Tag: Stephen Timms

The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 4 April 2000.

“The benefits and challenges of e-commerce”

Introduction

Thank you for inviting me to join you this morning.

We are on the threshold of a new era for business. Across the country people are talking of the impact of Business to Consumer – or ‘B2C’ – e-commerce. But the growth of Business to Business – or B2B – e-commerce has the potential to be even more explosive and pervasive. I have seen US estimates suggesting B2B turnover on the net could amount to 4 trillion dollars in America alone by 2003, compared with less than 400 billion dollars of online sales to customers.

That is a staggering amount of trade – with potentially staggering implications for our economies and our consumers, as well as business itself.

So I am delighted to be able to join many of the world’s B2B experts here this morning.

Budget aims

Let me begin by putting our hopes for electronic commerce and the knowledge economy in the context of the Government’s wider aims.

After the UK election in 1997, our first economic objective was stability. The Budget two weeks ago confirmed that in a remarkable way that has now been achieved. We are delivering a platform of stability and steady growth, with inflation low and the public finances under control.

More people are now in work than ever before: unemployment is at its lowest for 20 years; youth unemployment is at its lowest for 25 years and there are one million vacancies on offer across all the regions of the UK.

Inflation in Britain has also now been lower for longer than at any time for over 30 years. And today British inflation is lower than in any of our major competitors in the European Union.

And we are also investing now a bigger share of our national wealth than our largest competitor countries in the European Union, and a bigger share even than in the US.

The state of the public finances is sound as well.

So things are in good shape as a consequence of the prudent measures the Chancellor has taken.

But we have always said that our prudence is for a purpose.

And the Budget took the next steps towards that purpose, of building a modern and decent Britain, towards the four ambitions that we set ourselves last November:

• our prosperity ambition: that we should be bridging the productivity gap with our competitors;
• the full employment ambition: that we should achieve employment opportunity for all, and a higher proportion of people actually in jobs than we have had before;
• the education ambition: that for the first time at least half of our school leavers should go on to university by the end of the decade;
• our antipoverty ambition: that we should halve the number of children living in poverty by 2010, on the way to the Prime Minister’s ambition of eradicating child poverty altogether within 20 years.

Four ambitions which I think are now attainable and which encapsulate our commitment to a modern and decent Britain. Our best route for achieving this modern and decent Britain – for an enterprising society which is also a fair society – is success in the knowledge economy.

First Tuesday report

A few weeks ago, John Browning, a cofounder of First Tuesday – the global B2B start- up market and meeting place for entrepreneurs – gave an intriguing evidence to the House of Lords e-commerce sub-committee on the future of e-commerce in Europe. This evidence he gave was based on an e-mail survey of their members on what they wanted national and European governments to do.

The overwhelming view was that government has a very limited role – that it does most good where it treads lightest. Well, that is our view too.

The Internet and e-commerce world is moving at speeds difficult for anyone to keep up with. As Tony Blair says, the wind of economic change has never blown through our economies with such force as it is doing today.

We know the market sets the pace of that change. And it always will do.

But our role as a Government is an important one still. Not to dictate. Not to attempt to control. But to help to enable and to empower every business and individual to win from the changes, and to extend the new opportunities to all.

That is why we have set ourselves two parallel targets to these challenges.

First, to make the UK the best place in the world to trade electronically by 2002.

And second, to aim for universal access by 2005.

Those two goals are complementary. Making sure everyone has access to the Internet will both improve our competitiveness and reduce social exclusion. A very clear example of enterprise and fairness working together.

And we are working very hard indeed in a number of areas to achieve these goals.

Back to John Browning’s evidence to the Lords Committee: his statement consisted of a number of lessons First Tuesday had learnt in the course of their rapid growth. I want to spend a little time examining these lessons and what they mean for governments and for e-businesses as well.

Lesson 1: Europeans are passionate entrepreneurs

The first lesson learned by First Tuesday was that Europeans are passionate entrepreneurs. And, to quote him, ‘contrary to conventional pessimism, they are neither defeatist nor risk averse.’

That, I think, is clear enough from the number of European companies we have here today.

It is also clear from the signs that the technology gap between Europe and the US is narrowing. In some areas, of course, Europe already leads.

The first wave of the Internet came through PCs. But the next wave will come through broadband mobile and digital television.

In both, the United Kingdom in particular ­ and Europe more generally ­ have a pretty impressive lead.

Last month we launched the world’s first auction for third generation mobile telephone spectrum. Thirteen bidders from all round the world have been taking part and all have put in significant bids to play a role in the future market.

Third generation mobile will give businesses the Internet on the move. Everything we now get from our PCs, digital cameras and good old voice telephones – all on our mobile phones, our PDAs, our laptops and palmtops, and a host of new devices now emerging from the research labs.

Digital TV – interactive TV ­ is also taking off. It’s only just begun. But some forecasters suggest that as much as 75 per cent of UK households will have DTV by 2008.

Both of these – digital TV and third generation mobile – are technologies where the UK is a world leader.

And both are creating extraordinary opportunities for new businesses in both B2C and B2B e-commerce, new applications, new services and new jobs.

That is why we’re seeing venture capitalists, technology and telecoms companies, and individual entrepreneurs so active today in the UK, confirming our position as the single most popular destination for inward investment into Europe.

European enthusiasm for the new economy was out for all to see as well at the Lisbon Summit on European economic reform two weeks ago. There, the Heads of Government of our European States set a new strategic goal for the next decade – to become the most competitive and dynamic knowledge based economy in the world.

