Tag: 2003

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, at 11, Downing Street, London on 25 February 2003.

I am delighted to be here today with Charles Clarke, Sir Roy Gardner and Bryan Sanderson – and to have this opportunity to welcome you all to No 11 Downing Street for the launch of the new National Modern Apprenticeship Taskforce.

The launch of this taskforce marks a step change in our campaign to bring employers together with Government, trade unions, the voluntary sector and other partners to improve the skills of our workforce.

First let me say that I am particularly pleased that Sir Roy Gardner has agreed to chair the Taskforce. Sir Roy has been at the forefront of employers’ work to promote modern apprenticeships and into the future Centrica will continue to be a leading example with around 50 per cent of their recruitment coming from the modern apprenticeship scheme.

And I would also like to take this opportunity to thank both Sir Roy and Ian Ferguson, the vice chairman of the taskforce, for the work that they have already done since the Pre-Budget Report, in partnership with the Department for Education and Skills, the Learning and Skills Council and the Treasury, to ensure that the taskforce will be both experienced and widely representative.

Skills are critical to an individual’s chances of success – to push a teenager into the world of work today without any qualifications is to put them at lifetime risk of poverty, failure and wasted potential.

And a skilled workforce is also essential for the wider health of our economy. As the global economy restructures itself; as advanced industrial economies move from low value added, low skilled production, to high value added, high skill products and services; and as global competition is challenging every industry and almost every service our target for skills – 90 per cent with skills by 2010, is even more necessary.

So we are combining flexibility with active intervention to provide skills, information and incentives to offer the best route to full employment.

Of all of this Government’s reforms over the last six years, the New Deal has been the most successful. Unemployment is lower than at any time for 25 years and 1.5 million more jobs have been created. Where there were 350,000 long term youth unemployed in the mid 1980s, there are now less than 6,000. And despite the impact of the global slowdown unemployment in Britain is lower than in the Euro Area, Japan and America.

But we are not complacent and in the next stage of the New Deal conditionality and compulsion will become even more important as we help labour markets to move more quickly to get people back to work and to prevent too many long-term unemployed falling through the net.

Just as we act to get those unemployed for long periods back to work, so we should consider measures to help the short-term unemployed move more quickly back into the labour force. And where there are barriers to the unemployed getting back to work it is right to extend both the opportunities and the compulsion of the new deal to make labour markets more flexible as we tackle the social and economic causes of unemployment.

And just as we will not flinch from introducing increasingly tough penalties for those who refuse to accept their responsibility to take the job opportunities on offer, so too we are prepared to offer high quality training to enable people to develop transferable skills.

Skills are Britain’s Achilles’ heel – 8 million people have below level 2 qualifications including 20 per cent of 18-24 year olds – and as a Government our ambition is nothing less than a revolution in standards across the education and skills sector.

So alongside our Employer Training Pilots, the University for Industry and ambitious targets to improve the basic literacy and numeracy of 1.5 million adults by 2007, we are offering more opportunities in scientific and technical education for young people and encouraging the development of workplace skills.

Through Educational Maintenance Allowances and improvements in post-school training we are expanding work-relevant qualifications – with more young people staying on at school, more going into further education colleges as well as university, and more enjoying modern apprenticeships.

Apprenticeships, which a few years ago were dying, have risen in number to 220,000 today – increasing to over 300,000 by 2004, covering services as well as the industrial sector – and our aim is that over a quarter of young people aged between 16 and 22 will take part in the scheme by 2004, with even more benefiting by the end of the decade.

And because we must not only provide high quality training when we have the recruits but ensure that more young people know about the opportunities available, we are expanding the modern apprenticeship scheme:

Encouraging girls as well as boys to consider careers in a wider range of trades;

Improving the information available in schools for young people interested in developing craft skills;

And persuading employers of all sizes to reach out and compete for new recruits through this framework.

This is a challenging task and the Modern Apprenticeship Taskforce that we are launching today will play a crucial role.

The Taskforce will bring together employers from sectors across the economy, trade unions, government and the voluntary sector to ensure that the modern apprenticeship programme continues to grow in breadth, quality and in numbers; that we deliver the best possible work-based learning to our young people; and that, in British industry and across the economy, we have the flexibility we urgently need to prosper.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, to the Future Wealth of Nations Conference held in Canary Wharf, London, on 4 March 2003.

It is a great pleasure to be here in Tower Hamlets today and to congratulate all of you – your MP, councillors, businessmen and women, local community organisations – on your success in the last six years since the New Deal was created of reducing unemployment in this area from over 6,700 unemployed to 4700 – a cut of nearly 30 per cent.

With youth unemployment down from over 900 to 300 – a cut of over 65 per cent.

If only one person had found a job that would be good…but you have working together, found jobs for nearly 2,000.

And I know you are and should be particularly proud not just of what you are achieving in employment now, but in education for the future where you’ve seen the greatest increase in educational achievement of any borough in the country – and I’d like to add my congratulations to pupils, parents, teachers and everyone involved on this great success. In particular I want to thank all the headteachers here today for the dedication you show and the difference you make to the lives of the children in this borough.

I am delighted to be here this morning and I’d like to begin by thanking Oona for organising today’s conference.

Over the last 6 years as Member of Parliament for Bethnal Green and Bow, Oona has made a real difference to the lives of people here in the East End, fighting their corner when there are problems, celebrating their successes and working hard to highlight the real opportunities this area offers.

Oona’s reputation both in Parliament and across government for speaking up on behalf of her constituents is renowned.

And if she lobbies businesses in Canary Wharf as hard as she lobbies me in the Treasury, many of you here today have my sympathy!

Oona is a tireless advocate for her constituents, and today is testament to the hard work she has put in to broker partnerships between business, the voluntary sector and local people.

Because we know that many problems once addressed only by the state gaining more power can be solved today only by the state giving much of its power back to the people. The Government is determined to do more to build, strengthen and extend the links between the public, private and voluntary sectors – and we can already see the results of these partnerships here in Tower Hamlets:

The local Employment Zone and Action Team – equipping people with the skills they need to move into the jobs that are available both in the City and beyond.

The East London Health Action Zone where business men and women act as mentors to local GPs.

The Ocean Estate and Weavers and Spitalfields Sure Start projects providing access to health, education and childcare services for nearly 2,500 under 4s.

The New Deal for Communities and local Neighbourhood Renewal Strategies which are helping turn round your poorest neighbourhoods.

And the “Idea Store” which is combining a traditional library with an innovative new learning centre and computer facilities.

All these projects showing how, for the first time, public services can not only involve private, voluntary and charitable organisations, but can be run through and by them – not implementing a standardised central plan, but reflecting the needs of local communities and families.

The private sector is already playing a key role in many of these projects and it is a privilege to be here to recognise the contribution that many of the companies represented here today, as well as many others, are making not just to the strength of the British economy but also to the strength and vitality of British society – as your support for community regeneration, employee volunteering, mentoring and so many other initiatives in our community shows.

And as you expand and advance an enterprising economy in our country you hold the key to our economic prosperity.

But you are here today because you believe that business also has a responsibility to play a role not just in the traditional marketplaces of our country but in the real life neighbourhoods and communities in which you find your employees and your customers.

And that is what this conference is all about – how corporate self interest and corporate social responsibility are not irreconcilable opposites but can move forward in unison.

And what is fascinating as you survey the changes over recent decades – as global communication and global competition has intensified – is the progress that has been made as our shared understanding of corporate social responsibility has developed and deepened.

An initiative that began by focusing primarily on businesses giving money away is now widened to include issues of how companies make money.

And in this modern era, issues of staff morale and motivation, brand loyalty and reputational risk, and environmental sustainability are now also widely recognised as key drivers of competitive advantage.

So as corporate social responsibility has come to mean not just charity or philanthropy but also greater transparency, environmental care and direct engagement in communities – we have seen British companies lead the world in the advancement of corporate social responsibility as it has moved from the margins to the mainstream, from the arena of charity to the arena of corporate strategy.

Corporate social responsibility broadening all the time into a belief that economic, social and environmental objectives can be pursued together and in harmony.

It is a recognition that trust is critical to success; that reputation management is essential; that a brand must enjoy people’s confidence.

It is a recognition that when business loses trust and then legitimacy – either through lack of transparency or social engagement or corporate irresponsibility, whether it be Enron or Worldcom – it is at its most vulnerable.

And it is a recognition that social responsibility is no longer an optional extra but a necessity; not a part of the business of a company but at its heart; not a sideshow but a centrepiece; not incidental but integral to what you do — a smart strategy for modern business.

And businesses up and down the country are already demonstrating that they understand that corporate self interest and corporate social responsibility – the good economy and the good society – advance together:

Businesses making its equipment available to the disabled, developing new technologies in doing so as they give special help to a vulnerable group

Companies setting up in deprived areas, recruiting the local unemployed and at one and the same time creating profitable local enterprises and bringing the out of work back into work

Firms sending trainee workers to help out in local charitable or community organisations helping poor communities and gaining training opportunities for their employees

Banks providing basic accounts for people previously financially excluded and thereby tapping new markets and creating a culture of saving amongst low income families.

And so many of you here today are already making a huge contribution.

But now is the time to look at what more can be done, to scale up your activities, share best practice, and make even more of a difference.

And with a new understanding of the changing role of business in the community, governments are also challenged to leave behind the old ideas that see the achievement of a more dynamic market economy and a fair society as somehow mutually exclusive.

For fifty years Britain was bedevilled by the sterile and self defeating argument that there was a fundamental choice to be made between promoting a dynamic economy and creating a fairer society. That enterprise is bought only at the cost of fairness and fairness only at the price of enterprise.

But whether it is by tapping the potential of all through equality of educational opportunity, or through recognizing, our responsibilities to the environment for the next generation, or through companies engaging in the community in which they operate, people now see that enterprise and fairness can advance together. And I believe the challenge in our generation is to build a consensus in our country that stretches from the poorest to the richest community, from left to right of the political spectrum, that instead of enterprise at the cost of fairness or fairness at the cost of enterprise, Britain can lead the way in showing the world that enterprise and fairness move forward together.

And all this demands that government too must change the way we do things and, in changing our ways, face up to our responsibilities.

That is why we will continue to make the tax system the best in the world for encouraging individual and corporate giving, including extending the 10 per cent supplement on payroll giving donations until 2004.

Why we are working with business and the voluntary sector to develop a package of measures to encourage more employees to give both time and money to charity through the “Corporate Challenge”.

And why in high unemployment communities like Tower Hamlets we are now working together for economic renewal – creating new incentives to promote greater business activity.

In the last six years the number of businesses in Tower Hamlets has risen from 6,800 to 8,700 – an increase of nearly 2,000 businesses in this area alone – but we can still do more.

If in the best off neighbourhoods there are 50 small businesses creating jobs but in the poorest areas only 4 or 5, then there are less jobs, reduced income for services, and yet because of unemployment more social problems that public services need to fund. So we are agreed that one of the best anti poverty, pro jobs programmes is to encourage more businesses to start up and grow especially in areas of greatest poverty.

I believe we should see inner-city areas not as no-go areas for business or simply “problem” areas but as areas of opportunity: new markets where businesses can thrive because of the competitive advantages they often offer – with strategic locations, untapped resources, a high density of local purchasing power and the potential of their workforce.

So to remove the barriers preventing firms from starting up and growing in our most deprived communities, we have designated 2000 new enterprise areas – 18 of these in Tower Hamlets – where we encourage economic activity by cutting the cost of starting up, investing, employing, training, managing the payroll.

And with the new Community Investment Tax Credit giving new incentives for business investment in those areas – and new charity guidelines now defining economic regeneration as eligible for charitable status – I hope that working together we can bring investment, jobs and prosperity to areas that prosperity has by-passed.

But if we are to have the deeper and wider entrepreneurial culture we want, we need not just greater incentives for business activity in deprived areas but more businesses to become involved in our schools and colleges – one of the key themes of today’s conference.

Currently only 30 per cent – and in many areas as few as 15 per cent – of young people gain any experience of enterprise.

And it is crucial that we act now to equip our children with the enterprising skills and experience to go out into this fast changing world, whatever career paths they choose.

In Britain we have many world class businesses but productivity growth still lags behind many of our competitors and the number of business start ups remains low with half the proportion of people in the UK actively considering starting a new business compared to the United States.

Whereas enterprise in the US is seen as an exciting career option for young people, it doesn’t appear so glamorous in the UK and I want to turn this perception around.

I want every young person to hear about, and experience, the world of business; every college to be aware of the opportunities in business, even to start a business; and every teacher to be able to communicate the virtues of business and enterprise.

I want businessmen and women going into schools helping to provide enterprise activities; I want every student to have a quality experience of enterprise and contact with business before they leave school; I want every community to see business leaders as role models for their children.

Our ambition is to raise the aspirations of all our children and then show how these aspirations can be realised.

That is why the government is implementing the recommendations of the Review of Enterprise and Education led by Howard Davies – investing £75 million over the next three years so that, by 2006, all pupils will have at least 5 days of enterprise education before leaving school.

But we simply cannot make progress without the active involvement of the business community itself.

There are already many examples of City and Canary Wharf companies that have established trailblazing partnerships with schools in Tower Hamlets – sending employees into schools to provide classroom support, giving pupils the opportunity to undertake work experience or visit factories and operational sites, being mentors and career counsellors to young people or serving as business governors.

Later this morning Mulberry School will be highlighting their partnership with the Bank of America but I could equally mention the contributions of Unilever, Merril Lynch, Morgan Stanley, Lehman Brothers, to name just a few.

When I was at school the world of education was far too remote from the world of business but thanks to the activities of many of the companies here today, this is changing for the better.

But I believe that we can still do more and so I am urging all of you here today to forge links and partnerships with schools and colleges in Tower Hamlets and beyond.

In this way every business in the country will be helping to forge the new enterprise culture that we want to see, tapping the immense skill and entrepreneurial talent that exists in Britain to the benefit of us all – corporate social responsibility not just about “doing the right thing” but a core part of improving our competitive edge.

Now we have many demands on our resources and energies as a government.

And I make no apology for saying we will spend what it takes to prevent the proliferation of chemical and biological weapons by states that defy the international community and to advance the cause of disarmament. Last year I set aside one billion pounds to be drawn upon by the ministry of defence for security and military preparations, if and when it became necessary. Last month I set aside an additional £750 million. Our armed forces do an outstanding job for Britain and today I make clear our gratitude for the work that they do and my resolve to ensure our armed forces are properly supported for whatever lies ahead. The international community must not stand by whilst a regime that proliferates weapons of mass destruction defies more than a decade of international agreements.

But while we discharge our international responsibilities we will also discharge our domestic responsibilities.

And my duty is to those areas and communities of this country which for too long had suffered high unemployment and high levels of deprivation who will have the resources through the new deal and our community regeneration budgets that are necessary. It is around regeneration and how we deliver it that this conference will discuss and debate today. And I believe with its breadth of participation from business and the community this conference shows there is a will to work together to create a Britain where just as employment is open to all, enterprise is open to all – a Britain with a creative, innovative and enterprising economy in every area of our country.

Just as Britain works best when Britain works together so – as Oona’s initiative shows – Tower Hamlets works best when Tower Hamlets works together.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, at the British Chambers of Commerce’s Annual Conference held in London on 31 March 2003.

It is a pleasure to be here this morning and to have the opportunity to thank all of you here for the contribution you make to the success of the British economy.

Your dynamism, your achievements, your success for Britain is evidence that Britain truly is an enterprising nation.

You are the wealth creators, the men and women who make our nation more prosperous

And with over 135,000 businesses as members, the British Chambers of Commerce are a powerful voice, championing the cause of businesses across government and around the country.

And I want to congratulate your chief executive and staff for their work — and your new president Isabella Moore for the work she does regionally, nationally and internationally to make that voice of the British Chambers of Commerce count for Britain.

Madam President, today our country is having to deal with a new security threat: the danger from states with weapons of mass destruction and the risk of those weapons falling into the hands of terrorists.

All of us know families who have someone in the armed forces in Iraq.

All of us will wish to send them our best wishes in all they do and achieve for our country.

All of us will wish to send condolences to the families of the 25 British servicemen who have sacrificed their lives.

And all of us will wish to ensure that the armed forces are properly equipped for the future.

So I can tell you that I have set aside a total of 3 billion pounds in a special reserve to be drawn upon by the armed forces where necessary, so that we can honour the commitments we have made to our forces.

Between us Europe and the United States account for 70 per cent of the world’s output.

And I believe that, as Tony Blair has said, one of the lessons of the United Nations debates over Iraq is that both great continents should recognise that we do better as partners not rivals, not at odds with each other but true allies in creating both peace and prosperity round the world.

We know that Europe and America have military ties in NATO that have bound us together throughout the tense cold war years in pursuit of peace.

I believe we must create as strong economic and political ties so that together in these dangerous post cold war years we can work together in pursuit of peace and prosperity.

And so we must strengthen not weaken our links, and deepen and widen the transatlantic alliance.

And so I propose that we act to remove the remaining industrial tariffs that divide us and cause unnecessary trade disputes.

I propose we liberalise services across Europe and America.

I propose we agree a more consistent approach to competition policy.

And I propose in the same way that in the 1980s the Cecchini study demonstrated that cooperation in Europe would bring growth, jobs and prosperity, we examine and demonstrate the gains in jobs, output and prosperity from breaking down the barriers that frustrate trade and commerce between the USA and Europe. We should recognise that when Europe and America are set apart from each other everyone loses but when Europe and America work as one in partnership there is little that we cannot achieve for the world together.

