We are at a very significant stage in the economic development of the United Kingdom.
Because of the decisions taken, and choices made, the economy is strengthening.
In 1997 we inherited an economy with many weaknesses. There were changes made in the 1980s which we've kept; some we've even built on.
But in May 1997 the country was heavily in debt. We were spending more on interest payments than we were on our entire schools programme.
Inflation was returning. Business confidence had been battered by recession. The productivity gap with our competitors was growing. And hard working families had been hurt by high interest rates, unemployment and house repossessions.
In order to tackle these issues in a serious and systematic way, we had to make tough choices in Government. To drive through reforms. To establish the economic stability we need for long term prosperity and business success.
Our aim was to end the stop-go economy of the past -periods of high growth followed by recession - that had given us high interest rates and low investment. That gave us a perpetually devaluing currency as the sole means of enhancing competitiveness.
I fully recognise the concerns of some sectors of manufacturing - especially in this region - about the sterling-euro exchange rate in the last year.
But despite this, our exports to Europe are up almost ten per cent on a year earlier.
Despite the pain, industry has responded to the challenge - increasing productivity by four per cent last year.
Government cannot try artificially to manage the currency. That would be to repeat the mistakes of the past.
Let's not forget that boom and bust destroyed one million jobs in manufacturing in the early 1990s.
This Government will not return to those days.
When we were elected our immediate priority was to firmly establish economic stability.
We did so because we recognised that our values -opportunity for all; work for those who can, security for those who can't; extending prosperity to everyone - depend upon a strong, stable economy.
And because businesses need stability if they are to plan ahead and so grow and thrive.
We took action to lock in low inflation and to cut government debt - introducing new fiscal, spending rules, that keep Government to tight financial discipline. Entrenching in law the Golden Rule - that over the economic cycle the Government should only borrow to invest.
We made the Bank of England independent to ensure that interest rates decisions are taken in the best long-term interests of the economy, not for short-term political considerations.
These were choices we made. They were hard choices, because they meant that for the first two years we were very tight on spending, despite the pressures.
But I believe these decisions have been proved right. They have provided a solid foundation for Britain's strengthening economy.
Those decisions are now paying off.
The deficit has been eliminated. Government borrowing has been reduced by £44 billion in total since the election.
Inflation is at its lowest level for thirty years.
We have a higher level of business investment as a share of our economy than at any time in forty years. And long term interest rates are around the lowest for thirty years.
Living standards are rising. The average mortgage is 6.9% not 10 or 15% - a saving of £160 a month for the average mortgage holder.
We have moved away from the old 'stop go'economy of the past.
There are over 1.1 million more men and women are in work than in 1997. Claimant unemployment is now at its lowest rate since October 1975.
We have helped people get back to work through the New Deal. The most ambitious programme of employment and retraining ever. We promised to get 250,000 young people into work through the New Deal. Just yesterday we hit this target.
And to get more people into work we have also made work pay. By introducing the minimum wage and welfare reforms, we've increased incentives for people to go out and find the jobs that are out there.
The economic stability we have achieved now allows us to build for the future on firm foundations.
What's more, we are doing this whilst maintaining lower taxes than any major industrialized country apart form Japan and the USA.
OECD figures show we have lower income taxes, business taxes and VAT rates than any other European economy.
We have cut the corporation tax rate to its lowest ever level.
And introduced cuts in capital gains tax to create the most favourable environment Britain has ever seen for encouraging entrepreneurs, rewarding risk-taking and promoting wider share ownership among employees.
These are incentives for private investment.
But we also need to reverse the legacy of under-investment by the public sector over the last twenty years.
Under investment in transport - which we are only too aware of at the moment.
Under investment in education - which means seven million adults can still barely read or write.
Under investment in science and engineering. Whilst our competitors were increasing funding for science - funding for university research in the UK was cut by 30% in 1996.
We are now able to invest for the long term, to reverse this historic under-investment.
Another £300 per pupil in our schools, over and above what the last Government had pledged.
Over £1 billion investment in science - from which the growth industries of the future will develop.
And, in partnership with the private sector, an extra £180 billion for transport to sort out the ramshackle public transport system we inherited.
The Comprehensive Spending Review Plans announced in July are the largest investment in Britain's public services for over 20 years.
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.
Instead of the vicious circle of rising inflation and unemployment which dogged much of Britain's post war history, we are now in a virtuous circle. Where rising employment is cutting the costs of economic failure, freeing up public money for investment in the infrastructure and services this country so badly needs.
That means we can invest without risking the stability we have built.
As the Prime Minister said today in Sedgfield, stability has been hard won, and must never be put at risk. Economic stability is not something you achieve and then forget about. It is something that has to be worked on constantly.
We do not proclaim economic miracles. But we do say we have made a start.
But there is a lot more work to be done. Now we have to take the next steps forward and not return to the mistakes of the past.
We need to raise growth, to raise living standards further, and to begin to close the productivity gap with our international competitors.
We need to remove obstacles to enterprise and entrepreneurship in all parts of the country; to increase competition; to address the scandal of adult illiteracy and raise educational standards for all.
And to continue to reverse decades of under-investment - in both the private sector and the public.
We need to spread the fruits of economic progress to all parts of the country, and all people within Britain.
One of the challenges we face is to tackle the pockets of deprivation which exist across the country. In our towns and cities, in estates, people can be living alongside prosperity - but are a million miles away from it.
The White Paper on our cities and towns, launched by John Prescott last month, provides a comprehensive, radical strategy for tackling the causes of urban decline and bringing jobs and investment to disadvantaged areas.
This includes a Neighbourhood Renewal Fund of £800 million over three years, to breathe new life into our most deprived areas. And additional resources for the New Deal for Communities, where we are already investing £800 million to tackle crime and poor health, raise education and create new job opportunities in disadvantaged communities.