That is a huge change. And it is the beginning of a process with tremendous implications and opportunities for our economies and our workforces.

Lesson 2: Scale is critical to entrepreneurial success

The second lesson First Tuesday drew was that scale is critical to entrepreneurial success.

As they said, only by expanding quickly can companies grasp the available opportunities.

But companies can only expand to the extent that there is the sufficient size and sophistication of markets and the quality of skills base needed to be successful.

You cannot build a knowledge driven economy without a knowledge driven society.

So we have to make sure that the opportunities of the new technologies are shared by every business and every worker.

That is why the Budget two weeks ago introduced a special tax reduction to encourage a million small companies to get on line. For the next three years any small business buying computers, or investing in e-commerce and new information technology, will be able immediately to write off against tax the full 100 per cent of the cost in the year of purchase.

We are also legislating for other tax cuts – a 100 pounds tax cut for electronic filing of tax and vat returns, and a further 50 pounds tax cut for electronic filing for those paying the working families tax credit.

And side by side with these incentives, the new Small Business Service – opening its doors this month – will offer consultancy, advice and planning to help small businesses get on line and become e-companies.

Of course, while getting United Kingdom on line is vital, the big prize will come when we create a single European market for electronic commerce – a single market of 375 million people and potentially 100 million more.

Lesson 3: Speed is just as critical

That brings me to the third lesson from First Tuesday’s evidence that speed is just as critical as scale. ‘…because the Internet is evolving so fast, and because first-mover advantage is so powerful, Internet companies have to move very, very fast.’

A key priority for governments must be to ensure the right dynamic market framework is in place to cope with this speed of change.

At the Lisbon Summit, European Heads of Government recognised that the speed of technological change requires new and more flexible regulatory approaches in the future.

That is why they called on the European Council along with the European Parliament, where appropriate, to adopt as rapidly as possible, this year, pending legislation on the legal framework for ecommerce, on copyright and related rights, on e-money, on distance selling of financial services, on jurisdiction and on the dualuse export control regime.

We have already agreed a directive on electronic signatures that introduces their legal recognition throughout the EU and sets voluntary standards for certificate providers.

These further steps will take Europe quickly into the new digital age, boosting consumer confidence and making it far easier for a business based in one country to sell on-line in the fourteen others.

In the UK, we are currently also reviewing every barrier to competition in the emerging e-commerce market and seeking to remove them.

In every area we are asking what we can do to enhance competition and opportunity:

The new Competition Act makes our competition authority independent and for the first time prohibits all anti-competitive practices.

We are driving competition further and faster into the leadingedge communication markets, to bring prices down and give consumers more choice.

In the last few weeks we’ve seen four different companies offering new, unmetered Internet packages.

As the new tariffs come into effect, it will almost certainly mean that for the average Internet user at home and in business, the UK will be cheaper than anywhere else in Europe.

We are working as well on the legal framework.

Our electronic communications bill will allow us to update decades, indeed centuries, of legislation that refer to paper and post.

And we are helping employees in UK high growth Internet companies by tackling the issue of employer’s National Insurance Contributions on share options. I have been asked by the Chancellor to conduct a consultation on a technical solution to the tax treatment of share options in unapproved schemes, and I’m moving quickly to fulfil his request, and, I hope, to resolve quickly the serious technical problem that currently exists.

Lesson 4: Governments themselves are slow in using the technology

The fourth lesson First Tuesday learned from its European survey was that governments themselves generally are slow in using the technology.

Businesses represented here and individuals are responding to the new technologies and the new challenges. And Government has to do the same.

Last week, Tony Blair proposed a challenging target for Government – to offer all services online by 2005.

We need to transform relationships between government and citizen by delivering services on-line. And we need to do it quickly.

We also need to transform policy-making by managing government online.

The first step is to develop a clear strategy. So Andrew Smith, my colleague as Chief Secretary to the Treasury, and Patricia Hewitt, as our e-minister, are heading a crosscutting spending review to look at all aspects of Government and e-commerce.

Our strategy for e-government will be shaped by our view of the new technologies. Yesterday, Ian McCartney, the Minister responsible for e-government, launched our Government’s e-government strategy.

We want businesses and people to be able to access government anywhere and anytime.

From a computer. A mobile device. A TV. A kiosk in a post office or a shopping centre.

So the challenge to us is to make government-content, and government services, available across all our networks – wired and wireless – to all the devices.

It’s exactly the same challenge that content-providers in the private sector are facing. Financial services information providers, for example, now integrating content, and delivering it real-time to market analysts and retail investors alike on the trading screen, the television screen and the mobile phone.

But we also have to re-engineer government on the inside. Like every major global company, we have to move from vertical silos to horizontal processes. We have to move from inputs to outcomes. And we have to use ICT to enable all that to happen.

Like everybody else, we have to contend with legacy systems. E-mail systems that don’t talk to each other. Different data standards.

In the next few weeks, however, we will be publishing a single set of standards for inter-operability across government. We’re following the lead of business by adopting open, I/P based standards for all government systems. Making the browser the key interface for access and manipulation of all information. Adopting XML as the cornerstone for government data inter-operability and integration. And working with the global Govtalk consortium to create the infrastructure we need for implementation.

Conclusion

We are optimistic our British knowledge economy can match the best:

With individuals alive to the opportunities, and businesses sufficiently ambitious, we can rise to the challenge – making Britain and Europe the best place in the world for e-commerce.

