Based on research undertaken by Harvey Nash, Albert Ellis outlines some of the opportunities and the challenges facing UK business in 2008 and beyond.

Picture Gallery

Photos of speakers, delegates and exhibitors from conference 2007.

Click on the Speakers names to read their speech transcripts

Rt Hon Gordon Brown, UK Prime Minister

Chris Huhne MP, Liberal Democrat Leadership Candidate

Nick Clegg MP, Liberal Democrat Leadership Candidate

Rt Hon David Cameron MP, Leader of the Opposition

Rt Hon Alistair Darling MP, UK Chancellor

Albert Ellis Chief Executive Harvey Nash

This year's conference comes at a critical time in the relationship between government and business. There are lots of questions around private equity, taxation, skills and talent development that the conference will seek to answer. This is the event for business to get their voice heard and to debate the big issues that will affect our future success in the global economy.

Monday 26th November

The conference is filling up well, estimates suggest there are over 700 delegates and many take the time to stop by the Harvey Nash stand to say hello.

The first speaker of the day is Gordon Brown, the Prime Minister, so you can't really complain about the calibre of the speakers!

Fresh from his trip to Uganda and the commonwealth conference there is a high level of expectation that he will use his speech today to inject some positive sentiment into his Government's record.

Brown begins with a strong and upbeat statement that the vast majority of UK businesses are rising to the challenge of the global market, but that there is more his Government can do, and will do, to make UK firms global industry leaders in many sectors.

He goes on to outline his position on skilled migration and talent development, two topics that are of specific interest to Harvey Nash.

We are told that 190m people are now moving country every year in the search for better jobs and higher standards of living. The UK Government will continue to oppose those who want to abolish the opportunity for skilled migration but the Prime Minister announces a new points system similar to that seen in Australia will be introduced in the UK to limit low skilled or no skilled migration.

ID cards, the Prime Minister argues, are also positive for skills development of the UK workforce, protecting citizen’s rights and creating jobs.

Putting the war for talent into a global context Brown said that UK business needed to wake up to the battle that was emerging. Five million graduates are qualifying each year in China and India so there is really no choice for UK firms but to compete on a highly skilled and value added basis.

In response to a greater number of skilled graduates worldwide the UK Government are to announce a new approach for skills development for 16-19 year olds to raise the standard of ability across the board.

The Prime Minister concludes his speech with a bold statement that "education for skilled work is the Government's main priority going forward".

This is warmly welcomed by the audience and especially the Harvey Nash delegates who are at the sharp end of the war for talent and see first hand the value that talented people can have on their firms.

After the speech the Prime Minister remains at the podium to answer questions from the floor.

Clive Sexton, Director of Impact Executives (part of the Harvey Nash Group) asks why the Government are not planning to adopt the proposed European Blue Card scheme, despite the proposed 20m skilled professionals it would bring to the European zone (which of course includes the UK!)

In his answer, Brown states that his Government is pursuing radical change to the skilled immigration process, beginning with the introduction of a points system based on skills available.

The future will see business investing more in higher education, especially in the regions outside London if the Prime Minister has his way. He finishes by saying he wants to "unlock the talents of the next generation" and if the actions of his Government support his words we look forward to a new era of talent development and a highly skilled UK workforce.

Private Equity Debate

The role of private equity in the UK economy is the first of the big panel debates of the day.

It includes a keynote address from one of the industry's founding fathers Stephen Schwarzman, Chairman of multi billion dollar fund managers the Blackstone Group.

The panel includes another industry heavyweight, Philip Yea, CEO of 3i Group as well as Tim Parker, CEO of The AA (one of the highest profile companies to have been funded by Private Equity investment) and also Kitty Ussher MP, Economic Secretary at the Treasury.

We find out during the session that over one fifth of the private sector workforce is now employed by companies with Private Equity (PE) backing.

The numbers thrown about by commentators when covering the PE industry are astronomical, and in recent months, the industry has fallen under the media spotlight with the Chancellor’s increase in capital gains tax (CGT) designed to redirect some of those astronomical sums into the Treasury’s coffers.

We hear from Schwarzman that the PE industry should not be embarrassed by its success, and that there are many firms who are successful and profitable today that wouldn't exist if they had not received PE backing.

PE can bring with it culture of good governance and instil checks and balances in firms that are invested in. Where a small group of directors often hold the bulk, or all, of the shares and therefore the power in firms PE can bring a more open approach to decision making says the panel.

PE firms can also offer long term stability, far removed from the media portrayal of a "buy, cut and run" approach they have so often been accused of. The average PE investment is five and a half years, compared to 10 months which is the average holding for most publicly held stocks. The argument is that a long term approach reassures management and staff, allows them the freedom to innovate, and plan for success.

Investment managers (in the best firms) bring significant operational experience that benefit PE backed companies. Also, we are told that ongoing investment in R&D, talent development, operational efficiency and expansion runs at four times higher in PE backed firms than their privately held peers.

The panel finishes with a debate on the future of PE with a consensus held that the industry will only grow in importance and will continue to influence the world's macro economic trends for years to come.

The Reputation of Business

The afternoon debate is scheduled to begin soon, it is being led by Greg Dyke, former Director General of BBC and the panel includes Albert Ellis, Harvey Nash CEO, Steve Easterbrook, CEO McDonalds UK, Gary Hoffman, Group Vice Chairman of Barclays Plc and Iain Coucher, CEO of Network Rail.

The session begins with a keynote address by Greg Dyke; he opens with a strong statement that he wishes business was more like sport as far as engaging with the media is concerned. He believes that consumers are looking for straight talk and simple answers and that it is important to explain your version of the truth to your audience if you are being accused of activities that may damage your corporate reputation.

Dyke goes on to question the UK media’s treatment of successful businesspeople. He compares the treatment of some of the UK's leading entrepreneurs in the media to some of those in the US. His argument is that there is an aura of negativity around the reporting in this country, while success, profit and personal achievement are celebrated across the pond.

The debate is opened up to the panel with each member introducing their themes around reputation for business. Easterbrook, of McDonalds starts with a quote from Benjamin Franklin, one of the founding fathers of the United States, who recognised how fragile a reputation is when he said "It takes many good deeds to build a good reputation, and only one bad one to lose it."

He goes on to argue that customer expectations are central to business reputation and they must be met every time a consumer walks through the door.

As the debate continues, Gary Hoffman of Barclays states how the last couple of weeks have shown him how very fragile business reputation can be. He touched on his view that the public seems to absorb a massive amount from the media, which is often inaccurate and sometime biased or even untrue.

Harvey Nash's own chief executive Albert Ellis speaks next and his first act is to stand up for media after the comments by Hoffman. Ellis suggests that, far from being a tool of misdirection, reporting is often a force for good and helps to keep business honest.

The core argument from Ellis is that attracting the best and the brightest to become future business leaders is critical for sustainable success. However, these candidates - Generation (Y) - are highly influenced by reputation and demand a high standard of morality from current business leaders.

He proposes three simple actions that he thinks will help restore the trust of Generation Y in business.

One, recalibrate marketing messages for authenticity, No spin!

Two, embed a culture of honesty and transparency into the very fabric of your company culture.

Three, get used to having a reverse gear. All leaders make mistakes but we have to admit them and find credible solutions, not push on regardless in the pursuit of profit.

For sustainable business success there is no more important issue than hiring the right people, and Ellis concludes that the generation that cares most about corporate reputation is the talent that is so crucial to global competitive advantage, both now and in the future.

The final speaker, Iain Coucher from Network Rail, calls on personal experience of leading an organisation which struggles with its corporate reputation. He outlines some statistics that highlight how many people find the rail system to be a negative experience, but surprises the room by telling us that the most hostile views of the rail network is actually reserved for those who don’t use it!

The debate concludes with an overview from each panel member. All agree that a good reputation can add huge value to a company when managed well, that they are difficult to build and maintain, but that in the wrong hands a corporate reputation is easy to destroy.

With that, the first day of the conference comes to a close and the delegates make their way back to their hotels to prepare for the lavish Gala Dinner that is being held later tonight.

Tuesday 27th November

This morning David Cameron opened the second day of the CBI conference to an enthusiastic welcome.

After meeting delegates at the Harvey Nash stand he takes the stage and launched into his speech which was designed to show the business community that the Conservative Party is ready to run the country again and that he is going to be a more appealing occupant of No 10 than current Prime Minister Gordon Brown, who was heckled during his appearance here yesterday.

Cameron sets out his agenda by claiming there needs to be a big change in central government. Widely quoted in the media, he said, "Government has got too big, and too bossy". He states that changing the railways and infrastructures is not a hard thing, but it does take money, money that taxpayers must be willing to pay if they want these things. He tells the conference that he wants to decentralize Government. He argues that he doesn’t want to use today's technology to control the UK population like Gordon Brown and his ID card proposals, but rather help and liberate the British people.

Considering his audience Cameron makes sure he reinforces the fact that the British economy has prospered despite the longest and most complex tax code in the world rather than because of it. He asks the business leaders in the room to think about what they could achieve without an interfering Government.

The audience is also treated to some playful baiting of the embattled Chancellor, Alistair Darling, saying that even a half competent Chancellor would admit he is wrong if he had lost the personal data of half the population!

Cameron gives his slant on the skills debate that Gordon Brown spent so much time the previous day speaking about. A Conservative Government, he says, would encourage more private enterprises to invest in schools and higher education institutions to ensure the next generation workforce are prepared for a role in the global economy.

Extending his session with the audience he opened the floor for questions, but unlike the Prime Minister (who only fielded questions in batches of three that were selected by the conference chairman) Cameron engaged directly with each delegate with a question.

In a relaxed and good natured session he took questions on a range of topics including one from Harvey Nash Director Nigel Parslow, who asked how a Conservative Government would persuade the US and China - the world’s two biggest polluters - to sign up to the new climate change framework that is the basis of the upcoming Bali environmental conference.

Climate Change Debate

The CBI launched a major report on the role business should play in tackling climate change immediately before this year's CBI conference and it has generated huge media interest. Click here to see the related press release.
The next session of the conference debates the report and the business solutions to climate change. Ben Verwaayen, Chief Executive of BT and chairman of the CBI climate change taskforce opens the session with a keynote address.

He argues that the rate of progress UK business is making on tackling climate change issues is not good enough and that the UK will miss its 2020 emissions targets. He stresses that teamwork will be critical - the business community, Government and the consumer - all have to play their part.

Talking of the report, Verwaayen says that 50% of the proposed charges are easily implementable and can make an immediate impact; however 50% is longer term and requires more investment. He admits that the proposals translate into a cost burden on the UK consumer of about £100 per household per year, but, that the cost of doing nothing will be far higher. He echoes the report title by saying that business "will do what it takes to achieve success.

He is joined on stage by other members of the climate change taskforce: Hilary Benn MP, Secretary of State for DEFRA, Sir Terry Leahy, Chief Executive of Tesco, Robert Napier, Chairman of The Met Office and Philippe Varin, Chief Executive of Corus.

The audience is told that business should adopt the same approach to climate change as it has to health and safety standards. The panel also argue that climate change offers a one trillion pound business opportunity, in addition to the moral necessity to ensure the next generation is equipped to deal with changing weather conditions. UK business can lead the world by developing the new technologies and the new approaches that will be needed to tackle climate change.

Sir Terry Leahy points out that consumers are a vital component in the climate change solution. As a group they are responsible for 60% of the UK’s emissions and that getting them to change their habits will have a major impact in the UK's ability to reach global environmental targets. He tells the conference that perception is changing and that sales of energy efficient light bulbs have increased by 400% in the last six months at Tesco as consumers continue to become more environmentally conscious. He also points out that Tesco customers have saved one billion plastic bags this year with the incentive of club card points for recycling old carriers.

The Environment Minister, Hilary Benn, applauds the conference for seriously debating the issue for the first time and says that Government will also "do what it takes" when they are at the global environmental conference in Bali with other Governments from around the world. Benn says they will be drafting (and hopefully signing!) the successor to Kyoto treaty.

Another sound bite from the panel is "you have to be green to grow" which reflects the business opportunity argued from the stage. But one speaker, Robert Napier, Chairman of The Met Office, also has a stern warning - for all the positive words it may already be too late to reverse the advancement of climate change - and that businesses should prepare for the cost of increasingly adverse weather and higher insurance costs for floods and storm damage.

The panel closes with another call to action that, despite having some of the best scientific technology in the world, there is still huge opportunity for advancement. The economic, scientific and environmental conditions are now aligned for UK businesses to make money and save the planet, but the clock is ticking!

Alistair Darling, Chancellor of the Exchequer

The last keynote speaker of the conference is the embattled Chancellor of the Exchequer, Alistair Darling. He speaks on the same day as yet another question is raised about the judgement of his colleagues in Government with the embarrassing disclosure that Labour has been accepting major finance contributions from less than reputable sources.

However, here at the CBI the Chancellor is upbeat about the economic achievements of the last decade of Labour government. He reinforces his point by stating “Britain has a strong economy. We have highly successful competitive businesses, many here today. We have seen over ten years of uninterrupted growth.”

Comparing UK growth to that seen in the rest of the World he states “over the past ten years Britain has been the only major economy to enjoy continuous growth.” All very positive statements but the audience know there are a number of very public crises that the Chancellor has been at the centre of during the previous months and there is widespread expectancy that he will use the platform at the CBI to defend his record.

We do not have to wait long!