President, in the last few months a hesitant global recovery has been stalled as the oil price has fluctuated widely, world trade growth has been slow and, partly because of all the political uncertainties, global equity markets have fallen.

And I understand the concerns that this uncertainty causes for businesses, large and small

I know the difficulties you as manufacturers and service companies trading in a world economy face when twenty of the world’s biggest economies, accounting for sixty per cent of world output, have been in recession.

I know the effect on business investment when, continent-by-continent, through America, Europe and Asia we have had to face the first simultaneous world slowdown for almost thirty years.

The recent volatility in global stock markets – with US markets now down 43 per cent since their peak, UK markets down 47 per cent, France down 61 per cent and Germany down 69 per cent – has demonstrated once again that no country can insulate itself from the ups and downs of the world economy.

But it is because you and I have understood that monetary and fiscal regimes must work to create stability in challenging times as well as good times that — with the independence of the Bank of England, our fiscal rules to put public finances in a sustainable position and tough decisions in 1997 on deficit and debt reduction – we sought to ensure that Britain is better placed than we have been in the past to deal with economic challenges and ongoing risks.

Instead of being, as in previous downturns, first into recession, the country that normally suffers most, Britain has continued to grow in every quarter over the past six years while other major economies have been in recession.

And I am confident that, tested in adversity, our monetary and fiscal regime built around the Bank of England is demonstrating its credibility and resilience. And I can assure you that as a government we will take no risks with our hard won stability.

And even in these difficult times with growth slower round the world and the extra costs of military action I can tell you that because of the tough decisions we have taken we can and will fulfil all our commitments and at the same time meet our fiscal rules and disciplines.

At this time of uncertainty for the world economy, it is important that each continent plays its part in maintaining the conditions for stability and growth.

In the US reforms are underway to tackle an issue that has affected confidence: to improve corporate governance and auditing and accounting standards. In Japan there is reform to the financial and banking sector.

Growth in the Euro area is forecast be only around 1 per cent for the third successive year – the longest period of low growth for a decade.

And so as we continue to push for further economic reforms in Europe to promote flexibility and growth, we must not allow the current uncertain outlook for the world economy to be an excuse for a slowdown in the momentum of reform.

In particular, we need a stronger and more independent competition policy for Europe with the European competition authorities undertaking pro active investigations into markets and sectors that need opened up to the pressure of competition and prevent British firms from being excluded from European markets.

In the same way we must, as you have urged us today with your productivity proposals, keep up the pace of reform and liberalisation and the push for greater flexibility in Britain.

In the last few years when we, the government and the Chambers of Commerce, have worked together we have, thanks to your efforts in every region. We have achieved, even during a world downturn, a great deal.

America, Germany, Japan – our strongest competitors – have been in recession but it was because you insisted that creating economic stability was the challenge that mattered most that with Bank of England independence we have enjoyed:

– the lowest inflation for thirty years;

– the lowest interest rates for over forty years; and because of that stability achieved the longest period of sustained growth for fifty years.

You told us that if we maintained a stable economy you as businesses could create large numbers of jobs in every region of the country.

And it is because of your efforts that I can report to you that today, despite all the difficulties round the world, Britain has the highest levels of employment in our history:

– 150,000 jobs in the last quarter of the year;

– 253,000 more jobs created in the British economy in the last year;
In total 1.5 million more people in work since 1997.

Unemployment in France is 9 per cent, Germany 9 per cent, Italy 9 per cent, in the new European Union of 25, 9 per cent, but in Britain 5 per cent.

Britain’s unemployment lower now than not only the euro area but lower than in Japan and America too for the first time for nearly fifty years.

And just as you asked us to give priority to stability and the environment for job creation, so you have asked us to remove the barriers to growth and prosperity and to tackle bureaucracy and regulation.

You asked us to look at small business corporation tax so that we could reward entrepreneurship and encourage new investment

So we cut small business corporation tax from 23p to 20p and then to 19p last year and then at the same time we abolished the 10p tax rate and ensured that the first ten thousand pounds of profits are taxed at zero.

You asked us to look at capital gains tax which had for years been set at 40 per cent and discouraged new investment.

Amidst all our other priorities – the health service, schools, transport, policing – we decided that it was right to reduce capital gains tax from 40p to 10p for business investments held for two years or more and make it easier for men and women selling their business on retirement to receive more of the benefit of their hard work.

You asked us to look at the complexity of administering VAT.

So instead of having to account for every transaction we now have an automatic VAT calculation for small businesses and we are lifting the burden of VAT red tape off the shoulders of nearly half a million companies, enabling each of them to save up to 1,000 pounds in compliance costs – with another 200,000 firms due to benefit next month.

And today we are publishing a new, simple and straightforward guide to setting up in business — giving entrepreneurs the advice and support they need as they take their first steps.

Do you remember when back in 1991 John Major complained that “you need 28 separate licenses, certificates and registrations just to start a business”?

That’s why, taking your advice, we’ve reduced the cost and time it takes to form a business so that Britain is now best in Europe for quick and efficient business start ups.

Where in the rest of Europe it takes around 4 weeks and an average of 600 pounds in red tape costs: in Britain just 1 week and only 30 pounds in administration costs.

And we need to do more. That’s why we’re not only assessing whether each regulation, past and present, is really necessary and why we’re urging Brussels to do the same.

You asked us also to look at how banks and financial institutions meet the needs of small business. That’s why we accepted the recommendations of the competition commission requiring the big four banks to offer you either interest or free banking and that’s why we’ve set up the Phoenix Fund, regional venture capital funds and have now extended the Small Business Loan Guarantee Scheme to include access to finance for a wider range of firms including catering, retail and vehicle repairs.

And here too we’ll continue to listen and do more.

We heard you when you called for tax reliefs to promote research and development – help to turn your ideas into new business, jobs and profits. And so we have amongst the most generous system of R and D credits in Europe. And here again we want to do more.

And we heard you when you called for incentives for investment so we have made capital allowances for small and medium sized businesses permanent with a 100 per cent allowance for investment in IT.

And when you, rightly, have raised the question of the national insurance tax rise, let me say that there would have been no need for any tax rise had it not been for the rising costs in every part of the world – Europe, America, Japan and Asia, of new life-saving health technologies and the urgent need for greater capacity in British health care.

In America employers health costs, paying for private insurance, have risen 24 per cent in two years and employers are paying much more than in the UK – whether it is in America with private insurance of France and Germany through employers’ social insurance

And I can tell you that in Britain’s case the changes have been costed to fund health care improvements not just for this year and next but for the next five years, and we have insisted on the extra money – 40 billion pounds a year extra for health by 2008 – not only delivering a total of 74,000 nurses and 25,000 doctors between 1997 and 2008 but made dependent on reform to ensure greater results.

Last year, your then president Anthony Goldstone, told this conference that business pays “a higher price than most when the NHS does not operate as it should.” And he said “We in business know that we get what we pay for. If we want a world-class health service in the UK we need to pay more.”

And when nearly 200 million work days a year – at a cost to business of over 10 billion pounds – are lost due to employee sickness and ill health; and when a fitter, healthier workforce will raise productivity to the benefit of business and Britain, I hope the business community will join the secretary of state for health, Alan Millburn, in insisting on best value for money so that every penny we invest in health ensures value for money.

And we hear you today when you argue for a budget for productivity.

Let me tell you how I plan to proceed.

Globalisation means that there is hardly a good we produce here in Britain that is not subject to intense competition from at home and abroad — competition not just from traditional competitors in the advanced industrial economies but competition from emerging market economies not least in Asia and the east of Europe — competition which is itself a spur to growth and prosperity.

Twenty years ago, even ten years ago, it was just about possible – if costly and wrong – for countries to shelter their industries and sectors, protecting them from global competition.

But today there is no safe haven, no easy escape from global competition without putting at risk long-term stability, growth and employment.

Because investment will flow most to those countries that are the most stable, and ever more rapidly away from those that risk stability, there is an even greater premium than before on governments running a stable and successful monetary and fiscal regime to achieve high and stable levels of growth and employment.

So in Britain I can assure you that stability will be maintained and entrenched.

Globalisation also describes a world whose very mobility of capital and openness to competition is ushering in a restructuring of industry and services across continents. And while emerging market countries are ready to attract low value added, low investment and low skilled work, we have to compete on ever higher levels of skill and technology rather than ever lower levels of poverty pay.

It is for this reason that in our recent spending review we decided to match new resources to major reforms in education, science and innovation.

But because high levels of productivity growth are essential to high levels of growth and employment, there is a third essential response to globalisation that distinguishes the successful high employment, high growth economies from the least successful – in an open harshly competitive economy we must be able to adapt continuously and quickly to change and this demands, at a regional and local level, a new flexibility in labour, capital and product markets.

Indeed the paradox of globalisation is that it puts more emphasis on the local

The more we are interdependent, and thus the more our regions face intense global competition, the more successful will be the regions and localities that have the flexibility to adapt to change.

And it is because production need no longer be based where the raw materials or ports are and producers can choose where they wish to locate that the regional economies that are the most flexible will be the magnets for inward investment, will retain their skilled people, will attract more to join them.

So you are right as chambers of commerce to seek a British economy

– founded on monetary and fiscal stability;

– built on high levels of investment and skills; but also driven forward by a new adaptability and flexibility where the local and the regional voice is not only respected but seen as critical to economic success.

Run by local business for local business, your chambers of commerce have always been at the forefront of the demand for vibrant local and regional economies.

Indeed your whole history as a movement has been to stress

– the importance of the local and the regional;

– that Britain has not one centre but many centres of initiative in our regions and localities;

– that our economy’s strengths comes through our economy’s diversity;

– that empowering the local and the regional makes sense not just for the good society but for the good economy too.

The old idea in regional policy was of help directed from the centre.

The first generation of regional policy, before the war, was essentially ambulance work getting help to high unemployment areas – central government providing first aid.

The second generation in the 1960s and 1970s was based on large capital and tax incentives delivered by the then Department of Industry and then overseen by Brussels

Both were inflexible and both were top-down.

You know better that anyone that Whitehall and Westminster alone will not close the gap between the regions of high unemployment and regions of low unemployment and that we cannot increase employment and prosperity in the north or midlands, in Scotland, Wales or Northern Ireland, just by passing laws and regulations in London.

So the third and new generation of regional economic policy measures seek to strengthen the indigenous sources of growth – local enterprise, local innovation, local infrastructure, local skills and the local labour market.

And the way forward for each region is local people making more decisions locally about meeting local economic needs.

I applaud your president for her involvement as a leading member of her local regional development agency – Advantage West Midlands – and I know many of you take an active interest in your RDA, your Learning and Skills Council and your local New Deal.

And we want to back up your efforts with new measures that can make a difference.

First enterprise itself.

In the UK just 5 per cent of adults think of starting a business, in the United States it is 11 per cent, so we have a long way to go.

And there are also large variations in the rates of business creation between areas of the UK.

When some areas have ten times the number of start-ups than others we know the effect of economic activity, confidence, jobs and prosperity

Small business corporation tax has been cut everywhere.

But to remove the barriers preventing firms from starting up and growing in our most deprived communities, we have designated 2000 new Enterprise Areas with new incentives

I can tell you that here we are cutting the cost of starting up, investing, employing, training, managing the payroll.

Here we are bringing together industry, planning, employment and social security policies to tackle local property market, capital market and labour market failures

We start with the abolition of stamp duty for business property and residential purchases

We cut the cost of investing with the new community investment tax relief

Here we are urging local authorities to relax planning regulations

—- government and business working together to bring investment, jobs and prosperity to areas that prosperity has still by passed.

And, from April 2003, in schemes in the East and West Midlands and the North West, the small business budget will be locally administered with the RDAs — improving the delivery, effectiveness and coordination of business support management at the regional level.

Take innovation.

Some regions spend 3.5 per cent of GDP on R & D but others just 0.5 per cent.

Yet every successful region must encourage its scientists its inventors and its innovators.

Our regional and local approach means we are already moving from centrally administered R and D policies to the encouragement of local technology transfer between universities and companies and the development of regional clusters of specialisms – encouraging the growth of the knowledge-based company and the business friendly university through:

New research and development tax credits for large and small businesses;

An extra £1.25 billion pound investment in science;

Capital investment in higher education research increased to £500 million a year by 2005;

And the new round of the higher education innovation fund encouraging the translation of research into business innovation.
But we can do more to encouraging the development of new local science and industry partnerships like the North West Science Council and the technium schemes in Wales — developing links between businesses, universities and other regional agencies to support the development of hi-tech industry clusters.

The Department of Trade and Industry is now consulting business on how we can improve the UK’s innovation performance and we have asked Richard Lambert, former editor of the Financial Times, to examine how business-university interaction can contribute to productivity growth – with both reviews reporting in late summer 2003.

But we must do more.

To reverse decades of under investment in our infrastructure the government will have invested nearly 2.8 billion pounds more in real terms in housing by 2006 and 6.7 billion a year more in transport. And through devolution to the regions, what we spend and how we spend on housing and transport is increasing decided regionally and locally – local people making local decisions about local needs.

And take planning. You know the delays, complexities and frustrations of the planning system.

So I hope you will welcome not just our attempts to change the planning culture and make it more responsive to your needs but our proposal for business planning districts where detailed permissions are relaxed.

Now in skills too we are moving from a national one size fits all approach by devolving 90 per cent of the learning and skills budget devolved to promote regional excellence.

The more skilled men and women there are and the more they are willing to develop new skills, the more flexible and productive the economy is likely to be. And the more globalisation opens up the world economy to fierce competition across continents the more competitive advantage countries like Britain will gain from a higher level of skills

Yet despite our successes at university and college level, skills – particularly in basic and intermediate qualifications – are Britain’s Achilles heel —- the most worrying inflexibility of all within our labour market.

So Charles Clarke the Education Secretary is right to forge a new partnership between government, employee and employer with a view to expanding our skills and making labour markets work more flexibly.

We are expanding the employer training pilots now operating in six areas to around a quarter of the country — offering incentives for firms to give their staff paid time off to train towards basic skills and NVQ level 2 qualifications.

From April, we are piloting devolved pooled budgets for adult learning in four areas of the country

And looking to the workforce of the future we are not only investing to improve standards in schools but, through the work of the national modern apprenticeship taskforce, examining how to increase participation in modern apprenticeships and engage employers – particularly those running small businesses – more fully in the programme.

And we need to extend our approach of encouraging regional and local initiatives from R and D, skills, small business, transport and housing policies to the critical area of employment and welfare policy

Without the New Deal – in which so many of you here today have played your part – youth long term unemployment would be twice as high. And today inflows to jobseekers allowance are at their lowest since records began.

But after six years of a national programme I am more convinced than ever that if we are to get more of the long term unemployed back to work, and more successfully fill local vacancies we need to match our national framework of incentives and sanctions with more local discretion and flexibility.

So it makes sense for job centres to develop programmes more sensitive to, and tailor made for, local and regional conditions and to have greater local powers and new resources to match vacancies to jobs more quickly, to meet local employment and skills needs and of course to stop too many long term unemployed and young people falling through the net.

So we should consider extending the areas of job search for the newly unemployed and as we combine flexibility with help for people coping with change we are prepared to do more help with initial transport costs and other costs the unemployed incur in returning to work. At all time insisting that new opportunities to obtain jobs are matched by new responsibilities to take the jobs on offer. And side by side with a more regional approach to employment, a more considered approach to local and regional conditions in pay also makes sense.

So a new agenda opens up for each locality and region in our country – as we invest locally in enterprise, infrastructure, innovation, skills and employment opportunity

I said that building ever more successful communities and regions depends on the innovation, creativity and involvement of businessmen and women like yourselves across the country:

The leadership and vision you demonstrate;

The growth and innovation you achieve;

The new technology that you develop;

The new markets you identify and create;

The needs of consumers that you meet.

And the jobs and wealth you create

By disseminating the lessons learned from the most successful businesses – your skills, your innovations, your achievements – throughout the business community and beyond we can go further and help inspire the business leaders of the future.

I believe even the highest unemployment community can over time become an enterprising community.

And creating that entrepreneurial culture which matters so much to the future of Britain cannot be achieved without success in the boardroom but can only be achieved by starting in the classroom.

Exciting changes are taking place across the country.

When I was at school no business was ever invited in.

And the world of education was remote form the world of commerce

Now hundreds of thousands of secondary school children and now thousands of primary school children are getting introduced to business and commerce in the schools

I know the British Chambers of Commerce will join us in our attempts to give every pupil the opportunity not just of work experience but of enterprise education in our schools

I believe our country will be a stronger more successful nation when once again young people see you, our local business leaders, as role models for what they aspire to and want to achieve in the future.

In this way, business and government working together, I know we can tap the immense skill and entrepreneurial talent and potential that exists to build a Britain where no one and no community is left behind and where there is opportunity and prosperity for all.

Once again in every locality and region the chambers of commerce are leading the way.

And starting from the economic stability, the low inflation, low debt and sound public finances I am pledged to deliver, I look forward to continuing to work with you as we build the Britain you want: not just a Britain of opportunity for all but a Britain of prosperity for all.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, at Robert Gordon University, Aberdeen, on 17 April 2003.

It is a great pleasure to be here in Aberdeen today to celebrate the opening of your new faculty of health and social care – providing hi-tech facilities to train the nurses, doctors, radiographers, physiotherapists and social workers of tomorrow.