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

The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 9 May 2000.

Introduction

Sir Peter and friends, I am delighted to be able to join you at this important conference.

The global economy is changing at a speed difficult for any of us to keep up with. As the Prime Minister has said, the wind of economic change has never blown through our economies with such force as it is doing today.

So this afternoon, I want to discuss the Government’s view of how we can equip ourselves to meet the challenges of this ever faster change – and achieve the prize of a modernised economy which, because opportunity and security are open to all, is both enterprising and fair.

Stability

After the election, our first economic objective was to achieve a new stability in the British economy. And we are now delivering a platform of stability and steady growth, with inflation low and the public finances under control.

We can illustrate the scale of what has been achieved with what is now a pretty impressive set of superlatives:

More people are now in work than ever before in our history. The rate of unemployment is at its lowest for 20 years and still falling and there are one million vacancies on offer across all parts of the UK.

And what is particularly important I think is the dramatic fall in youth unemployment. Across the country, it’s at its lowest level for 25 years. Everybody sees there are incalculable benefits of having so many young people familiar now with the habits and disciplines of having a job, when so many young people have been robbed of that for so long in the past.

We are investing now a bigger share of our national wealth than any major competitor in the European Union, and a bigger share even than the US.

Inflation in Britain has now been lower for longer than at any time in the past 30 years. And British inflation today is the lowest of any member of the European Union.

The state of the public finances is sound. In contrast to the deficit of £28 billion in 1997, this year we will make a debt repayment of £12 billion. So, the monetary and fiscal foundations we are building on are strong foundations. And we are determined to keep them that way.

But our prudence is not for its own sake. It’s for a purpose. And that purpose is well summed up by the four ambitions that Gordon Brown first set out last November for Britain to achieve in the coming decade:

our prosperity ambition: that we should be bridging the productivity gap with our competitors, after decades of lagging behind;

the full employment ambition: that we should achieve employment opportunity for all, and that we should have a higher proportion of people actually in jobs than we have ever managed before, and do so on a durable basis;

the education ambition: that for the first time, at least half of our school leavers should go on to study for a degree by the end of the decade;

and finally our antipoverty ambition: that we should halve the number of children living in poverty by 2010, on the way to the Prime Minister’s ambition of eradicating child poverty altogether within 20 years.

Four ambitions which I think are now attainable and which encapsulate our commitment to a modern and decent Britain where opportunity and security are not just for a few but for everybody.

In the past, enterprise was open to some but all too often it was a closed circle which excluded too many.

In the Britain we want – a Britain where there is opportunity for all, fairness to all, and responsibility accepted by all – we must have enterprise open to all as well.

Our economy will be so much stronger – and our society too – if we can release the dynamism, the creativity and the potential of all of our people.

The pace of reform has to match the pace of change. The societies which will prosper will be those that are open, flexible, and able to distinguish between fundamental values they must keep and policies they must adapt. Those that move too slowly, or are in hock to vested interests, reacting negatively to change, will quickly fall behind.

I want to outline today the three fundamental areas of reform we need to push through for success in our aims:

First, competition – creating the right competitive environment for business;

Second, by tackling the cultural barriers to enterprise; and

Third, by transforming the relationship between Government, business and our citizens.

First, creating the right competitive business environment.

We won’t achieve our aims if small businesses or enterprising individuals are denied access to the marketplace and pushed aside by vested interests. In future we need to be the champion of opening up competition, and so opening up enterprise to all. We have already rewritten our outdated framework of competition law.

We have given the Office of Fair Trading new powers and new money to police anti-competitive practices which damage businesses and consumers alike. And now we will be consulting on the next stage, withdrawing Ministers from the decision process on merger cases.

For banking, having accepted Don Cruickshank’s main recommendations, we will legislate to ensure the UK payments system is open to new competition.

In our capital markets to, we must ensure there are no barriers to competition and innovation, that there are no unnecessary constraints restricting investment decisions, and that investors have every opportunity and encouragement to back dynamic small and growing companies.

For the professions, the Office of Fair Trading has now set out a detailed remit to examine how best to ensure that the rules of professional bodies do not unnecessarily restrict or distort competition.

Tax

But more competition is not enough on its own. Almost by definition, an enterprise economy needs high levels of entrepreneurship and investment.

But at the moment, too few businesses in the UK realise their potential because there is not enough investment to capitalise on our entrepreneurial talent and to enable firms to seize the new growth opportunities.

That is why when we came into government we cut the long term rate of capital gains tax for business assets held for ten years or more.

This year, we very greatly extended the numbers who benefit from lower capital gains rates, shortening the business assets taper from 10 right back down to 4 years. That is a step change in the incentives for investment and a huge boost in particular for many small and medium sized businesses – and an equally huge boost to the incentives to set up new ones.

Two days after the Budget, I attended a breakfast meeting hosted by one of the larger accountancy firms. A senior tax partner there said the Budget had put him out of his old job because so many tax loopholes had been closed. But thanks to capital gains tax reform, he expects to have a new job – encouraging clients to invest more in enterprise and in their own future. I hope the accountants here today will feel the same. It’s the start of a new, proinvestment era and you have a key role to play in making a success of it. We have also radically widened the definition of business assets to include all shareholdings in unquoted companies and all employee shareholdings, encouraging more of those who are involved in the success of a business to invest in its future and to secure the rewards from their investments.

The Budget also recognised the important role share options can play, particularly for young, growing businesses which often don’t have enough cashflow to reward their employees fully in cash.