Darling says he wants to “tackle head on” those in the media and business community who say the Treasury should not have provided financial support for Northern Rock. His view is that the Government could have let the bank collapse, but that they intervened for the long term benefit of other UK financial institutions because confidence would inevitably have been shaken in Britain’s financial industry should the bank have fallen.

His recent position to raise capital gains tax (CGT) from 10% to 18% is another topic for defence with this business audience, and he strikes a conciliatory tone when he says he recognises that the move has not been popular and that his department is listening to what the business community is saying, he states they will “publish final proposals in the next three weeks”.

We at Harvey Nash are encouraged to see that there is a strong message for investment in education and skills, mirroring his boss’s statement from yesterday, although the Chancellor provides no details on his spending commitments for education projects.

At the end of his speech Darling remains on stage to answer questions from the audience, of which there are many. All in all he has delivered a stoic defence of his department’s track record and hinted at positive announcements to come, but he leaves to a less than rousing round of applause.

Conclusion

And so the 2007 CBI Conference comes to an end!

We have enjoyed lively debate on some of the most pressing issues for UK business, including protecting business reputation and the role of business in the global reaction to climate change.

We have heard from the leaders of the three main political parties who outlined their economic credentials.

Harvey Nash has again taken a leading role in shaping the debate and has maintained a high profile position within the senior business community at this year’s conference.

If the majority of commentators and futurists are proved right we are facing a more uncertain economic period in 2008, which makes the support of organisations like the CBI all the more important.

However, despite reports of economic pessimism and business faith in Government competency at an all time low, delegates at this year’s CBI Conference remain upbeat. Many of those who visited the Harvey Nash stand expressed genuine excitement by the opportunities presented by the constantly evolving global marketplace.

So while the issues will certainly evolve over the next 12 months, and some trading conditions may deteriorate, it is vital for UK firms and business leaders to promote their ability extensively on the international stage.

UK plc still has a plethora of talent available to help ensure Britain’s success story continues.

See you all in 2008!

During the 1990’s a real minority of young professionals and fast track graduates were considering a future in the public sector.

So a larger proportion of the fresh talent pool was automatically available to us in business.

Now, the anecdotal research at Harvey Nash indicates that as many as 60% are actively considering building their careers outside the corporate world, within the public and voluntary sector, NGO’s, etc and many more than ever before see independence and starting their own business as a personal objective.

The result is that we now don’t have automatic access to the largest pool of talent!

In fact we have a battle on our hands to win their hearts and minds.

And much of this has to do with the reputation of business.

2007 feels like one of the worst periods for damaging headlines around business reputation,
a drip-drip of corrosive negative stories about fraud, fat cats, rewards for failure, unethical trading, poor environmental policies - its all there.

So why do we care and why are we debating this here this afternoon?

Well, Harvey Nash surveyed over 100 senior business leaders on their views around corporate reputation.

• Unsurprisingly, 95% believed their business reputation had a direct impact on their profits!
• Almost three quarters believe fostering a positive reputation is more important today than five years ago.

So it is clear that the majority of us here today believe that our reputation in the market place directly affects our ability to attract and retain the talent of tomorrow.

Attracting those future leaders is critical for sustainable business success

The simple truth is, our brands are not simply trademarks, they tell the story of the organisation and leadership behind the brand.

In our view, it all boils down to values.

The future leaders will come from Generation Y. In addition to the senior headhunting assignments we are well known for at Harvey Nash, we also both employ many of these rising stars and also place them with clients around the world,

from the West Coast of the US Seatlle & San Francisco all the way to our offshore IT centre in Ho Chi Minh City in Vietnam.

Amazingly they all have a strong set of common values which drives them irrespective of where they live and come from.

Alleviating poverty, protecting the environment, fair-trade, tolerance for other cultures – just to name a few

They are also very connected; totally at ease with the world of the internet, iPod, YouTube, Facebook.

But their main concern is about being genuine. They identify with a corporate brand by observing the leadership of the company. Particularly the CEO.

And here’s the big point!

Corporate reputation matters because the shortage of talent will seriously inhibit our ability to grow our organisations and be successful in the global economy.

So, as part of this panel, what do I think we can do to improve the reputation of business, what have we done at Harvey Nash AND what do we recommend our clients do?

1. One, we must recalibrate our marketing messages for authenticity.

We can’t make spurious claims that are not reflective of the reality. Otherwise as Greg with his media background will tell you, our organisations will be the subject of those fascinating public company hangings on Channel 4 or the BBC.

2. Two, we need to embed a culture of honesty and transparency into the very fabric of our company culture.

This is one of my personal anthems at Harvey Nash. Talk to the leadership in our organisation and they will echo this. Its not easy but it’s a priority for us.

3. And three, if we want the trust and respect of Global Generation Y, we need to get used to having a reverse gear.

As leaders we make mistakes. And, if the leader is “not for turning” under any circumstances I would suggest in my experience that’s going to fail to impress those future rising stars we want to attract and retain.

For example: We know that with the internet and its instant broadcast capability, damage to reputation can be communicated to untold millions within a very short space of time.

Just look at the small student group on Facebook who literally forced one of the largest banks in the world to capitulate on student loan charges over the summer.

I think this was a success as it showed engagement and admission of a mistake by the organisation, in my view a real positive message. There’s huge opportunity to use the internet dynamic to demonstrate the power of a company’s values to whole communities online!

Be honest – admit we have made the mistake, take responsibility, back out of the dead end and go off in the correct direction. People respond to leaders who are humble. Just look at the power of Nelson Mandela.

So the 3rd point is one of leadership & engagement.

There is no time like the present. As the Voice of Business we can collectively take action today to address the current perception issues we face draw the cynicism out of corporate values which is the first step to restoring our collective business reputation.

Because, the generation that cares the most about corporate reputation is the talent that is so crucial to our global competitive advantage NOW ….and in the future.

….PATIENCE

This year's conference is taking place at a time when the reality of the global economy is clearer than it has ever been.

The problems that started in the American housing market have quickly affected countries across the world. There are reasons to be cautious. We don't yet know the full effects of this uncertainty.

But there are good reasons too to be optimistic.

This year world growth will again be around five per cent - above its thirty year average for the third year in a row.

Britain has a strong economy.

We have highly successful competitive businesses, many here today. We have seen over ten years of uninterrupted growth.

And as I said in the Pre Budget Report whilst that growth will slow next year, the economy will continue to grow next year and the year after.

It is the Government's job to work with you as we deal with the present uncertainties. But there are also huge opportunities ahead as many of your members will testify. You are winning orders here and across the world in every sector competing with the best.

Supporting and sustaining businesses remains central to everything we do and I know that we have worked well together over the past decade and we will continue to do so.

Our shared priorities must be
" to maintain stability and flexibility in the face of financial uncertainty,
" to break down barriers to trade in the face of increasing calls for protectionism,
" to respond to the global challenges of competition and climate change.

And that means taking decisions that may be difficult - just as you do every day. And having made those decisions we see them through.

Over the past ten years Britain has been the only major economy to enjoy continuous growth.

Indeed in that time Britain is the only major economy to have grown continuously.

Our determination to take the difficult decisions means that even in today's uncertain times - with turbulence in international financial markets and record oil prices - we can be confident of the resilience of the UK economy.

Now, economic stability depends on financial stability.

In the financial markets, it is clear that both here and internationally we need to strengthen surveillance and supervision to head off problems before they arise.

We are working with the IMF and the Financial Stability Forum to provide far greater transparency so that institutions understand the risk to which they might be exposed.

And here at home there are lessons to be learned. I have made it clear our response has to be proportionate and appropriate, but that we will strengthen the regulatory system where it is needed.

And let me tackle head on those who now say that we should not have provided financial support for Northern Rock.

This was a bank that depended on being able to raise billions of pounds on the money market. When that was no longer possible, we had a choice.

We could have let it go down. But I believe that the consequences for the banking system, including the likely knock-on consequences for other financial institutions in which confidence would inevitably have been shaken, and for Britain would have been extremely damaging.

That is why I authorized the Bank of England to provide support. At the time that intervention was widely supported, even by some who now imply that it was the wrong thing to do and who are not prepared to accept the consequences of that support.

I believe it was right to intervene; that it was right to put in place guarantees arrangements to savers. And it is right to see it through.

It was never going to be an easy decision. There were always going to be critics when the going got tough.

But that is not the point. Far worse would have been to have done nothing, to have allowed that bank to have gone under. I believe this would have had very serious consequences for the banking system and for the British economy.

On Monday, Northern Rock announced that it had decided to take forward discussions on an accelerated basis with a consortium led by Virgin.

I am very clear that any proposal for the future of Northern Rock must be consistent with the principles I have set out, namely protecting the vital interests of the taxpayer, depositors and wider financial stability.

I welcome Northern Rock's decision to work with Virgin to turn its proposal into a hard agreement with Northern Rock and the authorities. Discussions are now proceeding urgently.

Governments will never succeed in avoiding the unexpected and the unwelcome and this episode certainly answers to both descriptions.

But Government should also be judged by how it responds to these difficulties when they arise. That response must be open and measured; perhaps not always the stuff of headlines but certainly the best basis of solutions.

Take the loss of the child benefit data. It is a huge problem, but one that has to be dealt with. That is what Government has to do in the face of problems like this. It is difficult but we have to get on with it and sort it out.

But it is also the job of Government to set out its long term vision for the country.

A vision of a strong and successful nation with its businesses competing with the best in a fast changing global economy.
And maintaining Britain's stability is my priority because it is the precondition for the long term prosperity of this country. And I have set out more details on this today.

So too is the need for Government and business to work together.

It is for business to win orders for goods and services.

But business rightly looks to Government to create the conditions for this success.

If we are to compete we must ensure that Britain remains a good place to business:

" flexible enough to adapt to change, with the right tax and regulatory approach,

" and able, because of the strength of our economy, to make long term investment from education and skills to science and transport, supporting business at every stage.

And we must also maintain our commitment to free and fair trade, resisting calls for protectionism, wherever they come from.

In each, we need to make the right long term decisions and see them through.

First, maintaining Britain as a good place to do business means ensuring we have a tax regime that is competitive, fair and simple.

That is why in the Budget earlier this year we announced we are cutting the corporation tax main rate to 28p and simplifying the allowances for investment. The basic rate of income tax will be reduced to 20p, helping not just the self-employed but small businesses too.

Simplication of the tax system is important. Because complexity brings increased costs.

I know that my proposals to introduce a single rate of capital gains tax have been controversial. That was inevitable.

We are working with the CBI and other business organisations to listen to what you have to say. I expect to publish final proposals in the next three weeks.

But many have long called for a simplified tax system and have long complained about the complexity of the tax system.

And we have to recognise that one person's tax exemption is another's complexity - simplification is not the easy option. But it is the right one wherever it is possible.

Let me say this on the principle: capital gains like any other profits ultimately come from the strength of the economy.

So I believe it is right and fair that they pay their share in tax as a contribution to the economy's future strength.

But because we want to reward investment, we are right to now tax gains at a lower rate than income - and the new single rate is among the most competitive in the world, is less than half the top rate for income, and is also less than half what it was ten years ago.
It is also right to make the system more straightforward and sustainable, with a tax that is easier comply with.

I am listening to what you say and will report to Parliament very shortly.

Britain has 800,000 more businesses set up in the last ten years and OECD says UK has lowest barriers to entrepreneurship of all its countries.

I am determined to do everything I can to keep it that way and keep Britain as a good place to do business.

So in the run up to the Budget, I want to continue to work with the CBI and other business organisations to ensure that encouraging enterprise remains at the heart of this approach.

That is also why we need to continue to improve the way we regulate so our approach is proportionate, competitive, and principled.

What is needed is genuine cultural change. If you don't need to regulate, then don't. And if we do, do what's necessary - no gold plating.

All of us know that effective regulation can help business.

All of us appreciate that it is right to help new mothers and fathers by giving them some time off at the birth of their children. Many of us would have liked that ourselves.

And proper regulation to protect employees against exploitation from the unscrupulous.

But that regulation has to be proportionate. Take health and safety, we have cut the number of forms by 50 per cent, my colleague John Hutton is reviewing what more we can do for small business, and the Health and Safety Executive is publishing practical suggestions that will reduce the paperwork burden firms face while protecting their staff.

Or take the risks and procedure relating to industrial tribunals, where I set out proposals for reform when I was at the DTI, which have now been agreed and will save businesses over £100 million a year.

Britain is a good place to start up and maintain a business. And creating the right conditions for success depends on sustained investment.

For decades Britain's problem was because of its inherent weakness it was never able to sustain investment in science or transport. It would start and then stop.

As a result of ten years of sustained growth, of only making promises on tax and spend that were costed and based on what we could afford, we have been able to maintain investment year on year. We will continue to do that.

Investing in skills and making the reforms necessary to raise our educational standards and levels of innovation, as the Prime Minister said yesterday.

Britain is now investing as much in the intangible assets that are essential for our future - in innovation and intellectual property, in software and skills - as we are in more traditional physical assets - and as much as the United States. We will continue to support R and D through tax credits.

And we will continue to match public sector with private sector investment. We will continue to expand the role of the private sector providing a greater diversity of supply, creating new opportunities for committed, innovative business and third sector organizations, as my colleague Peter Hain is announcing today in the jobs market.

In transport, where public and private sectors work together, committing to investment over the long term also plays a critical part.

Which is why in the spending review I extended the long term funding guideline for transport of annual growth of 2¼ per cent above inflation for the next ten years.