With the completion of this new state of the art faculty and the expansion of your teaching, learning and research facilities, Robert Gordon University is entering a new era. And I want to congratulate this university – which has advanced confidently from school to technical college to institute of technology to university – on its quality, diversity and its growing importance as a centre of knowledge, ideas and technological expertise for the Scottish economy.

Everywhere I travel in Britain and beyond I can be proud of Aberdeen – not just the granite that built the terrace of the House of Commons where I work and the 640,000 tonnes of Aberdeen granite that went into the Forth Bridge a minute or two from where I live, but the contribution that the people of Aberdeen make in so many areas – not least from an outstanding record in making the most of North Sea oil for Britain – to our prosperity.

And it is a privilege to be speaking here at a time when, despite a downturn in the world economy, in which two million jobs have been lost in America, 53,000 more Scottish men and women have moved into jobs in the last year – clearly demonstrating the importance of Scotland to the whole of the British economy.

And it is a particular pleasure to be in Aberdeen because here at Robert Gordon University the people of Scotland are putting their faith in the future by investing heavily in its great educational facilities.

In 1997 our two first decisions as a government were to make the Bank of England independent to achieve economic stability and to recognise that the countries that will succeed in the modern world will succeed not by taking a low road of low tech, low skills, low wage competition but a high road of high skills, high technology, high valued added investment and that we must therefore invest in science and skills.

So as companies scour the world for new ideas, the high quality science and skills that are the mission of ambitious educational institutions like Robert Gordon are the assets on which future growth depends.

There have been three eras of regional policy in the United Kingdom.

The first generation of regional policy – from the 1930s – was simply first aid for depressed areas.

The second generation of regional policy – from the 1960s – consisted of large incentives to attract inward investment.

Now, instead of simply relying on others to invest in our country, Britain is advancing to the third generation of regional policy – a policy that combines the encouragement of inward investment with the encouragement of indigenous companies through developing Scotland’s own science and skills strategies. And universities like Robert Gordon that concentrate on skills and science are absolutely pivotal to its success.

Recognising that our prosperity is driven by productivity – and productivity driven by innovation, enterprise, competition – the commercial exploitation of knowledge – Scotland’s first intermediate technology institute is rightly being launched here in Aberdeen – a joint project between Robert Gordon and Aberdeen University which aims to strengthen links between the universities and local business; encourage the development of high growth, hi-tech energy companies; and significantly increase the level of business research and development right across Scotland.

The intermediate technology institute is one of three, part of a £450 million investment in the future of the Scottish economy designed to create and grow new hi-tech companies for the future .

I hope that by abolishing royalty payments from the North Sea I have helped the North Sea industry make its future investments .

Last week in the budget I was also able to abolish the petroleum revenue tax on new tariffing business in the North Sea.

And alongside these new tax incentives the new investment at Robert Gordon makes Britain a world leader in the development of energy. It is Scotland competing for the future on the best basis – on high skills not low pay.

And backing up our intermediate technology institutes are

Across the UK:

· An extra £1.25 billion pounds invested in science

· New research and development tax credits for large and small businesses – which are now being even further improved;

And in Scotland:

· The £33 million pound “proof of concept fund” – encouraging the translation of research into business innovation

· Enterprise fellowships – helping young research fellows take the step from academia to business by providing financial support and tailored advice

· And the “smart Scotland” and “spur” schemes – supporting small businesses as they develop new, innovative and commercially viable products.

Our future demands we sponsor not just a science revolution but also a skills revolution.

Because nobody wishes Britain to compete on the basis of low pay but on high skills, the right to the highest quality of education to 16 must be complemented by the right to the highest quality of lifelong learning: a classic case of social justice building economic strength.

I believe a quiet revolution is taking place transforming the chances of young people to gain the skills they need.

When I went to university, less than 10 per cent of my age group did.

Look at what is happening now here in Scotland.

Even ten years ago just 40 per cent of teenagers were in full time education.

Today the figure is 55 per cent of 16 to 19 year-olds.

And added to that as the modern apprenticeship scheme takes root 13 per cent of 16 to 18 year olds – over 20,000 – are taking part in modern apprenticeships – compared to just 5,000 in 1997.

And as we help all young people gain skills and jobs the new deal – which John Milligan, Chairman of the Scottish Welfare to Work Taskforce, leads in Scotland – has, since 1997, offered hope to 100,000 young people in Scotland with nearly 50,000 moving into jobs.

Long term youth unemployment – once 40,000 – is now just 282.

And now having already raised lone parent employment in Scotland from a minority of lone parents in work to a majority, we will soon be working with companies to pioneer in Glasgow a multi-million pound new initiative that will help hundreds more lone parents gain the skills and confidence to take up work. Many lone parents will be £50 – £100 a week better off in work.

But there is a great deal more to do.

In all nearly one million Scottish adults in the workforce lack basic qualifications.

Despite educational progress 14 per cent of today’s 16 to 19 year olds – 35,000 young people – are not in work or in full time education or training.

And every summer more than 3,000 young people leave school with no educational qualification to show for their 11 years at primary and secondary school

That’s why, as in England, the Scottish Executive is rolling out educational maintenance allowances from next year -providing young people from poorer families with up to £1,500 a year to encourage them to stay on at school and get the qualifications they need.

That’s why we’ve made record investments in our schools and colleges: by 2006 a 66 per cent increase in funding for the Scottish Executive’s education and young people’s budget and a 50 per cent increase in further education funding and more than 40,000 more college places.

Apprenticeships, once withering away, will rise by 2006 to nearly 30,000 across Scotland.

So within our grasp is the realisation of the vision, central to Scottish education for more than a century and to the aspirations of this institution’s founders, that every young person leaving school should either be in work with training or able to go to college or university.

Our future depends on the encouragement of science and skills but also the encouragement of enterprise, again a central feature of this institution’s history.

But when small business creation rates in the poorest areas of Scotland are almost one quarter of the most prosperous, we know we must do more

The chance to start a business should not depend on your background, contacts or just luck. In every area of Scotland I want the enterprising to go as far as their talents and potential can take them.

So in the Budget earlier this month I announced new incentives for small business creation in the 130 most deprived places in Scotland:

· To cut the cost of property purchase, stamp duty abolished

· To cut the cost of initial investment, the prospect of enhanced capital allowances

· To cut the cost of risk capital, the community investment tax relief and proposals for a community venture capital fund.

In this way, we are bringing businesses and jobs based on science and skills to Scotland’s unemployment blackspots and poorest communities – and demonstrating the choice between our vision of a high skill, high investment, high productivity, full employment economy against what I see as plans from others that would put at risk economic and political stability and threaten employment.

And we’re also preparing for the future by doing more to bring schools and businesses closer together.

It is important that every young person across the country gets the chance to find out what business and enterprise are all about.

When I was at school, businessmen and women rarely visited schools and school pupils seldom went for work experience to business firms

The world of business was remote from the world of education.

I remember a visit from the national coal board…but I cannot remember a private businessman or executive or manager visiting our classrooms.

Today, things are changing. A quiet transformation in links between schools and business is starting to take shape. And I congratulate John Milligan for his groundbreaking Aberdeen schools partnership.

Under the leadership of Tom Hunter, Chris van der Kuyl and Iain Gray, the Scottish Executive is working with Scottish businessmen and women to ensure that Scottish children enjoy “education for the world of work” at not just secondary schools but in primary schools too.

Soon every pupil in Scotland will be given the chance to gain an insight into business and entrepreneurship before they leave school.

And a key element in the Scottish plan is encouraging universities and business to work together through the Scottish Institute for Enterprise.

The aim is to create a Scottish culture of entrepreneurship from the classroom to the boardroom.

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

In this way, working together, we can build a new enterprise culture where enterprise is truly open to all.

So, as I thank you for inviting me here today and for awarding me an honorary degree , let me congratulate you . Over the last few years, Robert Gordon University has gone from strength to strength – providing high quality teaching and research, and generating ever-increasing benefits for the businesses in the surrounding community – and I know that this energy, coupled with the wonderful new facilities opened today, will ensure it continues to thrive for years to come.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, at the CBI Annual Dinner on 20 May 2003.

I am delighted to speak to the CBI Annual Dinner.

To pay tribute to the contribution you as Britain’s business leaders make to our economy.

And say that it is a privilege to work with you, both individually and through the CBI, as together we build, for our country, a stronger foundation of economic stability, we increase employment, champion enterprise and enhance Britain’s competitive and trading position round the world.

The context for my remarks this evening is the changing global economy.

Today Britain is challenged not just by the short-term cyclical changes in the global economy but by an ongoing, long-term restructuring of global industry and services, and it is our duty to work with you to remove all the barriers to enterprise, productivity and growth.

That is why in the recent Budget and next Budget our focus will be on flexibility:

– continuing reforms of capital gains tax and corporate tax to encourage and reward investment;

– new help for small and medium sized companies seeking to invest and innovate;

– further reforms to reduce planning delays and expand the highly skilled migrant programme;

– improvements to the R&D tax credit to make our R&D incentive the best in the world;

– permanent capital allowances that are of particular help to manufacturing;

– continuing partnership with business in our successful Private Finance Initiative;

– and new measures to improve skills with an extension in the already successful employer training pilots —- showing enterprise and fairness advance together.

These reforms reflect the modern role of government – that we should work with business to break down the barriers to enterprise so that we can ensure that men and women with ideas have access to the finance, technology, advice and skills they need to transform their insights and initiative into business success. And in our reform and modernisation of our health, education and public services we – as a Government – wish to draw upon your business expertise.

At each point, it is the duty of government to ask: what does Britain need?

I believe it is a government with the strength to take the right long-term decisions for the long-term national economic interest of Britain.

And, as I have said on each occasion we have met, what matters most is to ensure the right long-term decisions on stability.

And this is more important than ever at a time of global uncertainty.

I understand how major international companies are hit by the sharpness of the contraction in world trade growth. And I understand the impact on business investment intentions of the first simultaneous world slowdown for thirty years.

Recent events have demonstrated once again that in a global economy there is a premium on monetary and fiscal stability.

And it is because you and I have understood that monetary and fiscal regimes must work to create stability in challenging times as well as good times that — with the independence of the Bank of England, our fiscal rules to put public finances in a sustainable position and tough decisions in 1997 on deficit and debt reduction — we sought to ensure that Britain – with the longest period of sustained low inflation since the 1950s and the lowest interest rates for thirty five years – is better placed than we have been in the past to deal with economic challenges and ongoing risks.

In the last few months we have remained vigilant as a hesitant global recovery has been stalled, the oil price has fluctuated widely, world trade growth has been slow and, partly because of all the political uncertainties, global equity markets have fallen.

And I am confident that, tested in adversity, our monetary and fiscal regime built around the Bank of England is demonstrating its credibility and resilience. And I can assure you that nothing will be done in future that puts that basic stability at risk.

But I now believe the world economy is ready to move forward. I have just returned from meeting my colleagues in the G7 and it is our view that with inflation low, geopolitical uncertainty now lessening, with the oil price coming down and with action over corporate standards, the previous impediments to growth are being removed.

And not just in Britain but in the euro area a modern route to economic stability is being sought — based on a shared recognition that the old fine-tuning cannot work, that in liberalised markets rigid monetary targets cannot on their own deliver stability and that the discretion necessary for effective economic policy is possible only within a framework that commands public and market credibility.

And there is, I believe, also a growing understanding that this credibility depends upon clearly defined and publicly understood long-term policy objectives.

So just as we in Britain are examining how we advance, the European Central Bank has been reviewing its monetary policy strategy and European governments are rightly also looking at how the Stability and Growth Pact can work most effectively.

The prize is regimes that are able to respond proactively and appropriately when world economic circumstances change.

The test for any government at any time, but particularly at times of challenge, is whether they have the strength to take the tough decisions in the long-term interests of the country rather than opting for the short-term quick fix.

When we came into power many in my Party thought it wrong to make the Bank of England independent, set an inflation target of 2.5 per cent and separate monetary decisions from fiscal decisions.

And having had the strength as a Government to reject the short-term attraction of retaining decision making over interest rates and make that long-term decision, most now agree Bank independence was right for the long-term national economic interest of the country.

When we came to power many also objected when the Government said that to cut debt and achieve fiscal discipline we had to freeze public spending for two years.

But having had the strength as a government to reject the short term temptation to meet pent up demands for more spending and having made that long term decision, most now agree it was right in our long term national economic interest.

And, in the same way, we will have the strength to reject short term or quick fix options and we will make the right long term decisions on Europe.

So we will reject the view of those who would rule out membership of the single currency even if it were in the national economic interest to join.

Ruling out membership on grounds of dogma not economics would in my view be damaging for investment, jobs and business.

But we similarly reject those who would urge us to join irrespective of the rigorous assessment of the five tests that define the long-term national economic interest.

I believe that membership of the euro can bring clear benefits to Britain in trade, investment and growth – benefits to British business, consumers and jobs. And our assessment will set them out.

But I also know that to repeat the ERM mistake and take risks with stability is not in the national economic interest.

So if, based on the five tests assessment, the economics are right we should join. If the economics are not right, we should not.

And it is only by showing that at all times we advance the national economic interest that I believe we can build the pro-European consensus that has eluded Britain for so long – a consensus that is essential for Britain if we are to play the effective role we want in Europe and the global economy.

For we know that around not just the euro but around the future of Europe as a whole there is an ongoing debate.

And I believe we can build a consensus in Britain about Britain’s future in Europe as we also build a consensus in Europe about how, together, we equip ourselves to succeed in the global economy.

Indeed, all the policy questions of enlargement, economic reform, the European convention, Europe’s trading relationships revolve around one central question: how Europe adjusts to the challenge of delivering stability and prosperity in a global economy.

Two decades ago the authors of the single market and the single currency rightly believed that the nation state was, and would be increasingly, too small for all the big economic issues confronting us all.

Yet a great deal has changed since the single market and single currency were first conceived.

Those who in the 1980s thought that we would move from being economically integrated at a British level to being economically integrated at a European level have only been partially right as, increasingly we become integrated not just at a European level but at a global level.

So instead of seeing Europe as a trade bloc sheltered from the rest of the world, with a focus almost exclusively on its internal markets and agriculture, our policy decisions for Europe must now be made in this new context: an ever more open and extensive globalisation in which Europe looks outwards and the countries that will do best are the countries that are flexible, open and outward looking.

This is of huge significance to the kind of Europe we need and the role Britain can play.

Adjusting to globalisation is why, as I will show, the debate in Europe has moved to economic reform – how Europe adapts to a more intensely competitive global economy – and how even the debate on tax has moved from harmonising internal rates to tax competition – being competitive in a global economy.

So the new debate about Europe’s future is no longer – as it was in the 1980s – how a single trade bloc organises its internal markets, independent of the rest of the world, but how all of Europe, thinking globally, can be outward looking, meet global competition and reform to do so – and thus benefit from global change.

And this allows Britain to enter a new and more positive stage of its relationship with the rest of Europe.

There have been three phases in Britain’s economic relationship with Europe since 1945:

– the period until the 1970s when as the British empire we defined our national interest as being at a distance from Europe;

– the period of membership from the early 1970s when no consensus over Europe was ever fully cemented;

– the period after the Berlin wall fell when all nations were redefining their post cold war role in the world and for a time Britain tried to define itself as being anti-European.

Yet Britain is part of Europe by history, by geography and by economics.

And I believe that Britain can be a leader in Europe as Europe equips itself for the challenges of globalisation.

First, Britain was the champion of the European single market from the 1980s onwards. Now we stand ready to lead its intensification to benefit from the new wave of globalisation.

In Europe there is now a growing consensus on the need to complete and extend the single market and the more Europe extends its single market the better it is for Britain and Europe.

Second, in the 19th century Britain pioneered free and open trade round the world. Now we stand ready to help Europe look outwards to the trading opportunities of the global economy.

In Europe there is again a growing consensus on the need to strike new trade arrangements in the WTO and with our trading partners, not least America. The more Europe and America work closely together the better it is for Britain, Europe and the world.

Third, Britain, with greater employment flexibility, is leading in the creation of jobs – 1.5 million jobs since 1997 – and our policies to enhance opportunities, matching flexibility with fairness, are the right ones for Europe’s future.

And the more Europe puts job enhancement at the centre of its social dimension the better it is for Britain and Europe.

In other words, Europe will best maximise the benefits of the new challenges of globalisation – and solve its problems of low growth and high unemployment – by creating a flexible, outward looking Europe.

So British ideas can play a pivotal leadership role. In particular:

– that in a global economy Europe must be open and outward looking and not protectionist;

– that we must step up the pace of economic reform to create a more flexible Europe;

– that, in a modern economy, enterprise and flexibility need not advance at the cost of fairness but can advance together;
and that constitutional arrangements must evolve to meet real challenges and be open and accountable.

Let me sketch out the policy changes that follow.

Since 1992, the single market has produced a gain equivalent to £4000 for every household in Europe. Goods now move freely across Europe, whereas before 1992 internal customs borders meant around 90 million forms were filled in each year, a massive burden on businesses and individuals. In telecommunications, for example, the average price of calls has dropped since 1996 by around 30 per cent for businesses and 16 per cent for households.

But while the single market encompasses 375 million people today – and potentially nearly 500 million in the future – we have still a long way to go to secure for British business and British consumers the full benefits in commercial opportunities and consumer prices.

While in 1988 Cecchini estimated that single market liberalisation would add 4.5 per cent to Europe’s GDP, cut prices by 6 per cent and increase employment by 1.75 million, many of the gains have yet to materialise. And the single market is often more honoured in rhetoric than in reality.

