Tag: 2004

The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 21 April 2004.

Can I say what a pleasure it is to be at this annual meeting of the Chambers of Commerce:

• to have the opportunity to thank all of you – representatives of, and speaking for, more than 135,000 businesses from every city, every town, every region of our country – for the work you do and the service you give championing the cause of business – and for what you achieve for British enterprise and for Britain;
• and to congratulate your President Isabella Moore and your Chief Executive and staff for the work you do regionally, nationally and internationally to make the voice of the British Chambers of Commerce count for Britain.

And let me say what I firmly believe: that the whole country owes you a debt of gratitude for the way, particularly throughout the world downturn of the last few years, you have been meeting the new challenges – demonstrating your resilience, your fresh thinking, your courage to respond and change – with Britain today, through your efforts and that of the British people, seeing 3,000 new businesses starting up each week and 25,000 men and women finding new jobs every day, with an additional 10,000 new vacancies being advertised.

Modern Britain was built by men and women of commerce and business; by men and women demonstrating entrepreneurial flair; men and women of commerce showing the best of practical skills committed to a vision of British manufacturing and commercial strength; men and women who were not cynics, who never talked our country down but were – and are – confident, forward looking optimists dedicated to the future well-being and economic destiny of Great Britain.

The nations that will succeed amidst ever more intensive global competition not least from a rising China and India, will be those that are sufficiently confident and forward looking to entrench stability, to celebrate enterprise, to make long term investments in science and skills and be outward looking rather than protectionist. And I want to suggest to you today that at this moment of opportunity when the world economy starts to grow again, Britain’s great strengths – as the country with traditions of stability deeper than almost any other industrial economy, with traditions of scientific inventiveness longer than any other, and with a global reach than has been wider than almost any other – make us well equipped, as long as we make the right long term decisions on stability, science, skills and enterprise, to be one of the great success stories of the global age.

Now Madam President: of all the economic duties of government the greatest and pre-eminent challenge is the creation and entrenchment of economic stability and taking the hard decisions to lock stability in, even in difficult times in the world economy.

Let us remind each other of Britain’s chronic post war history of stop-go, inflation, short-termism, under-investment and higher unemployment and the damage it did to good hard working businessmen and women. And only recently in the last world downturn in the early 1990s when – as a result of allowing the economy to run out of control – the British people and British business suffered 10 per cent inflation, 15 per cent interest rates, 1.5 million people in negative equity, 250,000 homes repossessed and 1 million more out of work

This was the old stop-go Britain: an instability that meant with 10 per cent interest rates or more for a whole four year period, businesses like yours could not invest with confidence; with interest rates charges so high and prospects so uncertain many with talent and initiative found it too costly and risky to start up businesses; even the most successful businesses could not make long term plans as everyone expected inflation to recur – and we must never repeat those mistakes again.

Now, by working together, we can see a Britain that has a new found and hard won stability with: the lowest inflation for thirty years; and the lowest interest rates for forty years; the lowest unemployment for a generation; and a Britain that is seen today as the most stable of all the major economies.

And it is important we understand how and why it is Britain – once the most stop go of economies – which has avoided the recessions that hit America, Germany, Japan, Italy and most other industrial economies during the world downturn of the last few years and has enjoyed sustained and sustainable growth.

So let me just explain the long term difficult decisions that had to be made and what I know we must also do to entrench that stability for the future.

When we came into power – and having understood the damage that stop go instability had done to your businesses and having talked widely with people like Alan Greenspan and others whom I respected round the world – I decided to break decisively with the old short termism that had brought stop go and so in our first day in office we removed the politicians’ power to make interest rate decisions.

But the changes we made were not just the right one – opposed by other parties – of making Bank of England independent.
Even more important we put in place a wholly new long term fiscal and monetary discipline and framework which some now refer to as the ‘British Model’ for monetary and fiscal stability:

• a symmetrical inflation target – now just 2 per cent – which is – important to how we responded to the world downturn – as worried about deflation as inflation;
• fiscal rules set not just for one year but for the whole economic cycle;
• and a new fiscal discipline founded on a radical reduction of the national debt;
• and having tightened fiscal policy radically by over 4 per cent of GDP and sold off assets including spectrum – paying off more debt in one year than all the debt paid off in the whole of the last fifty years taken together – we cut debt from 44 per cent of GDP to one third;
• and having cut debt dramatically, we reduced our debt interest payments – which with social security had taken up half of all additional public spending ten years before – to less than 2 per cent of GDP, lower than at any time since the first world war.

And in contrast with the experience of other economies hit by recession, the credibility that has come from independence for the Bank of England, the symmetric target, the reduction of debt and debt interest and the new fiscal rules – the British Model we have created – has enabled the Monetary Policy Committee to respond early and decisively – raising interest rates in 1997, cutting them sharply in 1998 and again with nine interest rate cuts during the global downturn, and now in the last six months acting pre-emptively with interest rate changes on two occasions – with the result that, even when more exposed than many other European economies to the IT shock, growth has continued and continues at a sustainable level.  And each year since 1997 low inflation – barely achieved by previous governments – has been achieved and our inflation target met each year and every year.

So instead of being – as in the old days – first in, worst hit and last out of any world downturn, Britain has not only avoided recession but has continued to grow in quarter after quarter, year after year, in all seven years of our government since 1997.

Indeed, Britain has now enjoyed the longest period of growth for over 200 years.

