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Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)Birmingham Chamber of Commerce |
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Today I want to discuss the part that government in general and my department in particular can play in ensuring that the restructuring of our economy, which is taking place in Britain like almost every major industrialised country, is a bringer of opportunity and not a threat. At the outset I want to be clear that I firmly believe there is a role for government and that I don't subscribe to the view that everything should simply be left to the market. But the role of government is to be active but not interventionist. Establishing a new partnership for this new economy. Doing so in a way which addresses the needs of the traditional or more longstanding sectors as well as gaining global leadership in the cutting edge sectors. We know that increasingly every product and almost every service will be exposed to global competition in one form or another. That continuous and rapid innovation will require flexibility and adaptability in skills and knowledge. So this is not a time for complacency, not a time to pause, not a time to relax our efforts. To those urging us to slow the pace of change, or simply stick to the old ways, whether it be old labour market policies, old attitudes to enterprise or old approaches to competition, I reply that if we slow the pace of change we will fall behind our competitors. Britain cannot assume either that the new information technologies will automatically bring the higher productivity growth now seen in the United States. To equip ourselves best to meet and master these challenges, we need as a country to raise our game. We have some of the greatest companies, some world class sectors, some global champions, in whom we do and should take pride, and once again we have record levels of inward investment in our country. But over the last 50 years, productivity growth across the UK economy has been just over two and a half per cent a year, compared to between three and a half per cent and four per cent among our main European competitors. In recent times productivity has been increasing - especially in manufacturing, where we have seen a four and a half per cent growth in the last year - but the increase is not fast enough. Meeting the productivity challenge - closing the gap with our competitors - must be the priority over the next few years. This is not just a priority for business. Government must play its part as well. That's why the outcome of the Spending Review recently announced by the Chancellor is so important. Not just in terms of properly funding essential public services and the social good that comes from it. We must not lose sight of the benefits to our economy that will result from the Spending Review. Support for health service, education is not simply a question of compassionate regard. Coupled with other measures like support for transport it is part of the productivity improvement process itself. So we can see that good quality public services can work with the grain of economic policy. As John Smith said "economic efficiency and social justice are two sides of the same coin". Let me give you a few examples:
This investment shows that strong, high quality public services and support for our infrastructure must not be seen as a burden but can actually be a driver for economic growth. It has always been recognised that economic policy has social effects. Now we need to acknowledge that social policy has economic implications and that social and economic policy must work together if we are to become more productive and overcome the gap that exists with our major international competitors. Indeed there is a strong argument to say that it has been a lack of investment by the government in the necessary infrastructure that has held back many businesses in the United Kingdom. We are now investing in the fundamentals of a growing economy. We are able to do this because for every pound of public expenditure just 17p goes to fund debt interest, unemployment benefit and social security spending. When we come into office in 1997 42p of every pound went on repaying interest on the national debt, unemployment and social security spending. At the beginning I mentioned the restructuring of our economy which is taking place. We must not under-estimate the significance of these changes. The shift from an industrial to a knowledge based economy at the beginning of the 21st century is as profound as the shift from an agricultural to an industrial economy was at the beginning of the 19th century. This new economy is deeply uncomfortable for many people - rapid change, industrial restructuring leads to greater insecurity and more uncertainty. The danger is that people don't feel part of this new economy. They feel the victims of it rather than partners in the change. As a country we cannot and should not try to resist change. We need to see it as a bringer of opportunity and not a threat. People often talk about the "new economy" or the "knowledge economy" as if it only applies to certain sectors of industry or is still some way in the future. That it's something only youngsters in dot.com companies participate in. In fact it's here and it's now. It affects us all. When we use a mobile phone or send an e-mail. When our children learn to use a computer at school. When we watch satellite TV. The modern economy is fast moving, dynamic and ever-changing. To be successful companies must innovate and take risks. They must learn how to compete on world markets against global competition. Government