Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)

Competitiveness UK

I want to thank you all for coming to this meeting this morning. I know that you are all busy people but I want to use this occasion to set a path. Not just a path for the DTI whose central task it is to enhance the competitiveness and so advance the cause of Britain. But a path for Britain and British industry.

Let me make it clear at once that you have been invited of course as an audience. But not just as an audience - as people who are already participants in enhancing competitiveness and who I want to be participants in a partnership with us in DTI and in Government in that same cause.

There are few advantages to being in Opposition but one of them is that you learn to listen. The case we made in Opposition - our analysis of Britain's problems, our prescription that future prosperity lay in quality and added value, not merely in lowest cost, and our call for partnership in pursuing those ends was, I know, widely - if sometimes slightly grudgingly - accepted.

But what was quite frequently and reasonably said - and the sentiment that could always be read in the eyes even where it didn't reach the lips was "yes but do you mean it, yes but will you do it, if you are elected".

My purpose here today is to answer those questions and to answer them so resoundingly that no one will bother to ask them again.

Let me first set the overall context. Not long ago a senior figure in the business community said to me, "your Chancellor is embarrassing me. In ten days he has done half of the things I have been arguing for 10 years". It made me think. How has it come about that we accept, as necessary and worthwhile steps such as giving greater independence to the Bank of England, such as the regulatory changes that the Chancellor has announced, when - despite the fact that they have been argued for by many in the business community - this agenda has not been previously addressed.

I think there are two reasons. First these are issues that directly address the question of economic stability. Two recessions split by an inflationary boom is no way to deliver the climate in which British business or Britain can prosper in the long term. Our acceptance that that is so is at least in part a direct result of our 3 year consultation with the business community.

Second, it seems to me that those whose lives and livelihood is to compete in the markets of the world have come to terms, employers and employees alike, with the global market place in which today Britain as well as Britain's industry and commerce operate. But I suspect that that reality has not been accepted in quite the same way in what I would call loosely the political classes, in which I include many in the media.

I don't mean of course that people don't talk constantly about the different context of a global market and environment. But all too often they have not come to terms with what it means for the way the business community or indeed government must now operate.

In many ways the most profound change I believe has taken place in my party in the last ten years and the change which will undoubtedly shape the course of this government is that we have learnt despite the day to day pressures of political decision making to look to the future - to look five, ten, fifteen, twenty years ahead - as business must - to consider what the circumstances and difficulties of Britain would be then, how they can be addressed and what role in that government can play.

And as we look to the future it is crystal clear that if our future is to be one of prosperity and harmony Britain must become and remain more competitive and that the path to competitiveness is one of partnership.

That is why I have brought the Government's Competitiveness Unit back where it belongs in the Department for British Business - the DTI.

Because of what remains a distressing tendency to harp back I should perhaps say at once that I am not advocating that Government seeks to do the job of others. I am saying though that Government must play its own proper role - take its own place - in that partnership.

You heard us say this in Opposition. Let me tell you how we propose to go about delivering it in Government.

I have no intention of indulging in change for change's sake. But I believe our predecessors showed an unhealthy abhorrence of the prospect of common ground. Common ground should in my view begin with the potential for a common analysis of where Britain stands today.

There is little doubt that, fairly or otherwise, the Competitiveness White Papers of the previous Government were regarded as something of a publicity stunt. The picture painted was often too rosy or too one sided - praise for example for rising exports without acknowledging even faster rising imports.

I want Britain to look at both sides of the balance sheet - the pluses and the minuses. That is why I propose that we establish a Benchmark for Britain, a benchmark for an incoming Government against which future achievements or problems can be judged. I seek in fact an audit that will tell us something about where Britain truly stands today - about our starting point for the future.

On the basis of that wider analysis, I hope we can develop much more common ground not just about the analysis itself but about how we address the problems how we take forward the strengths that it throws up.

I want to see a far greater emphasis on action for the long term. We need to see quality count as well as cutting costs and we want to see an emphasis on productive labour replace an emphasis just on cheap labour. In the creativity of the British people lies one of our principal assets as a country - as many inward investing companies will avow. We do not yet harness that creativity as fully as we should. Sometimes that failure is due to outdated or poor relationships in the workplace. Sometimes it is due to British companies failing to use the talent available. We have for example world beating design and marketing companies whose best customers are all too often the companies of our competitors. But it is a lack of recognition of the value of such assets that lies at the root of many of these individual omissions.

