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Tag: 1998

  • Gordon Brown – 1998 Speech to the British American Business Council

    Gordon Brown – 1998 Speech to the British American Business Council

    The speech made by Gordon Brown, the then Chancellor of the Exchequer, in London on 28 April 1998.

    I am delighted to be here at the Park Lane Hotel today at this the first conference of the British-American Business Council to be held in the United Kingdom.

    I am pleased that so many distinguished businesses are represented here today and indeed also the American Ambassador to London, Philip Lader, whose work here is much valued.

    And as someone who already knows a great deal of your work, not least from addressing the British American Chamber of Commerce in New York in December, I want to congratulate all of you, from the 27 member organisations representing 3,000 companies and billions in trade between our two countries who are making the British-American Business Council one of the strongest voices for transatlantic cooperation. And at the start of a week that will be decisive for European economic history, as we prepare to inaugurate a single currency, I want, in the context of a new Europe, to talk not just about relations between Britain and America but about the development of relations between Europe and America.

    But first, I want to thank someone who has, as an individual, done more in recent years than perhaps any other to cement the strength of the links between America and Britain. Sir Colin Marshall has combined a distinguished career in international business with a broader commitment to the success of British business and in particular to business links between the US and Britain. He has been a driving force behind the creation and growth of the British-American Business Council. As chairman of the international advisory board from 1994 to 1996 he mobilised the key players in British and American business in support of the council at a key stage in its development.

    So we honour Sir Colin today for helping to make the British American Business Council a success. We are all grateful for his commitment to this important network of over 3000 corporations, that helps strengthen your organisations and businesses and helps maintain and develop business relations between Britain and the United States, working with the US and British governments to strengthen these relations.

    Today Britain and north America enjoy trade flows of 60 billion pounds and have a total of around 150 billion pounds of investment in each other’s countries. We are the largest single investors in each other’s countries.

    Now I believe, as I think Sir Colin’s career shows, that the connections between Britain and the USA, are stronger today, not just because a shared history links our countries but because of our shared values that bind us even more closely together.

    A commitment to liberty and to our countries as lands of opportunity for all. A belief in hard work and enterprise, and a dedication to an openness that is outward-looking and internationalist, not least in our shared commitment to free trade.

    These are values that brought America to the defence of Europe twice this century and values that allow America to rely on Britain as a bridge to Europe. Values that become ever more important as the world economy is transformed from the relatively sheltered national economies to a global market place, and when, as the insecurities that come with change affect us all, protectionist tendencies must be tackled.

    Values that represent, in my view, a partnership for progress. And it is this partnership for progress between our two countries that has been so important in securing the basis of a peace settlement in Northern Ireland. And I pay tribute on behalf of the British government to the work of the American government.

    It is this partnership for progress that has led us to work together in Bosnia, in the Middle East and now in Africa.It is this idea of a continuing partnership for progress that lies behind the transatlantic agenda launched in 1995 that has achieved much progress in lowering barriers to trade and investment in our two countries and which we must build on John Kennedy, who quoted Alexander Hamilton urging Americans in the late eighteenth century to think continentally and said the task now was to think inter- continentally, and who said that the declaration of independence should be followed by a declaration of inter- dependence – a concrete Atlantic partnership between the new union emerging in Europe and America – said he regarded a strong and united Europe as essential to the free world.

    A strong and united Europe is not a rival to America but its best partner and I believe that for America, Britain is a bridge to Europe and it is this idea of a partnership for progress that most certainly lies behind the proposals for a reform of the international institutions which the G7 heads of government will look closely at when they meet in Birmingham in two weeks time: that the USA and Britain which, more than any other two countries in the world, were the inspirational forces in the creation over fifty years ago of the international financial institutions – the IMF, World Bank, GATT – institutions born in the days of essentially national economies, often sheltered, with very limited capital markets, should now lead the way in reshaping international rules and build international institutions that are more appropriate for the new world of global markets, massive international trade flows and the need for greater international cooperation and for greater openness and transparency to secure stability

    Now, today, I want to highlight how our shared values have led us as countries to a set of conclusions about the two priorities for national government in the new era of more open, more competitive, global markets.

    First, to succeed, the need to create a platform of macro- economic stability which rejects false trade offs between inflation and growth and is based on clear long term objectives, on well understood procedural rules and on openness and transparency.

    And, second, that our economies must pursue continuous and far-reaching structural economic reform to promote productivity and employment.

    And I want to tell you that in our first year in government we have begun to tackle these tasks. And as president of the European Union we have sought to drive forward work on these objectives throughout Europe.

    Now it is true to say in Britain that the last forty years has been characterised by stop go, boom bust, instability in economic policy. And so I can tell you that the first objective of the new government has been the determination to ensure monetary and fiscal stability, in place of stop go, and to do so in an economy far more open than the sheltered national economics of the past. And here we have learned a great deal from America, and the Federal Reserve Bank.

    In any modern economy it seems to me that monetary and fiscal policy , which can no longer be based on the so called fine-tuning of the 1945-1975 period nor on the crude application of rigid intermediate monetary targets that we saw in the years that followed should be based on three central decisions.

    First, clear long-term objectives by which governments will be judged – in Britain our inflation target of 2.5 per cent and our five year deficit reduction plan to bring prudent and sustainable public finances.

    Second, orderly procedural rules for monetary and fiscal decision making – making the Bank of England independent and legislating for a code for fiscal stability which guarantees certainty and therefore credibility in decision-making.

    And third, an open and transparent decision-making process which allows proper scrutiny and which, as a result, offers a confidence that a long term view is being pursued. Our budget deficit reduced from 23 billion pounds to only 3 billion pounds in a year and indeed I believe that it is because people are now coming to believe that for the first time in Britain’s post-war economic history the inflation target will actually be met that long term interest rates have come down to below 6 per cent, the lowest for 33 years.

    And it is the same search for stability in a global economy that has led our European neighbours to agree on monetary union.

    Again clear long term objectives. First of all at the heart of the project – price stability and sustainable public finances as the key to growth and jobs; secondly orderly procedural rules – the new European Central Bank and the growth and stability pact of the European Union; and third, a system of multilateral surveillance that allows for proper scrutiny of each member’s position and offers confidence that stability can be achieved.

    As I reiterated in a speech in New York a couple of weeks ago, as far as Britain is concerned, we have committed ourselves, in principle, to monetary union. To make our economic assessment of the advantages the decisive test as to whether we will enter and to begin preparations that will allow us to make a decision, subject to a referendum, early in the next parliament. Our strategy is to prepare and then decide.

    Meanwhile, we are working closely with all sectors of business to ensure that when the euro arrives elsewhere in Europe – as it will in 1999 – British businesses benefit from it.

    The Bank of England is leading Euro preparations in the City of London. So inside or outside the euro zone, British economic policies will go on being right for business. Britain will continue to be the most profitable place in Europe from which to exploit the new business opportunities after 1999. And Britain will continue to lead Europe towards ever freer trade and more open markets.

    But although macroeconomic stability is a necessary pre-condition for growth it is not sufficient on its own to achieve the high levels of growth and employment we need. This requires far-reaching reform of our labour, capital and product markets. And I want to say that learning from each other, the United Kingdom is now, as president of the European union, leading the debate about economic reform.

    As many here will know, in the UK we have embarked on a radical programme of labour market reform, through welfare reform to move people back into work, tax reform to create jobs and improve work incentives, changes in labour market rules to ensure the adaptability we need, and educational reform to ensure the standards and skills a modern economy needs. But we have also embarked on a programme of reform in our product markets – with a new competition policy – and our capital markets – with new measures, for example, not least cutting corporation tax to 30p, the lowest of any major economy, to encourage the flow of funds to small business, to hi tech business and to risk capital. But there is more to be done in Britain and in Europe.

    We need a new approach in Europe to risk taking, we need to increase the number of entrepreneurs and to raise the survival rate of small businesses. So we must remove the barriers that exist – fiscal, regulatory, economic, cultural – as a matter of urgency. Let me give one example of where Europe’s agenda is changing, learning from the USA – venture capital.

    In the UK, only 5 per cent of venture capital funds go to start ups and early stage companies. In the USA, nearly 25-30 per cent goes to these companies. The amount of hi-tech in venture capital is 50 per cent in the USA, but only around 20 per cent in the UK.

    The challenge for Europe is to create a strong venture capital industry and to orientate venture capital to hi-tech risk, early stage and start-up companies.In June here in London we are holding an EU conference to promote venture capital in Europe.

    So, just as the new government in Britain has begun to create a new Britain, we are also working with our European partners to create a new Europe – one that combines enterprise with social cohesion, more dynamic, more competitive, more open and thus learning from the entrepreneurial and flexible labour markets of the American economy.

  • Geoffrey Robinson – 1998 Speech to the PFI Conference

    Geoffrey Robinson – 1998 Speech to the PFI Conference

    The speech made by Geoffrey Robinson, the then Paymaster General, in Islington, London, on 27 April 1998.