And now that the world economy is strengthening, growth is also becoming more balanced with business investment, manufacturing output and exports rising now – and expected to continue to rise this year and next.  And as a result and because the New Deal has, at your suggestion, insisted on the obligations of the unemployed as well as on the opportunities, the numbers of people in work have risen by 1.8 million since 1997. Indeed, this year there are for the first time actually more than 30 million workforce jobs – 30.3 million in December 2003 – a rise of 2.42 million since 1997.  And while – as you know – jobs have risen and fallen in a number of areas, you will be interested to know that jobs in construction are up by 345,000; jobs in finance and business services up by 965,000; transport and communications up by 187,000; and distribution and hotels up by 540,000.

So let me be clear: but for the new British Model which other countries are now examining, Britain would have run the same old recessionary risks.

And I can tell you that such is my determination to lock in that stability that looking forward, vigilant to the global economic cycle, we can and will take nothing for granted.

And it will be the same forward looking monetary action – backed by our sound fiscal policy – that can, if we continue to make the right decisions and stick to our resolve, lock in greater stability not just for a year, or for an economic cycle, but in this generation —– a prize of greater stability that has eluded successive governments of all parties in the post war era; a prize that – with resolve and prudence – is now within our grasp.

While we will always be vigilant to the risks, growth in 2004 which is expected to be – even after three years of flat growth – just over 1.5 per cent in France, Germany and the euro area, will be between three and three and a half per cent in Britain with, of the G7 countries, Britain and America again growing fastest.  And I am pleased that forecasting organisations which doubted us last year and then doubted us again this year are now accepting – as the IMF has done today –  that growth will be higher than last year, one of the highest of the main economies, and above 3 per cent this year.

And I can assure you that having had the strength to make the difficult long term decisions after 1997 we will continue to have the strength to take the long term decisions that put stability first now and in the future, supporting our monetary authorities in the difficult choices they have to make. And I can say categorically to investors everywhere that while no-one can ignore the reality of the economic cycle and the potential of global events to impact on the economy, we will entrench not relax our fiscal discipline.

For let us recall that at this stage in the economic and political cycle, past governments have resorted to short-termism in fiscal policy and gone on to raise the rate of spending in a pre election spree.  But I can tell you this morning that in exactly the same way that we had the strength since 1997 to take long term decisions on fiscal as well as monetary policy, we are equally resolved today to avoid at all times the short-termism and mistaken fiscal as well as monetary policies of the past.

So, as I have announced, we will, while meeting all our commitments and our fiscal rules, lower not raise the rate of spending growth in the next spending round.  I can tell you that while it was right – because we are tackling decades of under investment – that current spending rose in real terms by an average of 4 per cent between 2000 and 2004, it will grow by an average of 2.5 per cent in real terms between 2006 to 2008.

And I tell you we will not be tempted into making the mistakes of the past. And I would caution against policies – bad for Britain’s long term future – that would complacently assume that our stability is a given that any government could maintain without risking the return of the old stop go; and against policies that would:

• tamper with our fiscal rules vital to that stability, abolish the New Deal with its obligations on the unemployed, cut investments each of us know are vital for our local economies in infrastructure and in science and skills, as well as in security and law and order, the importance of which you have highlighted this morning;
• and retreat from our long term fiscal disciplines – from fiscal rules set over the cycle – to the old annual inflexibilities which would repeat in Britain the same mistakes of the stop go years of the early nineties and indeed repeat in Britain exactly the same rigidities seen in the Stability and Growth Pact in the euro area.

And let us also recall that in the past Britain usually fell into recession after two inflationary bursts – an initial burst of inflation when demand got out of control and then a second burst of inflation when wage negotiators sought to catch up with expected high inflation in their pay claims.

But I can tell everyone who depends on a wage or salary that under our new model of Bank of England independence, inflation – as we saw yesterday – is now less than 2 per cent, is likely to be less than 2 per cent this year and it is set to be just 2 per cent in the next and subsequent years.   And in this upturn when Britain must seize the opportunities by being fully competitive it is vital we complement this anti inflation discipline by both private sector and public sectors showing pay responsibility.

Our message on pay is clear: there must be no return to the bad old days of pay irresponsibility in the private sector and we will tolerate no irresponsibility in the public sector. Civil service unions should also know that not only will we proceed with the 40,500 job reductions in the Department for Work and Pensions and the Inland Revenue and Customs – reducing administration costs across Whitehall from the 4.6 per cent we inherited to 3.7 per cent by 2008 – but there will be no going back to the old days of inflationary pay deals that would put hard won economic gains in jobs, prosperity and stability at risk.

So once a stop-go economy, Britain is now one of the more stable.  And we are determined not to be diverted from keeping it that way. And it is time for us, facing new global economic challenges, to combine this new stability with a new resolve to make the right long term choices and reforms to achieve excellence in enterprise, in science and innovation, and in skills.

So in the same way that a British consensus has been forged across the country – across management and workforces, and across all parties – for low inflation and our British framework for stability, we can, I believe, aim higher to forge – again across all parties, all groups – a deeper British consensus for enterprise — an entrepreneurial renaissance that celebrates and develops the entrepreneurial spirit that made us the first industrial power of the world and opens up the opportunities of enterprise to all with the talent and drive.

