business environment, for a modern enterprise culture and for a transformed Government – we are optimistic our new enterprise economy can rise to the challenges ahead – delivering opportunity and security to everybody.
Our objectives are two-fold – to build an enterprise economy and a fair society. The two go together. They are not alternatives. Doing well and doing good go hand in hand. An enterprise economy is the route to jobs and prosperity. And a fair society where there are opportunities for all will have an economy which is more competitive and more productive.
The challenges are enormous but if we work together the prize is an enormous one too – a modern enterprise economy offering optimism for the future, ready to provide opportunity and greater prosperity to all our people in the years ahead.
Thank you for the contribution you are making – let’s work together to make this a success for all our people.