Now, Enterprise Management Incentives will enable companies with gross assets less than 15 million pounds to recruit and retain their 15 key employees, with tax advantaged shares options worth up to 100,000 pounds, normally without any Income Tax or National Insurance charge.

And I have been asked by the Chancellor to conduct a consultation on a technical solution to the tax treatment of share options in unapproved schemes, and I?m moving quickly to fulfil his request, and, I hope, to resolve quickly the serious technical problem that currently exists.

Taken together, our measures are the biggest boost for employee shareholding our country has ever seen, a boost for enterprise and a boost for security and fairness as well.

And now – with the lowest corporate tax rates for businesses ever; the lowest ever capital gains tax rates for long term investors; and – at 22 pence – the lowest basic income tax rate for 70 years – bit by bit we are making Britain the place for companies to start, to invest, to grow and to expand.

Cultural barriers to enterprise

The second key area of reform is to break down all the entrenched cultural barriers to enterprise.

Not only must the work ethic be reinvigorated in every community of Britain but there needs to be a dynamic business culture which encourages enterprise open to all.

When we were elected in 1997, we put the restoration of the work ethic at the centre of our social and economic policy.

The role for government today is to remove the barriers to work and let everyone move ahead. To ensure that we give everyone the chance to contribute to the enterprise economy, if they can.

So we are building a new and modernised welfare state – one that in addition to its traditional and necessary function of giving security to those who cannot work, promotes work, makes work pay and give people the skills they needed to get better jobs – matching new opportunities with new responsibilities for the unemployed to take up the opportunities.

And already, over 400,000 young people have joined our New Deal programme and almost 200,000 have found jobs- the vast majority sustained jobs. Now we are extending the opportunities and obligations to the long term adult unemployed as well.

The rewards of work are being raised for working families as well. Already over one million people are receiving the Working Families Tax Credit, guaranteeing every working family with some one working full time a minimum weekly income of over 200 pounds today, and 214 pounds from next April.

And we want to see this new culture of enterprise extend to every part of the country, so that in places where in the past it was assumed that you would never get a job, in the future people will be starting their own enterprises and making a success of them for their own benefit and for the benefit of their communities.

Education

Rights and responsibilities are at the heart of our education programme too.

In an economy where there is an increasing premium on skills and where people need to be properly equipped to cope with change, we will devote more resources to education, including IT, so that everyone – at all ages – can move ahead.

So we have extended nursery education, reoriented our primary school system around numeracy and literacy, with startlingly good results, doubled the annual capital spending on schools, and committed resources for an extra 800,000 people in further and higher education by 2002.

And to close the digital divide we are investing 1.7 billion pounds in our national IT strategy. Connecting all schools and libraries through the National Grid for Learning and providing. money for teacher and librarian training. Offering cheap PCs to low-income families. And creating up to 1000 IT Learning Centres to enable disadvantaged communities across the country to acquire basic ICT skills.

Our £1.7 billion investment will deliver a new network of computer learning with a single purpose: that the whole of Britain is equipped for the information age. So that the opportunities of the new technologies are shared by everyone.

For people in work, our proposals for a million Individual Learning Accounts and a University for Industry recognise that people should not only upgrade their skills throughout life but they should be encouraged to take responsibility for doing so.

Our University for Industry will use the latest technology, including the Internet, to do in this decade for lifelong learning what in the 1970s the Open University did for university learning.

Enterprise Insight

Finally, we want young people in every area of the country to see that enterprise really is open to them.

Every one of us here has a role to play in building this new enterprise culture.

In two days time, on the 11th of May, the Prime Minister will be launching a business led national enterprise campaign, together with the British Chambers of Commerce, the CBI and the Institute of Directors.

The campaign, under the name Enterprise Insight, will raise awareness about the role and value of business and enterprise, with a national network of businesses ambassadors – including Reuben Singh, Alan Sugar, Richard Branson and others – who will take part in young people’s forums, roadshows, seminars and media events throughout the country.

Please get involved in what ever way you can.

The new campaign will build on the steps business and government are already taking to boost enterprise skills nationwide, from school to adulthood.

Government

The third and final area for reform is Government itself.

Some say in these heady times of change that government is a defunct piece of machinery which no longer has any relevance to the way a modern economy is run.

Certainly the winds of change challenge government to reform as much as any business or individual.

That’s why, last month, the Prime Minister proposed a challenging target for Government – to offer all services online by 2005.

We need to transform relationships between government and citizen by delivering services on-line. And we need to do it quickly.

We also need to transform policy-making by managing government online.

The first step is to develop a clear strategy. So Andrew Smith, my colleague as Chief Secretary to the Treasury, and Patricia Hewitt, as our eminister, are heading a crosscutting spending review to look at all aspects of Government and e-commerce.

We want businesses and people to be able to access government anywhere and anytime.

From a computer. A mobile device. A TV. A kiosk in a post office or in a shopping centre.

The Small Business Service, headed by David Irwin who is next on the programme, will offer a single electronic point of entry, for all small businesses – providing advice and information, backed up by new call centres.

The challenge to us is to make government content, and government services, available across all our networks – wired and wireless – to all the devices.

But as well as reforming the ways of government, perhaps even more importantly, government must articulate the case for reform by allying it to a purpose for the reform; to a vision of the future; to the values that underpin it. That’s how political direction and leadership can exert their own beneficial modernising influence.