To ensure well informed and open markets that ensure capital flows to productive uses and that labour and capital are used efficiently, we favour:

– a more proactive EU competition regime with investigations into particular European markets and sectors to drive up competition and prevent firms across Europe from being excluded from European markets from energy to telecommunications;
making the single market a reality for services as well as goods;
faster progress towards the integration of European capital markets; and support for Private Finance Initiatives in Europe.
So Britain – the champion of the European single market from the 1980s onwards – stands ready to lead its intensification to benefit from the new wave of globalisation.

But the single market neither requires tax harmonisation nor centrally imposed one-size-fits-all regulations.

Instead, building on minimum agreed standards and learning from the USA single currency area, tax competition and the mutual recognition of each others regulations is the best way forward for Europe.

Second, a Europe reformed is a Europe that can be the engine of liberalisation in the world.

But that requires us to tackle Europe’s most protected and distorted sector – agriculture – which could give rise to economic benefits of around 5 billion euros across the EU, as well as benefiting developing countries.

And it requires Europe to champion free trade.

In the 19th century Britain pioneered free and open trade round the world.

Today we must be pioneers again.

And in a new global environment where all the arguments for the benefits of free and open trade are now more pressing than ever before, but where political resistance is strong, we must stand firm.

Europe must take far more seriously the need for urgent progress in the Doha trade discussions. We should lead in the World Trade Organisation – not lag behind.

And we should also lead by example. The transatlantic economic relationship accounts for up to $2.5 trillion of commercial transactions each year, including $500 billions of foreign trade, and provides employment to over 12 million people. We should not allow trade disputes to continue interfering with such vital parts of our economies.

Instead, Europe and America should patch up their trade differences, move beyond the day-to-day issues and make a greater effort to tackle the barriers to a fully open trading and investment relationship, strengthen joint arrangements to tackle competition issues and engage in dialogue about the approach to financial services regulation.

We are about to publish and submit to the European Commission the results of a new study showing that if we broke down the tariff barriers and the barriers to trade in services Europe could increase employment by 1 million, raise growth by up to 2 per cent in Europe and up to 1 per cent in America.

So with trade vital to our programme for full employment we must now develop new areas for transatlantic cooperation and as a first step I believe the US administration and the EU Commission should work with the UK and other Member States to produce a detailed analysis of the benefits of greater trade and investment liberalisation.

The prize of being partners not rivals, rather than “Fortress Europe” versus “Fortress NAFTA”, is that each of us stand to gain much more from globalisation.

And all this puts Britain right at the heart of Europe — pressing for the greater competition and liberalisation that is essential to attain full employment and prosperity for all.

Third, Britain’s proposals for labour market flexibility.

Europe has not been very good at facing up to the flexibility issue. Some still see the term ‘flexibility’ as the abandonment of all minimum standards, the race to the bottom, low wage competition legitimised.

In the past, supporters of full employment have not been in the habit of thinking of flexibility as a route to full employment. And supporters of greater flexibility in our economy have seldom described its benefits as the attainment of full employment.

Yet today flexible economies are also the economies with higher employment.

And to get Europe’s 13 million unemployed back to work, we must move beyond the old style jobs policies and attitudes. It is right both to create flexible labour markets and to equip people to master change – through investment in skills and training, through the best transitional help for people moving between jobs, and through the operation of a minimum wage and a tax credit system, tailored in each member state to national circumstances. And we will resist inflexible barriers being introduced into directives like the European Working Time Directive – we will support flexible interpretations of existing rules and remove unnecessary regulations and restrictions

Instead of viewing flexibility as the enemy of full employment, we should persuade employers that the right kind of flexibility in European as well as British labour markets is essential for jobs.

So some say Europe can never reform. I reject this. Europe has a choice and I believe as the supporters of reform grow so too the pressures for reform grow.

Some say countries must make a choice between the US and Europe. I reject this. Europe needs an outward-looking non-isolationist America and America needs an outward-looking non-parochial Europe.

Some say Europe should harmonise taxation and move towards a super state. Again Europe has a choice and I believe that support for a flexible outward looking Europe is growing and will grow.

Indeed, I believe that British values – in particular our long term commitment to enterprise, opportunity, being outward looking and open to the world, and of course demanding political accountability – can make a distinctive contribution to the development of this new Europe.

The single market… new trading arrangements with America and the world… a new labour market flexibility that is the social dimension for Europe.

And as the great debate on Europe’s future begins, we can build a consensus around a reformed Europe — and Britain leading reform in Europe.

Put simply, a more self confident Britain and a more self confident Europe can become an engine for economic and social progress on the global stage —- not as a rival of the USA or other trade blocs but as a partner. Proof of the view, pioneer of the vision that economic success and social justice can advance together.

And in this new era where Europe is now seeing that it must not be an inward looking trade bloc but part of the global economy, we can, I believe, persuade the British people not just to a half-hearted acquiescence in Europe but a whole hearted engagement with Europe – a positive engagement grounded in a self confidence about British values and Britain’s future, and the important role they can play in the next stage of Europe’s development, the response to the latest wave of globalisation.

So where does that put Britain’s relationship in Europe?

To lead this way in Europe, we must be ready to put aside the soul-searching that has been so much a part of Britain’s post-war history.

While Britain’s relationship with Europe has neither been nor will ever be exclusive nor dogmatic, the experience of the first half of last century – in two World Wars – showed Britain did not and would not relinquish our role in Europe or abdicate responsibility for the progress of the continent.

And in the years ahead Britain will do best if we seek a leadership role in Europe.

So we should give short shrift to the view that being British means we must be anti-European.

Of course the nation state is and will remain the focus of our British identity and our loyalty.

It is entirely right that the test of whether we want to be part of any future European venture is whether it is good for Britain’s national interest. That is why we reject federalism.

So as the European convention draws to the end of its work in advance of the forthcoming IGC, I believe that it is through a close constructive relationship with our European partners – and the economic agenda I set down that moves us towards a flexible, outward looking, full employment Europe – that Britain will not only enjoy greater prosperity but continue to make a positive contribution on the world stage.

Being in and shaping Europe allows us to contribute what is uniquely British to the development of the European union and the changes in its economy that are now more urgent than ever.

So to those who say that the future means Britain submerged in Europe, I say emphasising British values – our commitment to enterprise, opportunity, being outward looking and to proper accountability – and their importance to Europe’s development will benefit both Britain and Europe.

Leading – the right way to express British identity and interest in the modern world – means a serious agenda for reform. And for Europe.

The aim: a continent much more open, more competitive, more flexible and adaptable, more fair, and more outward looking ready to play its full and proper role in global society.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, at the Global Borrowers and Investors Forum held on 17 June 2003.

It is a pleasure to be here this morning not just to speak to leaders of the financial services industry from within the United Kingdom but to welcome to the UK and to London today so many leaders of the financial services sector from around the world.

Today London plays host to a greater number of foreign bank branches and subsidiaries than any other city in the world;
London has the largest derivatives exchange in Europe; with the London Stock Exchange, London has the largest trading centre for foreign equities in the world; and our Foreign Exchange Market is the largest and most important in the world.

And this is a London which – while proud of a financial history as a world leading player stretching back to the 17th Century – has its thoughts firmly fixed not on the past but on the future.

For it is an essential feature of the longevity of the City of London’s history that as the world economy has opened up, the city has succeeded not by sheltering its share of a small protected national market but always by striving for a greater and greater share of the growing global market.

The last three years have seen the first simultaneous world slowdown for 30 years, with 10 of the world’s major economies in recession in 2001 and a downturn stretching across every continent for the first time since the 1970s.

It has been a slowdown one of whose features in the UK and US has been, unlike all previous downturns, the maintenance of still high levels of demand in the two basic consumer sectors – homes and cars. It has been led instead by dramatic falls in the ICT sector where in the UK alone output fell by 30 per cent in one year and hardware investment fell by 30 per cent too…sparking the decline in stock market valuations by 40 per cent from their peak to their trough in the USA, 50 per cent in the UK, 63 per cent in France and nearly 70 per cent in Germany, and the very large falls in business investment that followed.

If the world downturn has been characterised by synchronised slowdowns in all the industrialised countries and the dramatic falls in ICT output leading to large falls in both stock markets and business investment, it has also been characterised by a third special feature: in 2001, the sharpest slowing in world trade growth for at least 20 years, trade growth falling almost 12 percentage points.

Even in the world recessions of the early 80s and 90s world trade continued to grow by around 5 per cent a year…for much of 2001 and 2002 world trade barely grew at all.

These recent events have demonstrated once again that no country can insulate itself from the ups and downs of the world economy.

And perhaps at no time for fifty years have there been, as there were in 2001 and 2002, so many risks and uncertainties – geopolitical risks as in Iraq; oil price uncertainties; corporate standards issues; emerging market crises; and, as in Japan, deflationary pressures as well as the fall out from the IT boom.

Even in the last few months Finance Ministries and Central Banks round the world have had to remain vigilant as a hesitant global recovery has stalled.

But I now believe the world economy is ready to move forward.

A number of the world’s major downside risks have receded.

This has been accompanied by signs of a recovery in business and consumer confidence – particularly in the United States – and improving financial conditions in a number of the world’s major economies.

And with geopolitical uncertainty now lessening, with the oil price coming down, with a recovery in global equity markets, and with action over corporate standards, and most of all with the fundamentals sound – in particular with, unlike the early 80s and 90s, low inflation – previous impediments to growth are being removed.

And as we look forward it is clear that each continent must play its part, and face up to its responsibilities for sustaining and strengthening economic recovery around the world:

– Japan taking decisive action to speed up the pace of disposal of non-performing loans and promote corporate restructuring;

– America taking measures to ensure a sound medium term fiscal position and showing corporate reform is working;

– and Europe – as I will discuss later – making further sustained progress on wide ranging economic reform to enhance its long-run growth potential and increase resilience to shocks.

But the world has been challenged not just by a global cyclical downturn but by very large and profound global structural changes…with the latest wave of globalisation now shifting many industries and services to the industrialising world and challenging us in the industrialised world to respond and adjust more quickly and more flexibly.

Twenty years ago, even ten years ago, it was just about possible – if costly and wrong – for industrialised countries to shelter their industries and sectors, protecting them from global competition.

But as a result of this new wave of globalisation there is hardly a good we produce here in Britain and many services that are not subject to intense global competition — competition not just from traditional competitors in the advanced industrial economies but competition from emerging market economies not least in Asia and the east of Europe — competition which is itself a spur to growth and prosperity.

So today there is no safe haven, no easy escape for any country from global competition without putting at risk long-term stability, growth and employment.

So I want to talk about how as we enter the next wave of globalisation we together – the financial community, investors, businesses and governments – can meet and master the new challenges of the future.

Indeed my theme today is that the lessons of the recent world downturn teach us:

– first, the importance of getting the fundamentals right, that stability in modern economies must be built from the foundation of proactive, forward looking monetary and fiscal policies

– second, for the global economy as a whole, it is now vital that we open up new markets by making international progress on world trade

– and third, for national economies, we cannot and should not any longer underestimate the importance of policies for capital labour and product markets that promote flexibility.

Stability

First, stability.

The test for any government at any time, but particularly at times of challenge, is whether instead of opting for the short-term quick fix it has the strength to take the tough monetary and fiscal decisions in the long-term interests of the country.

In the global economy investment will flow to countries that operate stable monetary and fiscal policies and ever more rapidly desert countries that abandon monetary and fiscal prudence.

And it is precisely because we have understood that monetary and fiscal regimes must work to create stability in challenging times as well as good times that when we came into government in 1997 we immediately took the long-term decision to create a wholly new monetary and fiscal framework based on the independence of the Bank of England but with far wider ramifications:

– we set first of all clear policy rules for monetary and fiscal policy: a symmetrical inflation target, designed to combat both deflation and inflation, and a golden rule for fiscal policy – balancing the current budget over the cycle as the first of our fiscal disciplines;

– we then set down clearly established procedures for monetary and fiscal policy: a new code for fiscal stability that required independent audit of key indicators and, most of all, monthly decision making on interest rates by an open vote of the bank;

– and we required an openness and transparency in both monetary and fiscal decision-making under which people could be assured that decisions were not only made in the national interest free of political interference but seen to be so.

In setting down clear policy rules, new procedures and a new form of transparency, we rejected both the over rigid monetary targeting of the 1980s that while rightly focused on anti-inflation discipline could not work in open, liberalised capital markets; and we rejected also a return to the old Keynesian fine-tuning that wrongly sought to trade-off inflation for growth.

Indeed our monetary and fiscal regime has moved a long way from the old rigidities and inflexibility that denied policy makers discretion in times when the world economy turned down and allows an independent bank, not least because of a symmetrical inflation target that sees deflation as a big as problem as inflation, discretion to pursue forward looking and pro-active monetary policies and the fiscal authorities to respond to difficulties as they arise.

In this pro-active, forward-looking approach we have learned from the USA where Chairman Greenspan cut interest rates eleven times since January 2001, aggressively cutting rates from six and a half per cent to one and a quarter per cent.

In Britain prompt and decisive action by the monetary policy committee – cutting interest rates eight times since the beginning of 2001…

…supported by a proactive fiscal policy – made possible by tough decisions on public spending and the systematic reduction in the burden of debt…

…has made it possible for Britain – with the longest period of sustained low inflation for 30 years and the lowest interest rates for over 40 years – to be better placed than we have been in the past to deal with economic challenges and ongoing risks.

Ten years ago in a world downturn that was less severe for world trade, growth and equity markets, our country was unable to maintain growth because, with high inflation, interest rates had to be kept above 10 per cent for four years and rose to 15 per cent for one whole year. The result was the most prolonged recession of the post war years

This time, most now agree that bank independence – the symmetrical inflation target we agreed and the supportive fiscal policy – have been right for the long-term national economic interest of the country.

Today, tested in adversity, our monetary and fiscal regime is demonstrating its credibility and resilience – providing a bulwark against the downturn and sustaining British growth.

And I believe that the prize that can be grasped in future in all continents is the adoption of monetary and fiscal regimes that are able to respond proactively and appropriately when world economic circumstances change.

And so, in the same way, we must make the right long term decisions on Europe.

Our decision on the euro is one of far reaching consequence, indeed one of the most momentous economic decisions our country has to take, and one that must contribute to the attainment of stability, growth and employment.

My statement to Parliament last week set out the potential gains to Britain of joining the single currency:

– perhaps over 30 years up to 50 per cent increase in trade;

– up to one quarter of a per cent increase in annual growth;

– £1 billion a year less in transaction costs for business and consumers;

– and if, on the basis of sustained and durable convergence, we could lock in stability for the long term, a cut in the cost of borrowing for business on a sustainable basis.

So I reject the view of those who would rule out membership of the single currency on principle. They would refuse to join even if it were in the national economic interest to do so. To rule out membership of the single currency on dogmatic grounds would in my view be damaging for investment, jobs and business generally.

Similarly, I reject those who would urge us to join regardless of the assessment of the five tests we have set. Such a course would risk repeating past failures, would prejudice our stability and would also be damaging for investment, jobs and business generally. So last week I set down both the benefits of a single currency and the policy challenges we must now meet to achieve convergence and flexibility. And I also set down our proposals for a review of progress in next year’s Budget.

The lessons in monetary and fiscal policy from our experience of the world downturn are lessons also critical to the future of emerging markets across the world.

I have the privilege of chairing the IMFC committee – the IMF’s Ministerial Steering Committee – and since the Asian crisis in 1998 we have sought to improve the workings of fiscal and monetary regimes around the world.

The IMF has emphasised the importance of clear rules, proper procedures and accountability and transparency in monetary and fiscal policy: in other words internationally agreed codes and standards for monetary, fiscal and corporate policy.

We have sought to strengthen financial sectors through improved surveillance and support for reform.

We have set up the Financial Stability Forum which is evolving into an early warning system for the world’s financial authorities.

We have put forward proposals to back up codes and standards by increasing the independence and accountability of the surveillance work of the IMF.

We have now in place new means of crisis prevention including the Contingent Credit Facility.

And we have encouraged new means of crisis resolution including the use of collective action clauses, the development of a code of good conduct, and a new approach to official debt restructuring.

And throughout the emphasis has been – and will be – on the fundamental importance of stability. We will not take risks with stability. And no country trading in the global economy can afford to do so either.

Trade

The second lesson of the world downturn is that we can no longer afford to be complacent about trade: indeed that we must do far more to create the conditions for trade growth.

In the 19th Century Britain pioneered free and open trade round the world.

Britain led the way as countries moved from policies that were mercantilist and protectionist.

Today we must be pioneers again to the benefit of the rest of the world as well as ourselves.

Over the last two decades, world trade volume growth growing at almost twice the rate of real world GDP growth.

Indeed globalisation is defined by the rapid opening up of world trade: the rapidly expanding daily global flows of capital and the expansion in the global sourcing of products.

But as I have indicated world trade growth has stalled in the years after 2001.

World trade grew by just 0.1 per cent in 2001, and while it recovered to 4 per cent growth in the first half of 2002 it slowed again to around 1 per cent only in the second half of the year.

And in a new global environment where all the arguments for the benefits of free and open trade are now more pressing than ever before, but where political resistance from countries forced to change is strong, we must stand firm against protectionism.

Indeed to secure the gains from the opening up of trade in the 21st Century we need to take on protectionist vested interests in exactly the way free trade advocates like Cobden and Bright did in the 19th Century.

