The Rt. Hon. Patricia Hewitt

Serving The Citizen In The 21st Century

I'm conscious that I'm standing between you and your dinner, an uncomfortable place for any politician to be. I'll try to provide food for thought but can't promise to match the quality of cuisine here at the Landmark Hotel.

The founder of this lecture series, the businessman Eli Goldston, was passionately committed to strengthening society. He spoke and wrote on many issues, like corporate social responsibility, corporate financing of inner-city housing, and gender equity in corporate boardrooms. A man of vision, Goldston identified issues were on the fringes then, now they are in the mainstream, on the agenda of every responsible government and socially aware board. So it's appropriate that the theme of tonight's event is "Serving the citizen in the 21st Century".

I want to give you a view of the bigger picture.

And when we talk about serving our citizens, whether we are in business or in government or in the not for profit sector, we must talk about the citizens not just of one country, but the citizens of the world.

Thinking about what I wanted to say this evening, I was reminded of another 'Stockton': the Earl of Stockton, the former Prime Minister Harold Macmillan, who nearly fifty years ago spoke unforgettably about the 'winds of change' blowing across the world. He was referring to the process of decolonialisation in Africa. Today, those 'winds of change' are at gale force. The economic map of our world is being transformed.

• China joining the WTO
  
  
• India producing 220,000 science and IT graduates a year
  
  
• Ten more countries joining the European Union next year, making us the largest single market in the world, with others queuing up to join.

Technology and consumer tastes now changing so fast that product life-cycles, once four or five years from initial design through launch to peak and then decline, may only last just one or two years.

New opportunities, for the developing world in particular, but also new competition and tough challenges for all of us in the developed world.

Despite heroic efforts to sustain export volumes, too many manufacturing firms are closing and too many manufacturing workers are losing their jobs. And this restructuring in manufacturing is now spreading to our service sectors as well.

In the last two decades, we have seen shipbuilding jobs lost to South Korea. Textile and clothing jobs move to South Asia, China and Morocco. But we also have seen that new jobs taking their place from financial services, IT, business support and call centres. But now those call centres, those back office jobs, are moving abroad too, thanks to the IT revolution. Moving to India, where wages are lower, graduates queue up for call centre jobs and staff not only speak English, but also have learnt to speak English with a Scottish accent!

That's what we've learnt to call globalisation. But it's not new. Five hundred years ago, explorers, traders and conquerors were transforming the economic geography of the world. Until 1492, Europe believed the world was flat. But for a round world, it still has pretty sharp edges. Sharp edges of injustice and inequality.

Injustice at home. Here in Britain, a rich country, the 4th largest economy in the world, we still have children growing up in homes where no one has worked for a generation. Growing up barely able to read and write, at risk from poverty, crime and drugs. 25 years after the Equal Pay Act, women still earning only 80p for every £1 earned by a man. Black graduates making a living as taxi-drivers because they cannot get the jobs they're qualified for.

Wasted lives, wasted economic potential, not only in Britain but also in the United States and too many other developed countries.

But let's look at injustice abroad. Over 1 billion people, 1 in 3 of the world's population, living on less than a dollar a day. Most of them black. Most of them women. All of them without access to healthcare, medicines, decent food or water. We look at this world, the injustices and the opportunities alike. And how do we respond, as policy-makers or business leaders? Do we try and protect ourselves, as developed countries, from these winds of change? Or do we try and shape a new world order, making globalisation, in Kofi Annan's words, 'a positive force for all the world's people.'

We stand as a powerful and wealthy nation, looking across the Atlantic to America, across the Channel to Europe, connected by history of Empire and Commonwealth to countries all around the globe, we are positioned and have the will to lead and mould change. Change based upon our fundamental values: equality, opportunity and mutual responsibility.

Our belief that in the modern world, a fairer society and a more prosperous economy are not enemies of each other, as we used to believe, but partners that go together. And change based upon our growing understanding that in the modern world, where what happens in one country is instantly seen and felt everywhere else, the values and aspirations we have for our own people must also be the values and aspirations we have for people everywhere.

In an interdependent world, "national and international" policies are increasingly interlinked. Economic decisions can't be taken in isolation, nor decisions about our environment.

With the world facing a growing threat from international terrorism and Weapons of Mass Destruction, we have to build stronger coalitions for security. And recognise too that our security in the developed world depends on prosperity in the developing world. This presents challenges for policy makers, not only are we dealing with the consequences of change at home but we are also working with other Governments internationally.

Meeting the challenge of change

• at home
• in Europe and
• in the world.

At home, after decades of boom and bust, we've now entrenched stability and have

• the lowest interest rates for 40 years
• faster growth than other major European economies
• the lowest unemployment since 1975 - 1.5 million jobs been created since 1997

Whilst the global downturn has blown the door off some country's economies, because of these foundations, we've barely heard a rattle of the letterbox. So we'll preserve this stability at all costs. And use it as a platform as we aim for employment, and tackle the challenges of the global economy.

Responding not with protectionism or isolationism - but innovation.

Higher value-added products. Faster, cleaner production processes. A virtuous circle of investment, skills and innovation. Higher profits and higher wages. We can lead in this, because innovation is just something we're good at. With 1% of the population, we fund 5% of world science, produce 8% of all scientific papers and get 9% of all scientific citations. We need to make sure we build this up and better connect up our science base with industry. Getting ideas out of the labs and into the factories so products are invented in Britain, developed in Britain and made in Britain.