Conclusion

So we have begun with a new platform of stability and we are determined to maintain it. And with these three key areas of reform – for a more competitive business environment, for a modern enterprise culture and for a transformed Government – we are optimistic our new enterprise economy can rise to the challenges ahead – delivering opportunity and security to everybody.

Our objectives are two-fold – to build an enterprise economy and a fair society. The two go together. They are not alternatives. Doing well and doing good go hand in hand. An enterprise economy is the route to jobs and prosperity. And a fair society where there are opportunities for all will have an economy which is more competitive and more productive.

The challenges are enormous but if we work together the prize is an enormous one too – a modern enterprise economy offering optimism for the future, ready to provide opportunity and greater prosperity to all our people in the years ahead.

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

The speech made by Stephen Timms, the then Financial Secretary to the Treasury, in Leeds on 29 October 1999.

I am grateful to you for your kindness in both inviting me and welcoming me here tonight. Tonight I want to say a few words about our aspirations for the British economy in the next century.

Modern and decent

1. But let me first put this in the context of the wider aims of our Government over the last two years. What we have embarked on is a twenty year programme to build a new Britain which will be modern and decent. Both of those things at the same time.
2. Modern Britain will have an economy where the vital new stability has been locked in for good, beyond our past decades long record of boom and bust. We want thriving knowledge-based firms exploiting the know how, creativity and expertise of British people. We want to create the best environment in the world for electronic commerce. Higher levels of investment, in information technology, in infrastructure, in skills. Higher levels of productivity to catch up after decades with our competitors. We’ll have higher standards at school, have harnessed the potential of further and higher education, and provide high quality opportunities for our young people. As individuals and collectively we shall have confidence in the future.
3. Decent Britain will be an inclusive society where everyone has the chance to play their full part. Over the twenty year period, child poverty will be eradicated. There will be help for those trapped on benefits or in poor housing or without a job, and those unable to work through disability or through caring for somebody else. We’ll have a health service which people will have confidence in. There will be decent standards for those at work. We’ll confront crime, anti-social behaviour and drug taking which cast a shadow over too many young lives. We want to entrench decent values – society pulling together, and with rights matched by responsibilities.
4. So modern and decent – that’s where we want to be in the years ahead.

The Business Community

1. We want a thriving business community in Britain. Our enemy today is not competition – it is cartels. It is not profits – it is privilege. It is not markets – it is monopoly. We want to see more enterprise. More competition and more innovation too. We know – and you know too – that companies, indeed countries which fail to adapt, reform and lead get left behind.
2. The businesses represented in this room have learnt that lesson.
3. Businesses from the Asian community contribute £8 billion each and every year to the British economy. More importantly in my view, you epitomise the spirit of enterprise and the determination to succeed that is so vital if the British economy is to lead the way in the next century.
4. I’ve seen this from close quarters. Green Street in East London marks the boundary of my constituency. 35 years ago when Ahmed Din, the first Asian trader opened his shop there, it was a drab and declining inner city shopping street. Today, I claim it is the most successful Asian shopping street in the country. It is a vibrant and exciting place, attracting shoppers from all over the UK and continental Europe, and it has been the determination, vision and commitment of Asian entrepreneurs in East London which has brought the transformation about.
5. We – Government and businesses together – face a profound challenge in this country of ours. How to create a high investment, high productivity and high employment economy.

Stability

1. We start with stability. It is the precondition of success in the modern global economy. That’s why our first priority when we came to office was moving from the violent cycles of stop go that we had seen too often in the past, to an economy capable of sustained and steady growth.
2. Now – 2 years later – with the Bank of England independent and the lowest interest rates and mortgages in decades, it is now clear that we have steered a course for stability in what have been troubled times for the world economy. The British economy is growing. Inflation is low and set to remain low. The public finances are under control. Employment is up by over 600,000 since the election. We have a record number of people in work and a record number of job vacancies too.
3. So what we can rightly say now is that for the first time in a generation we have the prospect of sustained economic stability in Britain. But that is not enough. Our task now is to use this platform of stability to do what no government has tried to do before – to work with business in taking an unashamedly long term view about modernising the British economy.