The key to overcoming them is in so many cases and in such a variety of ways the harnessing of partnership to the pursuit of Competitiveness. That is why the key theme of what I am saying today, the key project that I am announcing, is the launch of Competitiveness UK - a range of initiatives which will build upon the most wide ranging consultation with British business undertaken by any British Government.

Let me say at the outset, because sadly some reaction to our proposals may be all too predictable, that I am not seeking to turn back the clock. I have no interest in turning back the clock, Britain can only do better by addressing the problems of the future.

Nor am I arguing for wide scale government intervention, though some have implied that I am itching to take decisions which are properly for the private sector. I am not trying to do your job but I am determined not to neglect my own. The view that Government cannot and should not seek to do everything has lately been used as an excuse for government doing nothing - yet sometimes there is a role that only government can play.

Let me give you some examples of what I mean both by Government listening to others and also by government acting in partnership with them.

The previous government announced, ignoring the results of consultation, a change in the way that funding support for trade fairs was awarded. This was to put it mildly, wildly unpopular with all those who actually practised in the field. They wanted to call a halt to that decision. We have done it.

This is one isolated example of the kind of partnership about which we spoke so often in Opposition and which I am determined to deliver in Government.

Much of our analysis of Britain's position is shared - there is much common ground. I would like to talk about that first.

One key area of common ground is the need to bring forward long overdue legislation to introduce prohibitions of anti-competitive agreements and abuse of market power. Competition contributes to competitiveness by driving up the performance of business, their ability to innovate and thereby benefits the customer.

Some have argued too that there is a case for simply merging the OFT and MMC, and for reversing the burden of proof in merger cases. Others - for instance the Commission on Public Policy and British Business had other views. Lord Borrie - a former Director General of Fair Trading - with others, was asked to examine these ideas. Today I can announce that he and his colleagues have communicated to me their view that these particular changes should not be made. Subject of course to the views of my colleagues, I intend to accept his recommendations.

I am grateful to Lord Borrie's team for their valuable contribution which I hope will continue as we move forward on the bill.

Much ink and brainpower has been expended agonising over the why and wherefore of my earliest competition decisions. There is really no need to work out what I mean. I mean just what I say - that such decisions were taken on competition grounds. This will be the primary consideration in future merger references. And of course this is why our legislative programme includes the reform and strengthening of competition law.

Another area of common ground is that competitiveness depends on high quality and added value, and on the kind of creativity I described earlier.

A key concept for us is employability. That means Government playing its full role in providing an education system for all that equips people with the confidence and basic skills to be employed by tomorrow's industries. But it also means creating an environment and culture within which employers play their role and, together with employees, share a common interest in continually training, learning and adapting to the challenges of rapidly changing technologies and markets.

Flexibility is the key to this. We believe in a flexible labour market, that serves employees and employers alike. We emphasised, however, in our election manifesto, that flexibility alone is not enough. A modern working environment demands what we called Flexibility Plus. Flexibility Plus higher skills, flexibility plus policies to ensure economic stability, and flexibility plus investment in the infrastructure, science and in research.

We all agree that our most successful firms have shown that a key to their strength is their ability to harness the skills and commitment of all of their employees, from managers to front line workers, around the common goal of building a successful business.

Our objective of introducing a national minimum wage is one element of the framework needed to expand on this best practice.

Of course there is an argument about decency and basic fairness - as there should be given the fact that inequality has grown faster in the UK than in almost any other OECD country - but there is also an argument about efficiency and competitiveness in the long term.

We can never compete with countries like China on wages, but we can compete and win on quality, and that is where the focus must be.

Although I recognise the reservations of some in the business community, we have made swift progress to establish the Low Pay Commission, to be chaired by Professor George Bain, in whose impartiality and expertise, confidence is widely felt and expressed.

We will, in the coming weeks, be working with him to appoint the other members of the Low Pay Commission, and to set its terms of reference. Let me make it clear that the issue of UK Competitiveness will be kept right at the top of the agenda.