• We're increasing spending on science and innovation faster than almost any other area of Government expenditure. 10% a year in real terms. We need to ensure that this investment in science is turned into wealth creation.
  
  
• We've extended the R&D tax credit.

And we're transforming the market frameworks that business operates in. Making sure our markets are open and dynamic so that everyone has a chance to contribute to and benefit from rising prosperity.

We need to protect the reputation of business. And keep our company law system up to speed. Let me say a bit more about this.

We responded quickly to Enron, WorldCom and Andersens collapse in the States. Not with kneejerk reactions but a measured and proportionate response. With action where needed, for instance, to promote auditor independence but no Hewitt/Brown version of Sarbanes/Oxley.

Derek Higgs reported on the role of non-executive directors. I welcomed his report. The FRC will publish the new Combined Code next month, after consultation.

Laura is also following up Derek's work, looking at how to increase diversity in the boardrooms. I think her report is actually with the printers now. I look forward to seeing it shortly.

Niall Fitzgerald was telling me that he called a meeting of his senior managers at Unilever some years ago and found 99 out of 100 were men. But 99 out of 100 men are not workers or consumers.

Laura's report will be really useful.

We've also recently launched a consultation on directors' pay. Tackling those who take huge rewards for failure and tarnish the reputation of vast majority of hard working businessmen.

So we're taking action at home to spread opportunity and prosperity, we're also taking action in Europe. For decades now, unemployment in Europe has been twice as high as unemployment in the States.

The Lisbon summit marked a change in gear in how we tackle this, shifting thinking away from heavy-handed regulation and intervention towards knowledge, skills, enterprise and innovation. Making Europe the most dynamic knowledge driven economy in the world.

The response to globalisation from Europe must not be to look inwards, forming a trade bloc but to be outward looking. Closely linked to the other great economic regions of the world.

We need to keep Europe focussed on delivering jobs and prosperity. This is particularly important as we enter the next stage of our campaign on a pro-Europe platform, making the case for Britain in Europe and the principled case for the euro.

Last week, we strengthened our commitment and support for the principle of joining the euro. We concluded that the financial services test is met. We concluded that we have made significant progress in achieving cyclical convergence. Indeed we are more converged in cyclical terms with the euro-zone than some existing euro countries are with each other, and more so than they demonstrated in the run-up to the start of EMU in 1999.

We still have to meet the two tests of sustainable convergence and flexibility. But with the achievement of sustainable convergence and flexibility, all five tests could and can be met. And at that point, the benefits will be substantial.

• greater trade - up to 50 per cent more over 30 years
• a larger economy - worth £3bn a year to start with
• higher investment - higher inward investment

As well as

• Lower transaction costs - worth around a billion pounds a year, the gains greater for smaller companies
• Less exchange rate volatility and
• Lower borrowing costs for business

To achieve sustainable and durable convergence to meet the five tests, we've announced major reforms to be implemented immediately and over the next year.

We will report on progress in the Budget next year and consider the extent of progress. This will determine whether we make a further Treasury assessment of the five tests which, if positive next year, would allow us to put the issue before the British people in a referendum.

The vital mid-Round WTO Ministerial Conference in Cancun is now less than 100 days away. After the division and disagreement of recent months, it's vital we get a result here. We can't have peace without prosperity.

At the end of the Second World War, Europe was torn apart. The nightmare of the concentration camps, millions of displaced refugees, industrial strength destroyed. In that crisis, six countries set out to bind their economies together with the aim of ending war between their peoples. Those six countries, by integrating their economies, removing barriers to trade and working together on issues of common interest, built the foundations for half a century of peace and prosperity.

We can do the same at Cancun. Uniting the world behind a vision of a peaceful world community with trade systems that are not only free but also fair.

• If tariffs in the developed and developing world were halved, developing countries would gain £150 billion p.a., three times what they get in aid
  
  
• The number of people living poverty would reduce by over 300 million by 2015.

But we can't preach liberalisation abroad and practice protectionism at home. There's a challenge to all of us in the developed world, to reduce food subsidies and open markets in the US, to reform CAP and open markets in the EU.

More than a billion people in our world live on less than 1 euro a day. Yet we pay our dairy cows in Europe twice that amount under the CAP. We must make real improvements to CAP before enlargement. The Agriculture Council has now reconvened and I hope they make some progress in that meeting.

EU Commissioner Fischler has proposed a CAP reform package that would radically alter the focus of CAP support. We strongly support his proposal to decouple support from production.

It's vital that Cancun provides that political impetus to secure a successful trade round by the end of next year. A failed round, or a long delay, would be bad for the world economy and terrible for the developing world.

The WTO, and the multi-lateral trading system with its rules, protects developing countries from the powerful industrial world and trading blocs. If we don't deliver on the Doha Round, even stronger blocs will trade between themselves at the expense of poorer countries and their development. Growth will be slower and trade diverted. The developing world will miss the opportunity of trading with the developed world. The developed world will miss the opportunity of lifting hundreds of millions out of poverty.

We mustn't let the developing world down by taking a short-term protectionist view. We're focussing our efforts on success at Cancun.

With the change the world is going through now, there's an opportunity to make a real difference, and achieve real change.

Based on our core values of equality, solidarity and internationalism.

Let's grasp it.