Modernisation

1. We will do so in five ways.
2. First, modernisation requires nothing less than a skills revolution. In today’s world it is no longer access to financial resources – capital – or to physical resources – iron and steel – that make or break a country.
3. Now – as never before – our key asset is our human resources – it is labour that counts. Now on the verge of a new century, the challenge for government and business working together is to equip all of our people to succeed in the new knowledge economy.
4. Hence our emphasis on education. The investment we are making not just in our schools, but in our colleges and universities too. In this new information age education can no longer end at the school gate. Lifelong learning is the only way in the modern world to keep Britain one step ahead of the rest.
5. Second, modernisation means encouraging innovation and invention. That’s why last year we put an extra £1 billion into university science. And it’s why next year we’ll introduce a new tax cut for R&D that will become one of the best incentives for innovation anywhere in the industrialised world.
6. It will help British companies to turn new British ideas into new British innovations, new British innovations into new British products and new British products into new British jobs.
7. Third, we need more and better investment. For decades the UK has invested less than our competitors.
8. We know in particular that businesses – if they are to grow- need help with investment. That is why the Treasury with Don Cruickshank, former head of Oftel, is working with the banks to look at how they might more effectively provide support, especially to smaller firms.
9. Fourth, modernisation means a new emphasis on enterprise. Companies create wealth not governments. But what governments do or do not do can help or hinder that process. This Government wants to see a new culture of enterprise in Britain – where we have more people starting their own business, having a go, taking risks.
10. Here the Asian community provides an example to the rest of Britain. The Asian community has placed real value and respect on entrepreneurship which has helped Asians to become a driving force particularly in small business development in Britain. Ethnic minorities, of which the Asian community forms a large part, account for twice as many business start-ups as their share of the population. And, as some of my fellow guests here tonight will testify, a number of these small businesses have been built up into some of largest companies in Britain today.
11. We know that in the future jobs growth will come from a large number of small firms rather than a small number of large firms. That is why we have cut the rate of corporation tax to the lowest rate in our history, in Europe and in any major industrialised country so that those who create wealth keep more of it to reinvest in growth and jobs.
12. That brings me to the fifth and final way that we are seeking to tackle the modernisation challenge our country faces: through a modern employment policy. One that matches rights with responsibilities. One that provides new opportunities for work. And one that through a reformed tax and benefit system makes work pay.
13. When we came into office, four and a half million adults lived in households where nobody worked, double the level of 20 years ago.
14. Nearly one in five children were growing up in households where no-one is working, twice the rate of France and four times the rate of Germany.
15. And the reason that this issue of unemployment poses a massive challenge is that it is now the primary cause of poverty.
16. 20 years ago, pensioners made up the largest section of those in poverty, today it is those living in workless, working age households.
17. Simply compensating people for their poverty through benefits is not enough. The task must be to deal with the causes of poverty. And the best form of welfare is work.
18. Our strategy has been to tackle the barriers that people face to getting into work – the lack of employment, the unemployment and poverty traps, the absence of necessary skills, even the absence of child care.
19. Under the old system the tax system set a personal allowance that failed to ensure that work paid, and also made thousands pay tax even as they claimed benefits.
20. In the new tax system working families will be guaranteed a minimum income, so that in future no-one in work should have to go to the benefits office to receive a living wage.
21. These then are our radical approaches to modernising our economy. Our objectives are two-fold – to build an enterprise economy and a fair society. The two go together. All too often in the past they were viewed as antagonistic even irreconcilable objectives. That is not this Government’s view. Rather we believe that the one relies on the other. An enterprise economy is the route to jobs and prosperity. And a fair society where there are opportunities for all will help make our economy more competitive and productive. That means building an inclusive society where not only are there opportunities for all – regardless of class, of gender, or of race – but where success depends on merit and merit alone. Our ambition is to widen the winners circle in Britain. That is what modernisation means for our country.
22. We want to see a Britain where there is economic stability; a Britain which is business-friendly; a Britain where public and private sectors, instead of working against one another, work with each other to create greater enterprise and greater fairness.
23. The Government will play its part in modernising Britain so that we can be a leader in the knowledge economy.
24. But so too must British business. Our challenge to business is this. Work with us. Use not just the skills of a few in your workforce, but invest in training and new technology for the many. Overcome with the Trade Unions the culture of us and them that can have no place in a modern knowledge-based economy that relies on the skills of the many not the few.
25. The challenges are enormous but if we work together the prize is an enormous one too – a modern economy fit for the future, ready to offer employment opportunity and greater prosperity for all our people in the years ahead. It is a challenge that together we can meet.

The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 25 November 1999.

I’m delighted to able to speak at this conference of Proshare which as an organisation has done so much to advance employee share ownership in an imaginative, progressive and effective way.

Modern and decent

Let me first put our aims for the new all employee share plan this in the context of the Government’s wider aims.

What we have embarked on is a twenty year programme to build a new Britain which will be modern and decent. Both of those things at the same time.

Modern Britain will have an economy where the vital new stability has been locked in for good, beyond our past decades long record of boom and bust. We want thriving knowledge-based firms exploiting the know how, creativity and expertise of British people. We want to create the best environment in the world for electronic commerce. Higher levels of investment, in information technology, in infrastructure, in skills. Higher levels of productivity to catch up after decades with our competitors. We’ll have higher standards at school, have harnessed the potential of further and higher education, and provide high quality opportunities for our young people. As individuals and collectively we shall have confidence in the future.

Decent Britain will be an inclusive society where everyone has the chance to play their full part. Over the twenty year period, child poverty will be eradicated. There will be help for those trapped on benefits or in poor housing or without a job, and those unable to work through disability or through caring for somebody else. We’ll have a health service which people will have confidence in. There will be decent standards for those at work. We’ll confront crime, anti-social behaviour and drug taking which cast a shadow over too many young lives. We want to entrench decent values – society pulling together, and with rights matched by responsibilities.

So modern and decent – that’s where we want to be in the years ahead. And it is my view that the new all employee share plan is exactly the type of initiative we need to take forward both strands of that commitment.

Promoting an enterprise culture

Make no mistake, employee share ownership is about to take a big step forward in the UK and, when it does, we shall be taking a big step towards our goals. One of our key priorities, as I have said, is to raise the levels of productivity in British industry, stubbornly stuck significantly behind those of France, Germany, the US, Japan. Another of our priorities is to give everyone a stake in the success of the economy, so that everyone can benefit from Britain’s growing prosperity. And increasingly, people recognise how much boosting employee share ownership will contribute to those two aims.

When Gordon Brown, the Chancellor, stood up two weeks ago and presented the Pre-Budget Report, he laid out four new ambitions for the next decade: that over half of all our school-leavers go on to degrees; a higher percentage of people in work than ever before; child poverty reduced by half; and that we should be catching up on productivity with our competitors.