This requires us to be at all times outward looking and in particular at this time to make the world trade talks – now stalled in four different areas, over agriculture, pharmaceuticals, services and the treatment of developing countries – work.

If we were to halve protectionism in agriculture and in industrial goods and services we would boost the world’s yearly income by nearly $400 billion: a boost to growth of 1.4 per cent. Developing countries would gain the most in terms of GDP growth – an estimated $150 billion a year – and all countries and regions stand to benefit.

So in the next few months running up to Cancun there is a common agenda for business and governments to push forward the trade agenda.

And we should not only lead in the World Trade Organisation but Europe and the USA – the world’s largest trading areas – should work together to complete the liberalisation of world trade.

And Europe and America should also lead by example.

Europe and America should patch up their trade differences, move beyond the day-to-day issues and make a greater effort to tackle the barriers to a fully open trading and investment relationship, strengthen joint arrangements to tackle competition issues and engage in dialogue about the approach to financial services regulation.

And I have no doubt that with Europe and America working together we could help developing countries move forward to the benefit of the whole world economy. It is for this reason that I am proposing that Europe and America join together to create a new International Financing Facility that would help developing countries reform, open up to trade and private investment, and meet their health, education and anti-poverty needs.

Flexibility

And just as the recent world downturn shows us the importance of making the right long term decisions on monetary and fiscal policy and on trade, so too we know that if we are to make the most of the potential of the new, more open global economy, we must keep up the pace of reform and liberalisation and the push for greater flexibility across our economy.

Changes in the marketplace include the impact of innovation and changing technology, changing consumer preferences and the changing need for particular skills. And failure to respond to these changes by companies and by individuals – and by governments – leads to the unproductive use and wasteful allocation of resources in the economy and thus huge costs in lost output, jobs and prosperity.

Without firms prepared to innovate and adjust, economies become sclerotic. Without the capacity to develop the new skills needed, countries will simply be left behind.

So in an open and far more rapidly changing global trading economy, flexibility – the ability to respond quickly – is not an option. It is a necessary precondition of success.

And since 1997 we have, in pursuit of this tried to create more flexible product markets, more flexible capital markets and more flexible labour markets.

To encourage more flexible product markets, we have

made our competition authorities independent and opened up product markets;

revamped the physical planning system;

and given the Office of Fair Trading powers over the public sector as well as to investigate anti competitive practises in the private sector.

To encourage more flexible capital markets, we have:

cut capital gains tax from 40p to – in most cases – 10p…now, with the USA, the most generous of all capital gains tax systems; cut corporation tax for large businesses from 33p to 30p and introduced new incentives for venture capital;  encouraged enterprise with lower tax rates for small businesses, reducing tax from 23p to 19p and exempting the first £10,000 pounds of profits; offered new incentives and resources to encourage greater investment – permanent capital allowances – and innovation – the R and D tax credit; and devoted time and energy to promoting economic liberalisation in Europe.

And to secure more flexible labour markets, we have: tightened up sanctions for the unemployed and cut long term unemployment by 80 per cent; compelled young people into training and work and cut youth unemployment by 75 per cent; started a major reform of housing benefit where there have been disincentives to mobility;
and in addition to the lowest unemployment of all the major industrialised countries we have – even more important for the future – invested heavily in school, college, university and workplace education and learning so that we can develop and attract the high skill, high value added industries and services of the future.

And we have more to do:

– to liberalise and reform individual product markets;

– to set tough time limits for our physical planning system to make it work more quickly and effectively;

– to remove the barriers to small business creation and build on our reforms of capital gains tax;

– to do more to encourage science and innovation through our tax credit system for research and development and our plans to link up universities and commerce;

– to offer tax incentives to invest in deprived areas and to encourage the development of venture capital in every region of the country;
to make our Private Finance Initiative work more effectively bringing together private and public sectors in partnership for infrastructure improvement;

– by further labour market reforms at a national and a local level to create even more flexible labour markets in each of the regions and nations of the United Kingdom; and proceeding resolutely with our public service reforms.

And as we seek to make Britain a more flexible, more entrepreneurial economy, flexibility in capital markets – and the efficient allocation of capital in the economy – is vital for high levels of growth. That is why the proposals in the Myners, Sandler and Higgs reviews are so important – and why I welcome the Institutional Shareholders’ Committee’s Code on Shareholder Activism – and we will press ahead with reforms designed to improve transparency, enhance disclosure and enable greater shareholder involvement.

And it is right to look for the same liberalisation in capital, product and labour markets throughout Europe to make the single market work.

In 1988 at the outset of the European single market Cecchini estimated that single market liberalisation would add 4.5 per cent to Europe’s GDP, cut prices by 6 per cent and increase employment by 1.75 million. Today many of the gains have yet to materialise. And if they did we would all be much better off.

Capital markets can and must help us manage risk more efficiently between sectors, over time and across national boundaries. While America has achieved a high degree of diversification across state borders, too much investment in Europe remains fragmented on national lines and there is a need to remove barriers to diversification of investments across borders, for example in pension and mutual funds.

So we will support the European Financial Services Action Plan as it improves mutual recognition of financial services providers in insurance, banking and capital markets.

And just as we must do more to make product and capital markets more flexible, so we must extend the same approach to the labour market.

It is inherent to globalisation – a world where change is rapid and change is potentially destabilising – that while there are opportunities there are also major insecurities.

Technologies arrive and quickly become out of date. Companies rise and fall. Jobs and occupations become redundant far more quickly than ever before. And it is right both to create flexible markets and to equip people to master change – through investment in skills and training, through the best transitional help for people moving between jobs, through the operation of a minimum wage and a tax credit system, and through investment in education and training at school, college, university and in the workplace.

So in this way – by learning lessons from the past and examining the challenges ahead – we open up a rich reform and modernisation agenda for our product, capital and labour markets.

And this is an agenda of economic reform not just for the future of Britain but for the future of Europe – a Europe that is changing not least because it is enlarging to 25 members.

And these British-led reforms – opening up trade, liberalising capital, product and labour markets – lead me to suggest that Europe is itself being forced to change in response to the transformation of the global economy.

My experience is that the new entrants to the European Union are keen to liberalise and make the economic reforms needed for future prosperity.

Indeed the debate about Europe’s future is no longer – as it was in the 1980s – about the future of an exclusive inward looking trade bloc, what some people called “Fortress Europe”, the world’s first modern trade bloc.

The issue in 2003 is no longer how a single trade bloc organises its internal markets and harmonises taxes, independent of the rest of the world, but how all of Europe, thinking globally, can meet the challenge of global competition.

And this requires Europe to move from organising itself as a trade bloc to becoming global Europe:

– outward looking – investing as it does in the USA and building more effective trading relationships;

– liberalising and reforming to meet the challenges of more intense competition;

– and modernising its social dimension.

And I believe that the British ideas and initiatives that I have been outlining – our commitment to stability, free trade, economic liberalisation – can play and are playing a pivotal leadership role in creating this changed Europe.

In particular:

– our view that we must continue to modernise monetary and fiscal policies to guarantee stability in a fast changing global environment

– our view that in a global economy all countries and continents must be open and outward looking and not protectionist;

– our view that we must step up the pace of economic reform to create flexible economies and that, in the modern world, enterprise and flexibility need not advance at the cost of fairness but both can advance together.

Those in Britain who have been ambivalent, apathetic or antagonistic towards the way the old trade bloc Europe worked and feared tax harmonisation on the road to a federated state can – I believe – be persuaded that an enlarged Europe can be shaped by British ideas in line with British values and that these changes are in the British national economic interest.

And around the economic liberalisation and free trade agenda I have outlined, it is possible in my view to bring to an end the old anti-European prejudices rooted in the inward looking trade bloc of the past.

It is possible to unite Britain around a modern, long-term and deep-seated pro-European consensus in support of a whole hearted engagement with an enlarged and reforming Europe – a positive engagement grounded in a self confidence about British values – and Britain’s future — and the important role we can play in the next stage of Europe’s development.

The lessons I learn from the recent world downturn are that as a world economy we can and must work together and do better.

The lessons I learn are that the nations that will succeed in the future will be those that are stable; that are most open to trade; and that are flexible, able to adapt continuously and quickly to change.

The lessons I learn are that with business, investors and government working together, we can drive forward a rich agenda of capital, labour and product market reform.

The lessons I learn are that we can together meet and master the challenge of this next wave of globalisation.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, at the Mansion House in London on 18 June 2003.

Mr Lord Mayor, Mr Governor, My Lords, Aldermen, Mr Recorder, Sheriffs, Ladies and Gentlemen.

In thanking you for your invitation, let me at the outset pay tribute to the contribution you, your companies and the whole City of London make to the prosperity of Britain.

Let me also express our gratitude directly to you Lord Mayor for the work you, the Lady Mayor and your staff do not just here but round the world in promoting the City and Britain.

And let me on the occasion of his retirement thank, on all your behalfs, and on my behalf too, for outstanding service to our country, for his leadership of the financial community, for his steadfastness at all times, and for his unshakeable integrity — Sir Edward George.

Sir Edward has not only been an outstanding leader and ambassador for this city and for the United Kingdom but I can tell you from my international meetings that Eddie George is held in the highest esteem not just in one but in every continent of the world.

And for the care, dedication and quiet dignity with which she has carried out her duties at all times let me also thank Lady George.

Eddie George has served the Bank of England for 41 years.

He has been Deputy Chief Cashier and Assistant Director in charge of the Gilt-edged Division; he was seconded to the Bank for International Settlements and to the IMF; he then became Executive Director with responsibility for monetary policy, market operations and market supervision, and then Deputy Governor before becoming the first Governor of the independent Bank of England and the first Chairman of the Monetary Policy Committee. And his career is the kind of career – and he is the kind of man – whose dedication and integrity gives public service a good name.

From 1993 when Sir Edward became Governor we owe a particular debt of gratitude to him. And I can say from my own personal experience that Eddie not only enthusiastically promoted and welcomed the independence of the Bank of England after 1997, but he supervised the creation of the Monetary Policy Committee, chaired its proceedings with great distinction and, as a result of his steady hand, other countries see Britain – with inflation now the lowest for thirty years – enjoying a period of remarkable success in monetary policy.

Mr Lord Mayor, I am pleased to speak to you this evening, a week after our announcement on the euro, because a central part of the assessment on the euro was the importance of the City of London and of the financial services industry to the country.

We thought it right to make one of our five tests the health of the financial services sector and the work of the City of London.

And let me say that the assessment confirmed your vital importance – not only because of the jobs and income you generate but also because of your contribution to increased investment, productivity and growth right across the UK economy: that you represent a financial services sector that generates £50 billion of wealth each year, provides work for over one million people, and accounts for over five per cent of UK output. And with the London Stock Exchange, the largest trading centre for foreign equities in the world, and the Foreign Exchange Market the largest and most important in the world, you lead for Britain in the world

The assessment showed that outside the euro the City continued to do well – with no sign of financial services activity relocating from the UK to the euro area – and that with a significant proportion of euro business transacted in London, the UK’s influence remains strong.

The assessment also confirmed that if we joined the single currency we could strengthen London’s position as a leading wholesale financial services centre – improving our ability to compete for new business generated by EU enlargement, the continued development of euro financial markets, and the pensions and savings business across Europe that comes from an ageing population.

We found that with lower costs on euro area transactions, possibly a more optimal allocation of investment portfolios, and potential economies of scale for firms competing in euro area markets free of currency barriers, the euro could improve the competitive position of the retail financial services sector.

We found also that the future integration of financial markets inside the euro could promote the kind of diversity, flexibility and risk diversification seen in the capital markets of the USA, making it easier for a more flexible Britain to win business throughout the euro area.

Indeed the assessment emphasised both the importance of completing the single market in financial services and getting the European Financial Services Action Plan right.

Overall, the assessment concluded that, inside or outside the single currency, the competitive strength of the City of London is such that the UK financial services industry should continue to thrive.

And I can affirm to you that in all the decisions we make, the government will continue to do all in its power to ensure that London remains the pre-eminent financial centre in Europe.

So the outcome of the Treasury assessment of the five economic tests is that the financial services test is met.

Subject to the achievement of sustainable convergence and sufficient flexibility, the tests for investment and employment would be met.

The issue is that while there has been significant progress in achieving cyclical convergence – and while the assessment made clear the potential benefits in:

trade – perhaps over 30 years up to fifty per cent growth;
transaction costs – £1 billion in savings; and perhaps one quarter of a percent a year increased growth… we still have to meet the two tests, the tests upon which others depend: that of sustainable convergence and sufficient flexibility.

So last Monday I announced not only a stepping up of our preparatory work but also major reforms which will be implemented over the next year and will assist the process of achieving sustainable and durable convergence and flexibility: and these reforms – in our labour markets, in the housing market as well as in our inflation target and fiscal framework – are right in themselves for British stability, growth and employment, and necessary for the greater efficiency and productivity of Britain competing in the global economy:

A new target for domestic inflation in Britain from the time of the Pre Budget Report, set on the consumer prices definition;
the speeding up of our planning system and improvements in the supply of housing as we also examine the structure of mortgage finance including the case for, and how we can help the development of, the long-term fixed rate mortgage market in the UK;
and radical reforms at a national, regional and local level to bring greater flexibility in our labour, product and capital markets.
We will report on progress on these reforms in the Budget next year and we can then consider the extent of progress and determine whether on the basis of it we make a further Treasury assessment of the five tests which – if positive next year – would allow us at that time to put the issue before the British people in a referendum.

So as I said last week, we reject those who rule out joining the euro forever as a matter of dogma even if it were shown to be in the best economic interests of the country. If, on the basis of the five economic tests, membership of the euro is shown as good for sustaining British jobs, business and future prosperity then it is in the national economic interest and right to join.

But we similarly reject those who would urge us to join irrespective of the rigorous assessment of the five tests. If we entered with the tests not met at the wrong exchange rate, then – just as with the ERM – we could see unemployment rise, public service investment fall and growth stall.

The five tests – on convergence, flexibility, financial services, investment and employment – are our guarantee of economic stability. And I can say today that the same comprehensive and rigorous approach we followed on the decisions announced last week will continue at all times. It is because stability is so fundamental to British economic success that I can assure you that there will be no short-cuts and no fudge. Because to join in the wrong way or on the wrong basis without rigorously ensuring the tests are met, would not be in the national economic interest. And we will do nothing to put stability, growth or the funding of public services at risk

Now Mr Lord Mayor, the euro decisions – and all the economic reforms we are pursuing – are being made in a wholly new global context:

the first world slowdown for thirty years to affect every continent;
a downturn characterised by, in the UK’s case, a 30 per cent fall in one year in IT output;

a downturn that spread to equities which have seen a 50 per cent fall and to business investment and a downturn characterised by a stalling of world trade growth and not just a global cyclical slowdown but a global restructuring of industry and services that is moving low value added production to industrialising economies in eastern and central Europe and in parts of Asia.

One of Winston Churchill’s memorable sayings was that those who try to build the present in the image of the past will miss out entirely on the challenges of the future.

And it is these challenges that I want to say something about today.

I believe that the three lessons we learn – and should apply – from our experience of the recent world downturn and the global restructuring now underway are the importance of pursuing the right policies for stability; for trade; and for flexibility: that stability in modern economies must be built on the foundation of proactive and forward looking fiscal and monetary regimes that building open non protectionist trading relationships in a globalised economy are even more vital to economic growth; and that in modern economies the flexibility to adapt continuously and quickly to change is essential to sustained growth.

And it is right to apply the lessons not just with economic reform in Britain but with economic reform also in Europe.

For it is precisely because we are by history, geography and economics part of Europe, and because today 55 per cent of our trade is with Europe, that there is a British national interest in the economic reform agenda working not just for ourselves but for the rest of Europe with which we trade so much. In other words, there is a British national interest in a Europe that – like Britain – learns these lessons from the world downturn and does more to promote stability and growth, is more open to global trade and becomes more flexible.

Indeed the debate about Europe’s future is no longer – as it was in the 1980s – about the future of an exclusive inward looking trade bloc, what some people called “Fortress Europe”, the world’s first modern trade bloc.

The issue in 2003 is no longer how a single trade bloc organises its internal markets and harmonises taxes, independent of the rest of the world, but how all of Europe, thinking globally, can meet the challenge of global competition.

And this requires Europe to move from organising itself just as a trade bloc to becoming global Europe:

outward looking – investing as it does in the USA and building more effective trading relationships; liberalising and reforming to meet the challenges of more intense competition; and modernising its social dimension.

And this allows Britain to enter a new and more positive stage of its relationship with the rest of Europe.

At no point in our long history has Britain ever been prepared to relinquish our responsibility and interest in Europe’s future.

But what is new, I believe, is that we can show that the enlarged Europe is changing and will change in line with the values – economic stability, free trade, liberalisation – that Britain holds important; and that, in this way, Britain can be a leader in Europe as Europe equips itself for the challenges of globalisation.

Stability

First, stability — where the test for any Government at any time, but particularly at times of challenge, is whether they have the strength to take the tough decisions in the long-term interests of the country rather than opting for the short-term quick fix.

And it is because all of us here have understood that monetary and fiscal policy must secure stability in challenging times as well as good times that we created a new monetary and fiscal regime based on the independence of the Bank of England that had at is centre:

clear rules – the symmetrical inflation target, the golden fiscal rule;
proper procedures -the code for fiscal stability and the monetary policy committee; and transparency and accountability.

It is these rules and procedures – particularly the pro-growth symmetrical inflation target – that make the Bank as concerned about deflation as about inflation and means that just as the USA cut interest rates 11 times since January 2001, so too the Bank of England has cut interest rates 8 times.

