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Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)Competitiveness Summit |
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Good morning and thank you all for taking the time to be here today. It seems an age ago now, but in fact it is less than twelve weeks since we were in Opposition. The case we made then that future prosperity lay in quality and added value, not merely in lowest cost, that there was a proper role for Government and that that role had to be executed in partnership with the private sector are views that underlie the work we are now beginning to undertake. I also said then and I want to repeat today that it ought to be possible to establish more common ground about where the UK stands. So let us try and identify it. I said we ought to look at both sides of the balance sheet. So let's do it. Our weaknesses - being in Government shouldn't mean we're afraid to acknowledge that we've got any. Our strengths - we've never hesitated to give credit where it was due. I am keen to hear from you today - but not just today - whether there is broad agreement on the importance of the issues we've highlighted. I am keen too to hear what you might think we've got wrong or what we've missed - what isn't there at all. In a sense we find ourselves in a similar position to that of a new management - a new Board. We need to take stock of where we really are. That's why Gordon Brown commissioned and published an independent assessment of the state of the public finances. That's why across Government we have initiated the Comprehensive Spending Review which is looking at whether Government expenditure really reflects Government priorities. While that is the most important and wide ranging of the Reviews we have undertaken it is only one of a number where we are taking the opportunity in Government to get that fuller picture and the more wide spread information not readily available in Opposition; and to use that as the basis of the decisions that we make. As so often what you find when you begin to take stock is that the assessment you make needs to be wider than you might at first have thought. And if what you want is to take people with you, if in fact you feel that there is a need to take people with you, then it is important to make sure that from the beginning of the process of assessment you can establish a genuine dialogue. I am more concerned to get full discussion and hopefully wide agreement on the basis of that dialogue than I am to get an earlier statement which might be more superficial or more contentious. So for us one of the first things that we want to achieve is with you to take a careful look at where we believe Britain stands today. I have said a little already about some of the points that we made in Opposition. Another of them was that we would not seek should we come to power to scrap what were potentially good ideas because they had been put in place by our predecessors, even if sometimes we felt that their implementation had been to a degree mishandled. We particularly recognised the dangers of seeking to scrap something just because a previous Administration had done it or presented it in a particular way not least because in some cases these were ideas which we ourselves had actually put forward or alternatively ideas which we shared. On Business Links for example which was, we believed, our proposal; and on ideas like Technology Foresight or having a White Paper on Competitiveness. These are not issues with which we had any quarrel. On 4 June, I told you I wanted to establish a benchmark for the UK and present that to you as the basis for a wide-ranging mutual discussion of what a new White Paper on Competitiveness should say - because I want this to be a rather different White Paper. White Papers are generally about what the Government is going to do - or if you like about the agenda for Government. But I want our first White Paper in this area to be a White Paper for and by the partnership we want to establish between Government and business. I want it to be more outward looking. A White Paper for the country not just for the Government. And the more we focused on the process of defining some of the key indicators for benchmarking the more it became apparent that even this first step would benefit from being the product of a much wider discussion. So I want to suggest a few of the indicators which might form the background to a benchmarking process to stimulate thought, input and perhaps even disagreement - and to do so in the context of my general approach to industrial policy, itself shaped in a pre-election dialogue with the business community. One of the key things to spring from these discussions was that a stable and secure macro-economy is a prerequisite for strong long term growth and competitiveness. Gordon Brown has made that his objective, first by the role he has given the Bank of England and then with his first Budget, three weeks ago. But the micro-economy also needs to be fit and healthy. Much of the responsibility for ensuring that the Government plays its part in enabling that to happen rests with us in this Department. To listen to past debate you'd think there was a stark choice between making every decision for the microeconomy from this building, and leaving it to fend entirely for itself in the free market. Both approaches are founded on dogma. Both have been discredited when they have been tried in practice. Our task is to identify a third way - a way in which both the Government and the business community have clearly identified and agreed roles and responsibility. A way in which the dynamics of market forces are used - not surrendered to, not opposed, but used - to deliver the results we all want. The Commission on Public Policy and British business made this point in a report last year, in which they suggested the four general roles which they felt the Government should play.