Think back to the old days not just of stop go but of a sterile self-defeating corporatism that stifled enterprise and creativity and was Britain’s response to our nation’s relative economic decline

Hence what we called:
‘The productivity problem’
‘The short termism problem’
‘The union problem’
‘The management problem’
‘The investment problem’
The ‘What’s wrong with Britain problem’.

I am pleased to report that because of your efforts there are today 100,000 more businesses than in 1997.

Because for us a key priority was to send a message not just about stability but also about enterprise, a Labour Government, even with other priorities including investing in the NHS, education and transport and law and order, made the decision to cut capital gains tax for long term business assets dramatically – from 40 pence where it had been for years down to 10 pence.

And I can tell you that while in every country health care cures and technologies have meant rising costs – in America most dramatically to 15 per cent of national income – hence our decision which I explained to you last year that national insurance pay for new investment matched to managerial reform in the NHS – we have since 1997 cut corporation tax from 33 pence to 30 pence, cut small business corporation tax from 23 pence to 19 pence and we are determined to keep our tax rates low and competitive, one of the reasons why  Britain is the most attractive place to invest and do business.

You asked us to consider capital allowances and in particular special help for start up businesses, and support for venture capital. And not only have we made first year capital allowances permanent and in 2000 enterprise areas we have abolished stamp duty altogether but for this year as the economy moves forward we increased allowances for small firms to 50 pence and gave new support in the budget for the venture capital industry in all regions and nations of our country.

Now regulation, red tape and bureaucracy are challenges in every industrial country of the world and whenever I go to the USA businessmen and women there raise about the very same things about the USA economy –  red tape, bureaucracy and regulation.

You asked if together we could look at VAT. Instead of having to account for every transaction an automatic flat rate VAT calculation for small businesses which lifts the burden of VAT red tape off the shoulders of hundreds of thousand of companies. And we have more small companies taken out of VAT from a more generous threshold than any country in Europe.

You asked us if working together we could look at red tape in auditing and we have exempted more small businesses from the requirement to submit an independent audit.

You asked us if working together we could look at the system of inspections and enforcement and its costs – and we have set up a review – to which I know you are contributing – to minimise and reduce duplication in the inspection system and enforcement regimes.

You asked us if working together we could look at the administration of the working tax credit – and having accepted the case for the Inland Revenue paying the credit directly to employees, we are now consulting with you on detailed implementation.

You asked us if working together we could look at the cost of submitting statistical returns and the National Statistician is working with you through the Business Forum to look at what more can be done to minimise the burden on small business.

You asked us if working together we could look at the Information Commissioner’s requirements and we produced shortened and simplified guidance for companies about the Employment Practices Data Protection Code.

You asked us if working together we could look at the way new regulations were examined and from now on, the Regulatory Impact Unit will prevent the implementation of new policies if no proper assessment of the regulatory impact on business has been done.  For the chemicals, construction and retail industries we have established industry forums to give business early warning of new regulations and allow you to express your views on them.  And just as legislation can only be is only approved after a Cabinet process chaired by the Prime Minister so too from now on new regulations with a major impact on business will only be allowed to go ahead after being submitted to a cabinet route, with a strengthened Panel for Regulatory Accountability.

And because 40 per cent of new regulation comes from Europe we have resisted inflexible barriers being added into European Directives like the Working Time Directive and Agency Workers Directive, the Investment Services Directive and the Transparency Directive – showing that the best contribution we pro Europeans can make to Europe’s future is to lead the reforms that will make it more competitive. And Britain has agreed with Ireland, the Netherlands and Luxembourg to put regulatory reform at the heart of our four EU Presidencies through to 2005, ensuring that any proposed regulation and every costly and wasteful existing regulation is put to a competitiveness test.

We also know that working together we can do more to enhance Britain’s great entrepreneurial culture.

And we have been considering what might be done to recognise that outstanding success.  So it is right to tell this conference which has been so prominent in promoting entrepreneurial talent in every region and every locality that building on the Queen’s Award for Enterprise the Government is in discussions with the Palace about new ways of recognising outstanding individual contributions to the development and promotion of enterprise nationally, regionally and locally.

We will hold the first ever national Enterprise Week – focused on inspiring the young to be enterprising – in November.

There will be an annual British competition for the British town or city of enterprise and just as we compete for a European City of Culture we propose a competition for the European City of Enterprise too.

All pupils before they leave school will have the opportunity to enjoy not just work experience but enterprise education too.

And we are launching a new national council for graduate entrepreneurship – and I’d like to thank you, and in particular your Director General David Frost, for your commitment to this initiative.

And we will devolve Small Business Services to where they should be – run locally, sensitive to the needs of local businesses.

And in budget after budget I want to do more making the right long term choices for Britain to encourage the risk takers and those with ambition to turn their ideas into reality and make the most of their talents.

And facing up to the global economic challenge – within 20 years potentially half the worlds manufactured exports produced in the developing economies, with up to 5 million jobs outsourced from Europe and America –  this government must also have the strength to make the hard long term choices in favour of free trade and an outward looking internationalism.

That is why our commitment as a Government is that we will make the case for our membership of the European Union – which accounts for 50 per cent of our trade – for the advantages it brings to Britain, and for being a leader in the enlarged Europe, the biggest single market in the world.

And we must also make the hard long term choices to build on Britain’s scientific and creative genius and make investment in science and skills a priority:

• offering the long term incentives that encourage new as well as established firms to invest in R and D;
• setting out a long term plan for science funding – all to encourage investment in the new technologies of the future

And as your report proposes this morning every one of you who runs a company knows that you must draw on the potential of everyone in your company to be successful – and its no different for a country.

