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Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)Turning Change Into Opportunity : The Next Steps For Industrial Policy |
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When we were elected in 1997 we promised a start and not a revolution. In four years we have laid the foundations on which we can build for the future. Our challenge now is to ensure that we use this opportunity to change Britain for the better. If we look at British politics since the Second World war for much of this time the electorate was given what was essentially a false choice. That you could have either economic efficiency or social justice. That one was in some way in conflict with the other. That believing in the importance of business left no room for concepts like fairness or spending on public services - which were considered to undermine economic efficiency. And equally, those who were committed to fairness and public services felt uncomfortable with business, with enterprise and economic change. For too long our country - and our political system - has been divided between these two positions. For too long our people and our economy have been held back by these false choices. The truth is you can believe in enterprise and fairness. In business opportunity and security for the vulnerable. In economic efficiency and an inclusive society. The reality is we will not have a strong economy if we have a weak and divided society. Let us first consider some examples:
It has been recognised for a long time that economic policy has social effects. Now we need to acknowledge that social policy has economic implications. 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. In government one of our major achievements has been to marry economic efficiency with social justice. Perhaps the most tangible demonstration of this has been the introduction of the national minimum wage and the giving of independence to the Bank of England over the setting of interest rates. Today I want to reflect on what we've been able to achieve and then to look forward to the next steps in the modernisation and reform agenda - in particular how we can support enterprise and small business. This is not the time to stand still. Not a time for complacency. Not a time to relax our efforts. To those who urge us to slow the pace of change I reply that to do so would mean missing the once in a generation opportunity we have to fundamentally improve Britain. We need to ensure that our values, ideas and policies are as much about enterprise, opportunity and responsibility as they are about equality, fairness and solidarity. Over the last four years we have delivered radical reforms providing for economic stability and enterprise. And at the same time we have introduced decent standards at work and investment in public services. In 1997 one and a half million people were being paid less than £3.20 an hour. Two and a half million workers had no paid holiday. Today they are guaranteed a decent minimum wage. And they have a legal right to four week's paid holiday this year. In 1997 many working parents worried about losing their job if they were called away to care for a sick son or daughter or an ailing parent. Today they have a right to time off work to deal with a family emergency, starting from day one of employment. These fundamental reforms have introduced fairness in the workplace. We have done so not only out of a sense of social justice but also for reasons of economic efficiency. Because a fair economy is a productive one. Alongside these reforms we have taken steps to improve economic efficiency. Establishing economic stability and introducing new measures to extend enterprise and increase investment and productivity. Far from being a 'golden economic legacy', in 1997 we inherited an economy with many weaknesses. With inflation rising, a 28 billion pounds deficit, and a national debt that had doubled, the British economy was once again at risk of repeating the old all too familiar pattern of inflation followed by recession. Let's not forget what happened before the 1997 Election when the then Chancellor chose to reject the advice of the Governor of the Bank of England that interest rates should rise because of the risk of higher inflation. Now the position is one that we can take pride in. The UK is enjoying the longest period of sustained low inflation since the 1960s. Employment has risen and unemployment fallen in every region since the election. And across the UK as a whole employment has risen by over one million since the election. Business investment is up - from 12% of GDP in 1997 to 14%. Business expenditure on research and development has increased by almost £1 billion in real terms since 1997. Our approach - combining fairness and economic efficiency - is particularly important during a time of change. If we look around the world today there is one main characteristic of the global economy. That is change. Change driven by new technology. By customer tastes. And by what economists like to call 'external shocks' - be they a slow down in a major country like the US, abrupt changes in oil prices internationally; or conflicts between countries. It is on the foundations of stability that we have been able to introduce reforms to the economy which mean Britain is now better placed to adapt to the change and restructuring which are part and parcel of the modern global economy and of the wealth creation process. Building on these reforms we now have an opportunity to take the next steps which can ensure that our businesses and individuals are not overwhelmed by these forces. That enable us to turn change into opportunity. I believe that in the modern economy Government has a fundamental role to play in ensuring we can harness change to increase and extend prosperity and improve the quality of life for everyone. Over the last four years we have taken the first steps in ensuring that Britain is equipped to win in a world of change. It is not the