These are interesting ideas. I think we should keep these sort of headings in mind when assessing policy proposals. I also believe we must try to focus on the importance of structural issues in long term economic stability. Instead of congratulating ourselves when some of our own economic indicators appear better than those of other countries and ignoring the possibility that this is because other economies are at a different point in their economic cycle, we should focus on our underlying strengths and weaknesses. This is a more testing but more illuminating way of comparing competitiveness for the long term. So let's look at some of the broad aggregate indicators which give a general idea of where we stand, before we turn to underlying structural issues. In terms of growth of GDP per head, we have been roughly in line with the performance of our main competitors over the last two economic cycles. But we should bear in mind that staying in line with other countries means we're not catching up with them and we remain 8 per cent below the OECD average in terms of GDP per head - despite the fact that we were the ones who had oil. In the most recent cycle inflation has fallen below level seen over the previous 20 years. However, the decline in inflation is a trend apparent in all countries. Moreover, there are growing signs of inflationary pressures and it is clear that these need to be contained. The Government's decision to give the Bank of England operational independence in setting interest rates demonstrates its determination to keep inflation under control. If we are to improve competitiveness, grow faster than we have in the past, and improve our performance compared to other countries, we need to invest more than our competitors. Instead, we find that the UK has suffered from years - or even decades - of underinvestment and that the stock of capital available to each UK worker is the lowest of any of the G7 economies. To encourage investment we need a stable and predictable macroeconomic climate. But in fact the UK has been relatively unstable. Inflation has been high and also volatile. We have suffered two deeper and longer recessions than other major economies since 1979. Our share of world trade in goods has broadly stabilised after a serious decline up to the early 1980s. However, since 1983 we have had a deficit in trade in manufacturers - the first time since the Industrial Revolution that we've had a manufacturing deficit in peacetime. Our share of exports to the fast growing markets of the Far East has held up in recent years and is broadly similar to the performance of France and Italy but we could do better. In services, we have a large surplus in financial and business services and I was glad to see the latest results for 1996 published earlier this month which confirmed continuing strong performance by this sector. However, shipping has declined significantly and the performance of tourism has been variable. Looking at our use of capital and of human resources, there is no doubt that UK business is using its physical assets more effectively than in the past. This is welcome, but it must go further. Sweating assets can only be part of the response in competition with countries that are investing more than we are. Our labour productivity is about 20 - 30% lower than our main competitors, and that apparently applies in services as well as in manufacturing. This is a mark of relative inefficiency. It means that to achieve nearly the same income per head as the Dutch for example we have to work longer hours. However, the news on productivity is not all bad. There is a wide variation between sectors and also between regions. The best are at the level of the best of European, and in some cases American competition. So we can do it. But not enough of us reach that level of performance. The UK has a relatively high proportion of its population in employment although the long-term trend has been for a decline in male employment and a rise in female employment, even in the Cabinet. While our unemployment has come down substantially, the proportion of UK households with no adult in work is nearly as high as in Spain, where the measured unemployment rate is twice the UK level. This statistic emphasises a need for us to find ways to bring those who are at present excluded from the labour market back into it. I want to turn now to some of the structural issues which may help to explain our performance at an aggregate level. I'd like to divide this into three key areas for competitiveness: issues relating to people, to the business environment, and to the future. First, our people. A highly skilled workforce will be essential to developing and exploiting the technologies of the future. There have undoubtedly been improvements recently in the proportion of young people gaining qualifications. But we are still behind our main competitors in this area. David Blunkett's recent White Paper shows how we expect schools to address this issue. But my Department can help with the skill levels of those in the workforce now. We have identified a problem with a skills gap in information and communication technologies. It seems also that, while there are high levels of ownership of computers in British business, much of this information technology is not being used to its full potential, and this is a problem which appears even more significant among smaller companies. Under the Information Society Initiative we are already establishing a national network of Local Support Centres which offer advice, support and guidance to firms on the business benefits of new information and communications technologies. We are also working together with the private sector, trade associations, other parts of the public sector and Business Links to develop guidance for smaller firms in the best ways of procuring and exploiting IT. This follows on from the highly successful Buy-IT initiative which has helped large companies make the best use of their IT purchases. In a new Smaller Firms Guidance Project, I can announce that we and our partners will be working together to develop new guidance and management tools for small firms in providing best practice advice on IT procurement and use. So there are activities Government can undertake to help to ensure that employees develop the right skills. But it's equally important that employers act to ensure that they get the best out of their employees. Much of that is down to inclusive and consultative management by firms. It is daily demonstrated that a well-motivated workforce which feels that its opinions count for something with management will be more productive, responsive and flexible.