Through Learn Direct, employer training pilots, union learning funds and then the return of apprenticeships, over 1 million more adults are gaining practical new skills than six years ago.  But I want us to be the best educated and best trained workforce and so I also commit us to taking, in this coming public spending round, the tough decisions necessary:

• demanding, in return for investment, the highest standards in our schools and further education colleges;
• reforming university finance to secure for Britain world class universities now and in the future;
• and because university financial reforms will help fund universities, a chance also to invest in consultation with you in the area you have highlighted today and to which I am committed to do far more in our review – the all too often neglected area of vocational education and the improvement of the numbers and quality of modern apprenticeships – once dying, now covering 250,000 young people and soon one third – giving young people the practical skills they and the economy needs.  Our aim, the aim you share – that Britain becomes the best educated, most skilled, most technically proficient workforce; all the time encouraging and incentivising a great historic British quality – a work-your-way-up ethos of self improvement and self reliance.
• So, in conclusion, no return ever to the old boom-bust policies of the past and no relaxation of our disciplines but a Britain – once the stop go economy of the world – that succeeds in the new global competition because as the country of great political stability it now also it maintains and entrenches its economic stability.

A Britain that succeeds in the new global competition because working together we reject the old rigidities of the past and win as a flexible, reforming, and ever more enterprising economy.

A Britain that succeeds globally because working together we build on our scientific genius and are outward looking, internationalist and European.

Government effective where it has to be effective – in economic stability, science, skills; businesses are able to be the wealth creators they are, and encouraged where it matters – with incentives and rewards to invest and grow.

And a Britain that succeeds globally because we share a long term economic purpose – that long term commitment not ever to take the easy way out or the short term course but resolute to get things right for the long term.

Making Britain a better place to do business – and, if we make the long term changes needed, better still years from now.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, at the Royal Albert Hall in London on 28 April 2004.

Can I say what a pleasure it is to be able to address you – Britain’s top business leaders – at this, the annual conference of the Institute of Directors, today.

And to be able, on my return from the IMF and World Bank meetings in America in the last few days:

• to share with you my discussions with Alan Greenspan, Central Bank Governors and fellow Finance Ministers on the strengthening world economy;
• to discuss with you how, building on the foundation of greater stability, we can as a nation seize the opportunities the world upturn offers us, now and into the future – the theme of your conference today;
• and because it is British industry, British jobs and British prosperity that is our interest – and because it is by government and business working constructively and creatively together that Britain achieves its full potential – to discuss with you how out of our dialogue we can advance a shared economic purpose for Britain that starts with our commitment to stability; an economic purpose that recognises that wealth creation is even more important to the society we want to build; an economic purpose that encourages – as I will propose with specific measures today – a wider and deeper entrepreneurial culture; and an economic purpose that is driven forward by the shared view that if we, the people and businesses of Britain, have the strength to make the hard long term choices, Britain – the country that pioneered free trade, the Britain that has a history of scientific invention greater than almost any other, the Britain that now has an economic stability rivalled by few others – is uniquely well placed to become one of the strongest, most successful enterprise centres of the world.

It is indeed true that of all government’s economic responsibilities – to create a competitive environment, to ensure investment in infrastructure, science and skills – the first and most fundamental duty is economic stability. And it has been the objective of Tony Blair and I that Britain have the strength to take the long term decisions to ensure stability — yesterday, today and tomorrow.

That is why in Washington in the last few days, while confident about a strengthening world economy, I have insisted that – even as trade, investment and output grows – fellow Finance Ministers and Central Bank Governors also be vigilant to global risks: current account imbalances, rising oil and commodity prices, the risks to emerging markets in the transition to higher interest rates, and the long term fiscal pressures of ageing and healthcare.

And at this time in the economic and political cycle, Britain has had its own special problems when past governments, of whatever political colour, have allowed either inflation to get out of control or spending to get out of control – or both as happened most recently in the early 90s with 10 per cent inflation, 15 per cent interest rates, an 8 per cent deficit and a doubling of the national debt.  And I do not need to remind you that our first duty in 1997 was to address Britain’s chronic post war history of stop-go, inflation, short-termism, under-investment and higher unemployment: the old stop-go Britain. An instability that meant many with talent and initiative found it too risky to start up businesses and even the most successful British businesses could not invest with confidence for the long term or make ambitious plans.

And it is because we recognised that – even more so in the global economy of the future – investment would move only to the countries that could demonstrate a long standing commitment to, and record of, monetary and fiscal stability, that in our first act in Government we broke from the old short-termism and removed from politicians the power to make interest rate decisions.

And the changes we made were not just making the Bank of England independent – but by:

• freezing spending, selling off assets and cutting the national debt dramatically;
• imposing new fiscal policies over the economic cycle which allowed us to invest through a world recession;
• and introducing a symmetrical inflation target that targeted deflation as much as inflation;

the Government under Tony Blair’s leadership also put in place a wholly new long term fiscal and monetary discipline and framework.

