16 May 2006
The Prime Minister has delivered a wide-ranging speech to the CBI that covered the economy, energy policy, education and skills, the NHS, science, pensions, regulation, the World Trade Organisation and the EU.
Parts of this transcript may have been edited
Read the speech:
There are key long-term decisions facing Britain and they need to be taken now. Globalisation continues to transform our economy. The competitive challenge from the new EU members of central and eastern Europe and above all from China and India is immense. We need to be in a state of permanent modernisation, business and Government.
These long-term decisions are clear. But they are also difficult. As you business leaders know, changing things requires faith in long term gain, to triumph over certainty of short-term pain. Hardly a single difficult decision I have taken in Government hasn’t resulted in prediction of disaster; shrieks of outrage; and a determined resistance.
But the urgency is begotten of the scale of the challenge. At one level, Britain can be confident about its future. We have great strengths.
Britain is well placed to succeed in the era of globalisation.
The British economy remains strong, with low inflation, low interest rates, low unemployment and income per head now higher than France, Germany and Japan. We take it almost for granted. But in reality it was hard won: by the efforts of British business and workforce but also as a result of decisions taken for the long-term by Government.
We had micro change in the 1980’s that gave us flexible labour markets; we had macro change with the independence of the Bank of England which gave us economic stability. We have the English language. We have a strong science sector. We are part of the EU and a partner of the US. As the Olympics showed, we are regarded now as a dynamic nation, at ease today with the multicultural and globalised world we live in.
And we are prepared to face up to and make the basic choice today for all developed nations: to be open not closed; to fight on our merits not on our past; to embrace globalisation not retreat from it.
But the challenge is also immense in making such a choice work.
First, the competition we face is no longer with what used to be called the ‘low wage, low skill’ economies. Increasingly we are confronted with ‘low wage, high skill’ economies - particularly the great nations of China and India, each of which are now producing 2m graduates a year and rising.
Every employer knows that without basic competence in literacy and numeracy, few people are employable in the modern economy. But now vocational skills are also vital, and so are what used to be called ’soft skills’ - the ability to communicate effectively, to work in teams, to recognise responsibilities.
That is why we need to take further the change in Britain’s schools. Trust schools and City Academies build on the success of specialist schools, modernising the old-style comprehensive model and by engaging business partners and others, open up the system to diversity, greater parental choice and greater school freedom.
Together with a modernised curriculum, including new specialised vocational diplomas being developed in close collaboration with employers, these are critical reforms to equip our young people for the future.
So are our reforms to adult education and skills training, including the new skills academies and the new ‘train to gain’ programme being extended to employers nationwide.
But the point is: we need to push harder and further with the changes to our education system to align it better with the demands of the modern workforce. I want to see business fully involved in this reform programme. The opportunity is now there. I ask you to take it.
Second, knowledge is the key to prosperity. Product cycles have halved every five years over the past two decades. Agile, globally networked businesses, whose only asset is what they know, have emerged. That is why a modern economy needs a coherent science policy.
Major British success stories, like pharmaceuticals, aerospace, IT and engineering, are underpinned by scientific knowledge. Indeed, many global businesses, such as IBM, Pfizer and Boeing invest substantial amounts in R&D in the UK - not least because it brings them close to our excellent science base.
Research also creates new businesses. In the past two years 20 spinouts from UK Universities have floated on stock exchanges, raising well over £1 billion alone.
Funding for science has doubled and will over time, treble.
Animal research and testing has played a part in almost every medical breakthrough of the last century, for both humans and animals.
Everything possible is being done to remove the threat from animal rights extremists. New, dedicated police units are using the economic damage legislation we brought in last year. We are currently introducing extra protection for Directors, shareholders and auditors in the Company Law Reform Bill. If this is not enough, we will do more.
The point is: whenever we can, we will take - as we did with stem-cell research - the pro-science and business friendly position.
Third, we must push further and faster with reform in the public sector itself.
We know there is concern that increased NHS funding has not been sufficiently matched by increased performance. PBR, PBC and patient choice are all changes that are coming in, over the next year. Of course they are sometimes painful and difficult. But they are nothing compared to the pain of the slow death the NHS would suffer in the 21st century if we left it frozen in time, trying to meet the hopes and fears of people in 2008 with the attitudes and practices of 1948.
Continued modernisation is the only way public services in the 21st Century will survive the constantly rising and changing demands and expectations of the public. The key question facing this government, and every government in the foreseeable future, will not be whether to abandon public service reform, but just how far it can be driven as our world changes rapidly around us.