Putting right decades of underinvetsment, providing the roads and railways we need.

I introduced the Bill to build Crossrail in 2005. I have now approved the financing package - essential for the competitiveness of not just the City of London but for the whole country.

In 2003 I published a White Paper setting out the need for an expansion to our airport capacity.

Last week the Government launched the consultation on the expansion of Heathrow.

Provided the environmental and access conditions can be met, the right thing for the growth of the economy and prosperity of our country is to build a third runway. And proposals for a second runway at Stansted are already underway.

And this is one of the tests that any Government has to meet. Has it the strength of purpose to see through difficult decisions, often ducked in the past, but which are essential for our economic success.

There is a simple choice. Other countries are making plans for the future. So must we.

So too in energy supply. Today's record oil prices simply underline the challenge we face, but also that in addressing it our economic and environmental objectives are increasing at one.

We need increased stability and security of supply from a greater diversity and cleaner sources of energy.

And as I made clear when I published the Energy White Paper in the summer nuclear power potentially has a role to play in tackling climate change and improving energy security.

So our preliminary view is that, subject to the outcome of our consultation, it should be part of the mix of future energy options. We will announce our final decision early in the New Year.

And if it is to be part of the mix, it can't be the last resort - if that was to be the case, because of the time it takes to build new power stations, by the time you have decided you need them, it would be too late.
And, as the Prime Minister said last week, there are huge business opportunities in new markets, products and jobs here as well. Sir Nicholas Stern recognised this.

Your report published yesterday and debated this morning did too. The value added of the low carbon energy sector could be as much as $3 trillion worldwide by 2050.

I want to see our British Energy Technology at the cutting edge of environmental innovation and London as the centre of the global carbon market.

There are difficult choices to be made as we seek to secure our prosperity and the environment. But ultimately there cannot be any long term trade off between strong and sustainable growth.

Modernising our infrastructure will require difficult decisions too, as we balance our environmental and economic priorites, and national and local needs.

The Planning Bill before Parliament is a critical part of this.

It is a test for all political parties. Seven years to get planning permission to build terminal 5. Six and a half years for the North Yorkshire power line application. The present system doesn't work and it needs to be reformed.

Our proposals will mean greater debate on energy or aviation policy, the opportunities fior individuals to be heard in a process that isn't drawn out month after month year after year, and greater certainty in decision making.

The Bill deserves support.

It is by making these decisions we can be confident of our success in a more open global economy. And I am committed to making our economy open to trade and investment. Our future depends on it.

The fact that over the past ten years world trade has grown nearly twice as fast as world growth is a demonstration that that those economies which are open to trade are most likely to succeed.

And the fact that Britain is a world leader in capital markets, already the most open part of the world economy, is a demonstration that Britain is well placed to succeed.

Our financial services trade surplus is the largest in the world, twice that of our nearest rival.

Indeed our openness has defined our history and our past successes.

And I am determined it defines our future and our continued success.

It is essential that Europe too becomes far more competitive. Last week the Commission published proposals for reform of the Single Market, which we called for earlier this year.

We must continue to argue against restrictions and unnecessary regulation which damage our competitiveness and which are holding back growth in the European economy.

Reducing agricultural tariffs, opening up completely the energy and communications and utilities markets, and properly completing the creation of the single market for services.

We will push for closer EU-US trade ties, including in financial markets.

We will do all we can to help secure a global trade deal.

We believe in breaking down trade barriers, securing free and fair trade across the world. We will continue to lead by example. But to secure the full benefits of openness for the global economy, others must follow.

We welcome inward investment. Indeed our country depends on it. Britain wins more inward investment as a share of its economy than any other major country.

But I also believe that all investors not only have to behave commercially but also be seen to behave commercially.

For sovereign wealth funds, I welcome the IMF and OECD proposals to establish the international guidelines including high standards of governance and appropriate transparency.

Just as we welcome investment here, there needs to be a level playing field for investment across the world: it benefits everyone if we all are open.

So when I met the Competition Commissioner Neelie Kroes yesterday, I agree that where a Member State fails to open the markets it has agreed to, there must be strong enforcement action by the Commission.

It must be made easier for individual businesses to overcome artificial and illegal barriers are erected that prevent them doing their legitimate business.

When I attend the G7 Finance Ministers meeting in Japan next year, business priorities will be the top of my agenda, I will argue that the G7 can no longer just be open amongst ourselves, but I want the G7 to become an advocate for openness between all countries.

And when I visit China next year, I will invite British business leaders to join me, in promoting greater trade between our two countries, and working with the Chinese Government to encourage more investment, including through tackling infringement and promoting adequate enforcement of intellectual property rights.

I will continue to do everything I can to break down barriers to trade and promote British trade.

There are difficult issues that need to be confronted if we are to maintain our competitiveness and secure our prosperity.

" Whether it is maintaining our stability in response to financial uncertainty,

" promoting free trade and open markets in response to protectionism,

" adapting in response to climate change,

" making the difficult choices - planning reform, aviation capacity, energy generation - in response to competitive challenges,

" these are issues that have to be tackled. If we are to seize the opportunities available to us in the new global economy

People rightly expect governments to confront these issues and have the commitment and determination to take the right long term decisions.

We will continue to respond and deal with the unexpected and difficult decisions that confront any government from time to time.

We have the strength of purpose to see through the current international uncertainty, backed by one of the strongest economies in the developed world.

And we have a vision of a successful Britain underpinned by successful British businesses competing with the best across the world.

I am determined that we keep it that way.

27 November, 2007

But before I answer your questions, I want to give you an element of political certainty…

…what you can expect from a Conservative government, and what you can expect from me as Prime Minister. And I want to be absolutely frank with you today.

You can expect a big change, because that's what our country and our economy need. Government has got too big and too bossy and a big change is required. Our national infrastructure is inadequate and a big change is required.

Our education system, the climate for enterprise, tax, regulation, public spending - in all these areas we're going in the wrong direction and a big change is required…

…and I want to show you today what those changes will be and what they mean for business.

BUSINESS TODAY

Business faces huge pressures today, and government's role should be to make it easier, not harder, to do business. Easier, not harder, to set up and grow a new company, to hire new labour, to borrow and invest.

That means big changes in three areas. First, to strengthen economic stability. Second, to improve our national infrastructure. And third, to create a real climate of enterprise. Let me take each of these in turn.

ECONOMIC STABILITY

George Osborne and I are determined to create a more secure framework for the economy. Right now we are seeing the consequences of the Northern Rock disaster.

Of course there have been problems with credit around the world. As the Government is always anxious to remind us, this crisis began in America. But only in Britain have we seen people queuing to withdraw their savings.

I believe we must urgently examine the way banks are regulated in Britain, as the tripartite arrangements set up by Gordon Brown are clearly not working properly. We must also develop a sustainable system of deposit insurance.

And we need to make sure that our long-term pension plans are affordable.

More widely, our proposal for a new triple lock on stability - enhancing the MPC's independence, independent monitoring of the fiscal rules, and independent national statistics - will help to reduce the threat of turbulence.

INFRASTRUCTURE

But strengthening economic stability is just the start. We urgently need to improve our national infrastructure. Here I think it's time for some straight talking.

For years, you've heard ministers make promises from this platform - talking about a skills revolution, about a transport revolution, about a green revolution. And not much happens. Why?

Because they never deal with the underlying problems. Of course Britain needs - and British business needs - a skilled workforce. But it won't happen unless we raise standards of literacy and numeracy in our schools.

So we need big changes: to make sure every child can read by six, and to open up the supply of education to new providers who will raise standards.

Of course we need a transport system that makes it possible to move goods and people easily round the country. But it won't happen unless we accept that big infrastructure projects cost big money - and that the people who will benefit from them should help pay for them.

So we need big changes: upgrading our road network, using tolls where appropriate And now that St Pancras is open, let's look again at the huge transforming power of high-speed rail. Of course we need to secure our energy supply while meeting environmental obligations.But again, a complete lack of long-term planning has put our energy security at risk.

In ten years, no action to increase decentralised energy. Nothing to open up the grid. No action to change planning law so it's easier to open new power stations. We will remove those restrictions and enable nuclear power to make its case on a level playing field.

But a level playing field means exactly that: no taxpayer subsidies for nuclear power; no compromise on our commitment to fiscal responsibility and economic stability. And a level playing-field also means a big change on green energy, giving it a transformational boost.

Labour's shameful and short-sighted ten-year neglect of green energy - a neglect which Gordon Brown has done nothing to remedy - has left this country lagging woefully behind our competitors.

So we will shortly be publishing our plans for a green energy revolution in Britain, a vital component of creating the right national infrastructure for business success.

CLIMATE OF ENTERPRISE

Ensuring economic stability; creating the right infrastructure: these are the foundations of prosperity.

But to make the most of the opportunities of the twenty-first century, we've got to create a real climate of enterprise in our country. How does it help to put burdens on our wealth-creators while France, Germany, Australia and Spain are all busy liberalising, cutting tax and cutting regulation?

Regulation imposed by this government has cost our businesses more than £55 billion.Our economy is labouring under the longest tax code in the world, more than double the length that Labour inherited in 1997. And in his last budget as Chancellor, Gordon Brown increased small business corporation tax from 19p to 22p in the pound.

We're leading the fight against the small business tax rise, and with the help of PricewaterhouseCoopers we're developing a detailed plan to simplify the tax system and sweep away complex reliefs and allowances.

That's the way we can reduce the headline rate of corporation tax.

CAPITAL GAINS TAX

And we should be making it easier for people to start and grow businesses and to profit from it - not more difficult. That's why I'm calling on Alistair Darling to resolve the uncertainty he's created when he speaks to you later today.

He must tell us what the Capital Gains Tax system will look like in five months time.

The best thing he could do is stand up, admit he's made a mistake and abandon his ill-conceived plans.

If he attempts further changes in order to try and recover the situation they must not be sticking plaster changes to proposals that have so angered entrepreneurs and the business community. If he proposes real changes, they should be judged against two vital yardsticks.

First, do they deliver real simplification of the tax system?

Second - and most important - will they make the UK a better place to be an entrepreneur and to invest in the new businesses that create the jobs and wealth that we need for the future?

If the Chancellor fails to abandon or radically alter his approach we will fight his tax hike on Britain's entrepreneurs every step of the way, both inside and outside Parliament

SHARING THE PROCEEDS OF GROWTH

Of course, it's easy for politicians to talk about cutting this or that individual tax. Gordon Brown has cut corporation tax by five pence in the pound - but we've got the highest tax burden in our peacetime history.

Yes, some taxes can go up to help others go down. We're committed to that principle so we can use tax to help families and cut pollution. But what really matters is reducing the share of the national income taken by the state - to ensure that over time the economy grows faster than the government.

As Prime Minister I want the organisations that you all run, to grow more quickly than the organisation I'm running. Only then can we get the costs I impose on you down.

BIG GOVERNMENT AND THE BUREAUCRATIC AGE

That means big changes in our very system of government. We're living with a 20th century model of government for a 21st century economy.

We've got decentralised, footloose, global companies.

We've got an informed, activist, grown-up population.

We've got amazing technology, enabling co-operation on a truly liberal basis - bottom-up and self-regulated. But we've got a government that tries to use that technology not to empower and liberate, but to control.

Big, cumbersome, centralised bureaucracies, trying to control a world that has moved on.

I believe that the days of big government are numbered.

The bureaucratic age is coming to an end. People just won't stand for it anymore. And the sooner ministers realise it the better. Look at how things are now.

The result of modern bureaucracy is chronic, unforgivable waste - waste which feeds directly into higher tax bills for families and businesses.

The Department for Work and Pensions misplaced two and half billion pounds last year - most of it not through fraud, but through error.

£500 million was spent on the National Literacy Strategy - with no impact on reading levels. Nearly £900 million was spent on fighting truancy - with no impact on truancy.

The NHS has been through a series of massive upheavals in the last ten years - apparently the cost of all that was £3 billion and the result is a system no better at doing its job.

In fact thanks to the way the Government has poured money into the NHS without reforming it, £19 billion has gone on increased costs - no new equipment or medicine or staff: just higher bills for the same things.

Big government and the bureaucratic age are institutionally wasteful.

But it's worse than that: what really gets me is the deliberate extravagance committed by the people at the top of the government machine. The administrators and managers and quangocrats who administer public money on our behalf.

Apparently managers of the exams watchdog, the Qualifications and Curriculum Authority spent more than £1.6 million of taxpayers money in just six months - on hotels and conference centres for themselves.

Officials at the Home Office spend £800,000 a year on taxis - charged straight to you and me.

The MoD has committed £2.3 billion to a new headquarters for itself - while our troops in Iraq and Afghanistan are going without the kit they need, and their families are living in substandard housing.

All these stories tell me one thing. Big centralised bureaucracies are incompetent and they can't be trusted.

What we have learnt over the last few days is that when it comes to regulation and legislation there's one law for government - and another one for everyone else.

These people, they set up these quangos, they pass these laws, they introduce these regulations, they insist on this bit of scrutiny, that bit of compliance - and whether it's their own government debts or their own party machine they just don't obey it.

There is a time in the life of every government when they've been in power for so long that complacency tips over into arrogance, and arrogance even becomes indifference to the law. They've passed that point and change, real change, is needed now in Britain

They're casual about spending our money. Don't tell me we can't do better. Well let me make it clear: a big change is on the way.

We will be a Government for the post-bureaucratic age - careful with public money, competent in public administration, conscious of the limitations of government.