And I believe that it is because Britain imposed these rules, this ‘British Model’ for stability – which allowed the Bank to cut interest rates aggressively during the world downturn and allows the Bank to act proactively and pre-emptively in the upturn too – that while the USA, Germany, Italy and Japan suffered recessions, Britain for the first time in 50 years did not suffer a recession during the world downturn and instead has grown in quarter after quarter, year after year, in all seven years of our Government since 1997.  The number of people in work has grown by 1.8 million.  And Britain has now enjoyed the longest sustained period of growth for over 200 years.

And while we will always be vigilant to the risks, I am confident that monetary and fiscal policy will ensure that growth in 2004 – which is forecast to be just over 1.5 per cent in France, Germany and the euro area – will in Britain, be between three and three and a half per cent with, of the G7 countries, Britain and America again this year growing fastest.

And, looking forward, I can assure you that Tony Blair and I will put stability first, now and in the future — supporting our monetary authorities in the difficult choices they have to make and entrenching not relaxing our fiscal discipline.

Because in the past Britain usually fell into recession after two inflationary bursts – an initial burst of inflation when demand got out of control and then a second burst of inflation when wage negotiators sought to catch up with expected high inflation in their pay claims – I have made it clear to wage bargainers that it is vital we maintain our anti-inflation discipline and be fully competitive by both private sector and public sectors showing pay responsibility.

And in the public sector we will combine this anti inflation discipline with moving forward our plans for the relocation of 20,000 civil service jobs from the south east to the regions and the reduction of 40,500 civil service posts.

And I can also tell you this afternoon that – in contrast to past governments who have resorted to short-termism in fiscal policy and gone on to raise the rate of spending in a pre election spree – we are committed to holding current spending at or below the level of revenues over the cycle and investing only where debt remains at a prudent level.  The Japanese deficit is now 7 per cent of national income, the US deficit is 5 per cent, and the French and German 4 per cent.  Our deficit is and will remain lowest of all these.  And while debt is 55 per cent in Germany, 50 per cent in the USA, 45 per cent in France and 86 per cent in Japan, it is around just one third of GDP in Britain.
So our debt and deficits are – and this year will remain – the lowest of our major competitors and not only are our public spending plans fully financed and affordable but we will also continue to meet, as we have done for these last seven years, our fiscal rules and disciplines.

So once the stop go economy of the world, Britain is now one of the most stable. And because we will not fall for easy options or short term quick fixes, we will not be diverted from locking in that stability.

Britain must never complacently assume that our stability can be taken for granted and would be maintained by any government.  As I have said, it is not by accident but by the specific actions we have taken together that we have the lowest inflation for thirty years, the lowest interest rates for forty years and the lowest unemployment for a generation.  And policies that would tamper with our fiscal rules and fail to take long term stability and investment seriously would be bad for Britain and take us back to the old short termism and stop go.

And I can assure this conference that we will not ever make the mistakes either of the late eighties and earlier nineties when monetary disciplines were forgotten.  Nor will we make the mistake of applying a rigid interpretation of the European Stability and Growth Pact – or a British version of that – where – as again happened in the late 1980s and early 1990s – insufficient attention is paid to the long term, to the economic cycle as a whole, to the needs of investment and to the long term sustainability of debt as well as deficits.

And I now hope that in the same way that business and Government agree on the importance of our new won and hard won stability, we can now move forward to build an even deeper and more lasting consensus about the importance we all attach to a wider and deeper entrepreneurial culture in our country – a culture which rewards and values business and wealth creation; a culture which encourages the risk taker, the innovator and the investor; a culture which says to the young person with the will to succeed that enterprise is genuinely open to all who make the effort.

Let me explain what I have said not just to business but to the Labour Party and to the trade unions about why it is so important to build that stronger and deeper enterprise culture in all areas of Britain.

We all know that the new global economy means not just speed in innovation but also a shift in global production so great that while in 1980 less than a tenth of manufacturing exports came from developing countries, today it’s 25 per cent; in twenty years time 50 per cent. That’s not just cars and computers but half of all the world’s manufacturing goods produced for export in the developing countries.

Already China and India are becoming technological powers – China with 750,000 researchers and 750,000 graduates a year, India with nearly 700,000 graduates a year. And China’s significance to the global economy is that this year it is consuming more than twice the amount of steel than the USA, nearly half of the world’s cement and is adding as much output as the whole of the G7 put together.  So for Britain, as for Europe, there is no escape from uncompetitiveness by resorting to the old loss making subsidies, artificial barriers or protectionist shelters.

And while there are huge challenges, the opportunity for us is that as low cost, low value production comes under increasing pressure, we are well placed to meet and master the challenge of finding and exploiting the high valued added, high tech, high skilled, science-driven products and services that are the key to our wealth creation in the future.

The Britain that fails will be the Britain that relapses into the old short-termism and stop go, failing to take long term stability seriously; and fails to invest in science, technology, infrastructure, skills and enterprise.

But the Britain that succeeds will be the British economy that builds upon its foundation of stability; thrives on robust competition and on free trade not protectionism; and insists on making the long term investments needed in science, skills and enterprise – backing enterprising and knowledgeable people from the entrepreneur and cutting edge research scientist to the trained apprentice and skilled worker.

British inventiveness is not just a feature of our industrial revolution past.  I am proud to say that today we lead the world in areas from aerospace, pharmaceuticals and financial services to telecommunications, broadcast technologies and digital electronics.

