A new model for public policy

1.12 Britain’s success in the knowledge driven economy of the future is ultimately down to business. But Government has a critical supporting role to play. The present Government will not resort to the interventionist policies of the past. In the industrial policy making of the 1960s and 1970s, to be modern meant believing in planning. Now, meeting the requirements of the knowledge driven economy means making markets work better. Our aim is to pursue the modern industrial policy spelt out in this White Paper.

1.13 Government’s first job is to ensure a stable macro—economic environment so business has the confidence to invest for the long term and to generate resources for public investment. Economic instability over the past twenty years has damaged long term investment, growth and employment, by pushing up interest rates and making returns from investment uncertain. That is why the Government has established operational independence for the Bank of England and published the code for fiscal stability.

1.14 Open, competitive marketsare the sharpest spur to innovation and the best way to reward risk taking. That is why the Government as a regulator will open up markets, crack down on harmful anti—competitive behaviour and modernise markets so British business can exploit the opportunities of electronic commerce. The Government is determined to avoid introducing new regulations which will impose unwarranted costs on British business. And we are reviewing the need for those existing regulations which seem incompatible with a flexible, innovative and entrepreneurial economy.

1.15 Government can also help business to compete by investing in British economic capabilities. This does not require Ministers and civil servants to second guess boardroom decisions or assume they can predict the future better than business. It means building our capacity for entrepreneurship, modernising our science base and developing skills throughout the workforce to make British business more productive.

1.16 Alongside creating a competitive environment Government also has a role in encouraging business to collaborate more effectively. Success in the knowledge driven economy increasingly requires teamwork within businesses where new ideas flow upwards and sideways and where goals are shared rather than imposed. The need for teamwork within businesses is matched by an increasing need for outside partnerships - regionally, locally and sectorally - to drive quality through the supply chain; to form joint ventures with partners who have complementary skills and technologies; to work with universities and research institutes and to learn from others by benchmarking. Government will act as a catalyst to encourage people to collaborate to compete.

1.17 These are the three themes of this White Paper:

• strengthening British capabilities
• encouraging people to collaborate to compete
• promoting competition.

1.18 In each of these areas the Government has benchmarked UK performance; set clear goals for what the UK must achieve if it is to close the performance gap; and developed specific proposals.

1.19 In Scotland, Wales and Northern Ireland the devolved administrations will lead these efforts. In England, the new Regional Development Agencies (RDAs) will play a vital role.

A vision for business in Europe The approaches set out in this White Paper do not apply to the UK alone. Our economic and political future is in Europe, our home market. We need to work with our European partners to create conditions across Europe in which business can compete freely, develop and exploit new technologies and generate sustainable jobs. Economic reform across Europe and an effective, open, competitive Single European Market are crucial to underpin Economic and Monetary Union. This is a challenge that we all have to meet. The British Government will continue to promote open, competitive, flexible markets for labour and capital, goods and services, because these are critical to innovation and entrepreneurship throughout Europe.

1.20 Our goals have been developed in partnership with business. Some 200 business leaders have contributed to six competitiveness working parties and a series of joint DTI/Treasury seminars on productivity. They have helped shape our policies. Business will also help us monitor and review progress. There will be further consultation with business on the proposals in this White Paper and the Pre-Budget Report in the lead-up to the next Budget.

• Government will develop a set of competitiveness indicators to measure the UK’s progress: the Competitiveness Index. The Secretary of State for Trade and Industry is appointing a Competitiveness Council drawn from a cross—section of business people to advise him on this Index and other issues. A new Cabinet Committee on Productivity and Competitiveness will ensure the UK’s performance against the Index each year keeps on track. The RDAs will similarly benchmark performance in the English regions and set targets for enhancing competitiveness. These will help them to identify the obstacles to business success that they need to tackle.
• Business must also benchmark and improve its own performance against world standards. The Government has already backed the SMMT Industry Forum initiative to do this for the automotive components industry. It wants others to follow this lead. DTI will help sectoral and other business partnerships to develop their own commitments and to deliver them.