| In a little over
12 months’ time, the British government and the
British people will, in all likelihood, be preparing
for a General Election. For the Labour government, having
won huge majorities in the 1997 and 2001 General Elections,
the Election will mark its bid for a “third-term”.
For a Labour government in Britain, this is unprecedented.
In political terms, it is a remarkable achievement as
no previous Labour government has ever won a second
term, let alone a third. In economic terms, it is a
remarkable achievement as no previous Labour government
has ever been able to avoid being blown off course –
and blown out of office – by the financial markets.
Indeed, it is fair to say that it is because of the
successful stewardship of the economy that a third term
is possible at all. The foundation of this success has
been the raft of economic reforms put in place by the
Rt Hon Gordon Brown MP, Chancellor of the Exchequer’s
Treasury team since 1997. Having made the Bank of England
independent, along with other structural reforms, such
as the Government’s fiscal rules and incentives
to encourage capital markets, the British government
has presided over a period of economic stability previously
unseen for most of the 20th century.
For the British people, this stability has provided
security – the security of knowing that inflation
rates are at their lowest for 30 years; the security
of knowing that interest rates are at their lowest since
1955 and that there are more people in work in Britain
than at any time in our history.
What makes these achievements all the more impressive
is that they have taken place against a backdrop of
global instability and economic downturn. In the Middle
East, war in Iraq added an extra dimension to continued
uncertainty, which has fed high oil prices. In Asia,
the continuing poor performance of the Japanese economy
and slower-than-expected Chinese growth has had an impact.
So, too, has the outbreak of SARS. Closer to home, sluggish
growth in Germany has adversely affected many countries
in Central and Eastern Europe.
Against this fall in global confidence and demand, the
British economy has remained robust and has charted
a steady path in what have been uncertain times. While
unemployment in America now touches 6%, in Germany,
Italy and the euro area it is 9%, and in France 10%.
In Britain, it is 5%.
Indeed, for the first time in 50 years, British unemployment
is lower than every one of our major competitors –
the euro area, Japan and America. While America, Japan,
and half of the euro area have suffered recessions,
the British economy has, uniquely, grown uninterrupted,
free of recession, for every single quarter and every
single year since 1997.
A brief glance at the history books should suggest that
the British economy would be the first to enter a global
recession and the last to recover from it. In short,
the post-1997 British economic model bucks both global
and historic trends. But rather than retreat in the
comfort of these achievements – considerable though
they are – it is vital that the government builds
on this progress to strengthen enterprise, and the enterprise
culture throughout the UK. It is this challenge that
is likely to form the centrepiece of the government’s
“third-term” ambitions.
Today in Britain, there are large and persistent differences
in economic performance between and within regions and
sub regions. Underpinning those differences are large
disparities in the levels of enterprise up, down and
across the country. Analysis shows that, across the
UK, start-up rates in the best performing areas are
10 times those of the worst, contributing to an enterprise
gap in our inner cities of 88,000 companies, £5bn
in turnover and tens of thousands of jobs.
Greater levels of enterprise are also needed if we are
to compete with our international competitors. Again,
the evidence is compelling, with business start-up rates
in the US almost twice as high as those in Britain.
The government knows how important enterprise is to
the British economy. It knows enterprise boosts productivity,
creates employment and prosperity, and helps revitalise
our communities. Because of this, the government approach
has been to change attitudes to enterprise – from
the classroom to the boardroom – and to tackle
the difficulties that entrepreneurs can face in starting
and growing their businesses in every part of the country.
In the main regions of the UK – Scotland, Wales,
Northern Ireland and the nine English “regions”
– the government has established a constitutional
and institutional framework which allows for greater
freedom to boost enterprise, tackle capital, labour
and product market failures closer to the areas where
those decisions will have greatest impact.
The government understands the importance of removing
the barriers and opening the opportunities to enterprise
in the UK. But entrepreneurs understand that in a new
era of globalisation, barriers to enterprise must be
tackled, wherever they exist. Given that the EU market
is a major international market for UK entrepreneurs
– 55% of total trade – where barriers to
enterprise exist in Europe, they must be tackled. Although
the 2000 Lisbon Council saw heads of state vow to make
Europe “the most competitive and knowledge-based
economy in the world”, a great deal remains to
be done to unblock Europe’s entrepreneurial potential.
In January 2004, the UK government – with the
French and German governments – made a start in
trying to break down the enterprise barriers. It called
for the EU to reduce regulatory barriers to enterprise,
to overcome social and cultural barriers, and to improve
access to finance for new businesses and for all businesses
seeking to develop and grow. If the challenging goals
set at Lisbon are to be met, it is vital that policy
makers in Europe take decisive action to tackle the
barriers currently constraining enterprise in the EU.
Only then will the EU be able to claim to be the most
competitive economy in the world.
Nothing symbolises more Gordon Brown’s determination
to prioritise enterprise than the conference he recently
hosted on Advancing Enterprise in London. Speaking at
the conference, the Chancellor said: “I believe
now is the right time to remove all unnecessary barriers
to wealth creation, open up enterprise to all and propel
forward what can be a British enterprise renaissance.”
Having built and entrenched stability in the UK economy
since 1997, the UK government realises the importance
of building enterprise at the local, regional, European
and international levels as a means to provide “opportunity
for all”. Having bucked global and historic economic
trends, the next step for the British government is
to build an enterprise culture that breeds even greater
levels of wealth, employment and prosperity than those
seen since 1997. Should this government win an historic
third-term, this will surely be the key challenge.
The Smith Institute is an independent
think tank, which has been set up to undertake research
and education in issues that flow from the changing
relationship between social values and economic imperatives.
In recent years, the Institute has centred its work
on the policy implications arising from the interactions
of equality, enterprise and equity.
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