We know that if we are to meet the productivity challenge, Britain needs to promote innovative thinking and enterprise. We need to encourage our workforce to think like entrepreneurs and to recognise the challenges of a competitive market place. We want them to think more like owners and to see the benefit of making their company successful. We want people to recognise that they have a part to play in our economy and a contribution to make to Britain’s growth.

We believe that only by pursuing both enterprise and fairness together – enterprise and fairness for all – can we equip Britain for the future and secure rising living standards for all. So we want all employees to enjoy the rewards of success, not just the privileged few. Where people generate growth they should also benefit from it. Where they are working with their companies to become more efficient and to become more productive, they should also reap their reward.

This is why employee share ownership is so important to this Government. And this is why we want to encourage more companies to offer all their employees a stake in their business.

Employee shareholders have a direct interest in the performance of their company and a real stake in its success. Research in both the US and the UK shows there is a clear link between employee share ownership and improvements in productivity. Over time, employees have an incentive to contribute more actively to the development of the business. And if the majority of employees have an ownership stake, then individual efforts become mutually reinforcing.

Employee shareholders also feel a greater commitment to their company which helps the company recruit and retain employees and improves its return from investment in employee skills and training. Employee shareholders better understand the risks faced by the business, which in turn can lead to greater pay responsibility.

The role of the new plan

Our target is to double the number of companies offering all-employee share ownership schemes. We want widespread employee ownership and long term shareholding by employees, and to encourage the new enterprise culture of team work in which everyone contributes and benefits from success.

The plan will be an important step towards meeting that target.

But we recognise that we need to encourage both companies and employees to take up the new plan if we are going to change the culture in the workplace. So we have devised a plan that is the most generous all employee plan ever introduced into the UK. One that offers significant tax benefits to both employees and companies. And one that will appeal to small as well as to large companies by offering a range of different features.

The process

We decided early on that we would not achieve the type of change we want to see just by tweaking the existing schemes. We want a plan which will meet our objectives and be attractive to all employees and companies.

To help us achieve this, an Advisory Group, made up of representatives from leading share scheme practitioners, companies, academics and trade union members, have worked with the Inland Revenue in the development of the new plan. Two members of that group (Graham Rowlands Hempel and David Tuch) are speaking here today and I would like to thank them – and all their colleagues as well – for the tremendous commitment and support that they have given to this work.

We are also listening to companies directly though the focus groups led by ProShare, who have organised today’s conference. Up to 60 companies have participated in these groups, which must be something of a record ­ even for New Labour! Again, many thanks to all of you who have given your time to attend meetings and to write to us. Your input has been extremely valuable and is reflected in the features of the plan which will have been outlined today.

This initiative is an excellent example of how this Government is bringing private and public sectors together to create policies which work well in practice.

Buying shares

Let me outline some of the key features of the new plan.

First, employees for the first time will be able to buy shares in their company out of their pre tax salary. Employees will immediately have a stake in the company – they will become “owners” from day one.

Of course, holding shares is risky, unlike the one way bet of an option – employees will need to understand this when they decide to buy shares and employers will need to communicate this carefully to their employees. We are currently considering ways that the Revenue can help in this process.

There are also features of the new plan to help reduce this risk. Because they buy shares out of the pre-tax salary employees are in effect always buying shares at a discount. Employers who offer matching shares to their employees add to that cushion, as indeed do employers who provide shares over a 12 month period based on the most favourable price.

And we have set limits within the plan which should mean that no-one overreaches themselves and uses more of their salary to buy shares than is advisable.

The second revolutionary feature reflects the fact that many companies have told us that they want employees to demonstrate their commitment to the company by buying shares. They also want to reward this by matching these with additional shares. Before now this has not been easy to achieve for everyone. The new plan will change this significantly and as a result many companies will for the first time want to set up a plan.

Rewarding performance

Other companies have told us that they have been put off from having a plan in the past because they would have to give shares to all their employees, regardless of their performance or their commitment to staying with the company. So our third innovation in the new plan is that companies can now award shares on a performance basis, if they want to. They can also take back shares awarded to employees who decide not to stay with them.
Rewarding performance in this way will help companies to create a more competitive environment within their business. This in turn will lead to greater efficiencies and more innovation. But again, all this must be done on a basis that is fair to employees. It will be up to companies to choose any performance measure that suit their business, as long as these are objective and fair. Companies must be open with their workforce about how performance will be measured. Indeed this is how any modern, successful business should treat its employees if it is going to get the best from them.

Smaller companies

I want to say a few words about smaller companies. Our aim is to increase the number of companies who offer shares to all their employees. To achieve this, we need to encourage and help companies setting up their first plan. Many of these will be the smaller quoted and unquoted companies.

Our fourth innovation is for these companies – the new plan can now be a very simple plan if this is what you want. It has also been designed so that you can set up a plan which can develop as the company grows.

We recognise that smaller companies, particularly unquoted ones, face more obstacles in setting up plans and, like all businesses, have to look carefully at the costs. That is why the new plan contains a number of innovative features aimed at smaller and unquoted companies. In addition we are looking closely, again with the help of the Advisory Group and the industry generally, at ways in which Government can give more help.

The internet gives us a tremendous opportunity to revolutionise the way that we can help companies set up plans and reduce the burdens on business of providing information to us. Next year we will have available on the net, and therefore free of charge, a set of draft rules that any company can take away and use to set up a plan.

