Iam delighted to be at the Birmingham Chamber of Commerce today, in the week the National Exhibition Centre celebrates its 25th anniversary.
It is a wonderful example of where vision can pay off. Controversial at first but now bringing ??700 million of income into the Midlands and the UK every year.
The title of my speech is "Helping People Through Change". That is the new industrial policy and role for Government and it is right for our times.
We will do all that we can to help the workforce affected by yesterday's Corus announcement. My case to you today is this: the fundamentals of our economy are becoming stronger and provided we carry on the policies of economic stability, and now add to them, policies which deal with chronic under-investment in skills, science, transport and basic infrastructure, we can help our businesses prosper through the change and restructuring affecting every country in the industrialised world. Indeed, we in Britain are better placed than most if we stay true to the course we have set.
What is happening today is not complex but simple. All business, new and old, services and manufacturing are facing the twin challenges of globalisation and technology. As a result, there is huge restructuring, here and elsewhere in the industralised world. Yesterday's blow from Corus followed the good news of Nissan, Toyota and Boeing. Manufacturing has long been used to this pattern. But even in those areas which until a few years ago were traditionally job secure, like High Street banking for example, there has been a massive process of rationalisation, change and job losses and gains. It is not limited to the UK.
In the US, LTV Steel in Ohio has gone bankrupt putting 18,000 jobs at risk. Over the last decade, as well as thousands of British job losses in steel, thousands were also lost in Belgium, Germany, Spain and elsewhere. In other sectors, General Motors is shedding 5,000 jobs in Continental Europe. Michelin announced 1900 job losses at their French plants. 1100 jobs went in France following the merger of Total, Fina and Elf.
Here, though it is large job numbers at well-known plants, for good or bad, that make the headlines, every week thousands of jobs are created and lost. In the UK now an average 1.8 million jobs go every year. It Italy, it is 2 million. In France and Germany, around 2.5 million. Yet overall employment continues to rise so that today in the UK there are more in work than ever before.
Of the ten largest EU companies today, five are British. Some of the largest British companies, like Vodafone have come from nowhere over the last decade.
The advent of the European single market and the continuing developments in technology can only intensify this.
Against this background, UK manufacturing has faced tough times in recent years. The strength of the pound has been a problem for exporters. Indeed the remarkable thing has been the resilience of many manufacturers despite the serious pressures of the exchange rate, only now abating a little as the euro rises.
We have other challenges: a transport infrastructure in urgent need of repair; a productivity gap with our leading competitors in key areas and a workforce, with great talent but often lacking in the skills we need.
Yet we still have huge strengths.
Manufacturing matters to Britain. It accounts for 20% of our national income and employs 4 million people. At least 2.5 million service sector jobs depend on manufacturing. Manufactured goods also make up 60% of the value of UK exports.
After years of decline and job losses in the 1990s, manufacturing output is again rising. The engineering sector is currently growing faster than the economy as a whole. Productivity is also rising - up by 3.7% in the 3 months to November last year - after years of stagnating in the early and mid 1990s. And despite the difficulties with the exchange rate, exports of manufactured goods were up over 9% in the 3 months to last November. Britain has even run small trade surpluses in goods with the EU in three of the last five months. This trend is set to continue. Manufacturing output is forecast to grow by 1.7% this year and exports by over 5.5%.
Here in the West Midlands, manufacturing remains at the heart of the local economy, accounting for nearly 30% of local output. Nearly a quarter of the local workforce are employed in the sector. This reflects the enduring strengths of West Midlands manufacturing. A strong work ethic; a heritage of manufacturing skills; a strong business-oriented education system including the excellent universities of Birmingham, Warwick and Aston; the best industrial relations for 20 years; the country's oldest and largest Chamber of Commerce; and an innovative culture.
That is why I am delighted to announce today that the Government is providing ??6.75 million for the new ??36 million R&D facility that the mobile phone company Sendo is building next to Birmingham International Airport. This will create over 400 highly skilled, well paid jobs.
Britain has a strong manufacturing future. But manufacturing itself is changing. The distinction between manufacturing and services is blurring. The terms are losing their meaning. Because of that, people now talk about the "old" and "new" economies. On the one hand, traditional manufacturing and heavy engineering; on the other, e-commerce, information technology, the life sciences, renewable energies and so on.
But that too is an artificial distinction. There is only one economy, and advances in technology affect all of it. Far from being a threat, new technologies are a source of opportunity. In the United States, manufacturing has been growing faster than the rest of the economy in recent years by moving into high-tech sectors like semiconductors.