And while it would always be easier to take the short term route – and fail to continue to make the necessary investments for the future – we propose to take the longer term view, to choose science and technology above many other spending priorities and building on the widely acclaimed one and a quarter billion pound renewal of Britain’s university and science base – and on the new research and development tax credits you have already welcomed – we propose to set out this summer a long term investment framework for British science, technology and innovation over the next decade. And I can tell you today that, as the next step toward our long term ambitions, we will raise the level of science funding as a share of national income in the next spending review period.

But there is something even more ambitious we propose for Britain.

Our aim must be to remove all the old barriers holding the enterprising back and create an environment in which businesses – whether companies starting up, investing, hiring, training, seeking equity, exporting – can grow and thrive.

Let me give a few examples.

Planning: Britain must make our planning laws quicker, more flexible and more responsive – and I can tell you that we will.

Pay: Britain must do more to encourage local and regional pay flexibility – and we will.

Transport: we must work with you – private and public sectors together – to tackle the massive backlog in infrastructure investment.  And with £180 billion of investment over ten years we will.

Company regulation: we have exempted 69,000 more small businesses – over 200,000 now in total – from the requirement to submit an independent audit. And we will do more.

Inspections: with our new review, we will seek to minimise and reduce duplication in the inspection system and enforcement regimes.

Small business regulation: we have introduced a simple flat rate VAT calculation for small businesses which lifts the burden of VAT red tape off the shoulders of hundreds of thousand of firms.  And we will do more.

Tax: just as we have cut long term capital gains tax from 40 pence to 10 pence, small business tax from 23 pence to 19 pence and corporation tax from 33 pence to 30 pence, I promise we will continue to look with you at the business tax regime so that we make and keep the UK as the most competitive place for international business.

As I was reminded when I heard business this weekend express their concerns about regulation in the USA, red tape, regulation and bureaucracy are challenges in every industrial country of the world.

In total over the last 2 years, 650 regulations have been identified in Britain for reform or removal and we now propose sector by sector, working with you, to look at how we can remove more wasteful regulations starting with the chemicals, construction and retail industries.

Because 40 per cent of new regulation comes from Europe we have resisted inflexible barriers being added into European directives like the Working Time Directive and Agency Workers Directive, the Investment Services Directive and the Transparency Directive. And I am pleased to report that Britain has agreed with Ireland, the Netherlands and Luxembourg to put regulatory reform at the heart of our four EU presidencies through to 2005, ensuring that any proposed regulation and every costly and wasteful existing regulation is put to a competitiveness test.

And just as we remove regulation that is wasteful we must also encourage competition, enterprise and trade that is job creating.

In the new global economy a competitive environment abroad is as important as the one at home so we must also have the strength to make the hard long term choices in favour of free trade and an outward looking internationalism.  That is why our commitment as a Government is that we will not only lead calls for a resumption of world trade talks but will make the case for our membership of the European Union – which accounts for 50 per cent of our trade – for the advantages it brings to Britain – and for being a leader in the enlarged Europe, the biggest single market in the world.   And I believe 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.

But Europe and America should also do more to work together.

Having just returned from meetings in the United States with John Snow, the Treasury Secretary, and Alan Greenspan, the Head of The Federal Reserve, I want to announce a joint initiative of the US Administration and the US Government — the first USA-UK Enterprise and Productivity Forum which will be held in Philadelphia on 24 May. The purpose is to bring together businessmen and women from both countries to discuss how best we can advance enterprise and equip ourselves for the next challenges of the global economy. And not only is your Director General but young entrepreneurs from across the UK being invited.

In June, in a second enterprise initiative jointly with the United States, we will examine how together we can improve enterprise education in our schools.  And as we learn from America’s “can do”, “get up and go”, dynamic entrepreneurial culture, we will be asking why a third fewer people in the UK say they are considering starting up a business compared to the US.

These are just two of a number of initiatives, working with business, that we are taking this year to strengthen and deepen the enterprise culture in Britain and to learn from the USA’s stronger and deeper enterprise culture – remembering that if Britain had the same rate of entrepreneurial activity as the United States, we would have 1.8 million more people starting up or running new businesses every year.

I want also to inform you that to further USA and European cooperation, the Transatlantic Business Dialogue – which has just been relaunched – will, with our support, meet at the forthcoming EU-US Summit on 26 June and will focus on the regulatory, competition and other barriers which deny us the full benefits in jobs, growth, business activity, employment and prosperity from the interaction of the world’s two most successful economies.

And let me tell you something that matters for this Institute which has done so much to foster and encourage enterprise: that building on the Queen’s Award for Enterprise the Government is in discussions with the Palace about new ways of recognising outstanding individual contributions to the development and promotion of enterprise nationally, regionally and locally – and thus recognising the importance of the dynamic entrepreneur as a role model in our community.

Let me also tell you that in June we will be announcing the detailed plans for Britain’s first ever National Enterprise Week to be held in November 2004 and to be led by your Director General – whose sterling work in this area has rightly won wide acclaim.

Out of our Enterprise Week – focused on inspiring the young to be enterprising with events, competitions, master classes and other initiatives in every part of the country – I want to see literally thousands of young men and women in Britain challenged by the excitement of business and fired with the enthusiasm to start a business or to work in business….yet another example of a sea change in attitudes to enterprise I want to encourage for Britain.

I can tell you that we have set aside resources, starting in September next year, to give each school pupil at least 5 days of enterprise education and from today, enterprise advisers will be working in one thousand schools in our most deprived areas – together ensuring that before they leave school all pupils will have the opportunity to enjoy not just work experience but top quality enterprise education too.

