Britain has huge strengths. Its economy has weathered the recent downturn best of any in the G8. It has record levels of employment. It has the fastest expanding healthcare and education systems in Europe. A recent poll in Germany rated Britain as the most influential nation in Europe above France and up from derisory levels in 1996. Whatever others may say, most people know that our alliance with America and our position in Europe give us unparalleled purchase on international affairs for a country our size.
But there is still a vast amount to do to improve our country further. And the single most potent driving force in Britain, as with any other developed country, is the pace and scope of change. It means we must be constantly on our guard, ready to adapt, ready to reform, eager to identify and overcome future challenge.
The role of Government likewise has to adapt. If it can no longer pick winners, micromanage public services or act unilaterally in foreign affairs, it still has a vital enabling role to play. It has to set the macro-economic framework; it has to create the right environment for business; in skills, education, transport and the system of healthcare, its role for good or ill is vital.
Most business people I speak to summarise the past few years as follows.
They welcome the economic stability. They support the investment in science and technology. They agree with a pro-European position, but worry about Europe's direction on the Constitution and economic reform.
They agree public sector investment is necessary but are unpersuaded that it is yielding sufficient results in health and education; and are profoundly concerned about transport.
They support the efforts on skills, but believe there is too much regulation and red tape.
So how can we entrench the success, allay the concerns and change the failures?
Economic StabilityNot so long ago Britain was racked by economic instability.
Today inflation, interest rates and unemployment are down at levels not seen in a generation. Our national debt as a proportion of GDP is now the lowest in the developed world. Despite a significant downturn in the world economy, the UK has just recorded 44 quarters of uninterrupted growth - this is the longest expansion since the advent of quarterly records.
I know that for businesses large and small, every other issue is secondary to the goal of stability. That stability is now real. The decision on the single currency should be taken on the basis of whether joining would entrench the stability or not. I believe we should keep the option open, plan for membership and make the decision at the time we want on the basis of our national economic interest. Ruling it out serves no one and simply limits our options unnecessarily.
But stability is only ever a foundation. It is important to build on it the private sector success and social infrastructure we need.
Public ServicesSome observers have argued that improvements in public sector productivity have failed to match the increase in public investment.
It has been claimed that a 20% rise in real NHS inputs has delivered only a 2% productivity gain. But this measure of productivity is only elective admissions to hospital. This is bizarre. It takes no account of improvements in waiting times. It takes no account of prevention.
There has been a more than 30% increase in the prescription of long-term statin treatments by GPs for cardiac care, saving an estimated 6,700 lives per year.
In recent years, within Europe, the UK has seen the largest fall in lung cancer amongst men and the largest decline in breast cancer amongst women. We have also seen a 19% decrease in overall deaths from heart disease. None of it, or the 24 new hospitals and 2000 renovated GP premises or the extra nurses counts in the 2% figure.
In education the number of pupils per teacher is considered the chosen measure of productivity. Therefore, perversely, hiring teachers to reduce class size is to reduce productivity. Important outcomes such as the dramatic improvements in Key Stage 2 results in primary schools and the steady improvement in exam results since 1997 are simply ignored.
The truth is that the increased investment in the NHS and schools has made a significant difference. It is being accompanied by reform to open up the NHS to new suppliers and consumer choice and to create increasingly independent state secondary schools, with ? of schools to be specialist schools or City Academies by 2006. The 'one size fits all' public service is on the way out.
In the next few months, each main delivery department will produce plans for a smaller centre and further forward steps on reform.
The most difficult area has been transport. With a 20% increase in road and rail use and the Hatfield accident exposing the true state of the infrastructure, we face little choice but to look in the future for different ways of financing the road and rail investment we need. The Birmingham North Relief Road is an example of the direction in which we need to move. We must also resolve, as we will shortly, the issue of airport expansion.
Education and SkillsEducation is more than schools.
Since the launch of skills for life in 2001 we have helped 156,000 people achieve basic skills qualifications. We are now on course to meet our 2007 target of helping 1.5 million adults to do the same. We can also take pride in the knowledge that the millionth learner this week gained new workplace skills through Learn Direct, our e-learning network.
Working with employers we are steadily rebuilding our technical skills base. We now have over 200,000 young people on our work based Modern Apprenticeship scheme - a tenfold increase on the number enrolled in 1996. The January 2003 White Paper targets that by the close of 2004 28% of youngsters under the age of 22 will be on such apprenticeship programmes.
It is projected that employers' demand for highly skilled workers is set to increase by 2 million in the next 10 years. Our goal should be more world-class institutions advancing both excellence and opportunity. We cannot choose one target over the other. Restricting higher education to a minority of the population despite rising demand would be a throwback to the sterile elitism of the past. Denying excellence would destroy universities' capacity to be world leaders in teaching and research.
We have set a 50% participation target for under 30-year-olds. Understand, this does not mean an uncontrolled expansion. On the contrary, England is already at 43% and Scotland is well above 50% —— in line with United States.
The blunt truth is that universities need more money. It either comes from the general taxpayer - the vast majority of whom had never been to University; the parents, or the students themselves when they eventually become graduates. We have chosen the latter course. We shall stick to it. It is fair, right and the only way to ensure our universities remain a key British asset.
EuropeBritish business has always given strong support to our membership of the EU and for good reason. You understand that being in the EU brings us massive benefits in trade, jobs and prosperity. You know that the EU is the most effective way that Britain can make its voice heard on global issues alongside the US and the growing Asian economies. You know that to be anti-Europe is to be anti-business. But you also know - and so do I - that a reform agenda for Europe is also vital. This is an area where we wholeheartedly welcome your engagement.