    1. Last month I visited Temple Primary School in one of the most deprived areas of Manchester. The school dated back to the early part of century, with all the associated deficiencies of poor security, neglected maintenance and inadequate facilities. Next door was a small urban park which had become the haunt of drug and solvent abusers.

    2. At the school, the teaching staff were excellent. They impressed me greatly with their commitment and enthusiasm and this had obviously rubbed off on the kids. But it cannot be right that so many of our children are being educated for the twenty-first century in nineteenth century conditions. And if we make the full success of the PFI which we intend, nor shall they be.

    3. At Temple primary school a now agreed public/private partnership will provide this community, its teachers and children with a new school. A school that will be well maintained and secure with modern facilities that will help provide these children with a modern education, and increase their aspirations so they make the most of it.

    4. The reason I open my speech with this very real example, is because that is what PFI is really about. It is about enabling investment in key areas to take place that otherwise would not; and to get best value for money in doing so.

    5. So it is on that note that I welcome you to this, the first Taskforce Conference. I think it is an indication of how we have restored credibility to the PFI concept, and of how widely the Taskforce is respected in PFI circles, that there are so many of you here today. So many, indeed, that we had to move to the conference to a larger venue to meet demand.

    6. PFI is part of the Government’s Public-Private Partnerships strategy. PPPs are about delivering high quality projects and services, as well as value for money for the tax payer. And it is about delivering the investment in the public infrastructure that is desperately needed.

    Treasury Role

    7. One of the Treasury’s most important jobs is to control public spending – to say no – and this will always be the case. There can never be any change or challenge to the Treasury as the ultimate point of accountability. But we must try to break away from simply being the “dead hand”. We must – and I believe we now are – think more intelligently about how we spend taxpayers money.

    8. In doing so, we must first reduce the mistrust and end the turf wars between the Treasury and other departments, and move to more open cooperation. For too long the bidding process has been characterised by a situation where spending departments bid for double what they need, the Treasury cuts it in half and everyone congratulates themselves on a job well done. In fact this is a most insidious process because it leads to sloppy thinking throughout Government. Propositions are not adequately tested in principle and the real cost is not assessed in any adequate detail. Perhaps worst of all, the end results are never rigorously analysed against the claims made for the investments in the first place.

    9. For Heaven’s sake we can do better than that! And I hope (in speaking to a wider audience at this point) that some changes in the Treasury approach are beginning to make themselves evident. We shall certainly need to do better because there will never be enough money to meet all demands, given that every investment for public purposes must be serviced from taxation in one form or another.

    10. It is vital therefore that we develop new methods of delivering public services and public investment aimed at ensuring the most efficient use of resources to meet priorities that are established by a process of thorough analysis and open debate.

    Resuscitating the PFI

    11. This was our approach to get PFI going. Immediately after taking office, we stopped the perversely counterproductive policy of universal testing and insisted that departments prioritised their programmes.

    12. For 4 years PFI had been a dead-duck in the water because of the lack of clear thinking and direction by the previous Government. The Initiative had been floundering, the system was gunged up with innumerable hopeless projects and bureaucracy was seemingly unable to even communicate amongst itself.

    Bates

    13. It was evident that we had to take a wide ranging look at what was going wrong and asked Malcolm Bates to review the PFI and to complete his review in six weeks. It was completed to time in June of last year. I would again like to pay tribute to Malcolm Bates who did a really outstanding job for us. His review was central to resuscitating PFI.

    14. One of the Bates Review’s most important recommendations was for the creation of a Taskforce which should work directly from the Treasury itself. In recruiting the Taskforce we decided to work directly with industry and Malcolm again advised. As the head of the Taskforce we had the great good fortune to find Adrian Montague who was Head of Project Finance at Dresdner Kleinwort Benson. Adrian, working with Treasury officials – notably Steve Robson and Peter Wanless – put together the excellent team of eight people with the balance of complementary skills we needed for the job

    15. At the same time we wound up the previous Panel and Executive. They had done some good work, but the time was right to move on and develop more appropriate structures.

    16. The Bates Report was commissioned in May, Adrian Montague was recruited in July and the whole team was in place by November last year. All 29 recommendations of the Bates Review have now been implemented. Government on its own could not have completed such a timetable. But working together with the private sector we pushed the job through.

    Results

    17. And now the results are coming through too.

    18. Over the last year we have breathed life into PFI. Projects totalling 1.9 billion Pounds have been signed. (Leaving aside CTRL) that’s nearly half as much again as that achieved in the five previous years since the Initiative was formulated back in 1992.

    19. Thanks to the vigorous action by our colleagues at the Department of Health we are now embarked on the biggest hospital building programme in the history of the NHS. The scale of the programme has probably not been seen since Victorian times. Eighteen new hospitals will be built in the first wave and a further ten in the second – a programme totalling some 3 billion Pounds.

    20. And it is not just on such major programmes that PFI is making the difference.

    21. The Colfox school in Dorset is being built under PFI and should be completed 6 months quicker than the local authority would have expected to do it. The Head is delighted with progress, and has even reversed the previous trend of children within the school’s catchment area going to an out of area Grant Maintained School. This is another example of new investment leading to new aspirations.

    Opposition to the PFI

    22. I quote these examples to those who are sceptical, to encourage them to think again about what PFI is about. Yes I know there are still those who have reservations about PFI. But PFI is not just about commercial contracts and the uncomfortable changes to established practices and ways of thinking that these involve. PFI is about making a real difference to people’s lives. Are the sceptics saying they don’t want these hospitals and schools built? Of course not. So we must all work together to ensure that the real benefits of Public Private Partnerships enjoy the perceptions they deserve.

    Project Review Group

    23. May I first stress again that funds are not infinite even less so is the Government’s capacity to service improvements. That is why we have established the system of PFI credits for each sector of Local Authority expenditure and are keeping a close eye on the overall level of transactions. And why – in order to avoid the wasteful proliferation of bidding – the Project Review Group of the Taskforce agrees the do-able projects in advance with the Departments.

    24. The Taskforce has compiled a list of 50 central government priority projects, enabling bidders to commit time and resources in the knowledge that the viability of these projects is verified; and contracts will receive Taskforce support. I should add that this does not mean many other projects, not listed, do not represent good value for money, or are not worthy of support.

    25. A list of 40 local authority projects assured of central government financial support was also released by the Taskforce.

    Maximising Benefits

    26. The Government – people often seem to forget – even after all the privatisation of the Tory years still represents 40 per cent of GDP. However successful we are with PFI in its present limited form it can only represent a relatively small part of Government capital expenditure – let alone of total Government activity.

    27. It is therefore all the more important that we get maximum benefit from the experience it brings us and ensure that public and private sectors learn from each other. For instance there is scope for more benchmarking of activities.

    28. The Taskforce is developing templates and framework contracts and is creating a library of best practice and approved templates that will lead to more not less sharing of information. A crucial element of improving the PFI process is learning from what has gone before. It will also reduce the hassle, waste and duplication of what happened in those Tory years.

    29. As a further part of the learning process, a number of guides, including a new introductory document, policy statements, technical guides and case studies have been published.

    30. We must ensure that ideas produced in the public sector are made available for commercial exploitation. Our approach to defence diversification and the University Challenge Initiative show that we are moving on this front too.

    National Asset Register

    31. And we must be prepared to bring in the private sector to help Government departments get full value from their assets, including by commercial exploitation where that make sense. The compilation of the National Asset Register will help the public sector realise the best value from its assets. And we have made changes to give central and local Government greater freedom and incentives to undertake this sort of activity.

    Resource Accounting

    32. One significant new development that will encourage a much more commercial approach by Government departments to the use of their assets will be the introduction of resource accounting. This is already operating on a trial basis throughout Government and will become official accounting policy from 1 April next year.

    33. No longer will departments be able to take their assets for granted. A depreciation charge will be visible and they will be expected to maintain year by year the value of their assets in real terms.

    34. This will have two beneficial effects. First it will put comparisons between PFI projects and purely public sector investment on an equal footing; and second it will put pressure precisely where it is needed – on the public sector so that it maximises the value from the assets it owns.

    35. The Treasury can make its own contribution, certainly on current account savings, but also capital disposals, by looking at the possibility of enabling Departments to retain even more of the ensuing benefits. This will create the correct incentives for departments to manage better their assets and their spending programmes.

    36. The scope of PPPs of all kinds will be significantly increased with the introduction of Resource Accounting, where it is worth noting that the UK is well ahead of Europe. Indeed the same could be said of PPPs as well.

    International Interest

    37. An indication of how much progress we have made is the increasing number of enquiries and visitors from all over world, eager to find out about the opportunities PFI has to offer. The Treasury has received delegations from areas as diverse as Australia, Brazil, China, Japan, South Africa, Eastern Europe and the Middle East, to say nothing of our European neighbours such as France, Holland and Spain. Whilst not looking to impose our view on others, this at least gives us a chance to compare lessons, and share best practices.