And tested in adversity, our monetary and fiscal regime built around the Bank of England is demonstrating its credibility and resilience and made Britain better placed than in the past to cope with a world downturn.

It is because of a forward looking monetary policy, supported by fiscal policy, that, unlike other economies, we have continued to grow through the world downturn and with geopolitical uncertainty now lessening, with the oil price coming down, with a recovery in global equity markets, and with action over corporate standards, and most of all with the fundamentals sound – in particular with, unlike the early 80s and 90s, low inflation – previous impediments to higher global growth are now being removed.

The lesson we learn from the recent downturn, and the prize for the future, is that monetary and fiscal should respond proactively and in a forward-looking way when world economic circumstances change.

The euro area has also been establishing a modern framework for economic stability based on:

the same approach that the old fine-tuning cannot work; the same recognition that in liberalised markets rigid monetary targets cannot on their own deliver stability; and the same view that the discretion necessary for effective economic policy is possible only within a framework that commands public and market credibility.
And there is, I believe, also a growing understanding that this credibility depends upon clearly defined and publicly understood long-term policy objectives.

And overall the euro area has managed to maintain both low inflation and, generally, low fiscal deficits even in a period of world instability.

And because these regimes are being tested not just in good times but in challenging times, it is right to look at how they best evolve in the future.

And the European Central Bank has suggested it gives greater priority to targeting inflation and has suggested it aims to maintain inflation rates close to 2 per cent over the medium term

So just as we in Britain are examining how we learn lessons from the downturn, we are encouraged by the new debate on the future monetary policy of the ECB and we will continue to pursue our objective in Europe of a Stability and Growth Pact that takes into account the economic cycle, debt sustainability and public investment.

Trade

The world downturn also shows us that we must be far more vigorous in the pursuit of open trade and do far more to create the best conditions for trade growth.

Over the last two decades, world trade volume has grown at almost twice the rate of real world GDP growth.

But world trade stalled after 2000. It grew by just 0.1 per cent in 2001, and while it recovered to 4 per cent growth in the first half of 2002 it slowed again to just 1.7 per cent in the second half of the year

So with, in a global economy, the case for free and open trade more pressing than ever before, we must stand firm and resist political pressures for protectionism

In the 19th century Britain pioneered free and open trade round the world.

Today we stand ready to work in Europe to make the best of the new trading opportunities of the global economy: helping Europe look outwards not least to a new world trade deal at Cancun and better trading relationships with the USA.

If we were to halve protectionism in agriculture and in industrial goods and services we would increase the world’s yearly income by nearly $400 billion dollars: a boost to growth of 1.4 per cent. Developing countries would gain the most in terms of GDP growth – an estimated $150 billion a year – but all countries and regions stand to benefit.

So in the next few months running up to Cancun there is a common agenda to make the world trade talks – now stalled in four different areas, over agriculture, pharmaceuticals, services and the treatment of developing countries – work.

This requires us to tackle Europe’s most protected sector – agriculture.

The case for reform of the common agricultural policy is now stronger than ever.

It imposes enormous costs on the EU economy: at 45 billion euros a year it absorbs nearly half the EC budget; member states provide an additional 15 billion euros in support from national budgets; and European consumers bear a burden of 50 million euros through higher food prices.

On top of that, agricultural subsidies and protectionism costs developing countries $20 billion a year leaving millions in poverty.

So Britain is working hard to secure agreement to reforms at the agricultural council in Luxembourg this week.

And we should not only lead in the world trade organisation but Europe and the USA – the world’s largest trading areas – should work together to complete the liberalisation of world trade.

And Europe and America should also lead by example. The transatlantic economic relationship accounts for up to $2.5 trillion of commercial transactions each year, including $500 billions of foreign trade, and provides employment to over 12 million people.

Indeed increased European investment in the USA has been the most interesting force for change in the last decade.

Since 1945 America has invested heavily in Europe.

But in the last decade European investment in America has been even greater.

In the last ten years, European investment in America has increased 10 fold to over $200 billion a year and more European capital is now invested annually in America than US capital in Europe.

This means that Europe and America have a shared interest in each other’s prosperity.

And we should not allow trade disputes to continue interfering with such vital parts of our economies.

A new joint British-Dutch study that we submitted to the European Commission last month, shows that if we broke down the tariff barriers and the barriers to trade in services, Europe could increase employment by 1 million, raise growth by up to 2 per cent in Europe and up to 1 per cent in America.

So Europe and America should patch up their trade differences, move beyond the day-to-day issues and make a greater effort to tackle the barriers to a fully open trading and investment relationship, strengthen joint arrangements to tackle competition issues and engage in dialogue about the approach to financial services regulation.

The prize of being partners not rivals, rather than “Fortress Europe” versus “Fortress NAFTA”, is that each of us stand to gain much more from globalisation.

And Europe and America’s shared responsibility does not end there.

We also ought to be at the heart of the new relationship between developed and developing countries.

In the same way that under the Marshall Plan America helped the regeneration of Europe, Europe and America should work together for a new Marshall Plan that spurs the economic development of the poorest countries. And our proposals for an international finance facility should be coupled with reform of the European aid budget.

The Single Market

And just as the recent world downturn show us the importance of making the right long term decisions on monetary and fiscal policy and on trade, so too there is now a growing consensus – reflected in the joint statement by European Union Finance Ministers last week and the joint letter from French, German and UK Finance Ministers today – on the need to complete and extend the European single market and for flexibility and structural reform in Europe.

And Britain – the champion of the European single market from the 1980s onwards – stands ready to work with others to lead the next wave of reform.

Since 1992, the single market has produced a gain equivalent to £4000 for every household in Europe.

Goods now move freely across Europe, whereas before 1992 internal customs borders meant around 90 million forms were filled in each year, a massive burden on businesses and individuals.

In telecommunications, for example, the average price of calls has dropped since 1996 by around 30 per cent for businesses and 16 per cent for households.

But while the single market encompasses 375 million people today – and almost 500 million next year – we have still a long way to go to secure for British business and British consumers the full benefits in commercial opportunities and consumer prices.

In 1988 Cecchini estimated that single market liberalisation would add 4.5 per cent to Europe’s GDP, cut prices by 6 per cent and increase employment by 1.75 million.

But many of the gains have yet to materialise.

Capital market flexibility and risk diversification in the European Union is still much lower than in the USA.

So too is product market competition across state borders, with price differentials across Europe far in excess of America in many markets

And labour market flexibility – either the mobility of labour or the adaptability of labour – does not match that of the USA’s single market.

So to ensure well informed and open markets that ensure capital flows to productive uses and that labour and capital are used efficiently, we favour:

a more proactive EU competition regime with investigations into particular European markets and sectors to drive up competition and prevent firms across Europe from being excluded from European markets from energy to telecommunications; support for private finance initiatives in Europe; and faster progress towards the integration of European capital markets. So we will continue to support the European Financial Services Action Plan as it improves mutual recognition of financial services providers in insurance, banking and capital markets – and the Government is working closely with the financial services sector to drive forward these reforms.

This growing single market requires neither tax harmonisation nor centrally imposed one-size-fits-all regulations.

Instead, building on minimum agreed standards and learning from the USA single currency area, tax competition and the mutual recognition of each other’s standards is the best way forward for Europe.

The whole City will be pleased to know that the proposal to harmonise taxes on savings income with huge implications for the bond market in London has now been rejected in its entirety by the European Union

With your support, Britain has successfully argued that tax harmonisation within Europe would simply chase savings out of Europe and that exchange of information is a superior way to deal with cross border savings.

It is, indeed, this global flow of capital, and the global sourcing of goods, that is fatally undermining the old flawed assumptions that a European single market must be followed by European tax harmonisation and, ultimately, a federal state.

I am pleased to say that here federalist ambitions are giving way to inter-governmental realities and, throughout the convention discussions, Tony Blair and I have insisted that we rule out tax harmonisation and embrace tax competition.

And just as we must do more to make product and capital markets more flexible, so we must extend the same approach to labour markets to help get Europe’s 13 million unemployed back to work.

With nearly 50 per cent of Europe’s unemployed out of work for a year or more but only 5 per cent of America’s, it is right to do more both to create flexible labour markets and to equip people to master change – through investment in skills and training, through the best transitional help for people moving between jobs, and through the operation of a minimum wage and a tax credit system, tailored in each member state to national circumstances. And as we resist inflexible barriers being introduced into directives like the European Working Time Directive, we will support flexible interpretations of existing rules and remove unnecessary regulations and restrictions.

And in this way – by creating a more flexible economy – Europe will best maximise the benefits of the new challenges of globalisation

So in shaping the new Europe, the Europe moving from the trade bloc era to the era of global competition, British ideas can and will play a pivotal role: continuing to modernise monetary and fiscal policies; stepping up the pace of economic reform to create a more flexible Europe; opening up trade with the rest of the world; and evolving constitutional arrangements that are sensitive to these real economic challenges.

British values – in particular our long term commitment to stability enterprise, and being outward looking – making make a distinctive contribution to the development of the Europe of the global era.

I started by mentioning Winston Churchill’s injunction that we prepare for the future

He challenged us not to live in the past but to make our home in the future.

The lessons I learn from the recent downturn are that to succeed in the new global economy we must not simply pursue policies for monetary and fiscal stability but entrench that stability; that we must not be protectionist but pursue free trade; and that we must embrace reform to make our economies more flexible.

And this rich agenda of product, capital and labour market reform must apply not just in Britain but in Europe.

And around the changes in Europe I have outlined, I believe we can bring to an end the old anti-European prejudices that arose from the inward looking trade bloc of the past and as the great debate on Europe’s future begins, we can build a pro European consensus around a Britain leading reform in Europe and a reformed Europe playing its full part in the world.

A Britain and Europe more flexible, more outward looking, better equipped to meet the challenges of the global economy that lie ahead.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, to the Local Government Association Conference held in Harrogate on 4 July 2003.

It is a pleasure for me to join John Prescott in addressing the leaders of our cities, towns and communities across England and Wales; to thank everyone here not just for the work you undertake, the service you give, the good you do and the difference you make, but for your central irreplaceable role in driving forward public service improvements and in bringing to life in our time and in our generation the ethos of public service that builds strong communities in our country.

I want to say today that this partnership between central and local government – which is not a partnership of convenience but, because of the beliefs we share in common, a partnership of principle; this partnership founded on the million acts of service by dedicated public servants; this partnership driven forward today by great challenges that face our country which we can only meet if we face them together.

This partnership that acknowledges not only that whenever we walk down the street, collect our kids from school, turn to the emergency services, or look for help for the weak and the frail we depend upon locally provided services but that service delivery for families and communities cannot come from central command and control but requires local initiative and accountability; this partnership is a partnership that I want to see strengthened in a new era of local and national cooperation not just in the social improvement of our country but in the economic development of our communities in the years to come.

So I want to talk today about how the partnership we are achieving in social reform – £57 billion more invested in public services, devolution and flexibility in delivery, the greatest possible focus on choice so that the focus is always on the pupil, the patient, the consumer, the citizen – can be complemented by a partnership for economic prosperity: that builds better infrastructure, that develops new skills, that rewards innovation  and moves each region and locality towards full employment in our country.

To build, in the last six years, a better long-term and strategic partnership between central and local government — moving away from the destructive centralism of the 1980s and early 1990s, years characterised by universal capping, strict limits on borrowing and the poll tax —- and to deliver improved public services, the Government – led by John Prescott – has already:

• Boosted financial support for councils, through real terms increases in revenue and in capital expenditure for four years in a row;
• Matched devolution with greater accountability and with new constitutions for local government following local consultation;
• Increased the freedoms and flexibilities that local authorities have to deliver – including a 75 per cent cut in the number of plans required; reduced ring-fencing; more targeted inspection; a fairer prudential regime for borrowing; and greater freedom to trade;
• And introduced local Public Service Agreements which link resources and greater flexibilities to stretching outcome targets for both national and local priorities – and next year we will launch a second round of local PSAs that will encourage partnership working and local innovation still further, as we take forward the current review on balance of funding.

To enable us to make inspection regimes more proportionate, target support where it is most needed, and identify the small minority of failing Councils in need of tough remedial action, clear and concise information about each Council’s performance across a range of local services is being provided for the first time through the new Comprehensive Performance Assessment.

And to encourage all councils to deliver the best public services, high performing Local Authorities will receive substantial extra freedoms and flexibilities including the removal of both revenue and capital ring fencing; sixty plans reduced to just two required  – the Best Value Performance Plan and a Community Plan; a three year holiday from inspection; and the withdrawal of reserve powers over capping, as a first step towards dispensing with the power to cap altogether.

Alongside these incentives, the new Innovation Forum – a genuine partnership between local and central government – is looking constructively at how Local Authorities can be empowered to provide more locally tailored and high quality services in health, for the elderly, in education and in community safety.  Utilising the expertise and experience of the best Local Authorities to help all Councils do better.

This is our vision of a modern partnership between central and local government to deliver both national ambitions and meet local needs – a new localism where there is flexibility and resources in return for reform and delivery. Local Authorities at the heart of public services, equipped with the freedom they need, and accountable to the communities whose needs they serve.

So let me now set out how – building on the new freedoms and flexibilities we have put in place, local and national government working together –– we can meet our goals of full employment and a prosperous, enterprising economy in every region of our country.

For just as we have learned in these last six years that the social goals – educational opportunity, health reform, public sector improvements, child poverty, helping pensioners – we share cannot be realised in practice without central government devolving power to local communities – and whatever challenges we face from time to time, we must remember that we must always work in partnership – so too our goals of full employment and prosperity for all will not be realised without cooperating together and backing local initiative, local solutions, local needs met by local people in local communities.

And let me just explain how it is because in an increasingly globalised economy a full employment Britain that offers prosperity to all depends on regions and localities able to adapt continuously and quickly to change that there is not just a social and political case but an economic case for each local authority’s involvement – each Councillor’s direct involvement – in the economic development and renewal of our communities and country.

Globalisation describes a world whose very mobility of capital and openness to competition is ushering in a restructuring of industry and services across continents.  And while others compete on low value added, low investment and low skilled work, a country like ours has to compete on ever higher levels of skill and technology.

And I tell you that in the new more open global economy levels of local skills and local innovation will matter as much as levels of national demand, otherwise we will have to compete on ever lower levels of poverty pay.

It is because production need no longer be based where the raw materials or ports are and producers can choose where they wish to locate that the local and regional economies that are the most successful will be the magnets for inward investment, will retain their skilled people, will attract more to join them.

What will separate off the successful high employment, high growth economies from the least successful is the ability to adapt on the ground, continuously and quickly to fast moving technological change, skills needs and demand changes.

Indeed the paradox of globalisation is that it puts more emphasis on the local.

The more we are interdependent, and thus the more our regions face intense global competition, the more successful will be the regions and localities that have the flexibility to adapt to change.

Meeting the challenges of globalisation depends on securing success in meeting the challenges of localisation.

And the whole of the UK suffers, and balanced economic growth becomes impossible, if we have unemployment, emigration and the under-utilisation of potential and resources in the poorer areas and yet congestion, overcrowding and inflationary pressures in the richer.

That is why we seek a British economy:

• Not just founded on monetary and fiscal stability – for in an open economy investment will flow to the stable economies and quickly away from the unstable ones
• But built on high levels of innovation skills and adaptability, one driven forward by rapid responses to change – with a new adaptability and flexibility
• where the local and the regional voice is not only respected but seen as critical to economic success.

The old idea in regional and local economic policy was of help directed from the centre.

The first generation of regional policy, before the war, was essentially ambulance work getting help to high unemployment areas – central government providing first aid.

The second generation in the 1960s and 1970s was based on large capital and tax incentives delivered by the then department of industry and then overseen by Brussels.

Both were inflexible and both were top-down. And both approaches did not do enough to close the gap between the areas of high unemployment and areas of low unemployment.

So the third and new generation of regional economic policy measures seek to strengthen the indigenous sources of growth – local enterprise, local innovation, local infrastructure, local skills and the local labour market – tackle disparities between regions and within them.

And the way forward for each region is local people making more decisions locally about meeting local economic needs.

So I want to put forward a set of proposals today that tackle these disparities and close these gaps so that we move forward together to full employment and higher levels of prosperity in each of our localities – and because the unemployment rate in some local authorities is five per cent higher than in others, we know that we have further to go.

The new drivers of prosperity in a modern economy are: enterprise, innovation, skills, investment and employment.

So in each area we ask ourselves: What more can we do? How we can learn from local government in areas where you are pioneering new approaches as we build a new partnership between central and local government?

Not the old relationship based on patronage or a blame culture. But a genuine partnership. We know the gaps to be filled. Let me give you examples:

Enterprise

First, enterprise. Small business creation rates are more than ten times lower in some Local authority areas than others.

And in Barrow-in-Furness and Wansbeck for example, there are six times fewer businesses per 10,000 population than in some London authorities like Camden and Islington.

But I believe that the gap between Local Authorities is such that we should see this not as a signal for despondency, but a challenge and indeed an opportunity for improvement.

The old idea was that you got full employment from a small number of large companies.

Today, as the paper we are publishing today on the role of Local Authorities in economic development shows, full employment needs a large number of small companies creating jobs.

For every three small businesses creating jobs in the best off areas, there is just one, creating far fewer jobs, in the poorest areas – and as every Councillor knows, fewer businesses means fewer jobs which means reduced income for services and yet more social problems that public services need to fund.