More than in the past, our colleges and universities ought to be a training ground for businessmen and women of the future.  And this is the thinking behind the new National Council for Graduate Entrepreneurship – to be launched shortly – which will provide advice and support for college and university students considering a career in business and will be championed by Karan Billimoria, the prominent graduate entrepreneur behind Cobra Beer.

I have always thought it right that if we have towns and cities recognised for their culture or environment or sports we should have towns and cities recognised for their contribution to enterprise and I will soon be announcing further details with the Deputy Prime Minister of an annual British competition for the British town or city of enterprise.

And just as European countries compete for a European City of Culture we have persuaded our fellow European partners that there should be a competition to identify the European city of enterprise too.

In the past, areas of high unemployment seemed to be no go areas for enterprise.  But in an era when enterprise is open to all no community should be left behind so I can tell you that the 2000 new enterprise areas – new zones for new business opportunities in areas traditionally associated with high unemployment, should enjoy a stamp duty holiday for property purchases, a special community investment tax relief, fast tracking planning for new business development and the prospect of enhanced capital allowances for renovating business premises.

In the past the work of science seemed remote from the work of business but I can inform you also today that – following Richard Lambert’s recommendations – we will make it one of our spending priorities to encourage business to draw on innovative work from our colleges, universities and research institutes, and to encourage universities to think of the needs of business — through funding grants for collaborative R&D; helping universities translate research effectively into commercial benefits; and encouraging more university-business link ups not just within the UK but between the UK and other countries.

Every one of you here who runs a company knows that you must draw upon, encourage and incentivise the potential of everyone in your company to be successful. And it’s no different for a country.   But each year too many 16 year olds leave school with no qualifications.  There are nearly 5 million adults still without basic skills. And only 300,000 of them are in training.

I believe this is a responsibility of all of us – employers, employees and governments – and not only do I want a partnership that raises the level of skills available to you in businesses but Charles Clarke and I have committed ourselves to making the tough resource decisions necessary to help make Britain the best educated, most skilled, most technically proficient workforce:

• demanding, in return for investment, the highest standards where training must start – in our schools and further education colleges;
• reforming university finance to secure for Britain world class universities now and in the future;
• focusing resources on the all too often neglected area of vocational education for young people and adults – including improving the quality of modern apprenticeships, once dying and now taken up by a quarter of a million young people;
• entrenching and expanding the rights and responsibilities of the New Deal – which has helped over 1 million people into jobs since 1997.

But it will only work if we work together:

• you taking an interest in schools, colleges and universities to ensure they are not remote from the needs of business;
• and, because it is a national priority where urgency is required, the Government ready to do more to be of assistance.  And I can say today that we are ready to do more, working with you, to expand the highly successful Employer Training Pilots that are now offering over 80,000 employees paid time off to train towards relevant skills.

So the modern role of government in the global era is to entrench stability, build a competitive environment, and to ensure the public investments necessary, in partnership with business, for a knowledge based economy — investments in science and technology, in enterprise and in skills.

Government doing what it needs to but only what it needs to do:

• determined to maintain stability and create a competitive environment in which businesses can thrive;
• resolved to invest in those areas where government can make a real difference – science, skills and infrastructure;
• committed to entrenching a wider and deeper enterprise culture;
• and building what is increasingly vital: a shared British economic purpose – hopefully a national consensus that stretches right across all parties and all sections of the community – that Britain, the first industrial nation, has the strength and the will to avoid the old short termism and mistakes of the past and think, act and work together for the long term.

Britain not only well placed to be the success story of the new global economy but determined that nothing will stand in the way of that achievement.

It is a global challenge we can meet by working together.

And a British achievement we can – in our generation together – celebrate.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, on 18 May 2004.

I am grateful to the Social Market Foundation not just for its contribution in forum after forum and publication after publication to a vibrant debate about the future of our country but for giving me the opportunity to speak on markets and social reform last year, now being so kind as to publish in pamphlet from the speech I made.

In the speech I argued for a new clarity on one of the oldest and most important issues in political economy: the role and limits of the state and markets.

I argued that markets are in the public interest, while not to be automatically equated with it, and that we should be advancing market disciplines across the economy – promoting greater competition, open trade, entrepreneurship and flexibility in labour and capital markets.

I said that where there are market failures we should work to make markets perform better – as in skills and training, in science and research and development, in financial markets, in regional policy and to tackle environmental damage.

And I suggested that where there are systemic problems with the operation of markets that cannot easily be corrected, such as in healthcare and other public services, the challenge is develop efficient and equitable but non centralist means of public provision.

Since that speech – and with your general support – we have already announced major changes in policy that were prefigured or anticipated by the arguments of the speech.

We have removed the last permanent industrial subsidies in coal, steel and shipbuilding.

We have announced the sale of UK Government privatised shareholdings.

From a platform of an increased national minimum wage and tax credits, we have promoted regional and local pay flexibility.

We have announced new deregulatory initiatives for the administration of small companies in for example VAT and audit.

We have agreed a four Presidency deregulation initiative for the EU, with the aim of putting every regulation to the competitiveness test.

We have proposed a further round of European economic reform – liberalising product, capital and labour markets.

We have proposed how the European Union can reform its state aid regime – abolishing wasteful state aids but also making sure the rules do not prevent measures which help make markets work better.