    Partnership and Trust

    38. I mentioned earlier the creation of templates and a library of best practice with the emphasis on more openness. There will always be issues of genuine commercial confidentiality and intellectual property that must be protected. We shall ensure that is so. I was shocked by the consultation we conducted with industry in Opposition how far mutual mistrust had developed between the public and private sectors to the detriment of the reputation of both and of the effectiveness of the whole PFI programme.

    39. I hope we have made at least a start in restoring relations of mutual respect and confidence. For at the heart of New Labour is the desire to establish a new partnership between the public and private sectors. As far as PFI is concerned this means the Government as purchaser and your industries as the provider.

    40. We all realise that partnership implies and requires trust. It is no good one side trying to screw the other, whether it is Government trying to off-load risk to the point where it is avoiding the responsibilities that only it can properly assume; or whether it is the private sector seeking disproportionate returns by exploiting information that only it can properly appreciate the significance of.

    41. If we are to seize the great prize that real partnership offers – the rebuilding of our schools, the reconstruction of our hospitals, the modernisation of our transport system, the restoration of our infrastructure – then we can only do so by a greater openness and trust between the two great pillars of our economy.

    42. Instead of hiding behind the barrier of policy or commercial confidentiality we must share information. Lessons from one project are wasted unless they are shared with others, both within the public and private sectors. It is about a fair deal for the taxpayer and a fair deal for the provider.

    Benefits Showing Through

    43. There are certainly signs that we are moving ahead in the right direction together. Lets take the new prisons construction programme. As a result of the experience gained and lessons learned form the first tranche of PFI deals to deliver prisons, the procurement costs of the second tranche are some twenty per cent lower than the first.

    44. This is also a tribute to Tim Wilson, who headed up the Contracts and Competition Group of the Prison Service. I am delighted that Tim will be joining the Taskforce as Head of the Policy Wing. I have every confidence he will continue the excellent work Peter Wanless has set in motion.

    Schools

    45. I would like to say a few more words on the recent PPP schools initiative.

    46. As you know we dedicated 1.3 billion Pounds of the Windfall Tax money to a four year programme of school refurbishment. It wasn’t enough of course. So we challenged David Blunkett and indeed we challenged ourselves to increase it by involving private sector capital in the process.

    47. The result was an increase of 35 per cent in last year’s allocation and nearly 50 per cent in this years. And this has meant that David has been able recently to encourage a list of five pilot projects under the New Deal for Schools. These projects will involve around 200 million Pounds of investment, and will each address major infrastructure needs across a large group of schools.

    48. And let us be quite clear; without PFI, many of these projects would not have been possible. We inherited public finances in poor shape – with borrowing still high after 5 years of recovery. Against this background and the necessity for tight control of public spending, PFI is enabling Government to support a significant number of additional projects beyond what can be provided through public purse.

    49. We all know about the big PFI projects. But PFI can become an agent for change also at a smaller level across a range of public services. PFI is now being used in the Belfast Hospital Renal Unit; the Highlands and Islands Airports; IT facilities for schools in Dudley; IT for libraries in Kent; and as you probably know there is discussion about using PFI for the new British Embassy in Berlin. 50. So PFI can deliver a wide range of public services – large and small – right across the UK, in all areas of public service. This presents many opportunities to you, the PFI provider as well as to the public.

    The future

    51. But we are under no illusions that whatever progress we have made in the last twelve months, there is still plenty of work to be done.

    52. Whilst getting PFI right remains an immediate priority, we are keen to widen the horizons and develop new kinds partnerships.

    53. For example, the Government’s election manifesto committed us to look for a public private partnership solution to tackle investment backlog in London Underground. The Deputy Prime Minister announced his intentions back in March, and we are now committed to bringing in private sector to develop 7 billion Pounds worth of infrastructure which is in addition to the 1 billion Pounds to be invested over next 2 years from public funds while the private sector concessions are put in place. Private sector expertise and funds for infrastructure: the public sector retaining responsibility for operations and the interface with London’s travelling community. A natural split of responsibilities: an intelligent PPP that will soon be up an running.

    54. But there is still a long way to go and it won’t be all plain sailing if I may mix the metaphors.

    Conclusion

    55. Last week, a journalist sat in my office and said he had been many times before to be told by my Tory predecessors that finally, they had cracked the problem of PFI. He asked me why I thought we had cracked the PFI problem.

    56. I am not sure that as of today I can assure him that we have entirely done so. But I hope when he reads this speech he would be obliged to say he has at least an interim affirmative answer. Before too long I hope to address you all again with a further account which even the most sceptical would have to report as solid evidence of the further substantial progress we are making together.

  • HISTORIC PRESS RELEASE : Chancellor Gordon Brown launches plan for 40,000 New Deal jobs in the Hospital industry [April 1998]

    HISTORIC PRESS RELEASE : Chancellor Gordon Brown launches plan for 40,000 New Deal jobs in the Hospital industry [April 1998]

    The press release issued by HM Treasury on 27 April 1998.

    An initiative to use the New Deal to support a new network of training centres for the hotel, catering and leisure industries was launched today by Chancellor Gordon Brown. The New Deal will allow the hospitality industry to take on and train around 40,000 unemployed young people over the next few years.

    Welcoming the biggest New Deal employers agreement yet, Mr Brown said:

    “From today, a new chapter is opened in the New Deal. Here is a practical example of how central and local Government and employers can work together to tackle the skill shortages that have held this country back for too long. The economy as a whole will never be at its best unless we unlock the potential of all our people, and I appeal to employers to become part of this national crusade to ensure that opportunity is open not just to a few but to everyone.”

    Paymaster General Geoffrey Robinson said:

    “The New Deal is proving the smart solution for business. The hospitality industry have worked with us to make the best use of the New Deal to address their own specific needs. Many other employers are doing the same. I invite all employers to take a close look at the New Deal, to see what it can do for them.”

    The Chancellor and the Paymaster General were speaking during a visit to a training centre in Kentish Town, North London, which the industry has developed as a pilot project, in conjunction with Camden Borough Council and other partners. With the support available under the New Deal, a network of centres can now be extended to every region of the country. The centres will provide places for around 40,000 young people who have been unemployed for at least 6 months, making this the largest single employer commitment to the New Deal so far.

    The industry estimates that of their annual turnover of 350,000 staff, only 6 per cent can be met with suitably qualified staff. The 750 Pounds training grant available under the New Deal will help meet training costs, with the 60 Pounds a week subsidy helping to provide new jobs for the successful trainees.

    David Batts, Managing Director of Radisson Edwardian Hotels and Chairman of the London Tourist Board, said:

    “The hospitality industry is ideally placed to take on New Deal recruits and to train them for real jobs and careers in hotels and catering. These recruits need basic training away from the direct hotel and catering environment, before being faced with the fast pace of business”.

    Jeremy Logie, Chief Executive of the British Hospitality Association, added: “We are delighted that the Chancellor is showing such a strong interest in what is a significant industry initiative.

    Minister for Employment, Andrew Smith said:

    “I welcome the enthusiastic support of the hospitality industry for the New Deal from firms such as Granada, Stakis and Whitbread. It is a mark of confidence in the New Deal by employers who are making a substantial commitment and opening up so many new opportunities for young unemployed people. Through the New Deal, they will get motivated recruits who can get help with relevant training to help solve the industry’s skill shortages.”

  • Alistair Darling – 1998 Speech at the Convention of Scottish Local Authorities

    Alistair Darling – 1998 Speech at the Convention of Scottish Local Authorities

    The speech made by Alistair Darling, the then Chief Secretary to the Treasury, on 24 April 1998.

    Introduction

    The Chief Secretary is usually as welcome as the grim reaper. And we usually come with the same message.

    Today I want to set out how we must build a stable economic platform to provide sound public finances in the future. And how it is essential that we take a new approach to Government. How the process of modernisation in Government and economic management has to continue.

    We were elected to government just under a year ago. The night of 1 May last year saw a complete change in the political landscape – not just in Scotland but throughout the whole of the United Kingdom.

    We are very conscious of the faith invested in us. People right across the country give us their trust. And we are determined to return that trust – delivering our election pledges – doing what we said we would do.

    The People voted for change – not just for a new Government but for a new political approach. Not for a return to old fashioned corporatism any more than a misplaced faith in neo-Liberal individualism. They voted for a new approach which recognised the complimentary role of government and individual effort.

    And they voted for a Government that would look to the long-term.

    We said that rebuilding the country would take time. And it will. But in this, the first year of the new Government, we have begun to put in place the building blocks we need.

    Economic Stability. Sustainable public finances to provide high quality public services. Modernising the Welfare State. Encouraging work and making work pay. Promoting enterprise. Encouraging investment. Building a fairer society. Supporting families with children. Tackling poverty.

    And of course constitutional change – handing power to the people.

    Constitutional Change

    Constitutional change. A year ago many people said it would never happen. Now – less than a year after we were elected – the Scotland Bill has almost completed its passage through the House of Commons. And elections to Holyrood will take place next year.