Conclusion

We want to hear your views on the new plan. Many of you have said that you find it difficult to comment, not knowing what is going to happen to the existing schemes. I appreciate this. But as we have said all along, we need to be sure that the new plan will deliver the changes that we want to see happen, before we make any decisions on the existing schemes. Your input into the process so far has helped enormously in shaping the new plan. Just as we want to get the new plan right, we want to make the right decision on the existing schemes.

From what we have heard already, we think the new plan will be very successful. These developments herald a dramatic change in the way many businesses operate, and point towards a new era of partnership between employees, shareholders and managers. They are a key building block for Britain’s future prosperity, for the modern and decent Britain we are working for. Join with us in promoting employee share ownership, so that we can make the most of the benefits which are on offer.

Thank you.

The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 11 November 1999.

Introduction

1. Thank you for inviting me to speak to you today. Over the past two and a half years this Government has started to build a new Britain which we want to be modern and decent – a new enterprise economy open to all the talents. That’s why the Chancellor set out on Tuesday as ambitions for the next decade the goals that we should have productivity moving closer to our major competitors, a larger proportion of people in work, halve the number of children in poverty, and for the first time over half of our school leavers should go on to study for a degree.
2. For too long British investment has been too low, productivity increases too slow, the potential of new markets, new technologies and new skills too often squandered. I want that to change and for corporate venturing to fulfil its potential in the new Britain, promoting long term investment across British businesses. 

The report

1. The CBI/Natwest report into corporate venturing is a timely piece of research – highlighting the important benefits that corporate venturing can bring.
2. Compared to the US, corporate venturing in this country barely skims the surface of the investment pond. When I was in Silicon Valley, in September, I met Stephen Nachtsheim, the Vice President for Corporate Business of Intel. He told me that Intel had invested over $3 billion dollars in more than 250 companies – most of them start-ups – some working from the owners’ garage. Corporate venturing is having a big impact on they way Intel does business and is as integral to their corporate strategy.
3. Case studies in the report show that companies outside the US have also benefited from corporate venturing. Reuters, the information service provider, is helping to reshape its business through corporate venturing. 3M is using corporate venturing as a part of its growth strategy for the continued generation of new ideas, products and technologies.
4. But examples like these outside the US are scarce. The report says, many large firms still don’t really know what corporate venturing is. And that worries me.
5. We are in an era where business is changing dramatically, where the difference between business success and failure is the speed at which new technologies are adopted. British business is missing out on the benefits of corporate venturing.
6. For example, in 1997, Intel conducted virtually no business on the Internet. In 1998, their Internet business had risen to 20 per cent thanks to corporate venturing. And this year they expect to carry out a staggering 50 per cent of all their business over the World Wide Web. It is becoming ever more noticeable that in the relentless competition of today’s global markets, large Goliaths of industry who cannot defeat the quicker Davids join them instead – creating innovative strategic partnerships – or symbiotic relationships as Patricia Hewitt called it – to the benefit of both firms. 

PBR measures

1. Enterprising attitudes are necessary in both established firms and new businesses. We need an enterprising culture which reflects the attitudes across society – attitudes to risk, reward and failure, and wealth creation.
2. In the 1999 Budget we set out our intentions for a new tax incentive to promote corporate venturing. Following consultation, Gordon Brown announced on Tuesday in the Pre-Budget Report that we will provide an up-front corporation tax relief of 20 per cent for all large companies that invest in growing companies for over 3 years. This underwrites one fifth of their investment and takes into account the needs of Britain’s small high-tech firms.
3. But we don’t just want companies to invest through corporate venturing once, we want them to become serial corporate venturers. Your report drew some interesting conclusion about the success of corporate venturing. 80 per cent of alliances were still going forward. 50 per cent of firms had gone on to undertake further partnerships.
4. So our measures go further.
5. To encourage serial corporate venturing, if a corporate venturer sells its investment at a profit and reinvests again through corporate venturing, it can defer the corporation tax charge on the gain.
6. This incentive could be worth up to £100 million if businesses rise to the challenge and invest £500 million through corporate venturing .
7. A thriving enterprise economy calls for a larger number of small businesses. That is why the Pre-Budget Report contained a number of new incentives for small businesses – the backbone of our economy. But we know that investments in smaller higher-risk trading companies are more risky. That is why as part of the corporate venturing tax relief we are providing a capital write-off against income for investments that do not work. Depending on the loss, a corporate venturer will be able to get additional relief of up to £24 for every £100 it has invested.
8. These tax relief measures provide strong financial incentives to undertake corporate venturing. But, I agree with Patricia that corporate venturing is about more than money. So we will continue to work with the Department of Trade and Industry, developing further non-tax measures to help create a corporate venturing culture.
9. Your research found that 38 per cent found partners through informal Networks. While I was in Silicon Valley I went to a meeting of the MIT/Stanford Venture Lab. This is a public forum where entrepreneurs, managers and investors can meet and learn about the small firms. I hope the CBI’s programme of regional seminars following this report will start the ball rolling in the UK. But we also need to look at other ways of encouraging dialogue between established companies and new firms.
10. We need to take corporate venturing into the boardrooms of the largest corporates and into the workshops and laboratories of our smallest firms. We must get the message across that corporate venturing can provide finance, support and technical expertise to turn innovative talent into commercial success.

Conclusion

1. Corporate venturing has been a mainstream in the US economy since the 1960s and has had a big impact on the shape of their economy. Let us now grasp this opportunity to make corporate venturing a success for British businesses as well.
2. Thank you.