These issues take us on to the business environment. I know that the pressures you face day-to-day are very different from those with which we in Government have to deal. You have cause to be even more acutely aware than we, that competitiveness in a firm is made up of many different factors. And that you haven't necessarily got much direct control over some of those factors - not just the macroeconomy but for example, the legal framework within which you operate. One key area, where the Government has already committed itself to action is in the field of competition policy. It has been made clear to me in discussions with business to date that you need a clear and stable framework so that you can plan for the future. It has also been suggested that there are benefits for business from an effective competition regime, which encourages competition and leads to enhanced competitiveness at home and abroad. That is what we aim to provide. The general framework of commercial law and regulation at local and national Government level also impact hugely on business. Adequate infrastructure and adequate sources of finance are other issues where the right framework is essential for business competitiveness. But beyond the business environment of today is that of the future. And that depends crucially on the investment which we make today. The overall picture on investment in R&D is disappointing - measured as a percentage of GDP we rank 5th in the G7. In 1970 we were second. In looking ahead to the longer term we want to ensure that British excellence in basic science -and its access to world science- is translated into British business success. That is the way to secure sustained competitive advantage in the long term. One of the ways we can achieve this is by working together to identify what our future needs might be and how developments in science, engineering and technology can help us meet them. This is what the Foresight programme is all about. Foresight brings together business, the science base and Government to explore emerging opportunities in markets and technologies. But Foresight is not just about setting an agenda for the future. It is also about acting on it. The LINK scheme, which supports pre-competitive collaborative research programmes in many areas of science, engineering and technology, complements the Foresight aim of helping UK organisations prepare for the future.
Other recent announcements have reinforced our emphasis on technology as the path to the future. For example, John Battle has launched the second round of the Business Mentoring and Incubator Challenge, which aims to encourage intermediaries to address the management and business skills required by emerging biotechnology companies. We want to foster the creation and growth of such companies to enable the UK to keep its lead in this important entrepreneurial field. But I also want my own Department to develop a much clearer understanding of what the industries and markets of the future, and their particular needs, are likely to be. We must try not to take regulatory decisions now which might cut off opportunities for the development of new ideas in the future. I am considering establishing a specialist unit within the Department whose role will be to build up that understanding and to ensure that tomorrow's needs inform the thinking of today's decision makers. These are just some examples of how we are already taking action on some of the findings of our work, even at this early stage. But in almost every case, these activities involve a role for you - British business - as well. You have the practical experience to advise us about the external barriers you face to improving your business's performance and how Government might help to overcome them. I was, for example, impressed to hear from US Commerce Secretary Daley recently about the Transatlantic Business Dialogue. It's a fluid collection of working groups of business people from Europe and America. They focus on specific barriers to trade and investment, and identify realistic goals to lower them. They were a key factor in the completion of mutual recognition agreements which will eliminate duplicative testing requirements for certain products sold on both sides of the Atlantic, saving industry many millions of dollars per year. Similar business dialogues have been set up with other economies. That's the kind of thing of which we want to see more. I want partnership to be more than warm words. I've already started to make it a reality by appointing (nineteen) representatives from the diversity of the business world to join my Advisory Group on Competitiveness. I'm publishing a list of the names later this morning. I have tried in drawing this group together to reflect the different strands that make up the wider business community in Britain today - people drawn from small business as well as large. Women as well as men, from differing background and experience. These are all practical people who will look for practical solutions and I look forward to working with them. My main reason for inviting you here today is to get your views on the key issues that business and government need to address to improve the UK's competitiveness. Your comments today will be taken into account in developing a fuller, more detailed version of the note I've introduced today. That fuller version will be published later this year. What you say will also inform my thinking about suitable subjects to be addressed by a series of working groups of business people which I propose to establish. Those groups will be invited to offer more detailed advice to be taken into account in developing policy proposals for a White Paper next year. To conclude, then. There is much that is good and encouraging about the way British industry is performing. And much of that has been achieved in the face of great difficulties - for example, the unhelpfully volatile macroeconomic climate and the relatively poorly educated workforce we've experienced in recent years. Now, with a stronger and more stable macroeconomy and a new spirit of partnership and inclusion, I am sure we have the potential to become better and to keep on setting better. After just 11 weeks in DTI it is clear to me where the priorities might lie for DTI in working with business to improve competitiveness. What can we do to encourage more and longer-term investment, not just in capital but in intangibles such as the skills of the workforce and innovation? How could we get improvement in productivity? How can we bring about an enduring improvement in our performance in innovation? How can we see that businesses across all sectors make the best use of information and communication technologies to gain and maintain competitive advantage? And how can we make sure that in all of these fields we best reflect the implications for small firms? This is what already it seems to me we should include on our agenda for further work. But even if you agree - and say if you don't - what are we leaving out; what have we overlooked; where should our priorities be? All Governments like all businesses have ambitions for what they want to achieve. It seems to me to be a proper ambition for the DTI and this government to put competitiveness through partnership at the centre of our work, in the hope and belief that together we can achieve a real and sustainable improvement in the performance of the economy, the prosperity of our people - all of our people - and the confidence of the nation. Thank you. |
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Other speeches by Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)
(the following are available from the archive) |
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