So one of the best pro-jobs, anti-poverty programmes is to help more people start more small businesses, and ensure that access to capital, advice, skills – once restricted only to an elite – is opened up to men and women in every part of Britain.

Some Local Authorities are already striving to achieve these aims.  Councils like Bexley, Eastleigh, Knowsley and Rotherham that have gained beacon status for fostering business growth have seen a real improvement in the numbers of businesses and jobs being created in their area.  Our challenge is to put in place the right environment to enable all localities to achieve these successes.

In the past, with the rigidity of the uniform business rate, Local Authorities gained no direct financial incentive from giving priority to business creation.  In fact Local Authorities could justifiably argue that they had to deal with the social and environmental cost of economic development – in transport congestion, environmental damage and pressure on services like housing and education – but that the financial gains through increased income tax and business rates were passed back to central government.

So to tackle this, the current Local Government Bill will allow Local Authorities to keep a share of the business rate receipts that result from new business creation — creating positive financial incentives for Local Authorities and the wider local community to maximise local economic activity while at the same time avoiding excessive bureaucracy and ensuring fairness between localities.

Today we are publishing the consultation paper on the details of the scheme.   This shows that if our preferred model had been introduced in 2000 then Harrogate District Council would by this year have received an additional £875,000 to spend on local priorities as dictated by local people, Sandwell an additional £5.7 million, Peterborough £7 million more and Stockport an extra £10.5 million.

Based on historical data we estimate that in total as a result of this measure, local authorities could gain up to £1 billion over the next three years — showing that the next stage of our employment and growth strategy for Britain can only succeed with greater initiative and engagement by local areas in improving business creation, job opportunities, skills and innovation.  Further reforms in the Pre Budget Report will reflect this.

So for the first time all of us in partnership can each secure financial benefits from creating new businesses.

And by introducing incentives for every local authority to encourage business creation, we not only put in place the right conditions for job creation but also release more resources for investment in public services.

This measure to give local authorities more resources goes hand in hand with our extra help for areas of greatest deprivation – the emphasis of our approach increasingly on policies to encourage and foster the indigenous skills, talents and potential of local people and communities.

I want people in disadvantaged communities to see that the enterprise culture too often restricted to the elite is open to them – not least in high unemployment communities where prosperity for too long has passed people by.

So we have designated the 2000 most disadvantaged areas in the UK as Enterprise Areas where – working in partnership with Local Authorities and RDAs – we encourage economic activity by cutting the cost of starting up, investing, employing, training and managing the payroll. Here we are bringing together industry, planning, employment and social security policies to tackle local property market, capital market and labour market failures — hence the new community investment tax relief, the power to relax planning regulations, the abolition of stamp duty, the engagement of the new deal – central and local government working together to bring investment, jobs and prosperity to areas that prosperity has still bypassed.

Today we are publishing a paper that shows why we see local authorities as strategic leaders of local economic development and sets out further details on the help available in enterprise areas.  I urge local authorities to use the opportunities presented by these measures to support and strengthen their own local economic and regeneration strategies, and boost the awareness and uptake of incentives by local businesses.

Renewing the local economic base is also one of the main aims behind not only neighbourhood renewal funding in 88 areas worth almost £1.9 billion pounds over this parliament and the new deal for communities in 39 areas worth £2 billion pounds over ten years; but the creation of local strategic partnerships which can do more to drive forward policies on enterprise and employment at the local level.

Innovation

Second, look at innovation. In some areas we spend one tenth – £50 per person – on research and development what we do in others – £500 per person.

While these figures are for regions, they show the gap to be filled. And we know that every successful region and locality must encourage its scientists, its inventors and its innovators – and improve links between its schools, colleges, universities and businesses.

Our regional and local approach means we are already moving from centrally administered r and d policies to the encouragement of local technology transfer between universities and companies and the development of regional clusters of specialisms – encouraging the growth of the knowledge-based company and the business friendly university.

But we can do more to develop new local science and industry partnerships like the north west science council and the Technium schemes in Wales — strengthening links between businesses, universities, regional development agencies and local authorities to support the development of hi-tech industry clusters.   And we have asked Richard Lambert, former editor of the Financial Times, to examine how business-university interaction at the local level can contribute to productivity growth.

Investment

Third, investment. To release new investment I know you want us to remove barriers in the planning system so that together we can better promote local economic development.

At the moment, there is an unacceptably wide variation in the performance of planning authorities.  Over 70 councils are already meeting our target of processing 60 per cent of major planning applications in 13 weeks, but a similar number cannot manage to process 30 per cent of such applications in time.

That is why the government has allocated an extra £170 million to reward faster responses to planning applications — and we will use best value intervention powers to bring change where improvements do not come fast enough.

At the same time we are simplifying the planning guidance we issue to local authorities and the new ‘Planning Policy Statement 4’ on planning for economic development will be issued for consultation later this year.

Alongside our investment of nearly 2.8 billion pounds more in real terms in housing by 2006 and 6.4 billion a year more in transport, we have also made it possible to ensure that what we spend and how we spend on infrastructure improvements is increasingly decided regionally and locally.

With the vast majority of the housing capital budget now devolved, we are moving towards pooling housing spend in regional “pots”, and have created new regional housing boards – bringing together RDAs, local authorities, housing corporations and other relevant bodies to draw up regional housing strategies and make recommendations on funding allocations.  Progressively a greater proportion of funding will be allocated by these boards on the basis of the case local authorities make for local needs rather than on arbitrary formulae handed down by Whitehall.  And the Deputy Prime Minister’s reforms will allow local authorities to mix and match financing and management mechanisms for turning round their housing stock rather than the one size fits all approach.

We are also enabling local people to make local decisions about local needs in transport —– matching local authority control over nearly a third of transport spending – and new powers to raise funds through congestion charging – with a responsibility on councils to produce comprehensive and costed five year transport plans.

So as we move from centrally run housing and transport policies to greater local coordination and flexibility, this major decentralisation is transforming relationships between the centre and localities.

Skills

I come now to skills. Look at the gap between the areas with the most skills and the areas with the least skills. In some local authorities, nearly 100 per cent of 16 year olds are participating in education or training. In others – Salford, Milton Keynes, Harrow – it is less than 70 per cent. Some local authority areas in our country have nearly 65 per cent of 16 year olds with 5 a*-c GCSEs others have less than 30 per cent. Overall across the economy 7 million adults lack basic qualifications. But when some do better we know that all can do better.

The challenge, because we waste too much of the talent of Britain, is to open up opportunities for education to an extent never before seen in this country so that every child, young person and adult will have the best possible chances in life.

And we know we have to look not just at schools but at post-school education. So we are extending the employer training pilots now operating in six areas to around a quarter of the country — offering incentives for firms to give their staff paid time off to train towards basic skills and NVQ level 2.  And a major shake-up in skills training will be announced next week. Building on the new frameworks for regional employment and skills action – in which local authorities are key partners alongside RDAs, the private sector and local learning and skills councils – we are piloting devolved pooled budgets for adult learning in four areas of the country — providing greater incentives to employers and individuals to develop their skills, reducing bureaucracy and strengthening the regional and local dimension in skills development.

And looking to the workforce of the future, we are expanding the modern apprenticeship scheme.

Already, apprenticeships, which a few years ago were dying, have risen in number to 220,000 today.  And our aim is that over a quarter of young people aged between 16 and 22 will take part in the scheme by 2004, with even more benefiting by the end of the decade.

Giving every young person who works hard and tries hard the chance of an apprenticeship or college or university.

Employment

Finally, employment. While some areas of Britain are now full employment areas – where in some council areas unemployment is below 1 per cent – some areas have 6 per cent claimant count unemployment and over 40 per cent of the working age population not in work.

In every area of this country, you as councillors will know at first hand young people who have never worked, long term unemployed men and women who have given up hope, school leavers with no qualifications – no jobs, no cash, no hope – many of whom are now enjoying opportunities for the first time in their lives because of the new deal.

This New Deal initiative has been taken forward by central and local government working together.

And thanks to the efforts of many of you here, 870,000 people have got work through the New Deal so far.

But as long as there is unemployment we will not be complacent – and as local councillors I would like you to play an ever bigger role in the next steps to help the newly redundant get back to work quickly and expand the New Deal to assist those hardest to employ.

We need to make the New Deal more effective and we want to work with you to overcome the barriers to local employment opportunity in your council area and in your region.

Today we find that there are almost 600,000 vacancies in the economy. That there are large numbers of vacancies in each region – almost as many as 2 years ago, and 1 year ago despite the world downturn jobs for people prepared to take them.  The North East which used to have few vacancies today has over 10,000.

And there are not just vacancies in the South East, but in every region

• In Wales nearly 15,000
• In the West Midlands 24,000
• In Scotland over 25,000
• In the North West nearly 30,000

And so the next stage of the New Deal is to do more to link jobs without workers to workers without jobs. So in addition to requiring the long term unemployed in 40 areas of the UK to take jobs on offer,

• Job centres will have local budgets to help with travel, training and equipment to ensure the unemployed can get back to work quickly
• There will be a new ethnic minorities fund and area-based initiatives to tackle the particular barriers facing those who too often miss out on jobs
• And we want to follow the innovative examples of councils like Bristol and Brighton who have tailored supplementary employment programmes to complement the New Deal

For too long too many single parents have been denied work. So in addition to the minimum wage and our new tax credits – raising the in-work income for a lone parent with two children who works full time to £276 a week even after tax – we will pilot an extra £20 a week for those lone parents who voluntarily undertake job search, rising to £40 extra a week for their first year in work.

And with new housing benefit help – delivered in partnership by local authorities – lone parents on a typical rent of £50 a week and working part time will receive at least £213 a week making them far better off working part time than not working at all.

For too long too many young people have fallen through the net.  Some of the hardest to help are young offenders ? 70 per cent of whom re-offend. So the government is now seeing how we can apply nationwide ? under the leadership of Sir John Parker of Transco ? the successful reading training for work programme ? offering young offenders training and work while in prison with, on good behaviour, a job when they are released: a programme with a 78 per cent success rate so far.

For too long too many disabled people have desperately wanted jobs but have lacked the support they needed to move into work.

As a first step for men and women on incapacity benefit who wish to work, there is now an extra £19 a week as the guaranteed minimum income for 35 hours work rises to £194.  We are looking at how improved rehabilitation, capability assessment and training support can help disabled people and those who have suffered ill health fulfil their potential in work. And in the local authority areas where our new pathways to work initiative is being piloted, we want local councils to play a full part – as both service providers and employers – in helping shift the focus on disability from what people cannot do to what they can.

For too long in too many deprived areas of the country there has been a destructive culture that “no-one around here works”.

So we will provide far more help than in the past in these areas, using the sanctions and opportunities available in the New Deal and where necessary taking job advisers onto estates — offering the unemployed training, advice and sometimes cash support to help them get into work, and linking them to jobs in the vicinity, but in return expecting the unemployed to take up the jobs that are available.

Tackling the worst concentrations of unemployment, street by street, estate by estate.

Conclusion

So one by one: enterprise, innovation, investment, skills, employment – we break down the barriers to prosperity with local and central government working closely together.

In other words, a new partnership – with government enabling and empowering rather than directing and controlling and with local authorities building capacity and focusing on improving the prosperity of their localities.

Instead of people looking to Whitehall for solutions in locality after locality, more and more people are themselves taking more control of the decisions that most affect them – a devolution of power that is now ready to spread across regions, local government and communities, large and small.

And as we look to the future, we will strengthen and deepen our dialogue with you to identify those areas where further reform will help you most.    And we will involve you too in our decision on the euro.   The deputy prime minister and I recently issued guidance to local authorities on euro preparations and you now have the opportunity to consult your local communities and develop your own changeover plans.

I agree with Sir Jeremy Beecham that this new localism – effective devolution based upon a genuine partnership between central and local government – moves us forward from an old Britain weakened by centuries of centralisation towards a new Britain strengthened by local centres of initiative, energy and dynamism.

And in this way, I believe that a new era – an age of active citizenship and an enabling state – is now within our grasp —- at its core, a renewal of civic society where the rights to decent services and the responsibilities of citizenship go hand in hand.

But I end where I began. We all know about what brings people into public services – the belief that we can make a difference.

And we know that if – building on the expertise and success that some of the best councils have demonstrated – we can empower local managers and local service deliverers, that ethos of public service – the importance public servants attach to duty, obligation, care and compassion – can, working within the right framework, ensure the best public services in the world.

And as we look now to the future, let us remember not just the challenges ahead but the inspiration that comes from the achievements of the pioneers of local government and civic pride — leaders whose hopes, whose vision, whose ideals inspired a whole generation to greater public service.  Men and women prepared to modernise, to reform, to change, to tear up old ideas and adopt new ones.

They developed a shared vision that remains our vision today: a vision of a just society in which everyone – and not just a few – had a chance to fulfil their potential, in which even in times of hardship people strove to help each other.  A shared vision of a society in which by the strong helping the weak, it made us all stronger.

Never let us lose that ambition for our country and for the communities which we serve. We must never lose the ambition that we can scale new heights, meet new needs, tackle deep-rooted injustices, and work together for a better, stronger society.

That shared ambition that social justice and economic progress can go hand in hand, and that in our Britain everyone has a part to play.

That is the vision I put before you today.

That is our aim.  That is now our task.  That, if we work together, will be our achievement.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, at the City Growth Strategies Forum on 8 October 2013.

It is a pleasure to be here today to celebrate the progress so far of the City Growth Strategy Pilots.

And I want to start by thanking everyone here – regional development agencies, local authorities, public servants, companies, academics, the small business service, urban specialists in every field, and in particular Professor Porter – for the work you do developing strategies for growth which build on indigenous strengths and aim to give every community in Britain the opportunity to realise their economic potential – and congratulate you on what you have done in the last few months in pilot projects in Nottingham, City fringe, Heathrow, St Helen’s, Haringey, Plymouth and London South Central.

When I became Chancellor in 1997 my first act was to make the Bank of England independent.

We acted immediately on coming to office because, with new monetary and then fiscal rules, we wanted to entrench a new culture of economic stability not seen in Britain for decades.

And following the election in 2001, our first act of economic policy was to make the competition authorities fully independent of political interference.

We acted then — and it is time to go further now — because the priority for our second term and the years ahead is to build from the foundation of economic stability a new culture of enterprise which helps open up new markets, breaks from the old corporatism of the past and opens opportunities for enterprise to all.

A British enterprise culture is vital because for fifty years since the war there was no consensus on business and enterprise. The left has been seen as for fairness at the cost of enterprise, the right for enterprise at the cost of fairness.

Yet we know that a pro-competition policy and pro-enterprise regime that encourages entrepreneurship genuinely open to all is a million miles away from the corporatist and anti-competition approach associated with the old left in the post war period

But equally we must move beyond the eighties when, despite the rhetoric, not enough was done to build an enterprise culture. Too often the image of enterprise was of a closed circle with millions left out, and of a regime which talked about competition but left the competition regime largely unreformed, protecting vested interests and stifling economic dynamism.

Instead, what we now want to see is a dynamic business culture which makes people feel that enterprise is not for an elite but potentially for them too.

Indeed in time we can, in my view, forge a new British consensus not just around stability but around an enterprise culture that is open to all, fairness and enterprise advancing together.

So in the next few weeks in the run up to the Pre Budget Report and the Budget I will set out the agenda moving forward so that we can make the most of the new opportunities available.

Enterprise for All

The latest evidence shows that the climate for small business in Britain is still robust.  Small business creation rates are still strong.  Survival rates continue to improve – and even during a global downturn Britain has suffered less than many of our G8 competitors.

But the gap between Britain and the US remains high and we know that there are still too many areas in Britain where enterprise struggles to thrive.

We recognise that the barriers to enterprise are greater in poor communities and that many businesses in our least well off areas face special problems in obtaining access to support, advice and finance.

Our objective is that no-one is left out on the margins, no-one excluded from the mainstream of economic prosperity.

And this is the time – when economic growth is strengthening – to do more to bring prosperity to those places and people the economy has too often and for too long forgotten

In tackling the employment and enterprise problem in the high unemployment areas, we will not return to the old ways which have failed.

Neither an old style benefits approach which ignored the causes of poverty and unemployment – and did not invest in education, training, jobs and business development. Nor a bricks and mortar only approach which, with enterprise zones, targeted subsidies for property development at the expense of help for enterprising local people.

Our way is not the old way of simply backing zones of enterprise and forgetting about the people – it is about backing people of enterprise. For we know that in our inner cities and old industrial areas we need not more benefit offices but more businesses.

Through our national strategy for neighbourhood renewal and our regeneration programmes, high unemployment communities will have extra support to allow enterprise to flourish.

But we need to do more.

Inner cities and established industrial areas should be seen as new markets with competitive advantages – their strategic locations, their often untapped retail markets, and the potential of their workforce. And so we want to put in place the right incentive structure to stimulate business-led growth in our inner cities and estates and encourage much bigger flows of private investment.

Our aim is to make the market more likely to work in places where it wouldn’t otherwise work. To build a network of relationships between the high unemployment areas and the private sector.

That is why we have created Enterprise Areas in the 2000 most deprived wards in the country – where we will give special help with starting up, employing, training, payroll and investment:

• the abolition of stamp duty entirely with full stamp duty exemption for all business property purchases since April 2003;
• new powers for planning authorities that will cut red tape for growing businesses by removing the need for them to apply for planning permission;
• community investment tax relief – which offers for every £100 of private investment an extra £25 of public investment;
• the possibility of enhanced capital allowances for renovating business premises;
• increased funding for the Phoenix Fund – providing support to thousands of small businesses with special help for women and ethnic minorities who face additional barriers to enterprise;
• and financial incentives to help all businesses bring their tax and payroll systems on line.