We have implemented our new competition and enterprise regime and the OFT and Competition Commission have a new work programme with investigations into market conditions in areas from pharmacies and doorstep selling to estate agents and the professions.

And we have invested substantially more in the areas where if Government does not act, voluntary, private or other agencies cannot be relied on to do so – in schools, adult learning, universities, colleges, health and infrastructure.

And in adult learning we are seeking a new partnership between government, employers and employees.

In health and the public services the programme of reform is proceeding faster than ever and that reform will go on and on.

Tony Blair and I are working closely on both our spending round and the five year departmental plans for the future:  radical plans for investment matched by reform which we and the Cabinet are also working through together, reform plans that we will outline in the next few weeks, reforms on the basis of which Tony Blair will map out the road ahead.

And working with John Reid in the field of health care, we are recognising just how much more progress on the reform agenda we can make.

Last year I argued for more devolution, more local accountability, more flexibility and more choice – more diversity of supply – in the delivery of services. But advances we are making now allow us to go even further.

Take information available to the patient. In my speech last year I pointed out that professional and care relationships suffer from information asymmetries — information asymmetries that made the typical market model of service provision difficult to work in every health care system including in America as well as Britain.    Whereas in a market there is always a temptation for the supplier to exploit information asymmetries, in public services we must attempt to face up to them in the interests of patient power.   So increasingly we will empower patients.

In addition to producing better information for patients through star ratings, putting waiting times and other information on the NHS.uk website, we are piloting expert support for patients in exercising choice over their care.  In our coronary and heart disease choice pilots, for example, specialist nurse ‘patient care advisors’ are being provided to help patients.  And we are now planning to roll out choice at referral, where PCTs and GPs will provide advice and support either directly to patients or with the help of voluntary organisations.  We are also providing more information particularly in primary care and for patients with chronic conditions where patients increasingly have considerable knowledge of their condition.

Addressing these asymmetries – putting patients and users of other public services at the heart of the delivery of those services – is a crucial aspect of the government’s desire to achieve a wider aim: to make public services more personal to the needs of the user.

Personalisation means opening up wherever possible a greater range of options to the service user and I believe it will serve us well to consider the future of the public services in this way: making public services responsive to the particular needs of their users so that his or her needs are better met:

• for the NHS patient, the opportunity to book an appointment time, to see their own electronic records, to choose a hospital
• for the school pupil, allowing the individual to learn at his or her own pace and style
• for the elderly or disabled person, the chance to design for themselves and then obtain the right package of care options for them
• for the young person on the New Deal, access to an adviser who can provide help tailored to the particular circumstances of the individual and the employment conditions of the area
• for the parent, a range of flexible childcare services and financial support to choose from
• for the local community, the opportunity to discuss and influence community safety strategies and environmental improvements.

And in this way the work of the doctor, the nurse, the teacher and the provider focus more on the individual needs of the patient, pupil and user than ever before; public services can be shown to be superior to privately provided services in these areas; and a new model of non centralised non market public service delivery can evolve – devolved, accountable, flexible, with the user in the driving seat.

For too long in the past chronic under-investment made many resigned to the poor performance of too many public services, standardised and uniform services starved as they were of resources and of long term direction and hope.  But today we can see a new vision ahead of us – where instead of standardised and uniform services, public services meet peoples diverse needs in ways personal to those who depended upon them

As Amartya Sen has famously argued, equality rooted in an equal respect and concern for our citizens demands not just greater equality of resources but also equal capability to function and develop their potential. Such capability can be developed through a new approach to public services – one that maximises responsiveness and flexibility to provide services that empower the individual to flourish and one that engages individuals themselves to be active partners in achieving these results.

Because achieving equality of opportunity is a fundamental goal in a progressive society, I believe each person has an equal entitlement not just to high standards of service, but to as equal a chance as another of developing themselves and their potential to the fullest. Because people begin from different starting places, in different circumstances and with different needs, public services need to be personalised in terms of their resources and range of provision.

Achieving this vision of personalised public services — meeting the individual needs of all our citizens — requires continuing reform in the way we deliver public services.  This is the process on which the government has embarked and on which we continue to push ahead, as we shall show in the spending review in the summer.

And this vision is not of personalised services just for the few, for those who can afford to buy them in the market.  It is for all.  For personalisation is not opposed to equity; it is at the very core of what equity means.  Achieving the goal of equality of opportunity – enabling each person to achieve their own potential to the fullest – requires a tailored approach that takes into account each person’s unique circumstances.

When I gave the speech to the SMF last year, some people said that the Government’s three goals for public services

– greater personalisation, higher efficiency, and increased equity – were mutually incompatible.  They said that we faced a dilemma:
– that if public services were to be efficient, they had to be inequitable, because only market mechanisms, which depend on ability to pay, can achieve efficiency
– and that if services are to be equitable and universally available to all, then they cannot be personalised, but must inevitably be uniform, inflexible and standardised

Yet, in my speech and now pamphlet, I showed how not just equity but efficiency is better served through a publicly-funded and publicly-provided NHS rather than a private market.

But now I believe we can go further than this. We can show that public funding and largely public provision cannot only be equitable and efficient but can provide personalised services as well.

I very much hope the SMF, along with other think tanks, will continue to contribute to the debates we are now engaged in on how we develop more personalised, equitable and efficient public services. I hope this pamphlet helps this process. I am very grateful to the SMF for publishing it.  And to all of you for attending this launch.