too must learn. The old approaches of left or right will no longer do. Some on the right argue that Government has no role any more. Deregulate, liberalise, a hands off approach, letting people and business sink or swim. But it is clear to me that it is a mistaken view. As is the traditional approach of the left. Interventionist, picking winners and supporting lame ducks, running nationalised industries and protecting monopolies. I believe that the role for government is to be active but not interventionist. Having a clear industrial policy is not old fashioned or backward looking provided it is not a prisoner of the past but is tailored to the needs of the future. A policy which helps British business meet the challenges of the 21st century. Two years ago we identified the global knowledge economy as the challenge. In the last two years the scale of change which the new economy is driving has become apparent. The human genome has now been mapped - much sooner than we expected. Two years ago there were nearly 10 million mobile phone users in Britain. Today there are over 30 million. In the last two years revenue generated on the internet has increased tenfold and the number of users has more than trebled. Digital television has taken off. Increased from zero to almost 4 million in less than two years. Alongside these changes we've seen increasing globalisation. In two years the value of outward investment from the UK has grown from £224 billion to £295 billion; inward investment has risen from £173 billion to £252 billion. Barriers to the global economy have fallen. This year, Vodafone took over the German communications company Mannesmann. Something which would have been unimaginable two years ago. And BMW sold Rover and Land Rover. We've seen what a truly global economy means. And how in the knowledge economy new sectors can emerge and grow at a previously unimaginable pace. In this world of great complexity and rapid change, the need for Government to be clear about its industrial policy is even greater. My view is that we do not want the extremes of interventionism or laissez faire or even a half way house between them. Instead, we must think again to shape a new approach, based on knowledge and skills, on maximising the potential of all parts of Britain and on exploiting the talents of all our people. To put in place the building blocks, the regulatory framework and the business support we need for the future. Looking to the future, not the past. Embracing change, not resisting it. Driving forward a positive, active industrial policy. One which creates an environment for world class business success, and promotes positive change in the economy. Which recognises the challenges of the global, knowledge driven economy. First and foremost business needs economic stability. That's why we took immediate and decisive action to lock in low inflation and economic stability and open the way to steady growth. But getting the economic conditions right is only the beginning. We need an industrial policy based on three clear principles. First, putting in place the building blocks for the future. To ensure that the science base is properly funded and linked to industry. That the skills of our workforce meet the future needs of industry. That we have the communications infrastructure we need to be at the forefront of the IT revolution. That we create a strong enterprise culture in Britain. Second, creating a modern regulatory framework that drives innovation and encourages growth and increased productivity. Modern, industrially advanced economies are complex. Governments take a huge range of decisions which affect industrial success. It is the role of my Department to ensure that sustainable wealth creation and business growth are at the heart of these decisions - in Britain, in Europe and internationally. To promote competition and open new markets at home and abroad. To build a modern legal framework fit for modern companies - for example to bring Company Law from its 19th Century origins into the 21st Century. To promote new ways of working; partnership not conflict in the workplace with a proper balance between home and work. To ensure balance in the labour market. Retaining flexibility but underpinned by basic minimum standards. And third, supporting business. Providing world class, forward-looking business support for businesses to expand at home and overseas. Helping manufacturing and services. Promoting innovation with more contacts between business and Universities and support for successful clusters in the regions. Opening opportunities for emerging industries and markets. Supporting start-ups and tomorrow's high growth companies with incentives to invest in R&D and backing for venture capital. Helping established industries to modernise and compete in new markets. Being a champion of business in government and on the international stage. So that the voice of business is heard. Looking to the future is the only way of ensuring sustained growth and employment. But as a Government we also have to look at the present. As industries restructure and the economy changes, some industries will face traumatic change. Let me make clear. We are not in the business of stopping change in industries which need to modernise. Propping up old ways of working, inefficient processes, doesn't do anyone any good. What we will do is to help established industries to modernise and compete in new markets. And to support people and communities through a period of change. To invest in training and skills to ensure that those made redundant can find new, quality jobs. To encourage enterprise - supporting new small firms with the potential to grow. To step up our work on attracting new investment in growth industries. And to help companies in the supply chain to innovate and adapt. Cash hand-outs are not the solution - we need new instruments focused on giving companies the knowledge and capabilities they need to succeed. In terms of large scale financial assistance to companies, I believe there should be a strong presumption against intervention. As part of our active industrial policy we should restrict support to the following areas:
These must now be seen as very much the exceptions. History shows that in the long run, intervention and state subsidies do not build strong profitable companies. I see no future in the old model of industrial sponsorship that has been pursued by my department in the past. The task today is to promote growth, innovation and improving the competitive position within and across sectors. To support enterprise, to encourage innovation and responsible risk taking, the DTI itself needs to be more enterprising and innovative and less risk averse. To be forward looking, creative, and ambitious. These are the characteristics which any organisation needs to succeed in a rapidly changing world. Businesses have changed their organisation and behaviour to reflect changes in the economy and in society. Government needs to change too. We need to work across boundaries; to back initiative; to make the most of people's talent, to encourage new ideas and not to stigmatise failure. We also need to be more business friendly and business-like in the way we work. To be customer focused. Many successful businesses market a few simple concepts or products, which they then adapt to the customer's needs. Government too often takes the opposite approach: a wide range of services and schemes, with inflexible rules. We must become more responsive and less bureaucratic - if we are dealing with business we should aim to work to business timescales. Whilst businesses continually cut product development times and customer delivery times, in government it still too often takes too long to put in place new schemes of support and to make individual grants. We also need to draw on outside skills and experience. The DTI is a leader in Whitehall in this area. Two members of the Departmental Board (John Taylor and David Irwin) are secondees, and taking account of British Trade International, with its Export Promoters Scheme, we have over 150 secondees in and out in place at the moment. But we need to redouble our efforts and increase this number still further. And we need to create and use knowledge and research. To produce quality analysis which adds value. To look across Government at all issues affecting business innovation and growth. To learn from the private and public sector. And from other countries - just as we have already drawn on the US experience in looking at support for clusters and encouraging the commercial application of university research. This calls for a new approach to our sectoral capabilities:
As far as I am concerned, old style sectoral sponsorship, based on cosy cartels and large scale state handouts, is dead. It will be replaced by in-depth understanding of the competitive position of sectors by joint teams of civil servants and people from the world of business and industry, whose remit is to actively promote more innovation and higher productivity in their sectors. This will sometimes involve expenditure on specific initiatives, but any such sums will be modest and time limited - pump priming best practice initiatives, for example. This reflects the approach we are already taking on Information and Communication Technology and e-commerce, where sponsor teams include people with industry and business experience. These take a comprehensive approach to identifying and tackling barriers to growth, including:- - international and regional benchmarking; - opening new market opportunities, such as third generation mobile and electronic signature, and removing barriers to market entry; - supporting clusters by attracting key inward investors and investing in research, including e-science. - championing the industry in Whitehall and Brussels, ensuring EU regulations support rather than stifle the growth of the industry, and securing fiscal incentives for investment in IT equipment; - investing in skills and widening access to the internet, through initiatives like the IT for all programme. This involves a small amount of pump priming for key initiatives; but it does not involve large subsidies. It is this type of approach which we need to take more widely in sectoral sponsorship. This represents a new direction for the DTI. We have already started the process. The Spending Review settlement and last week's science white paper underlined our focus on enterprise, innovation and scientific excellence in all parts of Britain. We will now take this forward. Building on economic stability to create a dynamic, knowledge economy based on enterprise, innovation and scientific excellence. Providing opportunity for people in all parts of the country to turn their ideas into successful businesses which create jobs and prosperity. Boosting investment in UK science to ensure we remain at the cutting edge of research. Driving forward an active industrial policy for the 21st century which enables British business to meet the challenges of the global, knowledge-driven economy in which we now live. |
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Other speeches by Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)
(the following are available from the archive) |
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