And now that we have set up a community venture capital fund – the Bridges Fund – with a continuing remit to help fund a regular wave of new businesses, we are investigating the possibility of a second fund which could operate in deprived communities right across the UK.

And just as we are working with local authorities and regional development agencies to develop these enterprise areas – so too we need to make use of the creativity and flexibility that the private sector can bring.

That is why the work of City Growth Strategies is so important – learning from the Initiative for a Competitive Inner City in the United States – harnessing the power of the private sector to generate economic growth – and revitalising seven of the most deprived urban areas in England by identifying their competitive advantages:

• the links to major transport routes that gives St Helens an advantage in the logistics sector;
• the international trade opportunities for Heathrow City that come from its multicultural population and location;
• the opportunities to grow the creative clusters in the City fringe and Haringey;
• the under-supply of shopping facilities that brings opportunities for retail in south central London.

Public and private sector working together to make a real difference in these communities;

• increasing income, wealth and jobs for inner city residents;
• making the inner city a more competitive place for business;
• and creating a positive attitude towards the opportunities for enterprise that these areas have to offer.

Enterprise in Schools

But if we are to truly have the deeper and wider entrepreneurial culture we need, we must start in our schools and colleges.

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

Already six hundred thousand 14 to 16 year olds are benefiting from work experience and thirty thousand teachers are in work placements. And we are now working with business and the world of education to build on this, improving the quality of placements and experience.

But this new initiative is not just about work experience but about enterprise and entrepreneurship in the curriculum

At present less than a third – and in some areas less than 15 per cent – of young people have the chance to take part in enterprise activities while at school.  We have announced plans – and money – to give all young people at least 5 days of enterprise education in our schools by 2006.

Conclusion

So this is the time to say to every corporate leader in our country, help us strengthen the enterprise culture by becoming role models for our young.  And take a look at investing in our high unemployment areas. They offer business new choices, new recruits, and new markets. It is good for business and for growth.

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

And with government, business leaders, and local communities working together, I believe we can achieve our goal.

Below is the text of the speech made by Gordon Brown, the then Chancellor of the Exchequer, at the CBI National Conference held in Birmingham on 18 November 2003.

I want to thank all of you here – the wealth creators of Britain – for the contribution you make to Britain’s continued economic growth; for the dynamism that you have shown in meeting and mastering the challenges of a more unstable global economy; and for your commitment to the prosperity of Britain.

And it is a particular pleasure for me that I am joined this morning by someone who has distinguished himself both in business – as the former Chairman and Chief Executive of CSX Corporation – and in government service. And I would ask you to welcome the Treasury Secretary of the United States John Snow.

And I want to say – I believe on behalf of all of us here – in welcoming President Bush’s visit later this week, what binds America and Britain together is not simply a shared history over the generations – and not just wonderfully good and cordial personal relationships – but shared values.

Indeed for centuries, America and Britain have been linked by the ideals that we share: a passion for liberty and opportunity; a belief in the work ethic and in enterprise for all; a commitment to being open not isolationist; and our shared conviction that economic expansion through free trade and free markets is the key to growth and prosperity.

And with shared values we must also meet a shared threat. As Tony Blair said yesterday, it has fallen to this generation –

the generation who were born or grew up at a time when Britain and America had together fought World War Two – what we believed was a war to end all wars; the generation who lived through the uneasy and fragile truce of the Cold War years; who dared to hope that when the Berlin Wall fell the threat of nuclear, chemical and biological weapon proliferation had been removed but now find the world at risk from a new threat; it has fallen to this generation to fight global terrorism and rogue states.

In this new century our shared values across the Atlantic can become our common destiny. And Mr Secretary, I – and all of us here – stand for a Britain – as you stand for an America – that is outward looking, ambitious to succeed, determined to advance an enterprise culture, fully equipped to lead in the new global economy.

And it is as a reflection of these shared values, and a special relationship we are not just celebrating but deepening, that today John and I are able to announce a joint US-UK enterprise agreement – that we believe will make for a stronger relations between America and the whole of Europe.

We know that damaging trade and regulatory disputes between Europe and the USA have hindered commerce and damaged transatlantic relations. It is time now for us all to make the effort to move beyond them. Just as in 1988, when Europe was at the outset of the great project to move towards a single market, the Cecchini report showed the benefits of breaking down barriers for commerce, growth and jobs, so too we have agreed today – alongside our efforts to revive the Doha trade talks – to proceed with a major transatlantic review — an independent study on how by liberalisation, the removal of tariff and non tariff barriers, and agreed approaches to competition and regulation we can reap the benefits – which could be as much as $100 billion and one million jobs – from greater trade and investment between our two continents.

And let me announce also as part of our agreement:

– incentives for our universities to become more entrepreneurial and link up in research and technology with US universities including a technology transfer fund to foster exchange of ideas across the Atlantic;

– enterprise scholarships for management studies not just in the UK but in the USA; sharing best practice on enterprise education in schools and universities, with young entrepreneurs in the US and UK able to learn from each other;

– and a joint forum next year to discuss common productivity challenges and share best practice.

John…thank you…

North America and Britain are the two areas of the industrialised world in which growth has been strengthening most – even amidst one of the G7’s longest and most protracted world downturns in growth and trade.

At various points in the last three years – America, Japan and Germany in 2001; half the euro area and much of Asia in 2003 – our main competitor countries have faced recession.

But, for the first time in fifty years, Britain has not only avoided recession but has continued to grow in quarter after quarter, year after year, in all six years of our government since 1997.

Remember the old days, what was called the British problem: stop go, boom bust, unstable cycles…Britain the country usually first in, worst hit and last out of any world downturn; invariably hit by an inflation problem that prevented interest rates falling when they needed to come down; and usually then by wage inflation that could not be afforded and prevented you making long term investment.

So I want to explain to you today the policy we – and the Bank of England – will continue to pursue to ensure the British economy entrenches our new won and hard won stability and continues to grow – ensuring we take no risks with inflation or stability generally, or with the fiscal position. And because we must never take stability for granted I want to set out some of the measures I propose to take in the Pre Budget Report to lock in that stability for the years to come.

The lessons all advanced economies have learned are that in a global economy, monetary and fiscal policy has now to adjust quickly to fast moving changes and to heightened risks of instability — and to do so it has to be proactive and forward looking. While there is a link between money supply and inflation, in open economies with liberalised capital markets rigid monetary targets just cannot work. But the experience of the 1970s and 80s also taught us that correct as Keynes was to point to the need for proactive and forward looking monetary and fiscal policy – ever more essential in fast moving capital markets – the old way of doing so – crude annual fine tuning – could not work either.

Instead the flexibility and proactive approach a modern economy needs demands a framework – whether monetary or fiscal – based not on short term targets but on clear long term objectives that are met and seen to be met; well understood operational rules of procedure that are painstakingly followed; and an openness and accountability that which helps build public trust and market credibility.

That is why my first acts as Chancellor in 1997 were not only to make the Bank of England independent but to introduce a new British model for monetary and fiscal stability with: instead of monetary targets, a symmetrical inflation target that is as concerned about deflation as it is about inflation instead of the old annual fiscal fine tuning, clearly established fiscal rules set over the cycle
and because it is important not just to build trust but to educate decision-makers about the costs and benefits of different courses of action, an openness and transparency.
And in Britain today our new framework – this British model – has, in most people’s views, made Britain better placed than before to cope with the ups and downs of the economic cycle. Indeed, the experience of other economies has shown that if monetary policy remains sluggish and inflexible – or fiscal policy is still based on the old style annual incrementalism, blind to the economic cycle – then growth has been lower.

So – to entrench stability for the long term – what are the lessons we learn for the future?

First, the importance not just of setting clear and precise objectives and rules of procedure but also a symmetrical inflation target that, with the bank seeking 2.5 per cent inflation, is pro growth as well as pro stability. The credibility that has come from bank independence and the symmetrical inflation target has enabled the Monetary Policy Committee in the difficult world conditions manufacturers and businesses faced to – as in the USA – respond proactively to the recent downturn by aggressively cutting rates —- in Britain’s case nine times since the start of 2001. With the result that, even when more exposed than any European economy to the IT shock, growth continued and unemployment continued to fall.

It is because we are committed to delivering the stability industry needs that the same proactive approach is being pursued as the economy strengthens.

Let us remember that in 1988 as the economy started to accelerate the then government cut interest rates, fuelling an inflation that eventually led to a deep recession. It was from these mistakes that in 1997 we learned: immediately after we came to power we raised interest rates and then even as inflation expectations started to fall the newly independent Bank of England raised interest rates again so that we could ensure a long period of low inflation and sustained growth.

And again in 2003 the Bank of England, determined to keep inflation low and stable in a strengthening economy, have raised interest rates to ensure that Britain continues to enjoy stable growth.

I believe that the MPC is right to take the forward-looking approach of pre-emptive action – taken as the economy strengthens – to lock in stability.

And we will not yield to any inflationary pressures, any unaffordable wage demands or any short term quick fixes or soft options that would risk or squander the huge economic opportunities that our hard won stability offers the British people.

Fiscal discipline matters too. It is where there is no credible long term commitment to fiscal stability over the cycle that economies can find themselves in the perverse position of cutting spending or raising taxes at the wrong time of the economic cycle, putting growth and stability at risk. And it is precisely at this point in the economic cycle that past British governments have made mistakes.

So breaking from the old familiar annual public spending rounds, the old annual promises and breaking of promises over surpluses and deficits, we set long term fiscal rules over the cycle – rather than rigid year to year targets – and these have supported monetary policy in helping us continue to grow.

It is because of this long-term commitment to fiscal stability that:
In 1997 and for two years we froze spending and turned the large deficit that we inherited into a large surplus; we then aggressively cut the national debt; we then paid off more debt in one year than in the whole of the period since the Second World War; and we then were able to reduce debt interest as a share of national income to its lowest in almost a century, since 1914.

Our stability first policy means that our fiscal decisions will ensure that while debt is rising substantially in other countries, levels of debt in Britain will remain low and sustainable. At all times we will meet our fiscal rules and, more than that, in the Pre-Budget Report we will publish our plans showing that after tough decisions made on pensions – state pension spending will rise to 15 per cent of GDP in Germany and France but remain at 5 per cent in Britain – our fiscal position is sustainable over not just a year or two but over the next decades.

So our policy will remain stability first – today, tomorrow and always. For stability is never a final achievement but always a permanent never ending challenge.

And it is upon this foundation of a shared national commitment to stability that we can move to my next ambition: that Britain agree a similar shared commitment to a wider and deeper entrepreneurial culture, a shared commitment across the whole country to enterprise:

– enthusing young people in every school and college with the spirit of enterprise;
– in all parts of our country and particularly in the high unemployment areas, demonstrating that enterprise is a solution to the unemployment and economic challenges we face;
– valuing business leaders as role models in our own communities;
moving beyond the old sterile political divisions so that there is, across the whole country and across the whole political spectrum, a shared purpose in ensuring that British enterprise, inventiveness and creativity can lead as we face our biggest challenge – competing successfully in the global economy – the theme of this Conference.

I know that for most of the companies here, there is hardly a good you produce that is not subject to intense competition from at home and abroad — competition not just from traditional competitors in the advanced industrial economies but competition from emerging market economies not least in Asia and the east of Europe.

I know that because you now operate in a global economy, the decisions you make every day about where you source your products are not just decisions about where to buy them within Britain but where to buy them across the world.

And that because the our labour market is now international, at every point you have to look not just where you source your labour and skills but where your competitor sources labour and skills.

All the ground rules – who you customers are, who your competitors are, where your labour comes from – are changing — and no one is going to turn the clock back.

And I think the whole country owes you – as our business leaders – a debt of gratitude for your response to these new realities —- in particular, your courage to change.

And just as you and your companies must respond and adapt on a continuous basis, so too must government. And for every government across the industrialised world – and we will be hearing from John Snow in a moment – the key question – beyond all the old, sterile political party point scoring – in this era of global competition is, and will be: what is the best contribution that government can make?

I am more than ever convinced that government should concentrate only on what it can do well:

– building a competitive environment;
– investment in skills, science and infrastructure;
– and beyond that getting government out of the way by removing the barriers to enterprise – whether from Europe or Whitehall – that hold you back.

So as we seek, as pro Europeans linked to Europe by history, geography and economics, to build a global Europe — flexible, outward-looking, reforming and open, far from an inward-looking trade bloc – and I am publishing our latest Progress Report on Euro Preparations today — I am proposing to my European Finance Minister colleagues that Europe designates 2004 a year in which we set a clear timetable to eliminate wasteful regulation.

I know that the best contribution pro-Europeans committed to Britain leading in Europe make to the cause of Europe is by ensuring that in Europe we face up to rather than duck the difficult decisions about economic reform. So I can tell you that just as we successfully resisted the savings directive that would have harmonised savings taxes, Britain will resist inflexible barriers being added into directives like the working time directive and agency workers directive, the investment services directive and the transparency directive, as well as tax harmonisation. And I invite you, as companies, to join us in putting European regulations to the ‘costs ‘test, then the ‘jobs’ test and then the “is it really necessary” test.

And at home we will support this by – as Patricia Hewitt has said – removing further audit requirements from more small firms and by making further cuts in the time and cost of VAT administration — and I invite you to nominate from your businesses men and women who will assist us in identifying and sweeping aside old regulations that have outlived their usefulness.

When we raised national insurance to finance a modern reformed health service you told us that we were right to insist on efficiency and value for money as the watchwords for the public services. I have announced the Gershon Review into cutting back central bureaucracy and making more effective use of our front line professionals; and the Lyons Review examining the relocation of 20,000 jobs out of Whitehall. It is by requiring reform as a condition of resources — by measures from more flexible labour markets, modernised NHS foundation hospitals where there is tough inspection and extra freedoms for high performers, and reformed systems of university funding to public sector pay linked to performance, a tough housing inspectorate, and freedom and flexibility for good performing local councils — that we will be able in the next spending round to ensure money is well spent and deliver new resources to our front line public services.

And we will legislate to tackle a long standing obstacle you have rightly raised with us that we make the planning system quicker, more flexible and more responsive to your needs.

I know the priorities of the CBI for investment: central to our economic future is excellence in British science and innovation. So not only will we create new centres of excellence in science teaching, we are investing an extra one and a quarter billion pounds a year to expand the science research infrastructure and training more skilled scientists and engineers, but you have asked us — and we have responded – for an R and D tax credit, on which we continue to consult, and more support for technology transfer.

And because we – Government and CBI – also agree with you that the key to success is getting the best people and the best out of your people, we are also responding to your wish that standards amongst school-leavers must be of a ever rising quality. And with

– the return of apprenticeships – once dying now taken up by one quarter of a million young people
– the new University for Industry – Learn Direct – which has already given nearly 1 million adults the chance to take courses from literacy to language to it
– and the Employer Training Pilots that offer paid time off to train towards relevant skills
– we are investing more today in education and workplace skills than at any time in our history and will continue to do so. And I hope that we can strengthen the skills partnership between business and government to achieve our shared aim: that Britain becomes the best educated, most skilled, most technically proficient workforce in Europe.

You have not only told us the importance you attach to the government investing in science and skills but of proper investment – in partnership with the private sector – in transport and infrastructure. And with the doubling of investment in our roads and railways – an extra £4 billion a year – we will proceed, no matter what the opposition, with our pioneering Public Private Partnerships and these will be extended from transport, schools and hospitals into prisons, urban regeneration, social housing and waste management.

An enterprise economy must be rooted in an enterprise culture starting in our schools and colleges, and extending across every community. And today John Snow and I have been meeting business leaders pioneering enterprise education in our schools and encouraging new start ups in high unemployment communities – as well as local young entrepreneurs from the Birmingham area putting their innovative ideas into practice – and I can assure you that having cut small business tax from 23 pence to 19 pence and exempted the first £10,000 of new company profits from tax, cut long term capital gains tax from 40 pence to 10 pence as well as mainstream corporation tax from 33 pence to 30 pence, we will continue to look with you at the business tax regime so that it can reward entrepreneurship and encourage new investment: an approach based on a broad base and low tax rates that is stable and transparent, reflecting our goal to make and keep the UK as the best place for international business.

So from a stop-go economy, Britain is now one of the world’s most stable and a growing economy – the best position from which to seize the opportunities of a highly competitive global marketplace.

But now its time for Britain – which has created a British model for stability – to build on that and come together to create a stronger enterprising economy.

I believe we can build a shared commitment to enterprise and wealth creation stretching across all communities of our country.

I believe we can create a stronger deeper enterprise culture that will help us take our rightful place in the global economy.

As John Snow can tell us, America has a model of enterprise which we can learn from.

John Snow himself has played a great part – in business and in government – in strengthening that enterprise culture —- and it is my pleasure to introduce him to you.

From John’s time in the US Department of Transport, in business leading CSX Corporation, as the Chair of the Business Roundtable – America’s foremost business policy group – and now as a distinguished Finance Minister, John Snow has been committed to bringing business and commercial expertise to the running of government — and dedicated to a strong pro Atlantic consensus

It is my pleasure and privilege to introduce John Snow and ask him to address this conference.

Ladies and gentlemen, Treasury Secretary of the United States of America, the Honourable John Snow.