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Competitiveness
3.33 pm
The Secretary of State for Trade and Industry (Mr. Peter Mandelson): With permission, Madam Speaker, I shall make a statement on competitiveness.
The White Paper that I am publishing describes the Government's strategy for modernising the UK economy. Overall, our industrial performance still lags well behind that of the United States and our European partners, despite all the privatisations and trade union reforms of our predecessors' 18 years. Yet a new economic landscape beckons, which will radically change the terms on which businesses compete with one another. As a Government, we have to create the conditions for an economic step change. The White Paper is a wake-up call to the nation to do just that.
The starting point for the Government's analysis is that knowledge and its profitable exploitation by business is the key to competitiveness. An advanced industrial nation such as ours cannot sustain the growing prosperity we want by producing standard products and services made with pedestrian methods and commonplace technology. Others can do that, just as well and more cheaply. We shall win only by developing innovative goods and services that customers want to buy and that use world-class production systems and the most sophisticated technology to keep us ahead of our rivals. We need also to ensure that the best environment for business in the world is here in the UK and the rest of Europe, which is our home market.
The bedrock of that business environment is macro-economic stability. Business hates uncertainty. That is why this Government are so determined to steer a stable course through the world's current economic turbulence. We fully understand the difficulties that this turbulence can cause.
The Government have no illusions that they alone can transform Britain's economic performance. Of course they cannot. It is not the Government's job to second-guess boardroom decisions; nor is the hidden hand of market forces sufficient to secure our competitive success. The false hopes of planning in the 1960s and 1970s and the obsession with laissez-faire in the 1980s both failed. This Government steer a new path: to work with the grain of markets, to use our regulatory powers to promote competition as the single most important spur to innovation; to encourage businesses to collaborate with each other to compete more efficiently; and to invest in the capabilities of the economy, including its skills and technological awareness.
Within this framework, there are three key roles for my Department. First, we must invest in our world-class science and knowledge base. Secondly, we will step up our efforts to convert the fruits of this vital resource into hard commercial success. Thirdly, we will lead a crusade to develop in Britain the spirit of enterprise so characteristic of the United States, so that we seize the new business opportunities that are before us.
The quality of the UK's science and engineering base is the foundation on which the knowledge economy is built. It is the mainspring of innovation, yet university research has been the victim of long-standing under-investment. This Government have acted to reverse the decline.
With the Wellcome Trust, we are investing an extra £1.4 billion in British science and engineering. We also need the private sector to increase its commitment to research and development. That is why my right hon. Friend the Chancellor will be consulting business on supplementing the current tax system with a research and development tax credit for small businesses. That is also why we will back strong participation by UK business in the European Union's R and D programme. However, research by itself does not generate wealth.
We must ensure that more research is transformed into commercial success, and that new ideas lead to successful innovation and new products. My Department will therefore switch resources to increase its support for innovation by 20 per cent. An expanded teaching company scheme will pay for 200 technology champions every year from among our best science and engineering graduates to help businesses innovate and to exploit the latest technology. In addition, the Government will offer a range of new incentives to reward universities which work effectively with business. Our target is to increase by 50 per cent. the number of innovative start-up businesses each year from the public sector science and engineering base by 2002.
Exploitation of science and business development is often strongest when businesses cluster together, creating a critical mass of investment, skills and co-operation. Governments cannot create clusters out of nothing, but they can help emerging clusters to grow. In a new initiative, which I regard as of fundamental importance, the Government will for the first time set up teams, each led by a Minister, to tackle barriers to growth ofnationally significant clusters, co-ordinating action across Government and with business. The first of those teams will concentrate on biotechnology, and will be led by the Minister for Science, Lord Sainsbury.
Boosting enterprise will be given the highest priority in what the Government say and do. We must encourage more people of all ages and backgrounds to start their own business, and we must help those businesses to grow. I have no magic wand that can create an enterprise culture in Britain, although Government can play a role in changing attitudes, facilitating finance, offering networks of support and enabling businesses to learn from one another, improving technological awareness, especially access to the new digital technologies, and promoting at every opportunity liberalisation and competition, without which an enterprise culture cannot flourish.
First, on attitudes, we will back a business-led campaign to promote enterprise in every part of the country. We have asked the Qualifications and Curriculum Authority to consider how best entrepreneurship skills can be introduced to teaching in school. This year, the Government are spending £15 million to promote links between education and business, and are co-sponsoring, with the private sector, the expansion of the young enterprise scheme into higher education, helping students to run their own businesses. That will build on the measures that the Government have already taken to invest in and reform the education system at every level.
Secondly, the financial community needs to be as entrepreneurial and innovative as the business community. This Government have already introduced a much-needed cut in capital gains tax. Today, I can announce the creation of a new £150 million enterprise fund to bring together public and private finance for
high-growth businesses. The fund will help financial providers to develop the expertise to understand and back growth businesses and new innovative technologies. It will help to create in the UK a far-sighted financial community that will be capable of taking risks alone.
Thirdly, to help innovative business start-ups through their crucial early development, I have set the business links network a target of supporting each year 10,000 new growth businesses. In a modern, enterprising economy, businesses need to learn from one another. The Government can play a crucial role. Indeed, we are full partners in the Confederation of British Industry's "Fit for the Future" best-practice campaign. My Department has helped the Motor Industry Forum to bring master engineers from Japan to advise and train vehicle component suppliers on world-class practice. That has produced truly outstanding improvements in performance. My Department will fund up to 10 similar programmes in other industrial sectors.
To help the regional development agencies in England to promote innovation and competitiveness, we shall provide them with an extra £10 million. We have decided to re-focus regional selective assistance on high-quality, knowledge-based projects that provide high-value jobs.
Fourthly, new digital technologies are the nerve system of the knowledge economy. Electronic commerce will be among the most revolutionary changes to markets since the industrial revolution. I recognise that many smaller firms find it difficult to make the leap into electronic trading, so I am launching a new programme to ensure that we achieve a target of 1 million small businesses exploiting the internet to the full by 2002. The Government will invest £20 million in new comprehensive advisory services to ensure that that target is met.
My ambition is that Britain should, by the end of this Parliament, have the best environment world wide for electronic trading. I have today published a document that benchmarks our performance in the digital economy against our main competitors. I will introduce an electronic commerce Bill later in this Session to take our laws into the electronic age and reinforce confidence in electronic trading. I will appoint an e-envoy to help to lead the United Kingdom in international discussions on electronic commerce. The performance and innovation unit in the Cabinet Office will conduct a study to build on that. I am also developing proposals further to liberalise communications markets.
Finally, if enterprise and innovation are to flourish in the UK, we need greater competition in markets, and those markets need to modernise. For 18 years, our predecessors preached free markets, but took fright at big business. We have already passed the new Competition Act, and we will use it to attack anti-competitive practices, strengthening the Office of Fair Trading so that it can expose all corners of the economy to the stimulus of competition. I will also consult next year on the case for reform of merger policy to ensure that that, too, promotes competition.
The White Paper sets out 75 commitments to boost business capabilities, promote business collaboration and strengthen competition, all aimed at closing the performance gap against our main competitors. In addition, we need to measure how well we are doing. I have therefore decided to develop and publish indicators
to track the country's progress: a new competitiveness index. Each year the Government will review Britain's progress against those indicators, and agree what further action is required. A new competitiveness council, drawn from across business, will advise the Government on the action needed.
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