15 May 2007
Speech by the Rt Hon Gordon Brown MP, Chancellor of the Exchequer, at the CBI annual dinner
Ladies and gentlemen, thank you for inviting me again.
I have been always aware of the enormous contributions that you, the best of British businesses, make to this country.
Indeed, you are our engines of wealth and prosperity.
So, here at the CBI, I want to start by thanking all of you, the representatives and leaders of British business.
And having had the privilege over ten years as Chancellor of meeting many of you and working with you on many projects of national importance, learning, I hope, from you all the time in a world that is not standing still, I want to thank you for your expertise and dynamism which means Britain leads the world in some of the most modern and most innovative sectors of the global economy.
Exactly ten years ago when I first spoke to you as Chancellor, the country had spent a whole era wrestling with inflation and volatility and quite frankly the havoc stop go visited on long term investment.
Thinking back to my words to you then, I set out my pledge to make stability the central pillar of my economic and business policy.
I was convinced that having the strength to take the long term decisions to ensure Britain's competitiveness meant developing a shared national purpose that economic stability came first.
Now tonight I am here speaking to you ten years on to say that we need to forge that same shared national purpose for the years ahead, this time to meet and master the new and even more profound challenges ahead - mastering the pace of change and the relentless competition we face from every part of the world in every area of our economy, now affecting every area of your business.
And building on our hard won stability, our mission now and for the years ahead is to make Britain the dynamic and competitive enterprise economy we all want it to be - and this is my theme - for Britain to be at all times open, flexible, and entrepreneurial and to have the strength to make the long term decisions to make our innovation, education and skills world class.
Now ladies and gentlemen:
intensifying competition from China and India;
the rise of Asia as a world economic power;
wave after wave of innovation and an accelerating pace of technological change;
side by side with rapidly rising individual aspirations.
But also new global social and security challenges that business as well as government has no choice but to contend with:
the challenge of global climate change;
energy security;
the uncertainty that comes from terrorism and instability;
and the growth of protectionist sentiment.
All new challenges that together are bringing about the biggest restructuring not just of the global economy but of the global order.
Two hundred years ago, a famous British Foreign Secretary said that the new world had been called into existence to redress the balance of the old.
In 1990 another old world order - the world dominated by the Cold War - came to an end.
Then too people talked of a new world order.
What they actually meant was a new world political order.
What was not foreseen then, but has become obvious now - and what you in particular are experiencing and living with every day - is the sheer scale, speed and scope of globalisation.
It is only now we can understand what the world order globalisation brings is going to look like - driven forward not just by the balance of military strength and ordinary political power, but by a seismic shift in economic power.
You as business leaders are responding every day with courageous decisions to adapt to change.
And I know that as governments we have to change the way we govern too.
Let me say what I think it means.
China and India will in future have a seat at the table as we discuss economic, environmental and other geopolitical issues.
An international framework will have to be agreed to tackle the climate change, environmental and energy challenges ahead.
Our post war international institutions - still too often geared to addressing yesterday's problems - will have to radically reform if they are to be relevant.
And because trade agreements are now the acid test of whether the world can cooperate for prosperity, both governments and businesses will have to work together to ensure they have the priority they deserve: both a world trade agreement which is urgent and what I also favour - an effective EU and USA trade partnership.
But what does the new world order mean for individual countries, like ours, looking to succeed?
I suggest that the countries that will succeed are those that combine flexibility, free trade, open markets with proper stewardship of the environment and investment in innovation, infrastructure and education.
And the question for us is how we meet and master all these challenges to ensure Britain enhances its competitiveness, and realises its destiny of success in a new world order.
I am determined on the principles that will inform the approach of the government looking forward:
first, economic stability, more important now than ever, will be the foundation of all we do;
next we will and must maintain our commitment as a free trade nation, resolute against protectionism;
we will and must support, open markets, the most open competition policy in the world and a level playing field for British companies;
alongside that we must maintain and enhance our flexibility, with less regulation and a competitive tax regime;
we must make our contribution to and I believe lead in the international reduction of carbon emissions;
and crucially also we need to make the necessary long term reforms and investments in infrastructure, in science and innovation and in education.
back to top
All these changes cannot be brought about by government or business alone but will best be achieved by us to working together in partnership.