Here in Britain, traditional manufacturing industries like car-making have been transformed through new technologies and techniques. Computers, robotics, information technology, the internet - all have been harnessed in the pursuit of greater productivity, greater efficiency, better design; making factories like Nissan's in Sunderland among the most efficient in the world.
Even more significantly, British manufacturing has taken the lead in Europe in many of the new knowledge industries and other high technology sectors. The British pharmaceutical industry employs 88,000 people, generating exports worth nearly ??6 billion in 1998, rising to ??6.7 billion in 1999. We now have the largest biotechnology industry in Europe, exploiting Britain's strong science base. Ten years ago it hardly existed.
As for the role of Government, today we have moved beyond the facile distinctions of the past. We neither need a return to the old 1960s industrial intervention nor laissez-faire. Businesses should run business. Whether a business succeeds or not cannot depend on Government but on the vitality and strength of the business itself.
But there are certain key things governments can do today to help or harm business prospects. These things can play an essential part in the overall business environment. I was delighted that recently two independent surveys put Britain as the number one place to do business in Europe. But I know we still have weaknesses we must remedy.
So what is our role?
First, to provide economic stability. For years we have had violent swings of the economic cycle. Almost four years ago now, we reformed the whole basis of economic policy-making.
We took tough decisions early on to make the Bank of England independent, to put in place a proper fiscal framework, and to pay back the national debt. As a result, inflation is now at a 30-year low, the lowest in Europe. Long-term UK interest rates are around their lowest levels for over 35 years, converging with those of Germany. We have been able to cut annual government borrowing by ??44 billion, saving around ??5 billion in debt and the same again in reduced welfare payments through strong employment. The economy is now enjoying its longest period of uninterrupted growth since the war.
This is not coincidence or luck, however. It happened not by chance but through the deliberate choices we took. It can only be sustained if we hold firm to the financial disciplines we have imposed and run fiscal and monetary policy in tandem together. But if we manage to come through this economic cycle with interest rates around their present levels, I think we should acknowledge that as unprecedented in recent UK economic performance.
Second, skills and education.
Education is central to any modern industrial policy. In the Knowledge Economy, education is the key to competitiveness. It is fundamental to our economic performance - and not just an aspect of social policy, as it was too often seen in the 20th century. People change jobs more often. Skills are at a premium. There are fewer and fewer decent jobs for those without them.
That's why, before the election, I said that education was my number one priority. And we have held to that in Government. Since coming to office we have focused on improving general standards of education, as well as increasing the skills that a successful modern manufacturing economy requires.
Our priority in this Parliament has been getting the basics right in primary schools. Nothing is more important to the life chances of our children - and nothing is closer to the lifeblood of the nation. So we introduced the daily literacy and numeracy hours. We carried through an unprecedented training programme for primary teachers in how to raise standards in the basics. We set national targets for a step-change in success in the literacy and numeracy tests for 11-year-olds, and translated this into targets for each individual school. And we invested massively to eliminate infant class sizes of more than 30, because of the clear evidence that smaller classes are essential in the early years. We have succeeded on all fronts. Test results are up sharply. Infant class sizes of more than 30 have been virtually eliminated. And the literacy and numeracy hours have transformed the quality of teaching school by school.
So we have built the foundations. Our mission is to replicate this success throughout the education system.
Secondary education is the next priority - moving beyond the traditional comprehensive to secondary schools better able to develop the full potential of each individual. We have also established the Learning and Skills Council for post-16 education and learning. A big drive has begun on adult skills, including the launch of a potentially transformational on-line teaching resource through the University for Industry. The learning options in the New Deal have also made an impact.
I am pleased to say that the proportion of people in the West Midlands without any qualifications has fallen from 27% in 1996 to under 20% now. This is still far too high. But we have made a start.
I know how important transport is for manufacturers in the West Midlands. Traditionally, one of the prime attractions of the West Midlands has been its position as a communications hub. Yet much of this infrastructure is increasingly old and unreliable, the victim of years of under-investment.
Last year, in the 10 year Plan for Transport, we set out a ??180 billion programme for modernising the nation's transport infrastructure. Here in the West Midlands, we are pressing ahead with the Birmingham Northern Relief Road. When this opens in 2004 it will relieve the congestion on the M6 and provide a modern link to the rest of the UK. The modernisation of the West Coast Main Line is now also underway, and Railtrack and the Strategic Rail authority are considering further improvements between Coventry and Wolverhampton including the renovation of Birmingham New Street Station.