    The Welsh Assembly Bill will shortly be going to the House of Lords with elections in Wales next year too. And that’s not all.

    We’ve incorporated the European Convention on Human Rights. A Freedom of Information Act will be introduced. Abolition of the right of the Hereditary peers to sit in the House of Lords is on its way.

    But people will judge those constitutional reforms not as an end in themselves but by what they do to improve the quality of our lives.

    The Scottish Parliament will be judged by the calibre of its members, the quality of its decision making and above all by what it does to deliver a first class education system, an NHS we can rely on, a business environment that encourages job opportunities. It will be judged by its actions.

    That’s why we are determined to ensure, for our part, that candidates for Holyrood are of the highest possible standard. People expect nothing less.

    Partnership between Holyrood and Westminster

    And Scotland will expect Holyrood to work in partnership with Westminster. Last September we voted for partnership not conflict. We voted for a Scottish Parliament within the United Kingdom. We voted for change – not for the sake of change but in the justifiable expectation of better Government to Scotland.

    And just as Westminster will have to work closely in partnership with Holyrood, so too will Holyrood have to work in partnership with Councils across Scotland. After all it is Councils that deliver many of the services we all rely on.

    And preparations are already in hand to ensure that this partnership works.

    Donald Dewar and his team are already working up proposals to allow the Scottish Parliament to get into its stride as quickly as possible.

    Scottish Office and Welsh Office officials are already working with Treasury officials and other departments to ensure a smooth working relationship which is essential if Holyrood and Westminster are to work together effectively and efficiently.

    And arrangements are already in hand to ensure that Ministers work closely together in the interests in the people they serve.

    But we will only get what we voted for if Westminster and Holyrood work together. Because if you stop anyone in the street in Aberdeen, Glasgow or Stornoway and ask them what they want they will say exactly the same thing.

    Constitutional change, yes. But now let’s see what you can do.

    An education system we can be proud of. That provides opportunity and a first class education for all.

    A National Health Service – in this it’s 50th year – that we can rely on. A Health Service that not only cures but prevents illness. A Health Service that is efficient and effective.

    Quality housing, better transport. Safer streets.

    Constitutional change is being put in place. Holyrood will soon open its doors. Now is the time to prepare to deliver what the people want.

    The New Agenda

    And it’s to that new agenda that I now want to turn.

    Delivering that agenda will depend upon Westminster, Holyrood and councils working together. There can be great changes in the next few years but it depends on us all being engaged in the same common endeavour in the interests of the new Scotland.

    The setting up of a Scottish Parliament represents a radical vision. But delivering that vision depends on the determination to work towards the same goal. A dynamic vibrant economic environment. Improving our quality of life. A country of optimism and ambition. Building a new Scotland. Where Government and business work together in partnership.

    But that ambition must be built on a secure and lasting foundation.

    Delivering that agenda depends on a secure and sound economic platform.

    Planning for the long-term

    A year ago, this Government came to power because of the failure of the last Government.

    We said we would inherit a mess. And we did. Years of underachievement and underperformance.

    We said that it would take time to sort it out. And it will. There are no quick fixes.

    We said that we would rebuild and modernise this country. And we are.

    But rebuilding will take time. This is a Government that is planning for the long-term. For that we need stability.

    An end to the boom and bust that destroyed so many business in the past and undermined public services.

    A commitment to low inflation – an essential pre-condition of long-term sustainable economic growth.

    Without that stability, that long-term sustainable growth, we cannot provide the public services we need. Good quality schools and hospitals need stable public finances.

    We are determined to avoid the mistakes of the past. Where the economic miracle of the 1980s became the economic disaster of the 1990s. Where unsustainable booms ended in damaging bust.

    There are some who are telling us today that our troubles are behind us. Just like Nigel Lawson in the 1980s. Then he set off on a spending spree where in two years inflation doubled and interest rates soared to double figures.

    We will not heed those siren voices. We will not repeat those mistakes for which so many people paid with their jobs and homes.

    We will not repeat the mistakes of the late 1980s. Or the mistakes of 1964 and 1974 where the incoming government tried to deliver its promises before sorting out the problems they inherited. That path leads to both political and economic failure.

    There are no short-term fixes. That’s why we unashamedly take a long term view. We are determined to be put in place a stable economic platform on which to build for the future. Anything less would be to betray the trust of those who voted for a new approach: a Government that would act in our best long term interests.

    Our objective is to raise the rate of sustainable economic growth in this country so that everyone can share in rising levels of prosperity.

    After 18 years the people voted for a new start. Not just the same as before. And deliver our commitments we will. And built on a secure foundation.

    That’s why we said at the election we would take the tough decisions necessary. That’s why we said would to stick to existing spending limits for the first two years while we sorted out the mess we inherited.

    Stability

    We can only deliver the economic growth, job opportunities and stable public finances if we keep our attention firmly fixed on the prize of long term sustainable growth and stability. Because that is the only way to provide the schools and hospitals and other services we all want and need.

    So I make no apology for the need to repair and rebuild our economy. We are determined to provide stability for the future. It’s in all our interest that we succeed. That is why Gordon Brown in his two Budgets has set about the job of rebuilding and modernising the British economy.

    We inherited a situation where the national debt doubled in just 6 years. We spend over 25 billion Pounds a year servicing that debt – more than we spend on schools in the whole country. We inherited a situation where the last Government planned to spend some 19 billion Pounds more than it was going to get in.

    The deficit reduction plan will mean that public finances will come into balance over the next two years.

    Modernisation in economic approach

    We have introduced radical reforms which will build long term sustainable growth.

    Firstly, a commitment to economic stability. Our reforms to the Bank of England – giving it operational independence – creates one of the most open and transparent central banks in the world. It has already begun has already begun to deliver. We now have the lowest long term interest rates for 33 years.

    The last time they were this low was when Willie Ross was Secretary of State for Scotland – the first time around!

    Secondly, we have introduced new measures to help business. To encourage investment and innovation.

    Corporation tax is at its lowest level ever. And we have introduced measures to help small businesses and to encourage innovation and research and development. A new fund to convert good University research into good business prospects – helping business and education work together for the benefit of all.

    Measures that generate wealth and create new job opportunities.

    We are modernising the Welfare State. We have introduced one of the most radical reforms to the tax and benefits system. To make work pay. And to provide opportunities for all, to a whole generation excluded for too long.

    We inherited a situation where one child in three grows up in poverty. Where poor families bring up children who themselves become poor when they grow up. A second generation of people without experience of work – denied opportunity, denied hope.

    And the tax and benefit reforms will provide for those who need it most.

    Making Work Pay

    The new Working Families Tax Credit is the most radical reform of the tax and benefits system for a generation. It will make work pay.

    For families where someone works full-time, there is now a guaranteed income of at least 180 Pounds per week.

    And to that same working family a second guarantee, that no income tax at all will be paid on earnings below 220 Pounds a week.

    We inherited a system whereby a family with two children paid tax even when they earned only 25% of average earnings.

    Now they will pay no income tax until they earn over 50 % of average earnings.

    And we have taken other steps to remove barriers from work for parents.

    That is radical reform. A radical transformation that makes work pay.

    And as part of that reform we have introduced the new childcare tax credit as part of the Working Families Tax Credit. It will pay up to 70% of the cost of childcare, up to a limit of eligible costs of 100 Pounds per week for one child or 150 Pounds for two children ormore.

    We are introducing a National Childcare Strategy thoughout the country. An extra 25m Pounds of money for Scotland will help set-up new out-of-school provision.

    This is major and radical reform of the system. Modernising the Welfare State. Putting the emphasis on work. Helping people into work. Making work pay.

    This is essential to increasing the capacity in our economy. You all know that people are better off in work than they will ever be on the dole.

    Child Benefit will increase next year by the largest single amount ever. We are determined to channel resources to where they are needed most – to children.

    And the Government’s Welfare to Work initiative – the Pathfinder Project for 18-24 year olds – was piloted in Tayside. And it has been successful in Tayside. Over 1000 people have entered the New Deal in the first 14 weeks and over 420 employers have signed up to the programme.

    The New Deal is a flagship programme which shows how Government, public and private sectors can and work together. There is a common cause in getting people into work. Its good for them and its good for the country. The New Deal has already seen thousands of people sign up. Employers and employees coming together.

    For years now we’ve campaigned against unemployment. Now we are delivering real jobs. Good training. New opportunities..

    We have set up a new Employment Zone in Glasgow. This will pilot a range of initiatives to get people off benefit and into work. It will put us on the road towards the creation of Personal Job Accounts.

    These Accounts will allow unemployed people to move resources between benefits, training and part-time employment to help them get back into work. Glasgow will be at the forefront of new developments – it will be an example of our new approach. It will strike at the heart of the problem. It will link these without work, with the work that needs to be done.

    A Government that helps provide opportunity where there was none.

    And we recognise that the local government settlement in Scotland, England and Wales was tough this year. But it was tough for everyone. However, it was better than it would have been under the Tories. And it was necessary if we are to build for the future.