So I recognise - and promise - that in all decisions I will listen to what you say and I will always bear in mind that you have to compete internationally in order for us to succeed nationally.
So what should our next steps be?
First, entrenching the stability that is essential to our success.
With renewed inflationary pressures in the global economy today, mainly because of high commodity prices, we have to be sure that our monetary framework which has proved resilient in the past ten years is the right one for the future, faced not just with commodity and energy price volatility but also the changing impact from Asian export prices.
Having carefully examined current inflationary trends and then re-examined the basis of our approach, I believe we are right to maintain our view that directly targeting inflation is the way forward;
that there does not have to be a trade off between inflation and employment and growth;
that the old rigid rules linking inflation and the money supply remain too simplistic for a modern economy;
and that instead our British model, our framework, based on clear objectives - an inflation target, openness - Bank independence, and transparency - proper public reporting, is and remains the right approach to anchor inflation expectations and to keep inflation low.
So not only is inflation this month coming down as expected but, as I said in my reply to the Governor's first open letter, we will hold to the forward looking, proactive framework, backed by the fiscal discipline we will always show and sensible public sector pay settlements we will ensure.
And we will never take any risks with inflation or with the stability of the economy.
And just as I stood up to those who opposed me when I made the Bank of England independent, introduced our independent competition regime and enforced our tough fiscal disciplines, so too I will not shrink from the difficult decisions to ensure that Britain makes the reforms and modernisations essential to our future.
We know that amidst all the changes people are insecure and when they see manufacturing jobs lost or service jobs offshored, or changes in their own local communities as people move in and out, they often feel, no matter the benefits, globalisation's losers and victims.
And up against protectionist sentiment, a heavy burden falls on us, and no government anywhere - in America or Europe - is finding it easy.
But let me tell you: I will always argue for free trade, open markets and flexibility backed up by investment in people as the key to our future;
will always resist the easy or soft options;
will take the difficult and hard choices that have to be made for reform and flexibility;
and because rewards will come to those who seize the future, I will seek to build the consensus and shared purpose essential so that Britain can be a showcase for the benefits that an open, free trade and flexible economy investing in skills can bring its people.
So from pushing the case for economic reform in Europe, to opening up and liberalising our competition regime to now modernising our planning energy and housing markets we will step up the reforms to do more to ensure a more flexible economy.
On competition we will continue to push Europe to ensure a level playing field for our companies.
On flexibility, we will argue, like on the 48 hour week law, against European Union rules that damage British industry.
On regulation, the challenge at home is to match our risk based approach, which now extends from the risk based regulation by the FSA and HMRC to local authority inspection, to actual delivery on the ground.
Like all advanced industrial economies - and this is what I hear every time I visit America - you know as do I that this requires a cultural change, a change of mindset, a rejection of the old model of blanket, untargeted, heavy handed intervention -- in favour of a new view of the corporate world, founded on trust in the responsible company - which recognises the importance of reputation - and in the informed employee and in the educated consumer.
And I want to work with you so that over time we apply the concept of risk not just to the enforcement of regulation, but also to the design and indeed to the decision as to whether to regulate at all.
On tax, we are incentivising the increasing importance in investment decisions of R&D, skills, intellectual property and environmental innovations, while recognising the diversity and range of businesses;
simplifying to just two categories, short term and long term reliefs, the corporate system of capital allowances - many of which were first introduced for the needs of the post-war economy;
and putting the basic rate of income tax at 20p and the main rate of corporation tax at 28p, the lowest main rate in the G7.
And in this spirit of reform, I welcome the taskforce on tax you announced yesterday, and I want to work with you to ensure we continuously seek to modernise and simplify our regime and improve our tax competitiveness.
On infrastructure, I also hear what you say on how much we invest, and on how we invest it. As Rod Eddington's report concluded action should be focused on those parts of the system which are critical to economic growth. So having in previous spending reviews, raised public investment to its highest level for thirty years and trebled capital investment in our transport system, in the Autumn we will set our priorities for the years to 2011; and we will consult with you in the run up to it.
More immediately, an effective and efficient planning system is essential for investment, and following the reports by Kate Barker and Rod Eddington, we will next Monday publish our Planning and then next Wednesday Energy White Paper.