CORPORATE RESPONSIBILITY

But there's one last thing I want to say about costs and the relationship between business and government.

As Prime Minister, I will need something from you as well.

If we share a vision of a world in which business has the freedom to succeed in a low-tax, low-regulation economy, sustained over the long-term, we politicians need your help. We need your help in reducing the demand for government spending, and the demand for regulation. That means your help in cutting the costs of social and environmental failure. We can't do it on our own.

We need your help in tackling the big issues confronting our society: from crime to climate change; from poverty to pollution; from obesity to biodiversity; from family breakdown to forest depletion.

That's why I'm so delighted to see your excellent report on climate change yesterday. We are all in this together, and if we work together, understand our responsibilities and embrace the opportunities of the modern world, there is no limit to what we can achieve.

I have a clear vision of Britain: where people have more opportunity and power over their lives.

A Britain where families are stronger and society is more responsible. And a Britain which is safer and greener.I'm also clear about the role of the state in achieving those objectives.

In place of the bureaucratic over-reach which sees the state trying to control everything in sight, while not running anything right, we see a state that is properly focused on delivering its responsibilities, while trusting individuals, families, businesses and communities to get on with their lives.

In place of the bureaucratic age which sees wisdom, power and moral authority invested in the state and its growing army of agencies and quangos we see a new post-bureaucratic age where the information revolution and our new world of freedom makes it possible to put real power in people's hands.

That is my vision for the future, a future fit for the twenty-first century, a future of change, optimism and hope.

ENDS

27 November, 2007

I don’t believe this is justified. Having a highly respected, world class economist, Vince Cable, as our shadow Chancellor, and now acting leader, seems not to be enough.

Perhaps we have struggled because we have allowed ourselves to be seen as uninterested in business.

And we have been portrayed by our opponents as the high tax party, as if we advocate taxes for the sake of more taxation.

Under my leadership, both our low poll ratings on the economy and unfounded caricatures of our tax policies would come to an end.

Liberals, let’s remember, are the natural friends of entrepreneurialism. The only party that has always stood for free and fair trade. The party of Cobden and Bright, Cabdury and Rowntree.

And I, personally, have a longstanding commitment to business and economics.

I began my career winning a Financial Times prize for writing about economic reforms in eastern Europe – a prize awarded to me 15 years ago by the then editor of the FT, now your Director General.

I managed economic development projects in Central Asia.

I was an international trade negotiator – leading the EU team on China and Russia’s accession to the World Trade Organisation.

I was Trade and Industry Spokesman in the European Parliament, where I pushed through new Single Market legislation in record time, opening telephone markets across Europe to competition.

And I did some vital early work on liberalising energy markets. Breaking down damaging monopolies has been a centrepiece of my work – and my political philosophy.
I believe this government has let business down.

In Westminster, I was at the forefront of the campaign against the extradition of the Nat West Three.

I called the first parliamentary emergency debate in over four years, and continue to make representations to the government on the issue.

From the massive, irresponsible credit expansion to issues like the Nat West three - this Government is simply getting it wrong.

The Brown-Darling partnership is now putting economic stability at risk and the conditions for long-term business success in danger.

They have arguably overintervened where they didn’t need to, and failed to intervene where they should. Government intervention in the economy should be light but effective. But Governments do need to intervene when markets fail. This includes intervention to stop monopoly behaviour, to protect consumers from price fixing and irresponsible lending, and to limit externalities like pollution.

The Northern Rock crisis has exposed some systemic regulatory failings.

At this stage the absolute top priority is to make sure we retrieve the £25bn of taxpayers money that has been invested, whilst safeguarding the significant contribution of Northern Rock to the economy of the North East.

Any private sector offer must be balanced against the alternative of bringing the bank into interim national ownership so it can be sold on.

But in the longer term, we need to look again at tripartite banking regulation to ensure we don’t find ourselves in this position again.

We need an independent inquiry, and where necessary an overhaul of the tripartite system.

Whatever happens, the Bank of England needs – at a senior level – to secure greater expertise in relation to the workings of the financial markets.

While the Bank’s macroeconomic competence is hugely respected, in the area of markets it still seems too much like a gentleman in a world of players.

The government, for its part, has to deal with the fundamentals of economic success. I believe Government must be an enabling state, laying the foundations for economic success - a skilled workforce, strong competition policies, a tax system that is fair and regulation that is effective and proportionate. But then stepping back to let business get on with the job of creating wealth.

Globalisation is one of the greatest forces of our time. But it has down sides as well as up sides.

Both business and government have a role in recognising that, and mitigating the helplessness that people feel in the face of untrammelled globalisation.

I believe multilateralism must be at the heart our response.

Britain wouldn’t have anything like the international leverage we have without our role in the European Union.

The EU has transformed itself into one of the most sophisticated responses to globalisation there is.

And it is leading the way in market-led responses to climate change, with carbon emissions trading.

And yet the Government does its best to pretend the EU doesn’t exist, while the Conservatives are flirting with an agenda that will lead us out of Europe and into isolation and decline.

Of course Europe needs reform – it must become more transparent, and it must return some powers to focus on what it does best.

But our increasingly unserious engagement with Europe is a betrayal of our business interests.

For starters, I want to see the UK play a fuller leadership role in the EU and the WTO to bring the ongoing WTO Doha Development Trade Round to a successful conclusion. Business groups have, if we’re frank, not been forceful enough in explaining the importance that the WTO talks should succeed. I was present at the inception of those talks in Doha. I am in no doubt that their failure would lead to a rash of trade unilateralism and protectionism which would be disastrous for British business.

Globalisation is also bringing increased numbers of migrant workers to our country.

Our economy has grown enormously on the back of migrant labour in the last 10 years, and will need migrant workers in the future.

Yet a mood of protectionism is starting to take root. Gordon Brown’s farcical pledge to deliver “British jobs for British workers” was, I fear, part of a growing trend.

We need to plan better for the effects of inward migration. We need to focus on integration as well as immigration.

But the fantasy that Britain can – or should – somehow turn off the flow of migrant labour like a tap is not only wrong, it is dangerous.

At the same time, large flows of skilled migrant labour have made it easier for us to ignore an unskilled underclass in Britain itself. We face a huge skills deficit in this country.

It is a national disgrace that as many as a quarter of our young people can’t read and write properly.

I’ve promised to put £2.5bn into boosting education funding for the poorest children. And to help tackle the skills gap for adults, I’ve pledged to change the way we charge for work permits to raise extra money to train domestic workers.

In a world of increasing mobility – of finance, trade and investment, as well as people, governments must compete to create the right conditions.

On too many measures Britain is struggling to compete against both traditional competitors in Western Europe and the United States but also emerging economies like India, China and Brazil.

Tax is central to our competitive edge.

The overall tax burden has gone far enough.

Liberal Democrats have always been ahead of the curve on the tax debate.

We called for an extra penny on income tax for education when the share of GDP taken by public spending was at a post-war low.

Now it’s at a post-war high. So we have moved to a tax neutral position overall, and are proposing to reduce the basic rate of income tax just 16p – and increase it on polluting activities instead.

For business tax, we should go back to the old principle of lower rates, and fewer breaks.

Including for Capital Gains Tax. The CBI was right to be up in arms about the way reforms have been brought forward.

But I’m afraid I’m no fan of taper relief. Taxation should be simple.

I don’t often agree with Nigel Lawson, but on this, I do.

I see no reason why income and capital gains should be taxed differently. And that’s what we’ve proposed - a fair, progressive and simple system with no perverse incentives.

I do want to look at retirement relief, so entrepreneurs who sell their business to pay for their pension don’t lose out. Britain needs to encourage, not undermine entrepreneurship.

There is a difference between people who sell a business they’ve devoted their lives to and a private equity billionaire.

But my ambition on tax is this: instead of a system of mind-numbing complexity, of benefit only to tax accountants, I want a simple, competitive system we can all understand.

Conclusion

Too many politicians take wealth generation for granted.

You are the people who create the revenues which allow Government to deliver public services.

You are the people whose work allows politicians to try and build a fairer society, where everyone has the opportunity to fulfill their potential.

Politicians should never be in the pockets of business, just as much as business should never be in the pockets of politicians. As a liberal, I abhor all forms of cosy corporatism.

Instead, the relationship should be one of mutual respect, underpinned by a a clear understanding of the privileges and responsibilities of both politics, and business.

26 November, 2007

Not any more. It takes real talent and determination to engineer the first full-scale banking panic since the Victorian age. To lose not one, but two disks with banking details of seven million families.

I know about the importance of consultation, and I don't want to discourage growing business built up over many years by raising Capital Gains Tax on a whim.

Gordon Brown's record is appalling. The broken pension system that was once the pride of Europe. The collapsed PFI schemes that boomerang back liabilities to the public sector. The increase in the sheer deadweight in kilograms of the tax code by a half.

Gordon's epitaph? Here lies the patron saint of tax accountants.

But is it any surprise that the government does not understand business? Look at the current Treasury ministers to see why.

There is not a single person with business or markets experience among them. A lawyer. Two Trade Union organisers. One lobby group economist. And a football administrator. In the past, even Labour put business savvy people like Joel Barnett and my old friend and mentor Harold Lever into government.

No wonder the credit crunch has caused a credibility crisis. Ministers don't listen, and they don't learn.

But Cameron and Osborne are no better. Osborne has never had a job outside the Westminster bubble. Cameron's only real world experience was four years as a public relations man for a television company. Never met a monthly payroll. Never run a business. Never created a job.

MY EXPERIENCE

Under my leadership the Liberal Democrats would be different.

I spent 19 years writing about business and the economy. Then I did what I had watched. For five years I built up a business, analysing risk and markets around the world.

I know the burdens of regulation, and I want to minimise them. I know they hurt little companies trying to break into markets, and benefit the big companies trying to dominate markets.

I believe in competition - and lots more of it. That's why regulations should be independently assessed by an agency to see whether the goals can be achieved at lower compliance costs.

And why we should use sunset clauses to set time limits on regulatory powers, as I pioneered on European financial services law.

It is time to cut the kilos off Brown's tax codes. Let's have a standing Tax commission like the Law commission to simplify tax.

CBI AND CLIMATE CHANGE

Don't get me wrong. Regulation is sometimes necessary. Business needs a framework of law. And for too long some business people have seen environmental regulation as a threat, rather than an opportunity.

That is why I am so pleased that you have asked Ben Verwaeyen to report on climate change, and devoted a session to the subject.

Climate change is the greatest challenge of our time. We are literally stealing the future from our children and our grandchildren.

It is ridiculous and patronising to say that business leaders do not care about the future. As parents, we all have a stake in the future and it matters enormously to all of us.

There's no point in worrying about our children's inheritance of wealth if they do not inherit a planet worth living on as well.

But climate change is not just a moral issue. It is an economic issue too.

The transition to a low carbon economy will be as momentous as previous industrial revolutions. As the shift from coal to oil. From gaslight to electric light. It has the potential to give us the competitive edge in the new global economy.

DYNAMOS OR DINOSAURS

So we have a choice. Do we want to be the dynamos that drive change, or the dinosaurs destroyed by it? Do we want to be Microsoft or IBM?

That is why I find it so worrying that many of the clean technologies are not being developed here in Europe, despite taking the global lead on Kyoto and emissions trading.

Many of the most creative developments are taking place in the USA. The same entrepreneurs who recognised the potential in the IT and software industry are now putting their money into innovative clean technologies.

Like the Tesla, an electric sports car. Jeremy Clarkson eat your heart out - this car has a top speed of 125 miles per hour, and does nought to sixty in less than four seconds.

Or Altairnano, producing environmentally safe batteries capable of powering a car for 250 miles on a single fifteen minute charge.

EUROPE'S CHALLENGE

The challenge for Europe is to put in place a stable framework that encourages investment in low carbon economies. With investor certainty. Friendly to business. And savvy about markets.

The uncertainty of the carbon price post-2012 will have worried many of you. Politicians need to be more aware of the long planning periods in business. And we still have work to do in Europe boosting venture capital, university-business links and start-ups.

We must hold our government and the European Union to the pledge made in March that we must negotiate the successor to Kyoto and extend the Emissions Trading Scheme.

Under my leadership the Liberal Democrats will push regulation that works for business. And it can. Clear standard setting across the European Union can help grow new business.

Just look at the success of European mobile telephony, where regulation enabled Europe to have one system of global roaming when the US had 16 incompatible systems. Result? We took the global lead with successes like Nokia, Ericsson and Vodafone.

Let's work on tough new EU-wide standards on energy efficiency for all appliances, and aiming for zero carbon emission cars by 2040. Let's use environmental regulation to give Europe the same business edge we won in mobile telephony.

TRANSFORMATION

We are on the cusp of a transformation of British business. We can and must become the drivers of the low carbon revolution.

If we do not, we risk missing an historic opportunity for the British economy. And we risk devastating our children's world.

Under my leadership, the Liberal Democrats will inject our energy and our ideas into the political system. We will look to the future with optimism, and help our economy to lead global change.

26 November, 2007

And today - and let me congratulate the leadership of so many companies represented today - we can see how the vast majority of British businesses are meeting the global competitive challenge ---- fitter and stronger than ever.

And I believe that - from financial services to modern manufacturing, from vehicles and aerospace to the creative industries - the British corporate community continues to rise to the challenges and opportunities of globalisation, the emerging technologies and new markets in Asia, the Middle East and Eastern Europe.