    So these reforms underpin our approach. Economic stability. Reform of the Labour Market. Modernising the Welfare State. Helping families with children. A fairer and therefore a more efficient society. And there are more reforms to come. The modernisation will continue.

    All these measures will build the economy and with it long-term sustainable growth. And that growth is necessary to generate the wealth we can depend on.

    Public Spending

    So we are building a platform for the future. And as we promised we are conducting a root and branch examination of all Government spending. Started last year, immediately following the election, the Comprehensive Spending Review, will be completed this Summer.

    We said that we would conduct a root and ranch examination of every penny spent by central Government – all 350 billion Pounds of it. And not just the amount spent, but the policies that underpin that spending. A radical Government must be prepared to reject failed policies of the past and embrace the changes needed for the future. A radical Government – like local government – has to make choices and set priorities.

    The conclusions of the Review will be published in the summer. It will set out the priorities of this Government for the rest of this Parliament and beyond.

    The Government will deliver its promises. But we will do so on a prudent sustainable basis. Hard choices do have to be made to meet our priorities. We will maintain rigorous control of public spending because that is necessary to achieve sustainable long- term growth.

    And we’ve already shown how choices can be made. How our priorities are different from the last Government. In the last year we have made significant changes to spending priorities because we maintained rigorous control over spending. We have redirected existing resources to meet our objectives.

    New Priorities

    We have invested an extra 2.5 billion Pounds to improving schools, including 1.3 billion from the windfall tax to improve school buildings and equipment. That would not have been done but for the change in Government.

    We introduced the Bill to abolish the assisted places scheme. A scheme under which the last Government unashamedly backed the few at the expense of the many. This money has instead been ploughed into public education. We abolished the nursery voucher scheme. Our priority is for the many and not for the few.

    We have invested an extra 2 billion Pounds in the National Health Service. We have scrapped the wasteful and inefficient Tory internal market. Sam Galbraith’s White Paper on the future of the Health Service has been widely welcomed.

    And all pensioners are getting cash payments to cope with winter fuel bills on top of the cut in VAT to just 5 per cent. The poorest pensioner households in income support are receiving 50 Pounds.

    And there’s more.

    We’ve introduced extra targeted funding to improve literacy for young children. A total of 24 million Pounds for the early intervention programme over the next three years.

    We’ve introduced 3 million Pounds alternative to exclusion grants scheme to develop additional alternatives to children being excluded from school.

    We’ve tackled the crisis in higher education funding with new plans for the funding of student maintenance and tuition. In the long term these will release funds to widen access to agreed standards at the universities and colleges.

    We have ensured that there will be an addition 8 million Pounds for further education institutions next year.

    And next year we’ll make an additional 17 million Pounds available to higher education institutions.

    And housing – we provided an extra 15 million Pounds this year and an extra 51 million Pounds next year to be spent on new housing partnerships – covering energy efficiency and other housing initiatives.

    The empty homes initiative gets 2 million Pounds this year and 7 million Pounds next year.

    The rough sleepers initiative will get 16 million Pounds in total across Scotland.

    And we have delivered many other measures in that short time. This is just the start. The CSR will set out our priorities for the rest of this Parliament and beyond.

    But we will only be able to deliver the high quality public services that we need if we have a stable foundation on which to build them.

    Scotland and the Global Economy

    And that stability is essential for the whole country.

    Westminster, Holyrood, local authorities have the same long-term interest. We are all part of the same economy. And increasingly not just the British and European economy but the global economy. It isn’t possible to go it alone – create an economic island in isolation from the problems that everyone has to deal with.

    There is no room for opting out. Pretending that fundamental problems are for others.

    We recognise that the global economy has changed everything. We are interdependent. As we know, what happens on the other side of the world affects us here. And in the global economy what will mark us out are the skills, adaptability and employability of the workforce.

    We now have economic objectives which are open and clear – which look to the long term. And we have a new approach where Government – at levels – needs to work with business and individuals in partnership – recognising each others strengths. Finding new ways of working together.

    A New Approach

    As we prepare for the new Parliament at Holyrood, we realise that modernisation, not just of institutions, but of approach must continue.

    We must examine our approach right across the board.

    This Government is committed to increasing investment. But investment accompanied by reform – whether its in education, welfare to work, childcare or health. The successful economies are those which can adapt at every level. Where change is embraced.

    Scotland is rightly proud of its education system. But we cannot rely on reputation alone. We must examine our schools and universities and ask ourselves how standards can be improved.

    We cannot shy away from change and innovation. It was our ability to innovate that made Scotland in the past. And the same spirit of innovation will make Scotland in the future. But we can only do that if we embrace change – look at new ways of doing things.

    People don’t want the new Scottish Parliament to cling to the past. To seek refuge in the old ways. They voted for change.

    I want people to come to Scotland not just to see our heritage, but to praise our innovation. In business. In education. That’s what made us in the past and that’s what will make us in the future.

    We’ve put in place a new system for funding higher education with student tuition. Because aspirations for improvement are not enough. Aspirations have to be accompanied by reform if we are to ensure stable funding in the future.

    In the Health Service – there are far too many hospitals in desperate need of replacement and renewal.

    The public sector alone cannot meet all the problems we inherited in an acceptable timescale. And new forms of management -getting the best of both public and private sector – can deliver a better service. What matters is the quality of service that the patient receives.

    That’s why we are working in partnership with the private sector – to bring forward investment that would never otherwise have taken place. And why we have set up the new Business Forum – so that business and Government works closely together.

    And in local authorities too – where a substantial amount of innovation has taken place over the years.

    At its best the public service provides excellent service. But we all know that that service can and does fall below standards we deserve. Second best isn’t good enough.

    The people deserve better. Councils should be the champion of the people who elect them and not the defenders of institutions where they know they could do better. It is the quality of service that matters.

    For us – as it should be for you – what counts is what works. Public and private sectors in partnership.

    And that must be the approach for the Scottish Parliament.

    We must change – not just the procedures – how members address each other – where they sit. But fundamentally we need to look at the way in which services are delivered. If we don’t reform and modernise, we will not build a new Britain or a new Scotland. Not a doctrinaire approach – but a practical one. What counts is what works.

    Conclusion

    The people voted for change, not just in structures and procedures but for a better quality of life.

    This Government has a different economic approach. We are a radical reforming Government.

    So too must the Scottish Parliament embrace change. It starts with a clean slate.

    New ideas to be examined.

    Partnership between Westminster and Holyrood. Between public and private sector. Setting the old conflicts behind us. Pursuing new objectives shared in common. All of us – Government – Business – Education – Councils – working together.

    In May last year the people of Scotland voted, in large numbers, for change.

    And they voted in large numbers for constitutional change last September.

    It is now up to all of us – wherever we sit – Westminster, Holyrood or in Council chambers – to show what we can deliver that new modern confident Scotland.

    It is on that that we shall be judged.

  • Gordon Brown – 1998 Speech at the Scottish Business Forum in Glasgow

    Gordon Brown – 1998 Speech at the Scottish Business Forum in Glasgow

    The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 24 April 1998.

    I am delighted to be with Donald Dewar at the launch of Scotland’s new business forum.

    The creation of  the new Scottish Business Forum brings in the biggest change in  the government’s approach to business consultation since the introduction of the Scottish Economic Council in 1971 and it reflects the new challenges for Scotland of a changing global economy.

    In the 1960s when the old Scottish economic planning council, later known as the Scottish Economic Council, was formed, Scotland led the way in a new generation of regional policy, whose central objective was to raise the level of incentives for capital investment.

    Today I believe Scotland can lead the way again, to a new understanding of how there can be better relations between public and private sectors and to a new generation of regional policy.

    In fact for far too long political arguments about our economy have focussed on how here in Scotland we divide the cake, about how we spend money, about the relative shares between public and private sectors rather than what we have to do to increase our wealth and our productive capacity as a country, and how public and private sectors can work far more effectively together.

    And so I want a new partnership for prosperity.  Not a return of the old corporatism which ended up in weak compromises in smoke filled rooms far from the factory floor but the whole country engaged in the shared challenge of improving productivity.

    And in doing so we will have to look at every weakness, every handicap that has held us back,  every barrier to growth.

    Modern Budgets are not so much about dividing up the national cake as about implementing measures that can help us compete more effectively in the global economy.    So I want the period from now until the next Budget to be used constructively by all of us to examine what more we can do.

    It is a relentless and uncompromising agenda of modernisation in education, the welfare state and our approaches to business that we now need.

    Our first concern is stability.

    Of course it is businesses not governments that make profits and create jobs, but business needs governments to shape the environment in which profitable companies can grow.

    It is the government’s job to make sure it has done everything to ensure stability and I can promise that we will not take risks with inflation, we will not engage in the false trade-offs between inflation and unemployment. And  we will not compromise our hard-won reputation for prudence in economic management by short-term gestures.

    We will avoid short termism in all these areas by the clarity of setting down  clear long term  objectives against which we can be judged.

