Trade Association Forum
Baroness Shriti Vadera, Minister for Economic Competitiveness and Small Business (jointly with Cabinet Office)
CBI - Centre Point, London, 06 March 2008
I was daunted looking at the list of attendees for today’s event. Everyone is here. It was very clever to bring together all the trade associations. Because it means you can’t get away with telling different groups the different, sometimes conflicting, things they want to hear.
There is no place to hide here. It reflects the real world of hard choices and trade offs.
I’m also adjusting to a change in my role. After eight years in the Treasury, I’ve moved from being the person whose job it was to say no, to the person whose job it is to persuade others to say yes.
I’ve known some of you for a while. For others, it’s the start of a new dialogue. I hope it’ll be constructive and that I’ll be able to prove to you that you have a strong ally at the heart of government.
I know why I’m here: to help this government realise its ambition: to make the UK the best place in the world to do business.
I know that sounds ambitious indeed for the way some of you may feel right now. I realise that some of you have expressed disappointed at the choices the government has made in the past few months around tax.
But it’s important to remember that, as a result of measures in the last budget, our corporate tax rate will remain the lowest in all the major economies. Lower than America, Germany, France, Japan and all our other major competitors. Gordon Brown said “Our goal is and will continue to be to have the most competitive business tax rate of the major economies”. That ambition remains.
We have taken some tough decisions. And it may feel like we have changed that ambition. We haven’t. Or that we have stopped listening. I assure you we haven’t.
I’ve only been in this job for 4 weeks. But I hear you. And I know you represent the wealth creators. As an ex-banker, I certainly appreciate the profit motive. When your members succeed, the UK economy succeeds. I know we have to work harder for you to maintain our competitiveness when it comes to tax, regulation, innovation and a risk-taking entrepreneurial environment.
On budget day next week, John Hutton and Alistair Darling will launch our Enterprise Strategy. We have listened to over 600 businesses and identified a framework that will drive forward the work of the department, as the voice of business in government. The framework will have five “enablers” around which we will articulate some new measures and continue to work and develop policy – with you I hope. Because this Enterprise Strategy is not by any means the end of the road but the next stage of the journey.
Reducing the burden of regulation
The first element of the framework is addressing the burden of regulation. We recognise that regulation can impose an economic cost albeit for a wider social benefit.
We will deliver on our target to cut administration costs by 25% by 2010. We have already removed £1.5bn of costs. By definition legislation is one of the main levers of change at the heart of any government. But I know we need to go further and ensure we address the culture and incentives to deliver regulatory reduction at the heart of government.
Business innovation
A second enabler of our framework is business innovation. We will continue this government’s relentless focus on stimulating innovation in the UK economy.
We’re already one of the most productive places for innovative firms in the world, ranking second only to the USA for the quality of our research base.
Our vision is to build on this unique strength and create the best possible environment for business innovation. And we have matched this with necessary resources.
We have provided £1 billion of direct public funding for business innovation over the next three years
This is backed by major initiatives like the R&D tax credit, which has already delivered more than £2 billion of support for innovative UK firms.
We recognise that you and the market are best placed to dictate future trends in innovation. Our strategy is to complement market forces:
- Ensuring the regulatory and legal framework allow you to capture the benefits of your intellectual property;
- Addressing market failures that may hold you back
- And helping you access our world-class research base.
Access to finance
A further enabler in our enterprise framework will be ensuring that there are no market barriers to access to finance for start-up & growth. This is particularly important as we see liquidity and credit problems emerge in the global markets in the coming months. We need to remain vigilant that these do not percolate down to small and medium enterprises. The government's current market interventions have already secured more than £5billion of lending to small business through the small firms loan guarantee. And have invested significantly in early stage market led capital. Our challenge is to ensure that these interventions will respond to change in economic conditions.
Creating an enterprise culture
We also need to create an enterprise culture in which everyone in society is inspired and empowered to turn their ideas into wealth.
A cultural change that starts in our schools and stretches right through our communities from classroom to boardroom.
We must tackle the fear of failure which is often cited as a major deterrent to starting a business. We will support business so that a set back is a spur to try again.
Improving our skills and knowledge
The last enabler, and I think the most vital: tackling the stark challenges on skills. There are 7 million adults who lack functional numeracy; 5 million who lack functional literacy. And for today’s 6 million unskilled workers in Britain, we will in the medium term only have half a million jobs.
No country can afford to waste these talents.
For me, the globalisation challenge is a challenge about skills.
One million manufacturing jobs and hundreds of thousands of service jobs are now moving from the US and Europe to Asia every year. For the first time, a significant slow down in the U.S. economy is not having the same impact on the global economy because China is forecast to grow by 10% in 2008.
But global markets have brought global opportunities.
- the global economy will double its size in 25 years
- the number of skilled jobs in the world will double over the next ten years.
For countries that rise to the education and skills challenge, that creates the greatest opportunity. According to the OECD UK is 12th for high skills, 19th for intermediate skills - average in fact. But we know average isn’t going to cut it.
And the days of it being lower skills for manufacturing and higher for services are long gone. Rumours of the death of UK manufacturing have been greatly exaggerated: as we saw with the US Air Force’s selection of the Airbus tanker aircraft last week - the biggest ever order placed by America in Europe.
I believe we must move away from the conventional wisdom that the UK must just move up the manufacturing value chain. This is too simplistic. The line between manufacturing and services is increasingly blurred: UK manufacturers are already finding that they can maximise their return by providing bespoke services to accompany their products. At the Mini car plant near Oxford, every single Mini produced – its colour, electronics, upholstery – can be tailored to the specifications of every individual customer.
And we know despite being only 14% of GDP, manufacturing constitutes 76% of business R&D. So when we talk about needing to be a knowledge economy in order to succeed, let’s be clear which sectors are investing in knowledge right now.
In the summer, we will publish a new manufacturing strategy to reflect the profound changes in the manufacturing sector.
Despite the challenges we face I have a deep conviction in Britain’s ability to succeed. We epitomise the globalised economy – we are arguably the most open economy in the world, we have a history of free trade and a hard won stability and flexibility. We have made long term decisions about investment in energy and infrastructure. According to Transparency International we are one of the most transparent countries in the world. We have the international language of business and even the central time zone. We have a unique combination of international reach, openness to ideas, to people, to talent.
This is a legacy we have as a nation that we have built on. Our record for the last 10 years speaks for itself. We are the government that put enterprise, innovation and growth on top of the political agenda. We made the key decisions to secure the underlying stability of the economy that has given uk businesses the confidence to grow and invest.
- It’s no accident that we have had the longest period of low and stable inflation since the Second World War.
- It’s no accident we have a record 4.5 million businesses registered
- It’s no accident that we are the only G7 economy to grow continuously throughout the last decade - sixty-two consecutive quarters of GDP growth and counting
We’ve achieved this by focusing on the core issues that matter to business. I know there is no room for complacency. These are testing times. And competition in a global market has never been so fierce.
I said at the start that BERR will be the voice for business at the heart of government. We need to hear from you. We need evidence, your arguments and your experience.
I have a clear vision: to help make the UK the best possible place to do business. Our dialogue with you is absolutely essential if we are to deliver this vision.
As Henry Ford said:
“Coming together is a beginning. Keeping together is progress. Working together is success.”
Thank you.