And I can say tonight these will include measures to ensure greater speed and certainty in processing planning applications,
focus the Government's role on setting out clear statements of national policy priorities;
and, with the creation of an Independent Planning Commission for major projects just as we have done with monetary policy and competition policy, take Ministers out of these individual planning decisions.
In each case, our aim:
to improve accountability,
to speed up decisions and make them more predictable while ensuring the voices of businesses and communities are properly heard,
and to ensure economic and environmental needs are fully integrated in the interests of promoting sustainable development.
And on the environment, I want to commend the business leaders here for what you are doing to play your part in tackling climate change. I am proud that British business is taking the lead among international companies. Your approach is the responsible one, but also I believe like you it will, over time, give you your competitive edge.
For Britain's part, the Energy White Paper and nuclear consultation will set out our next steps in the creation of a balanced policy which maintains competitive markets, a guaranteed supply and helps achieve our commitments to tackle climate change.
But above all, we all recognise that in a world in which we will be competing based on our talent and ideas, the source of our strength is our creativity and innovation - which is why we are investing twice as much in science than in 1997 and guaranteeing a ten year science budget - and in people and their skills. More so than ever before it is your employees who will be the creators of your intellectual capital, productivity and competitiveness. And we have to invest in that, equipping them so that if they have to move from their last job we can help them get their next job.
I want a Britain where there is no cap on ambition, no ceiling on talent, no limit to where your potential will take you and how far you can rise. To make a success of being competitive in globalisation we will continue to improve both structures and standards. And while in these ten years we have moved from below average to above average in education. Now we must become aim for the top of the league. And I want to debate with you how together we can achieve this.
And we all know this starts in schools with getting the basics rights. we will never be able to secure the place we want in the new world order and compete with 4 million graduates produced annually by China and India unless we ensure every young person leaves school and college with the numeracy and literacy they need to meet their ambitions for adulthood.
We have made big progress on literacy and numeracy. But as you will tell me we still have further to go: it is unacceptable that we still have 150,000 children leaving primary school who aren't numerate.
My proposal is a new nationwide programme so that a child is numerate by the time they leave school - a programme that I call "every child counts" - that will make a huge commitment to offer intensive 1:1 tuition to the those young children who struggle with numeracy. In total this should enable over 300,000 pupils a year by 2010 to benefit from 1:1 support in numeracy.
I know as employers you want young people who have mastered the basics and got strong life skills.
You also want a strong system of vocational education - something that quite frankly has been our Achilles heel and held us back for too long.
Now today over 250,000 young people are on full apprenticeships, including over 100,000 on an advanced apprenticeships. And a quarter of 14-16 year-olds - some 320,000 - already do vocational qualifications - often involving studying at a college or local employer as part of their course.
But looking to the future I believe we can offer not just more but higher quality practical and work-related learning that prevents young people falling through the net.
With the introduction of the new diplomas open to up to 40 per cent of young people, including in engineering, alongside a new entitlement to get on an apprenticeship for all those who have the appropriate skills, we are heading towards our commitment to 500,000 apprentices by 2020.
For 14-16 year olds we will develop a system of young apprenticeships which gives more pupils access to a day or more training every week in a work-type setting. This will run alongside the new diplomas - combining academic and practical learning - that will start to be available in subjects like engineering from next year.
And for those 14-16 year olds most at risk of dropping out, for whom conventional schooling is a turn-off, we need a system of special support that motivates them through work related training and raises their aspirations through intensive one-to-one mentoring in order to prepare them for further learning and the world of work.
And, while we will improve the British model for vocational training, think about this too:
70 per cent of the 2020 workforce is already in work so it is only by business and government working together that we will ensure every adult employee has the opportunity to retrain and upskill during their working lives - and achieve the shift in skills we need to ensure a competitive workforce over the next decade.
So in conclusion:
A new world order is emerging.
A new economic order with new challenges.
I believe Britain can meet them.
And, as we seek to do that, I will listen to what you say and I want to work with you to do it.
Let us together forge a British model that makes globalisation work for us - combining openness, flexibility and the championing of enterprise, with investment in our physical infrastructure and investment in our human capital: a model that can show that in the new global order we can secure success for our country and prosperity for us all.
Thank you.