    •     An inflation target of 2.5 per cent
    •     An independent bank
    •     A golden rule for discipline in  public spending
    •     A five year deficit reduction plan

    Scotland needs this stable foundation because it has been the victim of stop-go policies – and whatever the temporary difficulties for exporters with the pound, the greater concern is avoiding a  return to the  boom-bust approaches that have deprived us  of the long-term investment funds we need.

    First investment

    Cutting the main rate of corporate tax from 33p to 30p, 40 percent investment incentives, a 10p long term rate of capital gains tax are all measures designed, alongside  monetary and fiscal stability, to create the best environment for new investment in our future.

    But we are prepared to look at further changes and I want the business forum to comment on whether our investment incentives should be placed on a permanent basis, whether the targeting to small and medium sized firms is effective, whether more needs to be done to help the tax position of start-up and small companies and what more we can do to build the successful enterprises of tomorrow.

    Second innovation

    Scotland has now a reputation for inventiveness that extends well beyond the traditional inventions for which we are famed.  Biotechnology, computer software and electronics all provide examples of the latest wave of Scottish innovations of global significance.

    So we want to let the creative talents of Scotland flourish to turn new ideas into successful businesses created in Scotland. I want us to examine whether there is more we can and should do.

    So i would like the forum to comment on the practical advantages for business of more investment in science and technology in our universities, our new university challenge fund, the next phase of the UK foresight programme and the possibility of an r&d tax credit to build on developments such as the arrival of cadence and encouragement for the expansion of the venture capital industry.  This is a huge step forward and on these new developments we will build.

    A consultation paper was published in March, giving the business community in Scotland an opportunity to influence how this major initiative will be taken forward.  It provides us with a means of recognising Scotland’s needs and shaping the programme accordingly.  Foresight is about preparing for the future – in a very broad sense.  It is about future technologies, future markets, and their influence on the prosperous, modern and inclusive society that we want Scotland to become.  It is a UK guide to the future for today’s decision-makers – in business, in research, in government.

    That said, it takes relatively little foresight to come to the view that the Scottish venture capital industry needs to expand to American levels.  We need more high tech ventures and more risk capital.  We should consider what we can do together.

    Third small businesses

    The Scottish Enterprise business birthrate strategy now encompasses a range of initiatives to encourage individuals to set up businesses.  For example, there are 40 business shops offering assistance to new and small businesses.  And we want to build on these.

    We should ask whether we could do more to help men and women  start their own businesses and encourage small businesses to expand by using the jobs subsidy to take new people on.

    I want more young entrepreneurs, more Scots starting small businesses and the best motivators are those who themselves have worked their way up and know the pitfalls as well as the opportunities.

    And I am pleased that a number of business leaders have this week given a personal commitment to visit schools and colleges around Scotland, not just to talk to teenagers but to inspire them.  From this generation of business leaders will come the next.  And these school visits will help motivate young people to turn their ambition here in Scotland into achievement.  I am delighted that Richard Emanuel, Tom Farmer, David Murray, Belinda Robertson and Brian Souter have agreed to start this process off.

    Fourth getting people into work

    I want to  remove the barriers that deprive thousands of men and women of employment opportunities in Scotland today.  And so I want to discuss any barriers – tax, legal, regulatory and competitive  – that are unnecessary and that by their removal can help jobs be created.

    And I want employers to work with us on getting the New Deal right in Scotland not just for the young people who will benefit but for the companies to whom they will contribute.  Initiatives like the new futures programme  which is aimed at ensuring all young people have the social and life skills to make them job ready when they join a new employer.

    I want New Deal to become more than ambulance relief for young people in difficulty but the smart solution for companies looking for motivated young people they can train with new skills.

    Fifth, education

    Modern employers will succeed when we get the best out of all our people, and  the countries which succeed in mastering the waves of technological change and fiercer competitive pressures will be the ones that invest in their key national resource:  the people.

    One priority is improved standards in our schools and Donald Dewar and Brian Wilson have already acted  to ensure that for the first time individual targets are set for each school in Scotland.

    But equally because 80 per cent of those in employment today will be in the workforce in ten years time, education cannot stop at the school gates.  There must be lifelong learning if we are to achieve the productivity gains we want in the years to come.

    We must have a stronger relationship between education and business in charting the way forward.

    Scotland’s university for industry will enable people from their homes all over urban and remote  and rural areas  to benefit from education from home, on a range of areas beyond the university level courses catered for by the Open University.

    I believe we should consider the extra skills which Scotland’s university for industry should concentrate on expanding – whether it be for the expansion of call centres – or for computer software engineers – or for electronics as a whole, including starting your own business.

    So our aims – aims I believe we share in common – are of an open, dynamic Scottish economy  with  economic stability for investment rather than instability; a Scotland which is business-friendly, working with business rather than in isolation from it; a working Scotland with the vision to be a world leader in education the centre point of both our economic and social ambitions  for the long term.

    This modernisation for the future, is the way forward.  Setting the old conflicts behind us. Understanding the objectives we share in common.  Recognising the challenge must involve all of us, all of our workforces, working together.

    And the prize is a modern Scottish economy more fit for the challenges ahead, ready to ensure employment opportunity and greater prosperity for all our people in the years ahead.

  • HISTORIC PRESS RELEASE : Bank of England Act 1998 [April 1998]

    HISTORIC PRESS RELEASE : Bank of England Act 1998 [April 1998]

    The press release issued by HM Treasury on 23 April 1998.

    The Bill, which establishes the Bank of England Monetary Policy Committee and transfers banking supervision from the Bank of England to the Financial Services Authority received Royal Assent today.

    The Bank of England Act 1998, gives effect to the policy changes announced by the Chancellor Gordon Brown in May 1997 when he announced a new framework for monetary policy and the transfer of banking supervision. The Act also puts in place a new accountability framework for the Bank, and greater transparency in the Bank’s operations.

    Welcoming the swift passage of the legislation, the Chief Secretary Alistair Darling said:

    “Less than a year after taking office, the Government has put in place the most far reaching changes the Bank has seen in centuries.

    “The Bank of England Act is a keystone in modernising Britain’s economy and creating a modern bank ready for the 21st century.

    “The Act puts in place a new framework which will promote economic stability and give a long-term focus to monetary policy.

    “It maximises openness and transparency and ensures that the Bank is fully accountable and that its conduct of monetary policy meets the economic needs of the nation.”

    The intention is the Act will come into force on 1 June 1998.

  • HISTORIC PRESS RELEASE : Taskforce PFI Training Programme launched [April 1998]

    HISTORIC PRESS RELEASE : Taskforce PFI Training Programme launched [April 1998]

    The press release issued by HM Treasury on 24 April 1998.

    In the third Public/Private Partnership (PPP) of its own, the Treasury’s Private Finance Taskforce has awarded a contract for the provision of a programme of in-depth Private Finance Initiative (PFI) training for civil servants to Price Waterhouse, one of the UK’s leading providers of PFI advisory services to the public sector.

    Announcing the award of the contract, made in response to Recommendation 24 of the Bates Review of PFI, Paymaster General Geoffrey Robinson said:

    “With a growing number of PFI projects signed or close to signature, it is vital that Government Departments capture this knowledge and build on it through attending training events delivered by PFI practitioners with real extensive experience in the field.  This is another welcome step forward to ensuring that the Government delivers a steady flow of high quality PFI projects as efficiently and effectively as possible.

    It is also good to see the Treasury Taskforce itself actively practising what it preaches. PPP’s are all about negotiating deals that are good for both sides and the Government is keen to exploit the potential for better value for money through the use of a wide spectrum of partnerships that combine public and private sector skills”.

    The contract has been awarded following a competitive tender.  Pilot training courses are being run in London and Edinburgh during April, with a full roll-out of the Taskforce approved PFI training programme planned from early summer onwards.  The programme will be open to all public sector PFI practitioners, in both central and local government.

  • Gordon Brown – 1998 Speech at CBI President’s Dinner

    Gordon Brown – 1998 Speech at CBI President’s Dinner

    The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 22 April 1998.

    I am grateful for the opportunity to address this CBI Dinner tonight, to be able to thank you as business Leaders of Britain for the contribution you and your Companies make to the success of Britain at home and Abroad.

    When I spoke to your conference in Harrogate in the final months before the general election of the need to modernise government’s relations with business we agreed that we needed as our building blocks:

    • First, stability with low inflation;
    • Second, sustainable public finances;
    • Third, not just open markets but a constructive engagement with Europe;
    • Fourth, a modern employment policy;
    • And finally higher levels of skills and productivity.

    And the Government has already made a start:

    • to achieve monetary stability – independence for the Bank of England;
    • to achieve fiscal stability – a five year deficit reduction plan to which we have adhered;
    • to boost investment – a cut in corporation tax and new incentives for investment in small and medium sized business;
    • and to boost skills and productivity – our education reforms and welfare to work programme.