We are investing in our towns and cities - and in rural communities - to tackle pockets of deprivation.
But we also need to tackle disparities between regions.
In speeches over the last two weeks I've been making the case for a radical regional policy.
A regional policy which not only tackles the historic regional disparities but which also responds to the challenges of the modern economy.
Our regions count. We need strong regions to form a united and cohesive nation.
A strong economy of the United Kingdom is the sum of its parts.
In order to enjoy increasing prosperity in our country we need strong economic growth in all our regions.
I believe that we should see our regions as a solution to the challenges of the global, knowledge economy in which we now live. Not as part of the problem.
Dynamic regions, with strong clusters of knowledge based industry, can give us a competitive advantage in the modern economy.
We have a once in a generation opportunity now that we have laid the foundations for economic stability. An opportunity to establish lasting economic success in every region.
The hard choices taken on the economy mean we now have the financial resources to invest in our regions. To tackle underperforming regions and areas.
To strengthen the building blocks for economic growth in all regions: enterprise, skills, innovation, higher education and scientific excellence.
And to take a bottom up, not top down, approach. To provide the framework within which the private sector can expand and invest, working in partnership with the public sector, especially Regional Development Agencies and Local Authorities.
Here in the North East, ONE North East have played an important role, with local partners, in attracting new investments in the microelectronics industry. Atmel has decided to take over the Siemens factory to manufacture chips, and Filtronics has already begun production from the former Fujitsu factory at Newton Aycliffe.
And ONE NorthEast's Regional Investment Fund is already helping small businesses across the region.
When we set up RDAs we deliberately gave them a fairly limited remit. We wanted them to focus on the immediate job in hand - developing a strategic vision for their region - and to find their feet before giving them new responsibilities.
Some people would still like to abolish RDAs.
Try telling that to the people of Newton Aycliffe. Or to the business and their employees supported by the Regional Investment Fund.
I believe it is now time to strengthen the RDAs. To give them the backing and flexibility to realise their regional strategies.
Business - including the CBI - has encouraged us to strengthen RDAs. And we have responded. In July, we announced a new funding package for the RDAs. Increasing their budgets by £500 million to £1.7 billion by 2003, with these resources skewed towards the poorer regions.
Up to now, DTI funding for the RDAs has pretty much been shared equally between the regions. Given the tiny budgets we inherited in 1997 for improving the competitive position of the regions, this was the only practical solution.
But in future I want DTI funding to reflect the performance of each region - giving some regions support in order to realise their full potential.
As a result of the spending review announced in July, we are providing the Regional Development Agencies with £54 million next year to support innovation and enterprise -almost three times this year's support.
I can announce today that every region will receive an increase on this year's budget. But the level of that increase will be based on factors such as the levels of unemployment, business start-ups and investment in Research and Development.
The regions which need to do more will receive a higher level of funding.
The challenge they face is greater. With government support I am confident that they will be able to meet the challenges that lie ahead.
On this basis, I expect ONE North East to receive one of the largest allocation of funding.
In addition, I can also announce today that I am responding to those RDAs who have identified additional needs this year. RDAs have outlined to me how - with the help of a small amount of additional funding this year - they could step up activity on improving the competitive position of their region.
I'm delighted to say that we have been able to find £5 million additional funding within my Department's budget this year. Again, we will be allocating this to each region according to need.
With this additional support, One North East will be able to support a number of projects including extra work on developing e-commerce in the region.
Let's be clear. This extra support is a hand up not a hand out. We will not throw money at problems. What we will do is provide investment for a sustainable future.
Our aim is not to hold back our more successful regions -but to expand the winners circle.
That's why we are increasing funding for every region next year. Recognising that every region has areas of need. And that we need to raise the economic performance of all our regions against their international competitors.
We won't try to stifle growth in regions like the South East. That was tried in the past. It didn't do the successful regions any favours. Nor did it help the weaker regions.
A prosperous South East generates orders and creates jobs for companies in the North East. That is a win-win situation.
My Department - and Government as a whole - will be increasingly working with the RDAs to address regional weaknesses in the key drivers of the modern economy.
In the last year we have given RDAs greater influence in relation to support for exporters and small firms. The regional directors of British Trade International and the Small Business Service will be based within their RDAs.
We are encouraging the RDAs to add expertise in these areas, where it is needed, to reflect these important new responsibilities. We plan to appoint further board members with a business background to the RDAs, to ensure that these issues are picked up at the highest level.
This should enable the RDAs to raise levels of enterprise even more effectively.
We want Britain to be, in every area, every region, a creative, skilled and enterprising economy.
Government can provide the framework for this. But making the most of it is up to people in the regions - the Regional Development Agencies, local authorities, local businesses.
We've seen how Newcastle and Gateshead Councils are working together for the first time - in partnership with local firms through the Newcastle and Gateshead Initiative - to speed development of both cities. The massive positive impact of the new pedestrian bridge now in position across the Tyne shows the North East is still a cradle for innovation.
That's the example we need to follow across the region. Across Britain.
We all need to work together to address regional and local weaknesses in the key drivers of the modern economy.
That's what a radical regional policy should be about: focusing on the drivers of the knowledge economy; targeting areas and regions which are underperforming; and empowering the regions themselves to take this forward.
Building on economic stability to ensure that all our regions share in the nation's wealth and prosperity.
We must 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.
That is the challenge that we face.
Government alone can not create vibrant, prosperous regions.
To do so requires a partnership between business, universities, regional development agencies and local government.
I am confident that by working together we can meet that challenge and ensure all our regions and all our people can benefit from increasing prosperity.