Europe is changing rapidly. Ten new members join the EU a few months from now. Europe will then have over 400 million consumers making it the world's biggest market - one larger than that of the United States and Japan combined.
The CBI has put tremendous efforts into building links with these new members. That is a wise investment and I pay tribute for it to the CBI and in particular to Digby Jones.
But this also means that we must update the way Europe's institutions work. That is why I support a new European Constitution. We need to modernise the way we do business in Europe. Otherwise, far from speeding the pace of change, enlargement would make the system grind to a halt.
This is why a stable President of the European Council, able to pursue a consistent agenda, is so important.
But I want to be very clear. We will not yield up any of our crucial red lines in the forthcoming negotiation.
Specifically, on the matters of Tax, Social Security and the EU budget, we oppose any move away from unanimity. Within Europe Britain is a low-tax country and I am adamant that we will remain that way. I am aware that in the case of Financial Services, the City and other practitioners are opposed to the ECB's supervisory powers being determined by Qualified Majority voting - so are we. We will not agree the new provisions on economic governance.
We will also not allow the Charter of Fundamental Rights to open up interference with Britain's labour laws and will not agree the new Constitution until we are sure that they are safeguarded.
I am confident that in these and a number of other areas of national interest we will carry the day. Not least because have so many allies in the Council who feel the same way that we do.
In practical terms we have a string of reformist EU presidencies ahead - including those of Italy, Ireland, the Netherlands, and our own in 2005. But this is the moment to engage more deeply and press our case forcefully - not retire frightened from the field.
By being actively engaged in Europe, the UK has been able to press ahead on economic reform. The results are there to see - liberalised telecoms markets, deregulated air travel, energy liberalisation on the way.
But we need to go much further. We need to put jobs and competitiveness right at the heart of Europe's economy. On issues like the chemicals industry or Agency Workers, Europe must think first and foremost about jobs and competition.
We need further to reform Europe's labour markets so that more people can get into jobs.
We need a proactive approach to competition and opening markets.
We need a new approach to regulation, one that overcomes the instinct to regulate and harmonise.
And we need to do this quickly because the rest of the world will not wait for us to adapt.
Science and TechnologyYou have welcomed our investment in science and technology.
The last six years have witnessed a dramatic increase in the use of the Internet. In 1997 only 6% of the population had Internet access at home. Today the figure the figure is over 50%. In 1997 only 17% of primary schools were connected. Today 99% of all schools in the country are on-line.
Broadband is a key driver in the increase in productivity that we are striving for. To quote from your own recent report on the subject it has "become integral to improving supply chains throughout the UK". We have made great strides in this area. Broadband is now available to over 80% of the population - up from 67% a year ago. Last year I announced that the Government would spend ￡1 billion on broadband for its own purposes. I welcome Ben Verwaayen's announcement this morning that BT is eager to work with us and local communities to broaden access. I share with him the vision of achieving 100% national coverage by 2005.
On science, we are proud of our heritage and continuing capability in basic science in this country, like our key contribution to the Human Genome Project.
The Pharmaceutical Industry Competitiveness Taskforce has already produced positive outcomes for both citizens and industry in the UK. Following the success of this initiative we have, in partnership with the business community, set up a Healthcare Industries Taskforce to derive similar benefits for the Medical Devices and Equipment Sector.
Within the European Biotechnology sector the UK enjoys a strong position. Britain accounts for 45% of all public companies, 42% of the industry's market capitalisation and 37% of aggregate revenues. We want to buttress this strength. Today sees the launch of the Report to Government of the Biosciences Innovation and Growth Team. It comes hard on the heels of a similar report from the Academy of Sciences. We will take the recommendations made seriously.
We are also developing a whole new partnership between the private healthcare and research sector and the NHS. A detailed implementation plan is to be worked out by a working party chaired by Sir John Pattison, Director of R&D at the Department of Health. We will be involving Industry, the Medical Research Council, the National Institute of Clinical Excellence and the Wellcome Trust amongst others in this project. We expect this group to report within 6 months.
We are very aware that industry is attracted to clusters of scientific excellence. It is therefore important that the UK continues to be a destination of choice for the brightest research minds in the world. With this aim in mind I am happy to announce that, with the aid of matching private sector funding, we are launching the new Dorothy Hodgkin Postgraduate Scholarship Programme, to attract top PhD students from nations round the world.
Research and Development (R&D) CreditsWe will continue to promote our R&D tax credit. I am happy to note that whereas 1,700 companies applied for this benefit in 2001-02, in this financial year it is estimated that around 3000 claims will be made.
RegulationOn regulation, I simply state that we now have in Government better processes to limit regulation and test it against business efficiency than ever before and in David Arculus and his team, together with the new legislation, a better chance of succeeding. I also highlight the new Planning Bill which will greatly simplify the process of planning and speed it up. Not before time.
There is a large agenda here on which we have to work together. In the end, the interests of business and government converge. Both of us need wealth creation and enterprise to flourish. Both of us also need the highest levels of education and skills we can obtain and an infrastructure good both for business and the consumer. The whole country benefits from an extension of opportunity and the reduction of insecurity, poverty and social exclusion which follows. Whatever disagreements on particular issues, the partnership between us is essential and I intend to ensure it remains positive and firm.