    And it is the need to raise our game in productivity that I want to address many of my remarks this evening, and to make some suggestions on which I think we can agree.

    Stability with low inflation

    First stability

    When we have met representatives of the CBI we have been  agreed on the need for a credible framework for monetary stability for the long term.

    And I believe people now understand that the way to stability for national Governments in a modern global marketplace is to base monetary and fiscal policy on clear long term objectives by which you will be judged – in our case our inflation target and five year deficit reduction plan;

    • to have orderly procedural rules which guarantee certainty and therefore credibility in decision-making – making the Bank independent and legislating for a code for Fiscal stability;
    • and to have an open and transparent decision-making process which allows proper scrutiny and offers a confidence that a long term view is being pursued free of short term party political considerations.

    All to meet our aim, businesses aim:  In place of stop-go cycles, long term stability.

    Whatever one’s views of the month to month decisions of the monetary policy committee, the new system has, in my view, already freed interest rate decisions from short term political pressures and given greater credibility to monetary policy making.  And because people are now coming to believe that the inflation target will be met, long term interest rates have come down to below 6 per cent, the lowest for 33 years.

    At this point in every cycle in the past the British economy has been prone to inflation instability.  So when we came into power we faced inflationary pressures and had to act.  Because of the action we took inflation which when we came to power was heading well above our target is expected to be at 2« percent next year.

    And let me add just one thing –

    It would be the worst of short-termism now to pay ourselves more today at the cost of higher interest rates, fewer jobs and slower growth tomorrow.  All of us must therefore show greater responsibility.

    Whilst the public sector has understood the need for moderation, today’s wages figures suggest that private sector employers have some way to go sustainable public finances

    When I spoke to your annual dinner last year we were also agreed that responsible public finances are the cornerstone of stability.  We had already demonstrated a commitment to prudence with our two year ceiling on public spending.  We have now made it clear that this is not a one-off measure, but is part of a five year deficit reduction plan that has not only brought public borrowing down from an unacceptable 23 billion pounds in 1996-97 to 3 billion pounds last year but has allowed us to lock in a long term commitment to sustainable public finances while meeting our priorities.

    In July we will complete our comprehensive spending review and we will lock in our commitment to fiscal stability not just by the legislation for a code for fiscal stability but also by the conclusions of the Spending Review.  It is only if we manage to achieve spending discipline across the board, through the elimination of waste and rigorous focus on our priorities, that we will be able to ensure investment in and modernisation of our key public services, particularly education and health – consistent with both our golden rule of at least balancing the current budget over the economic cycle and our commitment to keep debt at a stable and prudent level.

    To achieve our aim, your aim: sustainable public finances and modernised public services.

    Trading relationships

    So stability and long term prudence are key building blocks for prosperity but there is another building block that for too many years we have undervalued – strong and lasting trading relationships with Europe.   We are not only one of the most open economies in the world – trading 25 per cent of our GDP.  But, in addition, nearly 60 per cent of our exports are to mainland Europe and astonishingly high levels of us and Japanese investment into Europe – 40 per cent of it – comes to the UK.

    The new Government has made four principled decisions on Europe which have decisively and unambiguously put this country on a new road.

    First, for the first time we are committed, in principle, to European monetary union.  second, we see no constitutional barrier that prevents us joining.  Third,  we are committed to making an economic rather than political assessment the decisive test as to whether and when we will enter and finally we have committed our country to full  preparations that will allow us to make a decision, subject to a referendum, early in the next Parliament.  Our strategy, to prepare and then decide, is being pursued.

    So this is a government that having declared for the principle will help to make sure that the preparations are made.

    Our slogan is Britain is ready for the Euro and we will be.

    All necessary steps are being made to ensure business will be able to use the Euro here from 1999 for a wide range of business activities, from filing company accounts, to paying certain taxes and issuing shares.

    And low corporate tax as well as our financial expertise  and our commitment to free trade and open markets will further underpin Britain’s position as the most profitable place in Europe from which to exploit new business opportunities after 1999.

    And I believe that a new national consensus on Europe – the very consensus that has eluded us for years – is now within our grasp.

    Modern employment policy

    The fourth building block is a modern employment policy that does not offer welfare irrespective of work, but is built on a system of matching rights with responsibilities, an active welfare state which provides new opportunities for work, and a tax and benefit system that makes work pay.  And I am grateful to many of the companies represented here today for signing up to the new deal, to help tackle our problems of youth and long term unemployment.

    And to create the right incentives to work and to cut the costs of hiring, we have already announced radical changes to the current tax and benefit  system;  changes in employers and employees national insurance for which I am grateful for the CBI’s support; and a new working families tax credit which, underpinned by a national minimum wage, is the means to ensure that work pays more than benefits.

    Higher productivity

    But our aim is high levels of employment and high levels of growth to secure prosperity for all.  And that brings me to my fifth building block – how, in Britain, we modernise to achieve the higher productivity on which lasting growth depends.

    Since I arrived at the Treasury I have been seeking to understand the extent of and the reasons for our productivity gap  with other major economies.

    The latest figures show a productivity gap with France and Germany of around 20-30% and a gap of 40% with the United States.

    There are great British success stories – world class firms that are beating competition all around the Globe, many represented here tonight, in whose achievements we all have pride.  But in manufacturing as a whole UK productivity is lower than in other major economies.  In the United States, productivity is twice that in the UK in the food and  beverages industry and in the machinery industry.  Even in the service sector we fail to lead the others in any major industry.

    I believe these disappointing figures can no longer be ignored.  And together we have to consider how to close the productivity gap.

    Today I want to set down a challenge to ourselves in Government, to you the country’s business leaders and to every shareholder, every employee, every citizen of this country.  The challenge is to work together to bridge the gap in productivity, the gap between what Britain is today and what we can become in the future.

    For decades governments of all parties have wrestled with these problems.

    Some say that first we managed decline. Then we mismanaged decline.

    Then we declined to manage.

    But I think we can all agree that fifty years of our economic history from 1945 was marred by a succession of sterile and self defeating conflicts between state and market, managements and workforce, public and private sectors.

    I believe that we should not only set aside for good these old battles but think of a Britain where public and private sectors are not just in some temporary truce but where public and private sector are constructively  working together to meet nationally Important and defined objectives.

    In other words it is time to develop a sense of national economic purpose, to agree a new long term direction for Britain.

    A new national purpose born out of the recognition that we need to work together;  focussed on removing the barriers to higher productivity whether they are regulatory, fiscal or cultural;  with the clear long term objective – to bridge the productivity gap with our competitors; and founded on the innate British strengths – our creativity, adaptability and internationalism.

    The British genius is our belief in hard work and enterprise,  and these are the strengths on which we can build: our creativity, our willingness to adapt, our belief in fair play and opportunity for all, our outward looking approach to the world.  The same strengths which built manufacturing in the 19th, are the platform on which to build our strength for the future, not just in fashion in London but in every manufacturing and service industry in every part of the UK.

    But we must turn ideas made in Britain into products made in Britain, make our strengths count with our team work and innovation in individual business and companies, and we must be sufficiently confident about our virtues to make  committed long term investments in our future.

    Margaret Beckett and I will look systematically and rigorously at every barrier to higher productivity that is identified.

    So let me say to exporters.

    I do understand your worries over the current strength of sterling, but what would be an even greater worry would be any risk of a return to the boom-bust we saw in the late 1980s and early 90s, when 1 million manufacturing jobs were lost, over 150,000 businesses went under and thousands who faced mortgage misery and negative equity are even now not yet recovered from it.

    It is for this reason we must all of us take a long term view, Government, Industry and the Financial  Community:

    • Government – by ensuring lasting stability;
    • Industry – by investing for the long term and
    • The Financial Community by refusing to resort to
    • The short-termism and stop-go attitudes which
    • Have bedevilled us since the war.

    I repeat our policy is a stable and competitive pound in the medium term.

    The countries that have succeeded over the long run are not those that have made a policy of continuously devaluing  their way to success, but those  who have travelled the long and hard road to high productivity.

    Now I know that it is businesses not Governments that make profits and create jobs, but I also know that business needs Governments to shape the environment in which profitable companies can grow.

    So today I make the promise that Government will do everything it can to create the conditions in which you can succeed.  To help set in place the basic building blocks for long-term economic success: stability and low inflation, responsible public finances, good trading relationships, a modern employment policy and improved skills and productivity.

    We have made a start in the last year.

    We have since we came to office reallocated money to education and training  allowing an additional 2.5 billion pounds to improve standards and facilities in our schools and to improve skills – 100 million pounds was made available in the budget to help reduce the skills gap in I.T. And high technology.

    And we have made tax changes to create the right environment for investment.  I was delighted that last July’s 2 per cent cut in corporation tax, to its lowest level ever, the reduction to 21 per cent of small business corporation tax, and the new investment incentives for small and medium sized companies, could be followed last month by the announcement of a further reduction to 30p for the main rate of corporation tax and 20p for small business corporation tax.