Government's role to try to resist profound structural changes in the economy or to intervene to pick winners. But equally Government can not stand aside. Government should play an active role. To help businesses and individuals anticipate and respond to changing circumstances. It is clear that many sectors of industry are going through major restructuring as a result of globalisation, and there are bound to be implications for some due to the slowdown in the world economy, particularly in the USA. We are seeing job losses across the world. Grundig and T-Online have recently announced redundancies in Germany; Danone, Alstom and Usinor in France; NEC, Hitachi and Toshiba in Japan. No country can ever insulate itself entirely from world economic events. But because we have taken decisive action. Introducing tough fiscal rules and reducing the national debt. Making the Bank of England independent. Delivering the lowest inflation for 30 years. Because of these reforms we are in a stronger position to cope with the challenges of the world economy than we have been in the past. We remain on course to continue to deliver stability and sustained growth. Recent announcements of job losses have attracted significant attention. But this should not detract from the overall state of the economy. The most recent figures show that jobs growth over the last year was even stronger than the previous year - with over 300,000 more people in work than a year ago. Unemployment continues to fall on all measures. At 5.2%, the rate of unemployment is well below the level in countries like Germany (7.8%) and France (8.7%). The most recent business start up estimates from Barclays show there were nearly 91,000 start-ups during the last quarter of 2000 - eight per cent higher than during the same period in 1999. The latest figures for company insolvencies published today show that the rate of insolvencies as a percentage of registered companies is 1.1% - the lowest for over a decade. Under this government the rate of company insolvencies as a percentage of registered companies has been falling consistently. At the same time today's figures show that the number of active companies has been increasing - with over 300,000 more active companies now than in May 1997. The most recent figures show that in the final quarter of last year stocks of inward investment remained at record levels - double the levels in 1997. The latest Ernst & Young Investment Monitor Report, published yesterday, showed that in 2000 the UK remained the top location for investment in Europe. Attracting 26% of all inward investment in Europe. Up by 2% on the previous year. And today Pfizer is announcing a major new investment of £134 million, creating 400 new highly skilled jobs at Sandwich. This is a ringing endorsement of the UK as the No. 1 European location for inward investment. The reforms we have introduced and the stability we have established in the economy mean that we now have an opportunity to establish a virtuous circle. Running an economy with low inflation, low interest rates and introducing tax and other changes to promote enterprise, we have seen businesses growing strongly, investing, taking on people, creating wealth. So as we cut the costs of economic failure ? cutting public debt, reducing unemployment, and enjoy the fruits of economic success - we are able to free up the finance necessary to invest in the infrastructure and high quality public services that underpin further economic strength and business achievement. Investment in our science base - reversing years of underinvestment. Ensuring that our universities and research bodies are able to generate the new ideas and develop spin offs which form the industries and jobs of the future. Investment in schools so that where in 1997 more was being spent on debt interest repayments than our schools, in 2001/2 we will be spending £10 billion more on schools than on debt interest. Investment in hospitals. And in transport. Investment which improves the quality of life for all of us. Investment which ensures a healthy, skilled workforce and the infrastructure which business needs. The key underpinning to business success. Let's remember that investment also creates jobs directly. In terms of employment, the increase in Government investment on school capital is likely to result in 26,000 extra jobs being sustained in the construction industry during 2000-01, rising to 50,000 jobs by 2003-04. Our 10 year £180 billion transport plan will create at least 60,000 new jobs in transport, engineering and construction. In this way we are creating a virtuous circle. Economic efficiency and social justice working together. Reinforcing each other. Today I want to touch on two areas in particular. Support for enterprise especially in the small business sector and the need to strengthen our regions. We need to increase the possibilities for people to transform their ideas into successful businesses. Over a half of the companies in the current FTSE 100 are new entrants since 1984. The pace of change in the economy means that we must encourage new companies to start and grow and support the development of new industries. That's why we have taken action to improve business support through the new Small Business Service. And taken action to reduce the equity gap. We now need to build on that. To make sure that Britain is the best place to start and grow a business. Making it easier to start a business. Ensuring that anyone with a good business idea can get the finance they need to get it off the ground. In higher education we are providing new incentives for commercial application of research, with a £140 million Higher Education Innovation Fund. This will provide - for the first time - a permanent third stream of funding for universities, aimed at industrial research and innovation. We must build on this to strengthen activities to promote an enterprise culture. To integrate universities into the economy of their region. And to increase opportunities for new and