I know with the difficulties of the last few months, how deeply frustrating it is and how unreal it can sound to talk of improvement. Yet the plans announced do offer real hope for the future. Yes, it will take time, but it can and, if the investment stays in place, it will be done.
Fourth, business taxation.
We have cut corporation tax rates to the lowest levels of any major European economy. Corporation tax receipts are now 3.4% of GDP, down from 3.6% in 1996-7. And we have also reduced Capital Gains Tax to 10% for business assets held for longer than 4 years, to reward long-termism and risk-taking.
Many of you have voiced concerns about the Climate Change Levy. This is an essential part of meeting our Kyoto international obligations. Even though the proposal is overall revenue neutral, I know there are real concerns and we are listening to them. I would simply point out that overall, we continue to enjoy business and personal rates of tax, way below those of our main competitors.
The health of the science and engineering base is crucial to the economic future of this country. Two years ago the Government announced increases in science spending in partnership with the Wellcome Trust of ??1.4 billion over three years. And over the next three years the science budget will grow by nearly another ??1 billion, with ??252 million going to research in the high-technology sectors upon which the future of manufacturing depends.
I am aware of business worries on regulation. I want to make just one point. The new Regulatory Reform Bill is at the heart of a new framework for striking down unnecessary regulation and for ensuring the business community is properly consulted before any new regulations are passed. It will be legislated for as soon as possible. Together with the Small Business Service and the reorganisation of Whitehall to provide a new focus on preventing and rooting out burdensome and unnecessary regulation, it will over time, deliver real benefits.
You will be sceptical I know. All Governments promise less red tape. But these are substantial changes in the way regulations are made. In Europe at Stockholm next month, we hope to have a major push forward on reducing EU regulation, with a fairer wind behind us from the new European Commission than for many years. And because we have been more engaged and constructive in the arguments about Europe, I am confident that at Stockholm, as at Lisbon last year, we can win the arguments and Europe will take another positive step in the right direction for economic reform.
Seventh, Government has to be the helper and partner of business internationally in the WTO, G8 and above all the EU. We remain committed to joining a successful single currency in principle; in practice the economic tests must be met because they are essential to membership being good for Britain; meantime, we prepare for its advent; and the final decision will be for the British people in a referendum.
I have no doubt at all that if we ruled out the single currency in principle, we would lose substantial inward investment in the UK. We have to stay engaged. Millions of jobs and the strength of the UK economy depend on us being key players in Europe. The changes in position on the financing of Europe where over the coming years our contributions will at last be more in line with those of France and Italy; the protection of the UK rebate; the preservation of UK positions on tax; the whole agenda of economic reform in Europe: all of this shows the fundamental importance of Britain not being isolated from the EU, the key strategic alliance on our doorstep. However unpopular it is in some quarters, I shall continue to make the case for Britain in Europe.
But I do not believe the role of Government should end here. Where companies are facing major change, such as the Fujitsu plant in County Durham now owned by Filtronics, Rover/BMW at Longbridge and Ford at Dagenham, the Government has acted as a facilitator. Not to try to run companies; but to enable change, to work with the company to ensure that the disruption to workers and communities is minimised.
At Siemens in North Tyneside, the Employment Service played a major role in helping around 90% of the workforce find new employment. With the support of the DTI the plant itself now has a new owner. And a survey published this week showed that the Rover Task Force set up in the wake of the BMW sale has already saved 1,500 West Midlands automotive component jobs. Concrete evidence that active Government engagement works.
I have also been determined that this Government should catalyse investment in the areas that need it most. To lead change by promoting alternatives. That is why we provided the Regional Development Agencies with ??54 million next year to support innovation and enterprise - a threefold increase over this year. As the Chancellor set out in his speech earlier this week, we are determined to increase the role of the RDAs in regional policy, giving them the resources they need to act locally in ways that best meet local needs.
I am optimistic about our future. There is a process of transformation in Britain taking place over many years, from which business can benefit.
In the 1980s there were changes to trade union laws and enterprise that I have often admitted my Party was too slow to come to terms with. That era was about breaking down barriers for business.
But whatever the strengths of the 80s policy, there were two weaknesses that remained: instability in economic management and chronic under-investment in education, science, transport and the basic public infrastructure.
The whole purpose of this Government has been not to turn the clock back on the enterprise agenda; but to deepen it and then to correct the instability and under-investment. That we are now doing. The result gives us the best chance of rising living standards and prosperity for all our people and our regions, that we have had in Britain since the War. It is a battle for the future. With your help we will win it.