    But just as in business the competition for economic success requires constant modernisation, business developing new approaches to achieve success in new circumstances, so too  rapid  change forces government to reconsider continuously its
    responsibilities and role.

    I believe that we must now combine a strategy for achieving stability by being prepared to consider major structural reforms of our product, capital and labour markets to equip us for the future.

    And I say tonight that where it is necessary modernisation,  wholesale modernisation and nothing but modernisation will be my policy.

    Just as there will be no room in the New Britain for penal taxation, wasteful public spending or for taking risks with inflation, there will be no room in the new Britain for complacency, old confrontational attitudes, short-termism, the undervaluing of education and investment or  restrictive practices from whatever quarter they come.

    We do not want a return of the old corporatism which ended up in weak compromises in smoke filled rooms far from the factory floor but a joint strategy to achieve a new dynamism which engages everyone in the workplace.

    On product markets the way forward is not stifling competition by over-regulation, or pursuing a free-for-all devoid of anti-trust, anti-monopolies legislation.  It is to vigorously pursue a pro-competition agenda, that involves opening up competition in financial services, telecommunications, energy – removing barriers that still thwart open trade.

    Any examination of price levels shows the need for more competition.  Let me give you some examples. According to the OECD, household appliances like washing machines and dishwashers are about 30% more expensive here than in the United States, prices in restaurants and hotels are more than 50% higher and furniture is nearly 60% more expensive.

    The challenge in a modern economy is to balance the minimum standards that are needed to make markets work effectively and fairly with rooting out excessive regulation and red tape.

    The competition bill will help achieve more competitive markets and I know it is welcomed by business.

    We also need to consider modernising our capital markets.

    In the first half of the 90s NASDAQ in the United States raised seven times more capital than all the European equivalents together.  Its listed companies employed nine million people and created 16 per cent of all new jobs.

    The challenge for Britain is to create a stronger venture capital industry and to orient venture capital to hi-risk, early stage and start-up companies.

    In the UK, only 5 per cent of venture capital funds go to start ups and early stage companies.  In the USA, nearly 25-30 per cent goes to these companies.  The amount of hi-tech in venture capital is 50 per cent in the USA, but only around 20 per cent in the UK.

    We need a new approach in Britain to risk taking, we need to increase the number of entrepreneurs and to raise the survival rate of small businesses.  So we must destroy the barriers that exist – fiscal, regulatory, economic, cultural – as a matter of urgency.

    We must also engage in far-reaching reform of our labour markets not just in employment policy but in welfare, education and taxation and social security policy.  The way forward is neither old style regulation or a crude form of deregulation, which leaves the unskilled without the training or education essential for employability.  But one that recognises that bringing out the best in people – by policies that ensure opportunities for – is the best route to prosperity in the modern world.

    That is why we are committed to widening opportunities in education and training: higher standards in our schools and lifelong learning.

    In fact about 80 per cent of people in employment today will still be in the workforce in 10 years time.  And yet only a fraction of today’s workforce ae upgrading their skills.  while their skills are all the time becoming obsolete.

    Our proposals for individual learning accounts and a University for industry recognise the new reality that not only should people upgrade their skills throughout life but they should be encouraged to take responsibility for doing so.

    I want the period from now until the next budget to be used constructively to examine what more we can do, focussing on modernisation in labour, product and capital markets and on the tax and spending reforms they imply, to meet the 40% productivity challenge.

    We need to work together -that is all of us, business, workforces and government – to increase our productivity as a nation.

    Margaret Beckett and the DTI have already undertaken a benchmarking study to identify some of the main constraints on UK productivity performance.  And subsequently set up a number of private sector led working groups to look at this in more detail.  In the Treasury we sponsored a business-led working group examining proposals to overcome barriers to finance in high-technology companies, and in the budget we launched a consultation exercise on ways of improving the UK’s record on R&D and innovation.

    Now Margaret Beckett and I have agreed to hold a series of seminars with business leaders, over the coming 10 months to address the British productivity gap and how we can catch up.

    The first seminar, to be held next month at number 11 Downing Street, will start by examining the global picture and Britain’s place in the productivity league. Mckinsey’s global institute are currently compiling an independent study of Britain’s performance in growth, employment and productivity, this is a follow-on to previous studies which have focussed on France and Germany.  Their report will analyse Britain’s record across a wide range of industries – and this will form the basis of discussion for the first seminar. Future seminars will focus on the sectors where our performance is weakest and the policy areas where government can play its role.

    These then are the challenges ahead: to lock in stability, to invest for the long-term, to reward work, to encourage new enterprise and skills so we can bridge the productivity gap.  So we must set old conflicts behind us . Understand the objectives we share in common .  And recognise that the challenge must involve all of us, Government, workforces and business working together.  The challenge is enormous but the prize is a more up-to-date and dynamic economy more fit for the challenges ahead, ready to ensure employment opportunity and  greater prosperity for all in the years ahead.

  • HISTORIC PRESS RELEASE : Statement on the 1998 Community Budget European Community Finances [April 1998]

    HISTORIC PRESS RELEASE : Statement on the 1998 Community Budget European Community Finances [April 1998]

    The press release issued by HM Treasury on 22 April 1998.

    The Government today published its Annual Statement on the Community Budget, entitled “European Community Finances”. The  Statement gives details of the 1998 Community Budget, including:

    • total payment appropriations of 83,529 million ecu (55,693 million Pounds), 1.4% higher than 1997, and 1.14 % of Community GNP (well within the Own Resources ceiling of 1.26%);
    • total commitments of 91,013 million ecu (60,683 million Pounds), 2.1% above 1997; and
    • information about the UK’s contributions to, and receipts from, the Community Budget.

    Economic Secretary Helen Liddell announced publication in reply to a Parliamentary Question from Jackie Lawrence (Preseli Pembrokeshire). The full text of her reply is attached. Commenting on the announcement, Mrs Liddell said :

    “The Statement provides a useful guide to the breakdown of expenditure and sources of revenue in the 1998 Community Budget, along with details of the UK’s contributions to, and receipts from, the Budget.

    “As the Statement shows, the very small overall increase in expenditure over 1997 demonstrates the Council’s determination to apply the same budgetary rigour to the Community Budget as is being applied at Member State level. The UK is using its Presidency to seek to ensure a similarly rigorous approach during the 1999 Budget negotiations”.

    As in previous years, the Statement outlines the key developments in EC financial management and measures to counter fraud including:

    • the European Court of Auditors’ Annual Report for 1996 and Statement of Assurance, published on 18 November 1997;
    • the Council’s recommendation to the European Parliament on the discharge to be given to the Commission for its implementation of the 1996 budget. The recommendation, which the Council drew up under the UK Presidency, is based on the findings in the European Court of Auditors’ Annual Report.  The recommendation to grant discharge is accompanied by an in-depth commentary, which emphasises the need to learn lessons for the future from the Report and to focus not only on whether monies are properly accounted for, but on setting clear aims for expenditure and ensuring these are achieved as effectively as possible.
    • details of progress on the major areas of work under the Commission’s Sound and Efficient Management 2000 Programme.
  • HISTORIC PRESS RELEASE : Government Task Force on the industrial Use of Energy [April 1998]

    HISTORIC PRESS RELEASE : Government Task Force on the industrial Use of Energy [April 1998]

    The press release issued by HM Treasury on 9 April 1998.

    The Government Task Force on the industrial use of energy, chaired by Sir Colin Marshall, held its first meeting on 6 April.

    Sir Colin Marshall was appointed by the Chancellor, Gordon Brown, as announced in the recent Budget, to examine the use of economic instruments to improve the industrial and commercial use of energy, and to help reduce greenhouse gas emissions.  The Government Task Force will assist him in carrying forward this important exercise.

    The UK has taken a strong lead internationally on the issue of climate change.  Later this year, a legally binding commitment will be agreed as part of the EU’s undertaking at Kyoto to reduce greenhouse gas emissions.  All sectors of society will need to play their part in meeting this.

    Within industry, the Government believes that economic instruments may offer the potential to achieve greenhouse gas reductions most cost-effectively.  The Chancellor has asked Sir Colin Marshall to consider whether and, if so, how best to use economic instruments – such as an industrial energy tax and/or other market mechanisms – to improve the industrial and commercial use of energy and to help reduce industrial emissions of greenhouse gases.

    Sir Colin Marshall and the Task Force intend to consult widely throughout industry and with other interested parties in the preparation of the report, which the Chancellor has asked for by the start of November 1998.

    A consultation paper will be issued shortly, seeking responses as to whether, and if so, how best, economic instruments – such as an industrial energy tax and/or other market mechanisms – could be used to improve the industrial and commercial use of energy, and to help reduce emissions of greenhouse gases. All interested parties are invited to contribute their views at that stage.

    Sir Colin Marshall said:

    “I am looking forward to the work that lies ahead for myself and the Task Force.  These are truly vital issues. I want to give an opportunity to everyone who has an interest to feed in views, and hope that as many people as possible will take time to respond to the consultation paper.”