But we must recognise too that the last 12 months have shown that - along with challenge and almost unlimited opportunities - the new global order brings new uncertainties and new insecurities too - most recently in the form of financial turbulence and credit problems whose origins are clearly international but whose full implications are still unfolding.

And it is precisely because of these new short term and long term global challenges that every government in the world has to look afresh at what it can do to support business.

And today I want to discuss how we cooperate more fully to meet these new challenges and find, for this new era, enhanced ways of working more closely together for Britain -- a new engagement through which government and industry can together respond to changing circumstance.

And my profound conviction is that if together we address and master all the long term challenges, Britain - with its openness, global reach, willingness to adapt and innovate and our new stability - can be one of the great global leaders of this century.

Some of the foundations of this framework we have already laid together. Over the last ten years, our shared resolve to entrench stability and the resilience of our economic framework have been tested again and again: the Asian crisis, the Russian crisis, the American recession, the escalation of oil prices and now the recent financial turbulence. But because of the tried and tested framework we now have in place - Bank of England independence, the Financial Services Authority, a new system for financial regulation - Britain has succeeded in delivering both low inflation and low interest rates and at the same time has had sufficient flexibility to adjust when events threaten our growth.

Earlier this year when inflation threatened to increase in the wake of oil and utility price rises, we took the difficult decisions to bear down on inflation and by staging public sector pay, keeping average overall awards at 1.9 per cent, we supported inflation moving back to target.

At the same time when we have had to deal with the fall out from global turbulence with events at Northern Rock, we have taken difficult decisions to steer a course of stability and protect the taxpayer which have led to today's announcement by the company of a preferred bidder.

And so in difficult times we have been able to and will continue to hold to a stable course.

And I assure you that we will continue to take all necessary measures to ensure that in future we maintain our hard won stability. We will take no risks. There will be no irresponsible relaxation of pay discipline, no unfunded spending commitments, no unaffordable promises and no short-term giveaways. By definition, responsible government demands that stability will be our first priority - yesterday, today and tomorrow.

But whatever the ups and downs of the world economy, the short term fluctuations we face, globalisation forces us also to make the right long term decisions in infrastructure and planning, the environment and energy, science and education - to leave behind the old policies of yesterday and make the right long term decisions for a more successful tomorrow.

First, a long term approach to our transport and infrastructure where we must - and will - continue to step up our investment in major projects. And in each year to 2017 we will invest £20 billion a year in transport - double what was spent a decade ago. And having opened the Channel Tunnel Rail Link we will now proceed with a unique partnership between business and government: the £16 billion investment in Crossrail.

And we know also that even as we place strict local environmental limits on noise and air pollution and ensure that aviation pays its carbon costs, we have to respond to a clear business imperative and increase capacity at our airports - and you have rightly called for action at Heathrow. Our prosperity depends on it: Britain as a world financial centre must be readily accessible from around the world. And this week we demonstrated our determination not to shirk the long term decisions but to press ahead with a third runway.

Second, planning - which we all know that despite recent changes remains too inflexible. Following the case put in the Eddington and Barker reports the legislation which will be published tomorrow will put in place a streamlined system for making decisions on key national infrastructure projects ----- a new independent body to take decisions fairly and without delay while allowing the public and local communities to participate effectively in the process. And we will stick to our plans to build 3 million more homes by 2020, making housing more affordable and providing homes for the workforce of the future.

Third, we need the same long termism in our approach to energy. We must - and will - take the right long term decisions to invest now for the next generation of sustainable and secure energy supplies. We have said that new nuclear power stations potentially have a role to play in tackling climate change and improving energy security. And having concluded the full public consultation we will announce our final decision early in the New Year.

Fourth, energy security for the long term must be matched by what your taskforce have reported on today - a sustainable environment for the long term. Among our market-based measures to achieve our goal of reducing carbon dioxide emissions by at least 60 per cent by 2050, we are working to expand the EU Emission Trading Scheme. And to meet that and our share of the European Union renewables commitments - and to create a new global carbon market in London - is not just a challenge but an opportunity for British business to lead the world in environmental technologies and finance.

Fifth, a long term approach to managed migration. In a world where 190 million people a year are moving from one country to another, we will continue to balance the needs of our economy - opposing those who want to abolish the highly skilled migrant programme - with the need to create a stronger sense that residence and citizenship means responsibilities too - not least through a new Australian-style point system and ID cards for foreign nationals.

Sixth, a long term approach to tax and deregulation including for Britain's 4 million small businesses. Having cut the headline rate of corporation tax to 28 per cent, with a lower rate for small firms and an additional allowance for investment, we will continue to work with you to continuously modernise and simplify our tax regime and improve our tax competitiveness. And we will continue to listen and discuss with you the representations we have received about capital gains tax, ensuring that we maintain reforms for a fairer and simplified system that rewards enterprise.

Our risk based approach to deregulation - outlined originally in the Hampton Report, now extends from the light touch of the Financial Services Authority right across to reducing inspections by local authorities. Recent changes include replacing a multiplicity of planning forms by one, reducing health and safety burdens, abolishing the requirement for private bodies to hold AGMs, creating a single point of contact for all import and export regulatory requirements, pushing forward single market reform in Europe, and in December departments will publish further measures. And so I share with you the aim that with a risk-based approach we significantly reduce the numbers of inspections and reduce information requirements and form filling by firms and so reduce red tape.

And to help meet all these challenges we have set up the new business department so there is a better business voice in government.

And just as we have made monetary policy independent of government, we have made competition policy, industrial policy and now much of planning policy more independent of day to day political control.

And the new Business Council headed by some of our leading business leaders has a remit to examine every significant area of policy and to scrutinise and challenge government on the tasks ahead.

The new Council for Educational Excellence also contains business leadership so that standards in the schools can reflect the needs of business for the future. And last week we announced our intention to set up a new forum for the private sector to make sure their contribution to the NHS continues to grow - and to represent value for money for patients and taxpayers.

And together we should continue to search out new ways of attracting and retaining the best businesses in the world as we have in financial services, pharmaceuticals and aerospace. This requires a long term approach to the advancement of science and innovation in the UK - building on our 10 year science framework which links the universities, research institutes and knowledge centres to business, the £15 billion allocated to medical research, and the new public-private Energy Technologies Institute.

And up against the competition of over two billion people in China and India - with 5 million graduates a year - Britain, a small country, cannot compete on low skills but only on high skills. Our imperative - and our opportunity - is to compete in high value added services and manufacturing; and because that requires the best trained workforce in the world, our challenge is to unlock all the talents of all of the people of our country.

And the nation that shows it can bring out the best in all its people will be the great success story of the global age.

Richard Lambert has spoken powerfully of this imperative and the CBI is doing important work to help the cause.

And we must lead the world in mastering the most far-reaching change in our occupational industrial and employment structures for more than a century.

Let us face facts: as a result of changes in the global economy many of the jobs British workers do now are becoming redundant.

Of today's 6 million unskilled workers in Britain we will soon need only half a million - over 5 million fewer.

We have 9 million highly qualified workers in Britain - but the challenge of the next ten years is that we will need 14 million - five million more. Higher standards of living will depend on higher standards of learning.

For most of the past half century we have had a Keynesian paradigm - either you are in work or you are on welfare. And in the old days it was the economy that had to create work - what prevented full employment was lack of jobs.

Now we need a new and very different paradigm. If in the old days the problem as unemployment, in the new world it is employability.

If in the old days lack of jobs demanded priority action, in the new world it is lack of skills.

So as we prepare and equip ourselves for the future, many of the policies of the past are out of date, with no answers to be found in old dogmas - and long term reforms changing the role of education and welfare - the responsibilities of the individual and government will have to intensify and be stepped up.

While in the old days we could assume that if a teenager left education with no qualifications they could get unskilled work, in the new world the unqualified and unskilled teenager will, in future, have to acquire a skill to be easily employable.

While in the old days only a limited number of apprenticeships were available for a far larger number of highly qualified teenagers, in the new world it makes economic sense to expand apprenticeships to make use of all the skills of all who have them.

While in the old days it was seen as the duty of government to create work for the inactive, in the new world there has to be both a duty on the government to help the inactive become employable and a duty on the inactive to take up those opportunities.

Indeed while in the old days the obligation was on the unemployed to find a job, in the new world the obligation on the unemployed should be not just to seek work but to train for work.

In the old days we could leave lone parents on benefit until their children left school. Now if they are to go to work sooner, they must train earlier and be ready for work when they can take it up.

In the old days when incapacity benefit was introduced the focus was on disabilities preventing work. Today in the interests of claimants and in the economy the focus must be on their capabilities and the opportunities for new skills for work.

In the old world you had colleges for everything that happened after school. Now we need a new focus on 16-19 year olds in sixth form centres ---- and a similar focus on community colleges with state of the art training facilities that increasingly specialise in adult vocational excellence.

So making education for skilled work our first priority we need to provide new incentives and new obligations to train;
we need to transfer resources from welfare to education and move claimants from passive recipients of welfare benefit to active job and skill seekers;
----- far-reaching reforms of our welfare state and education system to put us right in the forefront of the higher paying, highly skilled economy of the future.

Quite simply the old system does not fit the aspirational society the Britain of the future needs to be. The new idea is the development of all the talents of all our people.

Since June we have stepped up reforms in our schools and in the coming weeks we will publish our Children's Plan, founded on an historic change in the span of schooling and the range and quality of learning - in the classroom and beyond it. Our aim that every teenager goes on to college, university or an apprenticeship or is preparing for this.

And today, as we come to terms with the far reaching nature of the global challenge, I have asked John Denham, who is responsible for skills, and Peter Hain, responsible for welfare, to bring together businesses, colleges, the whole of education and the voluntary sector to forge a new partnership to push through the scale of changes needed to equip people for the future.

In the old days the government ran the whole welfare system through separate jobcentres and benefit offices. In the new world Jobcentre Plus - which since its establishment in 2001 has built up a genuinely world class track record in getting people off welfare into work - will ask private sector agencies and charities to play a central role. As Peter Hain will set out tomorrow, we will contract with new providers - and incentivise providers - to find innovative ways of helping the long term unemployed and those outside the labour market altogether to move into work.

Already 200 of our best companies are leading the way in local employment partnerships. And while in the old world employers felt that the training system was unresponsive to their needs, in the new world you will increasingly be able to direct training budgets and we are inviting employers to play a more central role in the development of further education colleges.

Let me explain the new principles for welfare that will guide our new approach across the whole of government --- on both what is being announced this week and what we will set out in the coming months.

First, if the best welfare is no longer the benefits you have today but the skills you gain for tomorrow then the inactive should, wherever possible, be preparing and training to get back into work.

So when someone signs on as unemployed, they sign up for a skills review, be given access to skills advice and training if that is what is needed, and this could be taken into account in their benefit entitlement. In the same vein, we should not deny people who are looking for work the chance to better their skills. So today Peter Hain is announcing we must reform the so-called '16 hour rule'.

And we will help people not just get work but get on at work - helping them move up the jobs ladder. So we propose a seamless transition from out-of-work training to in-work skills development and - as John Denham will set out later today - a new adult careers and advancement service will be created to help people in work improve their skills or change their career: a commitment not just to one-off learning but to life-long learning.

Second, rights and responsibilities will be at the heart of our approach so we will intensify compulsion while at the same time offering new incentives.

In return for new rights to training and help to get into work, we will demand more responsibility.

We want lone parents on benefit to be training in preparation for going back to work when their child goes to school. And there will be a more modern regime for new IB claimants which, for the first time, will mean work for those who can, education or training for those with no skills, and treatment for those who need medical help including for mental health problems. Peter Hain is announcing today that in the future we will look to apply this more active approach to existing IB claimants as well as new ones, starting with those under 25.

And whilst in the old world, with no minimum wage or tax credits, 740,000 households faced marginal deduction rates of over 70 per cent, from April next year that figure will have fallen by three quarters and we will now do more to ensure that the long term unemployed, lone parents and those on IB are better off in work, even after reasonable transport costs.

And we believe that the flexibility you want as employers can be matched over time by more rights to request flexible working.

And we will focus on those areas where worklessness is concentrated and later this week Hazel Blears will announce details of new plans to help communities act together to get more people back into work.

Everybody in this room is well aware of the pressures this country faces and the need to rise to the challenge.

So just as we are modernising transport, planning, science policy, we are redefining the Britain welfare state for a wholly new world --- to give people skills through transferring resources from welfare to education, not leaving them dependent, reliant on benefit without the opportunity to improve their skills and prospects.

All over the world - and this is what lies behind protectionist sentiment - peoples and countries are worried that they will not be globalisation's winners but its losers, its victims not beneficiaries.

To help British people win from globalisation, I have outlined a new framework for British business based on firm fundamentals - open markets, free trade and flexibility - and action plans for equipping us in infrastructure, science, education and employment that we can now progress.

Working together we can move forward the long-term investments in education and skills we need.

Working together we can prepare, equip, and make Britain ready for a stronger future.

And working together we can make Britain a model - indeed a beacon - to the world for stability and progress.

ENDS
26 November, 2007

The CBI's presence is global - indeed I opened your office in Beijing - and I am delighted this conference's speakers are global, and the theme of this conference is that globalisation is a fact and here to stay. The real question not whether it exists or not, but whether it is well managed or badly managed, and one of my themes today is that it is for us to be evangelists for globalisation, taking on the anti-globalisation and protectionist forces who fail to recognise today's economic truth that free trade, open markets and flexibility are preconditions of modern economic success across our global economy.