Recently I have met with CBI members on two issues of concern to you: procurement and public/private partnership, especially in the NHS. On the first we will have active proposals for improvement across the public sector by the summer; on the latter the Department for Health’s Commercial Directorate, under Ken Anderson’s leadership, has identified service improvements and potential savings of over £500m per year.
The NHS IT strategy is a large and complex programme but it is having a real impact. A few weeks ago we passed the point where now, in the South of England, half of patients now have images such as x rays taken digitally, up from 10% a year ago.
The publicly-funded but independently-run Independent Sector Treatment Centres (ISTCs) are consistently achieving satisfaction rates of over 94%; theatre utilisation is up to 33% higher than in the NHS. The increase in capacity for the NHS has reduced waiting times nationally for cataract surgery to under three months where previously patients often had to wait over a year and sometimes as much as two.
In addition by the end of July, we will have published the first departmental capability reviews, together with the preliminary results of the savings review, to deliver Government at the centre that is smaller, more effective and where spending matches changing priorities.
Fourth, we will publish before the summer break, the Energy Review. Essentially the twin pressures of climate change and energy security are raising energy policy to the top of the agenda in the UK and around the world.
Yesterday, I received the first cut of the Review. The facts are stark. By 2025, if current policy is unchanged, there will be a dramatic gap on our targets to reduce CO2 emissions; we will become heavily dependent on gas; and at the same time move from being 80/90%, self-reliant in gas to 80/90% dependent on foreign imports, mostly from the Middle East and Africa and Russia.
These facts put the replacement of nuclear power stations, a big push on renewables and a step-change on energy efficiency, engaging both business and consumers, back on the agenda with a vengeance. If we don’t take these long-term decisions now, we will be committing a serious dereliction of our duty to the future of this country.
Fifth, we need a long-term solution on pensions which the Turner Commission gives us; something both fair and affordable. We will publish our proposals later this month. The aim will be a solid basic state pension linked to earnings and an easy low-cost opportunity for people to top up that basic state provision. Self-evidently business will need to be fully involved in how we do it.
Sixth, globalisation means that the burden of regulation weighs more heavily than in the past.
Smarter regulation means doing away with regulations that are outdated or inefficient; fewer regulatory bodies; and it means risk-based enforcement by all regulators, not enforcement by rote.
Our intention is then to measure existing burdens and to set stretching, public targets for de-regulation, to be announced later in the year.
Tonight, the Legislative and Regulatory Reform Bill is in its final stages in the House of Commons. This Bill will give us powers to amend legislation to reduce burdens. We need your support.
And, we need to do all of this in Europe as well. The tide of opinion in Europe is changing. Read Angela Merkel’s speech to the Bundestag last week and the recent programme with its heavy emphasis on economic reform published by the European Commission under Jose Manuel Barroso’s leadership.
We will not agree to anything that surrenders our opt-out on working time.
More broadly in Europe we have, collectively, to have the courage to take the long-term decisions for Europe’s future prosperity. There are voices of protectionism once again being raised in the US and in Europe. They are completely wrong.
From 1992-2002, 2.5 million jobs were created across Europe thanks to the Single Market.
Between 1992 and 2000 foreign direct investment into Europe rose from 15 billion pounds to over 100 billion pounds.
One might expect, therefore, that the Single Market is universally supported. But it isn’t.
At the moment we only have a properly functioning Single Market in goods. The services sector - 70% of European GDP - remains unintegrated.
The Services Directive is massively controversial, bringing demonstrators onto the streets in other European capitals. There is a deal currently on the table.
Britain would have been much more ambitious in market opening. We would have had fewer sectors of the economy excluded.
But we also have to recognise that even this deal represents important progress. And once the services sector has started to open up, it can only go in one direction.
The Four Freedoms - freedom of movement of people, goods, services and capital - are a foundation stone of the European Union.
And they have their wider global relevance. There is a long-term decision, the international community must make in the months to come: a bold WTO deal.
It is possible but to get it everyone must move: Europe on agriculture; the G20 on NAMA; and the US on subsidies. From the discussions I have had with President Bush, President Lula of Brazil and Chancellor Merkel, I think a bold deal is do-able. But it has to be done.
In the end that is the choice globalisation poses to us: open or closed. We in Britain have pretty much made our minds up. At a recent meeting with business leaders, all of whom were facing strong competitive challenges, all of whose companies might gain short-term from a more restricted policy, not one was in favour of closing in on ourselves, here or in Europe.
That, in itself, is a mark of Britain’s confidence.
But that only comes from people willing to change and adapt in order to beat the challenge. We in Government have to do the same. Tonight I described some of the long-term decisions we have to take. I intend fully to take them.
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