forward looking small firms. Today I can give details of a new programme to use Government R&D contracts to encourage more hi-tech small firms to start up or develop research capacity. Under the Small Business Research Initiative, Government Departments and Research Councils will aim to procure at least two and a half per cent of their R&D contracts from small firms. This is worth £50 million a year when fully established. Already the following departments have signed up: Trade and Industry, Health, Environment and Transport, International Development, Agriculture Fisheries and Food, and Defence. Between us our R&D spend is around £1 billion. This is a radical reform to Government R&D. In the past the key criteria has been value for money in its most narrow sense - the cheapest bidder wins. But there was never any way of maximising the benefits to our economy as a whole. The new approach looks at securing the best value for the economy - encouraging new and innovative small firms by opening up Government contracts to them. The first opportunities under the initiative are now available. And to maximise the opportunities available, the Small Business Service will be setting up a matching service where small firms can register their interest and capabilities and will then be matched against government tenders as they are issued. We not only need to exploit Government research and development, we also need to see more business investment in R&D. Investment which generates the ideas which feed into new products, new processes, and increased productivity. In 1997 we inherited historically low levels of business investment in R&D compared to other G7 countries. If we are to develop a dynamic economy we need more R&D. We have taken steps to do this. The new R&D tax credit for small firms is already in operation. We're now looking to extend it to larger manufacturing businesses. And we are establishing new University Innovation Centres to enable universities and businesses to collaborate on large scale research and development. But we need to do more. As a result of the economic reform programme which the UK has driven forward in the European Union, the European Investment Bank has established a new fund to provide loans at favourable rates for investment in R&D. The European Investment Bank has agreed to make £250 million in loans available to British companies over the next three years for investment in research and development. They will lend up to half the external finance for R&D projects of £15 million or more, at below commercial rates. I want to make sure that British firms benefit from the new facility being offered by the EIB. The EIB is not in business to substitute for normal, commercial lending. It is looking to plug gaps in the market. So we need to reach companies who probably think they cannot borrow enough to bring new ideas to market. This facility could help businesses which have previously been unable to raise the money for R&D. So today I am asking the CBI and other organisations to work with the Government in encouraging British companies to take advantage of this new opportunity to develop bright ideas and bring them to market. At the beginning I mentioned our goal of bringing together social justice and economic efficiency. Nowhere is the link more clear than in our drive to improve the trend rate of growth in every region. To ensure that all our regions share in the nation's wealth and prosperity. To break down those barriers that deny opportunity and which have held back some of our regions for far too long. We do so out of a sense of social justice but also because our future economic success as a country depends on all parts and all people of the United Kingdom achieving their full potential. Different communities face different local problems. In a time of change, different communities will be affected in different ways. Some areas are more affected by industrial restructuring. In other areas the rapid growth of new business clusters can create different problems of space planning, housing and transport. No two places are the same. There is no single solution that can be applied across the United Kingdom. What we need therefore are policies which empower communities so they can determine their own future and co-ordinate action at the neighbourhood, local, regional and national level. It is a social imperative. But it is also an economic necessity. The creation of a privileged "winners circle" limited to certain people, geographical areas or sectors of the economy will hold back our economy. That is why we must drive forward a new regional policy. One which signals a significant break from the failed policies of the past.We can't go back to the centralised planning approach which ended up stifling growth in successful regions. Nor should we accept the approach of the last Government: laissez faire indifference, making regional problems worse through neglect. Instead, we must equip every community, every region to succeed in the world of change in which we live. Over the last four years we have made a start in giving the regions the tools they need to realise their full potential. We established regional development agencies. We're substantially increasing their funding. And we're giving them greater financial flexibility to tackle the priorities in their region. We now have an opportunity to build on these foundations. To help communities succeed and to widen the winners circle. At the beginning of the 21st century we will as a country face many challenges. In response we must not be defensive. Instead we should have a bold and ambitious vision of our country. An enterprise Britain where all can prosper. An opportunity Britain where all can succeed. A fair Britain underpinned by social justice. That is our vision and one that I believe the British people are ready to share. |
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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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