Such are the contradictions of those who are simply anti-globalisation that a few months ago when I went to Washington I found demonstrators waiving a banner:

Worldwide campaign against globalisation

I believe that, instead, we need a worldwide campaign for globalisation and its benefits

And there is no better person to work with on such a campaign than - and I am pleased to join John in welcoming to this conference - a great friend of Britain, Hank Paulson, formerly Chairman and CEO of Goldman Sacks, and now the US Treasury Secretary.

Now today Asia is producing more than Europe: China is producing 50 per cent of the world's computers and textiles, 60 per cent of digital cameras and mobile phones; over the next fifteen years up to half the worlds future growth will come from China and India alone; by 2020 our G7's share of growth - once the majority of global growth - will fall to just one third.

And there is a real question about what is the destiny of Britain and what we want our destiny to be in a world where globalisation means that you can buy and service almost anything from almost anywhere and that we succeed now, not by protecting our markets, but only if we out-innovate, out-think and out-perform our competitors.

My passion is that our country, Britain, be the great global success story of this century.

As you know, every company that is successful has a clear mission.

You as successful chief executives and business leaders know what you are aiming for; a determination to turn the new realities of globalisation into an opportunity; a clear sense of purpose led clearly from the top; a culture and commitment to take what are often tough decisions; to be both far sighted in your vision but very much living in the present tense when making sure things get done and get delivered.

It's the same for our country. We must also have a mission, strong sense of direction, clear and ambitious objectives: the same confidence to take difficult decisions, to reform and restructure, to focus and give priority to what we can do best.

And that's my theme today:

how we as a nation do what companies are already doing and continuously rise to the challenge of globalisation;
how we enhance our commitment that government work more effectively to support business at every level; and
how, on a concern which affects every advanced industrial economy, including the USA, regulation - and building on what Tony said yesterday, we create a real and effective push back. And here I want to share with you some fresh thinking that could be the basis of a real change in our approach.

Two years ago at this conference, I asked whether it was possible to build an agreed national consensus: a shared purpose about what we as a nation have to achieve.

Since then I have been asking businesses this question as I have visited every region of Britain meeting people, touring round companies and firms, talking with people at universities and colleges, meeting business leaders and young entrepreneurs;

I've seen how in every city - from Bristol to Liverpool, and Manchester to Birmingham to Leeds, from Cardiff and Belfast, to Newcastle and Edinburgh - financial, retail, education and creative industries - in manufacturing and services - are bringing new life and prosperity; I've witnessed the remarkable growth of financial services here in London and been to East London to see how a derelict but massive plot of land can be transformed into the scene of not just an Olympic games but of urban renewal and regeneration; and just a few days ago at the Treasury's business summit we tested ideas with many of your companies

And my conclusion is that there is a strong, shared view, indeed agreement, about what Britain can be, and Britain can do, in the global economy - and the priorities we must pursue.

And there is a strong sense that we have the talent, the ability and the determination to do what we have to do to succeed - to out-innovate and out-perform other countries and that to do so, we need to upskill our economy.

I have found a shared view among business that the priority for any advanced economy like ours, meeting the global challenge, is:

to be stable seeking always low inflation and low interest rates;
to be for free trade and open markets;
to be flexible and champion entrepreneurship; and
as a nation, to make the necessary long-term investments in education, innovation and infrastructure.

These are the ways we are agreed that we will out-think, out-perform and out-compete other countries - and find our destiny as a nation.

All the best British companies are successful because this is what they actually do - in the DNA of your companies, and in your forward planning, is to be outward looking, entrepreneurial, competitive, adaptable, challenging the world and investing heavily in innovation and skills.

So are we as a country well placed for what we need to do?

And what are the next steps so that we can do better?

We are well placed as a nation because our fundamentals are strong.

First, our monetary and fiscal reforms, which have turned us from a stop go economy to one of the most stable economies in the world are the foundations on which we can support continued growth and continued prosperity.

And I will continue with my programme of making government decisions long-term, and independent of short-term political pressures by making not just interest rate decisions independent, but also competition policy, statistics policy and much of industry policy.

We will entrench out stability, keep public sector pay under control, maintain discipline in public finances, and my watchword will be stability, now, tomorrow, and into the future.

Second, we are well placed for globalisation not just because we are among the most stable economies in the world but because we are the most open economy. Britain is the pioneer of free trade - we have constantly advocated openness above protectionism and our openness extends to embracing new ideas, and new influences - as proven by the strength and diversity of our economy, from the City of London, to our science, and our universities.

Third, we have more global reach than almost any other country - seeking out trade in every continent, deep links with the European Union, the Commonwealth - and as we celebrate today - the United States of America.

Fourth, from the industrial revolution right up to the internet, the human genome project and stem cells in the 21st century, our historic commitment to liberty of thought has given us faith in the importance of discovery through science and creative innovation, more so I believe than any other country.

And because innovation is what is driving the dynamic sectors of the global economy, we - Britain - are well placed in the fastest growing high valued added manufacturing and services from IT and aerospace to pharmaceutical, and of course financial and business services, education and the creative industries, which account for a larger share of our economy than in any other G7 country.

So, all of these qualities - our stability, our openness, our reach, our innovation and our scientific and creative strength - make me convinced that of all countries, Britain is one of the best placed to step up to the next stage of globalisation - if we make the right long term decisions now.

In other words they give us the platform on which we should build.

And because the challenge for Britain is to out perform our competitors, the answer to the jobs lost through offshoring is to upskill, and the answer to outsourcing is to out innovate.

It is to meet this supreme challenge, the economic challenge of our generation, that a year ago I commissioned a number of your colleagues in business to work with me, to look at Britain ten years from now, and to analyse in depth how we can equip ourselves better in areas critical to our future: in transport infrastructure, Sir Rod Eddington; and planning, your former Chief Economist, Kate Barker; on skills, Lord Leitch; on intellectual property, Andrew Gowers; and on innovation, Sir David Cooksey's report on scientific and medical advance.

So today I want to discuss with you what we must now do.

Innovation

You, the leaders of business alongside our scientists and universities are Britain's innovators.

The task ahead is to have a seamless and effective progression from pure scientific invention to the commercialisation of innovation in small medium and large companies.

Our role as government is to give you the best support we can.

And the recommendations of Andrew Gowers and Sir David Cooksey will be important in this.

I want to encourage our universities to become more dynamic knowledge centres which are linked up to business and the economy.

I want to offer, within an affordable framework, business the best regimes of fiscal incentives for research and development

I want to give modern manufacturing and the smaller high tech and innovative companies the benefits of access to capital through a range of financial instruments from venture capital trusts to enterprise capital funds.

I want to give more support to new technologies in manufacturing and services from IT and the biosciences through to environmental technologies, because as we now know they provide new ways to create new wealth.

And, in a world where piracy and stealing copyright is becoming more of a problem, I want Britain to lead in the digital age as the secure home of intellectual property.

And so I can promise that next week's Pre Budget Report will build on our decision to double investment in science to over £3 billion a year and to modernise our support for innovation.

Skills

Second, I invite you to become partners with us in building the very excellence in education we need to compete globally.

There is today a global market for skilled people.

China and India are turning out 4 million graduates a year, Britain 250,000; and these people are not only raising skills in their countries, but challenging us Britain and other advanced nations in a race to the top.

If we are to succeed in global economy, it is clear that we will have to make more of the potential of our own people.

Let's face it: the number of new computer scientist graduates Britain produces has quadrupled to 37,000 since 1997; but China now produces 150,000. The number of engineers has doubled also to 37,000; but this compares to the 375,000 of China and India.

And, as a result of the advent of Asia, there has been an astonishing 400 per cent in increase in the numbers of unskilled workers, most of them offering their labour at 5 per cent of the cost of Britain's.

So, for today's 6 million British adults without basic skills there are now jobs for only 3 million of them - and by 2020 there will probably be jobs for only half a million.

So, either we will have to bear the social security costs, or they will have to gain new skills.

Some people ask if we can afford to invest in skills. The actual truth is we cannot afford not to.

This is a task that cannot be met by government on its own or business on its own, but by government and business in partnership together: responsible employers; responsible employees; and responsible government.

How do I see it working?

Raising standards in our schools, not least in specialist schools and city academies, and with our new 14 - 19 vocational path, where we want you to engage on how we train our young people and to take a bigger role in setting the agenda for our further education colleges.

And on apprenticeships, how many of you know that in 1997 there were just 75,000 and now there are 250,000, and that the numbers of manufacturing and construction apprenticeships have risen from 27,000 to 110,000. We must build on this momentum in economically relevant crafts and trades.

And because 70 per cent of the workforce of 2020 is already in work today, there is a special reason why government and business need to work in partnership.

Employees taking responsibility to upskill, employers offering time off, government paying for the basic training, and I am grateful to you for helping 1 million learners by 2010 and I hope after the Leitch report we can chart the way forward.

Flexibility

But, greater investment in innovation and education must be combined with greater flexibility all round. And I know we have more to do.

On pay, we must do more to encourage local and regional pay flexibility.

On infrastructure and planning, it is to make our system more flexible and more responsive that next week Kate Barker will set out the challenges we still face - to which I can say we will rise.

On transport, the Eddington review will be the basis on which the public and private sectors can work together to meet our long term investment priorities.

On tax, I have read the most recent international tax survey by Price Waterhouse Coopers comparing countries. It says our corporate tax rates are lower than the rest of the G7, and because of capital allowances and interest rate deductibility, so too are the effective rates of tax paid. And just as in the past we have been ready to cut long-term capital gains tax from 40p to 10p, corporation tax from 33p to 30p and small business tax from 23p to 19p, I promise that we will continue to look with you at the business tax regime.

On Europe, where will continue to resist removing the opt-out from European working hours legislation, as well as promoting greater deregulation across Europe, we will stand up for an approach that is pro-Britain, pro-business and pro-European single market - for a Europe which is outward looking, reforming, liberalising and lighter touch in its regulation. And I am today publishing the report I commissioned last year from Lord Davidson who has identified ten areas where we can work together to prevent unnecessary goldplating of European directives.

And let me say this about regulation more generally: whenever I go to the USA - and Hank I am sure will verify this - businesses express the same frustrations about regulation and the same hopes about reducing burdens as you do here.

Last year when I spoke to you, I set out the risk based approach we are pioneering in Britain.

The priority now is delivery.

First, we are introducing new early rulings by HMRC, quicker binding decisions, and for large firms, risk assessment. So, if you are making an investment and you want early advice you will no longer be told you cant be given it; when you ask for certainty you will get it within a standard 28 days; and where there is an issue to resolve, you can have the confidence that only the areas of high risk will be looked at, so they can be concluded more quickly.

Second, most inspection is done by local authorities. So we are today publishing details of how the risk based approach will be applied to all their inspections, with enforcement based on your feedback of what you experience locally; and for firms who have outlets round the country less inspection where there is low risk. And to make immediate progress, we will extend to 70 areas the pilots in Bexley and Warwickshire that have already cut retail inspections by a third.

And our approach will now be backed up by professor Richard MacCrory's recommendation of a proportionate system of penalties because its right to distinguish between the rogue trader who should be pursued and the good company who should not.

You know the old regulatory model, the implicit principle from health and safety to the administration of tax and financial services has been, irrespective of known risks or past results, 100 per cent information requirements, 100 per cent form filling and, if resources allow, 100 per cent inspection, whether it be premises, procedures or practices.

The risk based approach of the future that Britain is now pioneering is founded on a different view of the world - trust in the responsible company, the educated consumer and the informed employee, with then on a risk basis the goal should be a fraction of forms, a fraction of information requirements and a fraction of inspections needed.

And over time this new model of regulation should not only apply the concept of risk to the enforcement of regulation, but also to the design and indeed to the decision as to whether to regulate at all.

But throughout, the crucial test I will apply is action: concrete results in what you experience as companies on the ground.

Internationalism

Among the discontents of globalisation that together we must address is the threat of protectionism. And with this old enemy that is not outside our gates, but across the continents, now inside our gates, I believe we, the 19th century pioneers of free trade, must become the 21st century protagonists for free trade. And there can be no greater signal of our commitment to openness than our support as businesses and government - as Hank and I said in the Wall Street Journal yesterday, for an urgent resumption of the stalled talks on a new world trade deal.

Hank and I are meeting today to discuss trade but also energy and the environment, the global economy, and how we tackle terrorist finance.

And our discussions are founded on shared values we celebrate that bind our two countries ever more closely together and it is for that reason - the common destiny our two continents share - that I welcome this friend of Britain to the CBI today.

Indeed since becoming Treasury Secretary he has broken new ground: not just in his backing for trade and his recognition that protectionism does not work, but on our relationship on China, and with his approach to regulation.

It has been a pleasure to work with him on these issues where we are at one, and also in our broader determination to make globalisation work.

I know that we share the same approach - that a successful globalisation will match a commitment to openness and flexibility with investment in education, and innovation and to equip those in danger of being left behind both in our own countries and the developing world.

I want globalisation's children - the coming generation - to enjoy the vastly increased opportunities it brings.

And I believe Britain, and America so strong in the ties that bind us, not just the shared history but the shared values that link us together and give us shared purpose, can play a unique role in making globalisation work.

So it is my privilege and my pleasure to ask you to welcome America's Treasury Secretary, a great friend of our country, Hank Paulson, and invite him to address our conference today.