We will also be signing the Social Chapter. I know that there have been concerns expressed that the Social Security costs of the French or the Germans could be transferred to Britain through this means. Let me make absolutely clear that if such measures were brought forward, measures which would be damaging, we would have no hesitation in using our veto to prevent them.

This is all part of a process of placing Britain back at the heart of Europe, fighting for British business and making our voice heard on the issues that will shape the future development of Europe.

This will be a major theme for the Government during the UK's Presidency, and especially of course for David Simon, Minister for Trade and Competitiveness in Europe.

These are the areas of legislative change which, like the need for economic stability, have emerged to date from our discussions with the wider business community.

But there are others.

We have called on the Post Office to halt and re-examine their franchise programme and to come forward with proposals as to how they can operate with greater commercial freedom.

Our objective is to increase the Post Office's freedom to invest. This is key, both to improving its Post Office's competitiveness at home and - increasingly - abroad, and to contributing to the competitiveness of businesses across the UK who rely on its services.

Central to the Government's overall competitiveness strategy is the need to translate excellence in basic science into business success. It is vital for businesses to look ahead to the longer term and explore the potential contribution that developments in science, technology and engineering can make to business success. This is what the Foresight programme is all about. Foresight brings together business, the science base and Government to identify and respond to emerging opportunities in markets and technologies. I supported Foresight in opposition. In office I want to drive the programme forward. I want to give it a real boost and establish Foresight so companies can improve their competitiveness, innovate and be successful. Small companies as well as big companies, working in partnership with the science base.

DTI too often looks like the Department not for all business but for big business. Under my leadership it will be the Department for all businesses. And that means making sure that we do everything we can to promote enterprise and to assist smaller firms.

Small firms create employment, promote competition, innovate and create wealth right across society. Small firms can give a big boost to our economy.

I have therefore started a review of the incentives and support my Department provides for smaller firms. This includes local and sectoral challenge funding. We will also be working to strengthen the quality of Business Links services to match the best that business receives anywhere in the world. We will work with Business Links to develop an Internet site, an "Enterprise Zone", providing rapid, low cost access to a comprehensive range of business information.

Inevitably the DTI is responsible for some areas of regulation, which can sometimes turn into reams of red tape and bureaucracy, particularly again for small firms. I will take a fresh look at the regulations with which firms have to deal. This review will seek to ensure that regulation, where it is necessary, provides a framework which helps and does not hinder business and which encourages innovation, investment and growth.

We have announced our intention to consult fully on legislative proposals to tackle the problems of late payment, experienced by so many small business, and proposals for which, in consequence, they have consistently called.

And as I said earlier we have also re-established the trade fairs programme, ending its widely disliked incorporation into Sector Challenge.

More generally I intend to review the support Government gives to the promotion of exports. I am, for example, establishing an Export Forum to advise me on how best to achieve this objective working with Stanley Clinton-Davis in particular. Our trade performance shows the need to improve everything we do in this area.

I am very conscious that as we move from the industrial to the information age, competitive advantage will be rooted in an ability to manage change and to innovate, in technology and in the skills of the work force, rather than depending on labour costs.

I am therefore determined to build, with business, an innovative hi-tech economy; by improving the access to finance for emerging technology-based firms with the potential to grow, by building improved partnerships between industry, the science and engineering base and Government; by encouraging greater investment by British business in best practice and R&D and by informing business about what IT can do for them through measures such as the Information Society Initiative Programme for Business.

The technology can in itself be impressive and can impart wonder, but its real significance lies in how it can change our society, and part of its challenge is to ensure that change is for the better - we hear already of information stress - information overload. That means we are not managing these opportunities successfully but being diverted by them.

The Information Superhighway is the means of delivering to all of our people improved access to information, to services and to markets. But I suspect Britain's best chance of leading in the markets of the future lies in providing access inclusively across communities - through libraries, schools, town halls: the mass markets of the future will first be identified by those who provide access to the technology for the mass of their people and opportunity follows that understanding. The DTI will be at the heart of encouraging the rapid development of the superhighway.