The United States and Great Britain have enjoyed a close bond for many years. This relationship is built on a foundation of shared principles and values rooted in individual, political, and economic freedom. Among these are strong support for free markets and confidence in the power of trade and commerce to improve lives.

Today we've had a good discussion about the issues we will face in the months and years ahead. We have discussed income distribution in our two countries and around the world. We have discussed strategies for maintaining and improving the strength of the global economy, and the economic condition of its people. And we agree that keeping the global economy strong depends to a large extent on our ability to promote competitive capital markets around the world and our success in reaching a comprehensive agreement in the Doha trade negotiations.
We are fortunate to face our long-term challenges from a position of strength. As a participant in financial markets for more than thirty years, I say with confidence that over the last couple of years, the world economy has been stronger than I have ever seen it.

Growth in world GDP is expected to be 5.1 percent this year, stronger than the average of the last 25 years. Furthermore, gains in GDP are not being eaten away by price spikes. Inflation for 2006 will be under four percent, compared with nearly 14 percent in the previous two-and-a-half decades. And perhaps most importantly, economic growth is broad-based. In fact, the IMF projects that GDP will decline in only four out of 181 countries this year.

Stable, non-inflationary, broad-based growth is the best way to improve living standards around the world. Now how do we keep this strong global economy moving forward?

Our modern economy is more interconnected than ever before. This is the result of decades of efforts to strengthen multilateral institutions and lower barriers to trade and capital flows. The rapid pace of technological change also brings us closer.

Our interconnected economy is aided by capital markets, which put money behind job-creating ideas in every sector. This generates a positive spillover effect, with strong financial markets spurring growth in everything from technology to manufacturing to services. Every healthy, balanced economy in the world has strong and competitive capital markets.

The United States and the UK have had well-developed, highly efficient markets for many years. And both serve as an example to the rest of the world. U.S. financial sector deregulation in the 1980s led to an explosion of new services and financial instruments, making the United States the world's leader and innovator in financial services, including mergers and acquisitions advice, securitization skills, derivatives, high-yield debt financing, and hedge funds.

Similarly, the UK experienced the benefits of deregulation 20 years ago with the Big Bang. Today, London attracts vastly more foreign investment than it did prior to deregulation, and it offers investors a wide variety of financial instruments. And your markets place a strong emphasis on innovation, competition, and the use of technology to increase efficiency.

As friendly competitors, New York and London push each other to be more innovative, more efficient, and more responsive to changes in the marketplace. Investors are the clear winners in this competition, as they have more choices about how to earn positive returns on their capital.

These innovations, combined with technological developments, make it is easier than ever before to make investments across the globe. British investors aren't limited to London, just as Americans aren't tied to New York. And our two markets capture investment capital from every part of the world.

As the world's largest investor and largest recipient of international investment, the United States has a key stake in promoting an open and stable investment regime. President Bush continues to work with Congress to maintain an economic and political environment that is welcoming to investment, both foreign and domestic. We understand that markets which are open to investment and capital flows are enriched by them.

Today we see emerging markets in Asia, Latin America, and parts of Europe that are opening themselves up to capital flows. More countries are recognizing that competition in all markets lowers costs, and a lower cost of capital means more growth, more jobs, and higher living standards.

A great deal of innovation is taking place in the international capital markets, which are in many ways laboratories of capitalism. A number of securities exchanges and markets in the U.S. and Europe are aggressively embracing technology and developing innovative business models that increase efficiencies. These markets are also developing their own standards and protocols for regulating commercial activity. A number of these approaches are excellent, and in the U.S., we will be open-minded about how ideas implemented by others might prove beneficial to us. Policymakers and regulators alike are constantly examining the dynamic marketplace and reviewing our policies to ensure we maintain both the integrity and the competitiveness of our financial markets.

In two weeks, I will travel to Beijing for the first session of our recently initiated Strategic Economic Dialogue with China. We will encourage China to accelerate the development of their financial markets infrastructure in order to support sustainable economic growth - growth that will bring benefits to many nations.

We should applaud successes in markets around the world, because in today's interdependent world, exports and employment opportunities in our two nations are affected by how well our major trading partners are doing. When any major economy does well, its growth benefits the overall global economy. When a major economy falters, it is a drag on global growth. The Asian Financial Crisis of 1997 may have reduced growth by as much as one percentage point in the United States and Europe. The Russian default in 1998 led to a sudden widening in credit spreads and a financial shock which contributed to the failure of the hedge fund, Long Term Capital Management, in the United States.

There are no islands of economic stability in today's world. Globalization and interdependence are here to stay. No nation can turn back the clock, so the imperative is to find ways for all nations to benefit together.

Economic integration makes economies more efficient, more productive, and more competitive. Integration gives businesses greater access to markets around the world, and increases their ability to achieve economies of scale. Global markets give consumers more choices. And global competition helps reduce the prices of goods and services - a real benefit to those with lower incomes, whether in the United States or abroad.

Today, the nations of the world have a tremendous opportunity to create freer markets in many sectors, through the Doha Round of trade negotiations.

Nothing would be more beneficial to global economic growth than a successful Doha agreement.

It is difficult to overstate the importance of these discussions. Global trade agreements are only on the table every 12 years or so. Representatives from many nations have already invested years of effort toward reaching accord on a variety of issues. The United States Trade Representative, Susan Schwab, regularly meets with her counterparts in bilateral negotiations around the world, and these discussions are fruitful. Now, we must build on that progress with the goal of getting a final deal done.

The United States has a strong track record of negotiating successful bilateral trade pacts. We also strongly support the WTO, and the multilateral framework for trade agreements. A successful Doha Round is crucial to the success of the WTO.

Why is trade so important? Simply put, free trading nations have access to an enormous flow of goods and services. In 1980, international trade flows totaled 41 percent of world GDP. By 2005, this ratio increased to 57 percent. And this year, the number is expected to be 60 percent.

Nations that are open to trade have vastly stronger economies than countries that close themselves off. By keeping our markets open and convincing others to do the same, we can generate growth that will benefit all parties, narrowing the gap between rich and poor in our own countries and among the nations of the world.

When foreign markets grow and foreign economies prosper, our businesses have more outlets for their goods and services. And by expanding their business into other markets, our domestic companies can become more efficient. With more outlets for selling abroad and greater efficiencies, U.S. and UK companies have more opportunities to succeed. Success translates into more jobs and higher incomes for American and British workers, as well as for foreign workers employed by our companies.

Despite the known benefits of trade, the protectionist sentiment that is rising in our two nations and elsewhere around the world is predicated on a false perception that trade harms our economies. The lesson of the last 25 years is that those nations which have opened themselves up to greater integration with the global economy have prospered, while others have been left behind. Nonetheless, at a time when global prosperity is at or near an all-time high, protectionist sentiment appears to be increasing.

It is true that openness to competition can result in job losses in some areas. We have a responsibility to help people acquire the education, skills, and training they need to compete in a globally integrated economy.

But we must not, in the name of a few jobs today, eliminate many more jobs and higher incomes in the future.

Protectionist policies do not work and the collateral damage from these policies is high. Jobs saved in the short term are offset by more job losses and a lower standard of living in years to come.

We should confront protectionist rhetoric with facts. It is a fact that trade improves wages and creates jobs. One study suggests that if post-Uruguay Round trade barriers were removed, global wages would rise by 1.9 trillion dollars - including increases of 512 billion dollars in Europe and 537 billion dollars in the U.S. Other studies indicate that U.S. employees of multinational firms earn wages and benefits that are 18 percent higher than employees of purely domestic firms. Another report shows that nearly 42 percent of U.S. workers are employed by a company that engages in global trade. This implies that more than 56 million American workers today work in jobs that depend on trade.

These are the benefits that isolationists believe we can do without.

We cannot allow protectionist elements to stifle our growth, limit our opportunities, and dictate the terms of our engagement with the world. Giving in to protectionist sentiment would send a terrible signal. We would be telling developing nations that while we have benefited from increased trade, we aren't going to allow them the same opportunity to develop. We would effectively be relegating countless people to the status of a perpetual underclass, with little income and few opportunities for advancement. That is not only bad policy, it is morally wrong.

I can assure you that this month's elections have not altered the U.S. commitment to achieving a successful outcome to the Doha Round. The Round continues to be our top trade priority. We won't wait to raise this at the next heads of state summit. Ambassador Schwab is traveling extensively, and ready to meet anytime, anywhere. She and other senior U.S. officials are continuing to have quiet conversations with various trading partners to explore some "what ifs" and test new ideas.

We need to be clear on what constitutes a Doha "success." It can only be an outcome that generates meaningful new trade flows in agriculture, manufacturing, and services.

To succeed, these negotiations need to produce benefits for all nations and all sectors. The focus has been on agriculture, which has been a sticking point. Reducing agricultural subsidies and opening markets can create growth opportunities for millions of people across the globe, especially in developing countries. Just as vital to the economic growth of our nations is trade in manufacturing and services. In particular, opening up financial services markets to foreign competition can bring great rewards to every nation.

The stakes of the Doha trade round are huge. And they transcend the purely economic. Closer economic ties between nations help promote international peace and prosperity by creating common interests and raising the costs of conflict. In fact, the greatest threat today is not from conflict between states, but from instability within states, and from those states, like North Korea and Iran, which are not prepared to abide by international standards of conduct, including WMD proliferation and terrorism.

A successful Doha trade pact will reinforce the world's commitment to working in an international framework to advance a common agenda.

Chancellor Brown and I believe a Doha agreement that benefits everyone is within our reach. We all need to work together to find that agreement.

The global economy is in a period of exceptional growth. People around the world are enjoying higher standards of living. The task before us is to build on this strength as we move deeper into the 21st century. Strong, competitive markets will be a foundation for continued growth. And freer trade among nations is the way to help spread prosperity to every corner of the world.

The work ahead is not easy. But it is essential. In the United States, President Bush has set as a high priority achieving a successful Doha Round, and I will proactively work to help Susan Schwab and other members of the Administration do just that.

I appreciate having a strong partner in Gordon Brown. Together, the United States and Great Britain can lead the world toward a more prosperous future.

Thank you very much.

I am delighted and greatly honoured to have been invited to address the CBI's Annual Conference.

The Evolution of Ireland’s Economy

Some forty years ago - during the term of one of my predecessors, and a great hero of mine, Seán Lemass - a new way of thinking about the economy, society and the future was taking hold in Ireland. We began to move away from protectionism and towards a new openness, especially towards seizing market challenges and opportunities.

It was a long journey and success did not come overnight. In the mid-1970s for example, our GDP per capita was only a third of Germany's. In the early 1980s, Ireland's national debt per capita was higher than in either Ethiopia or Sudan.

In the mid-1980s, our economy was losing between 20,000 to 40,000 people per annum - or 1% of our population - to economic migration.

But by the early 1990s, the Irish economy had started to turn around and it continued to grow beyond all expectations. Last year, the economy registered its 18th consecutive year of expansion, with virtually full employment and GDP per capita 16% above the EU average.

Lessons for a Globalising World

How did we achieve this? And are there any lessons of more general application as we address the challenges and opportunities of ever increasing globalisation?

Openness Works

I think the first and most obvious point to make is that, from our experience, openness works. As a country which suffered the consequences of protectionism, we have secured unprecedented gains from opening up to Europe and the wider world.

The Policy Mix must be Right

But, of course, openness, on its own, is not enough. We need to have a pro-business, pro-employment environment. In our case, we did this through a mix of mutually consistent policies, covering areas like taxation, incomes, investment, education and skills. All of these, consistently applied, continue to be of critical importance in this era of globalisation. But for economies like ours, there is an increased premium on investment in education, skills and R&D.

An Actively Engaged Workforce

Sustained growth of the type we have enjoyed can only be generated with the proactive engagement of the workforce - employers and employees alike. In Ireland, we secured this through our system of social partnership, which has delivered key benefits: of industrial relations peace and stability; the associated freeing up of management time for managing and innovating; a climate of certainty for investors; a capacity to respond quickly to emerging challenges; and a predisposition to flexibility and adaptation to change in the workplace.

More recently, Ireland’s system of social partnership is enabling us to respond to the dramatically changing circumstances in the Irish labour market arising from our decision in common with the UK and Sweden, to allow direct access by citizens of the new Member States. Through dialogue and negotiation, we have agreed measures to ensure decent employment standards, without compromising flexibility or adding unreasonably to regulatory burdens.

Obviously, we would not presume to be prescriptive about our system of social partnership but it has served us very well as a process that helps us to adapt to the changing economic environment.

Ireland and the UK: Our Special Economic Relationship

As a small open economy, Ireland’s economic success is dependent on our ability to export the goods and services we produce. As the UK is Ireland’s second largest export market after the US, its importance is clear.

For many companies, especially newer or smaller businesses taking their first steps into exporting, links of culture and language make the UK the obvious first port of call.

In 2004, the UK accounted for 18% of Ireland’s total exports, worth approximately £10 billion sterling. ICT products, food and beverages, and chemicals dominate Ireland’s exports to the UK, with food and beverage products, accounting for over one fifth of our exports to the UK.

The relationship is by no means one way. Ireland is the UK’s fourth largest export market and the largest on a per capita basis, accounting for £13.7 billion sterling in 2004. From the perspective of Foreign Direct Investment, Ireland historically has received large inflows and the UK has been the second largest source of inward investment into Ireland. In recent years, continuing high rates of inward investment have been accompanied by a growing value of overseas investment from Ireland.