As I have said, our success depends on our companies producing a stream of high innovation, high tech, design intensive goods and services, leading market development with a workforce continually retrained to adapt to new technologies. Make no mistake. The United Kingdom already has such companies. Many are represented here today. But we do not have enough. And without more dynamic firms we will not be in the front rank of the world's trading nations, or anywhere near the top of the prosperity league. Such firms hold the key to our competitiveness. But there are real obstacles to growth for smaller companies; obstacles we must help them to overcome.

These are all outcomes of the consultation which we began while we were in Opposition. I want to now address how we take them forward in Government.

I want the theme of competitiveness to diffuse through all of the Department's policies. And what is more I want it to diffuse through all of Whitehall as well. The DTI is the interface with business. I will make sure your voices are heard - and that they are listened to.

I spoke earlier about the need for a benchmarking of our position - an audit of UK Competitiveness. This will be published in July. It will provide an overview of how well Britain is performing in every factor of competitiveness and will highlight areas of potential concern.

This audit will look at both the good and the bad. The economy is now growing strongly and inflationary pressures are relatively modest. But the Government is faced with an economy which has fundamental structural weaknesses.

- We are the poorest of the G7 countries. GDP per head in the UK is 8% below the OECD average.

- Despite our many excellent firms, productivity in manufacturing - and in services - lags substantially behind those of our major competitors

- Our share of world trade has fallen below 5%

- As the previous Government's Skills Audit showed, our workforce is less well educated and less skilled than our main competitors.

- Despite welcome falls in claimant unemployment, the facts are that employment is still over 400,000 below its 1990 level and nearly 1 in 5 households currently have no-one in work.

I will be inviting people to join an Advisory Group on Competitiveness. This will I believe be invaluable in offering practical and informed advice from business people across the range of sectors and types and sizes of firm.

I shall invite you and many others to a Competitiveness summit in July.

At the Summit, the agenda covered in the audit will be used to test our approach to competitiveness and establish common ground on a range of areas for further, more detailed consultation. Each of these areas will then be examined by a Working Party some of which will be chaired by one of my Ministerial colleagues here at the DTI. The Working Parties will meet several times in the next six months. Their task will be to produce advice upon which I will draw upon in framing a new Competitiveness UK White Paper, early next year.

I cannot emphasise too strongly that each of these groups will engage in a genuine dialogue with government. Of course we will need to recognise the limits on what we can achieve but I guarantee now that I will take up the best ideas and push them forward through a White Paper for Business, written by business and government together.

It is the Government's ambition to ensure that competitiveness is high on regional agendas. Competitiveness is a key issue in every region of the UK, and our commitment to the creation of the new Regional Development Agencies is a major part of our strategy. I want the Government Offices, and in due course those Regional Development Agencies, to develop strong regional competitiveness partnerships. I also want the Regional Directors to reflect the views of local business on the working parties I am setting up. We will also continue to support the work of the Government Offices and their local partners in their competitiveness strategies.

What I have announced is a major exercise in consultation, the most wide ranging ever undertaken by my Department. It may challenge some of the ideas we have already developed. We are confident that it will confirm others. It is my ambition to take this agenda to every region and across every Whitehall Department. Because British business deserves no less.

Today I have set out my vision of UK Competitiveness. I have explained the process through which we can forge a real and effective partnership. I look forward to working with you.

Building a better Britain - playing to our strengths, combating our weaknesses is no spectator sport. We are all on the same team - all engaged in the same process. Making Britain more competitive, recreating a national purpose, rebuilding genuine deserved national pride. That can't be the sole province of any single group, or any single interest in the Britain of the future. It is in the interests of us all. We need to succeed for Britain to be better than it is. To succeed we need to work in partnership.

Other speeches by Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)

(the following are available from the archive)
• Seminar "Preparing Businesses for the euro" (05/05/98)
• The Engineering Council's Annual Conference (30/04/98)
• G8 Energy Ministerial Conference (01/04/98)
• The PIRC Annual Conference (04/03/98)
• CBI Annual Conference (11/11/97)
• CBI Launch of the National Manufacturing Council Report (23/09/97)
• Competitiveness Summit (23/07/97)
• "UTILITIES 2000" Conference (30/06/97)