Mergers and acquisitions have largely driven the increase in overseas investment by Irish companies. The UK has been one of the largest beneficiaries in recent years of this increase, with more and more Irish firms opening up operations in the UK.

On the other side of the coin, one fifth of all foreign-based firms in Ireland are British – second only to the United States. There are clearly a number of factors driving this investment.

Excellent Workforce

Firstly, Ireland has one of the youngest populations in Europe, with over 36% under the age of 25; and demographic trends mean that we will continue to have a capacity for growth far ahead of other EU countries in the coming years.

Almost 40% of our 25 to 34 year olds have been educated to third level. Indeed, I believe that our education system is particularly attuned to the needs of a competitive economy and it was described in the IMD World Competitiveness Report as one of the best in the world. Perhaps most importantly, our people have a reputation for a positive attitude, hard work, flexibility and above all for innovation – for coming up with new ideas, new processes and new methods of operating.

Strong R&D Focus

A second feature of our economy is that we have an excellent R&D base, following on from a fivefold increase in research investment over the period 2000 - 2006, and we are continuing to prioritise investment in this area.

Earlier this year, we launched a new Strategy for Science, Technology and Innovation, involving an investment of €3.8 billion. Over the lifetime of this Strategy, we aim to secure our position as one of the world’s advanced knowledge economies, developing a worldwide reputation for research excellence and the generation of new ideas.

Our objectives are to double the number of Phd graduates, especially in the physical sciences; to reinforce R&D in our core strengths of ICT, biotechnology and pharmaceuticals; and to significantly enhance R&D in the areas of agri-food, marine industries, energy, healthcare and the environment.

We aim to further internationalise our R&D capability by attracting more top scientists to Ireland, by participating in leading international research networks and collaborations, and by creating strategic international partnerships in key areas.

We will also be seeking to ensure more effective commercialisation of the ideas and know-how being generated in our universities and public research institutions, and to forge new partnerships between these institutions and enterprise.

Good Corporate Tax Environment

Thirdly, we have one of the most favourable corporate tax environments in the world, with a corporation tax rate of 12.5%; tax exemption for certain income derived from patents; tax credits for incremental expenditure on R&D; a positive holding company regime; and an extensive network of double taxation agreements.

Heavy Investment In Competitiveness

Fourthly and more generally, through our most recent National Development Plan, we have undertaken an unparalleled level of investment in developing our infrastructure and our education and training services.

We will be renewing that effort in our next National Development Plan, covering the period 2007 to 2013. Under it, we will continue to invest around 5% of GDP in infrastructure development, ensuring in the process that we remain competitive in the global marketplace. No doubt, there will be plenty of opportunities for CBI members in this next phase of investment. Likewise, your Irish counterparts will be hoping to maximise the opportunities presented by your great achievement in securing the 2012 Olympics for London.

Industrial Relations Stability

Fifthly, our economy enjoys industrial relations stability and certainty around wage development derived from our system of social partnership.

Ease Of Doing Business

And, two last points. Our political and administrative system is very accessible, we listen to business and we are geared to responding quickly to business needs and concerns. Furthermore, it is easy to do business in Ireland.

As a small country, our State agencies, local authorities and others work together as a team. So much so that the Director of the IMD Competitiveness Yearbook recently held up, as an example for others, our one stop advice system – where an investor only has to deal with one authority, IDA Ireland, rather than “20 different people – and you still don’t know with whom you should be dealing”.

So in all therefore, the seven particular attributes of the Irish economy that I have just listed, amount to seven good reasons for investing in Ireland. Last year was a particularly good year for R&D investment from multinational companies. Key investment decisions in this area included Bristol Myers Squibb, Citigroup, Genzyme, Pfizer, Xilinx, Dell and Microsoft – celebrating their 20th anniversary in Ireland.

This year promises to be just as good, with major announcements by Amgen, Amazon, Cisco, Georgia Tech Research Institute and Abbot among others. So we are making real progress in putting Ireland on the map as a Knowledge Economy.

Today five of the top ten ICT companies in the world have substantial operations in Ireland. This sector of over 220 companies employs nearly 40,000 people, accounts for €50 billion exports and generates €500 million in corporate tax annually.

Another sector of huge significance is the pharmaceutical sector. Ireland has attracted 13 of the top 15 pharmaceutical companies in the world and 25 of the top 50. 6 of the top 10 leading drugs in the world are manufactured in Ireland.

Ireland and the EU

Ireland’s success is in part due to our place at the heart of the European project. In our view, the Union must continue to justify itself by delivering real benefits for its people. It must deliver and be seen to deliver, starting by the contribution it makes to growth and jobs.

The current difficulties being experienced in the adoption of the Constitutional Treaty reflect a real sense of disconnect between significant segments of the European public and the institutions and policies of the Union. To my mind, this sense of disconnect springs from a feeling that at the European level, there has been too much emphasis on constitutions and too little focus on practical results.

I firmly believe that the draft European Constitution is a necessary and worthwhile enterprise. And having chaired the final negotiations that led to it, I am certain that the Constitution represents the best outcome available. However, if we are to persuade the people of Europe that further constitutional advance is both necessary and desirable, we need to show clearly that Europe can make a real difference in their day-to-day lives. To that end, the Lisbon Agenda is of key importance.

Stepping back from the detail for a moment, it is clear that maintaining the European way of life depends on successful competition within the EU and on successful competition between the EU and the other economic blocks.

The Lisbon Agenda challenges Member States specifically, and the EU generally, to look more closely at how we can compete more effectively and how we can balance more appropriately economic growth with social goals.

At the heart of the issue is getting the balance right between standardisation, to ensure fairness and flexibility, to adapt to change. That is a key and daily challenge for the Union with regard to economic sectors holding varying significance for different Member States. This challenge is particularly evident from the National Reform Programmes now being implemented in each Member State to give effect to the Lisbon Agenda.

Northern Ireland

Perhaps I could conclude by saying a few words about Northern Ireland.

Last Friday, we heard an echo of a terrible past but we also got a glimpse of a shared future.

The failed attempt by one individual to use violence on one hand, and the continued suspicion between the political parties on the other, suggest a world that never changes.

But that is not the case.

Things have changed enormously, and for the better.

People, especially young people, are putting the past behind them. They are building for the future.

In many ways, the people are way ahead of the politicians.

But, to be fair, the parties are, more than ever, also trying to get on with it.

And, as you know, the British and Irish Governments now enjoy a unique partnership in our dealings on Northern Ireland. Through this partnership we have also ensured that relationships between Britain and Ireland have never been better.

The strength of this partnership has driven the peace process towards conclusion. It has been slow and indeed at times frustrating. But it has been worth it. Lives have been saved and Northern Ireland is now a different place with a real and promising future. Prime Minister Blair and I remain absolutely committed to seeing this process successfully completed. We are determined to proceed with the implementation of the St Andrews Agreement leading to the re-establishment of a devolved power-sharing Government next March.

That will give important political stability and local leadership to boost the economic progress that has been made.

Business has taken a leading role in placing economic issues at the heart of the public debate about the future.

And there is significant and welcome common ground between the political parties on economic matters.

They recently went together to meet the Chancellor to discuss a financial package for the future Executive. He responded with a significant package which the parties now need to address together.

I welcome the increasing focus by politicians and business in Northern Ireland on economic development, on improving the climate for business, and about how to encourage investment.

And they are increasingly looking to the Republic and to ways in which we can work together.

For our part, we wish to work with the British Government and the new Northern Ireland Executive to build an even stronger economy.

There is no reason why the Celtic Tiger cannot be an all-island phenomenon.

The people of Northern Ireland certainly have the capacity and the drive to succeed.

Last month, the British and Irish Governments published a ground-breaking report on the all-island economy.

We are in negotiations with the Treasury and the Northern Ireland administration about a potential package that can help both economies, North and South.

We want to invest together in the productive capacity and competitiveness of the island – in infrastructure, in education, in skills and in science. We also want to see how we can improve services to our citizens by working better together.

This all-island dimension will be an important part of our new National Development Plan.

I look forward to seeing these plans agreed and implemented – on the basis of mutual respect and for mutual benefit - with a new First Minister, Deputy First Minister and Executive, in 2007.

Conclusion

In conclusion, Ireland and Britain have come a long way by acting together. We have brought our relationship onto a new plane. We have replaced conflict with co-operation. We are working closely together to realise the progressive vision of the Good Friday Agreement. We are busily trading with each other and investing heavily in each other. We are holidaying in each other’s countries and enjoying each other’s cultures, while cherishing our own. Our economies and our peoples have benefited enormously as a result.

The scope for co-operation has by no means been exhausted. We face many common challenges in the years ahead, not least those being addressed at this important Conference. Let us keep working closely together as we take them on.

Thank you for your attention.

Frankly, what I have read in the media and heard so far I find all too depressing. The debate too often centres on nationalistic and xenophobic rhetoric…and misses the point! A famous President elect said in the run up to the 2002 US election "… its the economy stupid"

There may be a case for saying that shareholders are rushing to cash in and end up selling UK companies too cheaply to overseas buyers….but that is another topic for another day. The issue we need to focus on is this. Quite simply, the UK has always had too little home-grown business talent and commercial leadership. The big issue is not just Capital its about Talent.

The Americans filled the gap and have turned our Financial Services companies into the world beating sector that it is today. The Japanese and Germans have helped us build cars again and even Minis got a BMW badge. (For those of you not as well travelled as the honourable John Prescott that does not stand for Birmingham Motor Works). We await the white knights for Coal and Nuclear….. "Peut-être la France peut aider ?" (Perhaps, France can help?)
 
In an age of globalisation and global benchmarking of talent, we must keep up. Some observers forecast that in just 15 years, therell be more Russians running FTSE-100 companies than Britons!!! Dont laugh the highest paid CEO of a Footsie 100 company last year was not Lord Brown or Fred Goodwin. It was Mick Davies of Xstrata to the tune of £11m. Oh, and by the way, Davies is a highly skilled professional migrant.
 
Why whats going on?
 
Firstly, we dont educate our children in the basics at school. Our own Richard Lambert has warned that much of the current publicly-funded skills infrastructure is failing employers. The Treasury commissioned Lord Leitch to report on the skills crisis in the UK, this is to be published in a few weeks.
 
Secondly, our graduates are leaving university with irrelevant degrees
 
Over 84% of Vietnamese students leave University with either a Science or Maths degree. Meanwhile its only 15% in the UK and the trends are more worrying for example Newcastle University recently cancelled its Physics degree course through lack of interest!
 
Thirdly, the post-graduate interest in education seems about getting a piece of paper and having fun. The business school culture is too theoretical and not results focused enough. So, if you dont like Johnny Foreigner coming over here and taking over….then, there’s a simple but not immediate answer. We need to get serious about producing a qualified, experienced business leadership.
 
In the meantime, the good news is that the UK is attracting great professional and managerial talent from around the world. As new Harvey Nash/CEBR research reveals, this highly skilled migrant talent in 2005 accounted for an additional 5% of GDP…thats nearly £55 billion! And this is not Polish plumbers or Bulgarian waiters….it’s £55 billion of value generated by highly skilled professional migrant talent.
 
We have one of the best legal frameworks in the world. It looks after important issues such as intellectual property rights, data protection and so on. We have highly developed corporate governance norms, and on the whole I believe we have struck the right balance between employees, employers and competitiveness. I also thank God for our highly aggressive free press!
 
Richard Lambert said London was clearly far behind New York 30 years ago. I can second that. I first came to visit the UK in 1977 when my father, the most British ex pats I have even known, proudly showed me around the country of his birth. It was a shame it was in the midst of the Winter of Discontent. I never returned until 1993. However, after 14 years I cannot see myself living anywhere else.
 
I believe we should welcome the fact that foreign ownership is helping to close the skills gap that exists in the UK today and lets start as a country to put the foundation in place to grow our own talent in the future.
 
And please keep our taxation policy and regulatory regime up to the job Mr Brown………….or should that be Mr Cameron?

He has this morning arrived in Basra, to assess for himself the current situation in Iraq and speak directly to the ommanders on the ground both in Basra and Baghdad.

He felt, and I am sure you agree, that it was important to do that before the Baker-Hamilton Commission publishes its Report in the US. For that report will shape the future of our involvement in that troubled country.

Mind you, believe some of the press reports and you'd think that the CBI Conference is almost as dangerous a place to be for the Conservative Party leader.

It is a paradox that at the very moment when we have caught the political imagination of the country, and are engaging with individual businesses as never before, some claim that we do not understand the importance of
business.

Let me confront this head on.

We understand how important you are.

We understand that without successful businesses there is no prosperity, no jobs, no funding for public services, no rising living standards or general well-being.

We understand today, as the Conservative Party has always instinctively understood, that without a strong free economy little else can be achieved.

But in return, understand us.

When we put on to the centre of the political agenda issues like the environment or social responsibility or flexible working that is not because we are somehow 'anti-business'.

It is precisely because we do understand the way that modern businesses operate. It is because we recognise the new challenges that you face.

I don't think it is a coincidence that the most successful businesses I have met, in the eighteen months I have been doing this job, are also the ones that have taken these issues to their hearts.

When BP and Shell invest in renewable energy that is not anti-business.

When Tesco reduces its energy use and Kingfisher promotes forest stewardship in fight against climate change that is not anti-business either.

It is not anti-business to champion flexible working.

I've sat with Andy Bond, the Chief Executive of Asda who is speaking at this Conference later, and the ASDA Board in Leeds. They told me that flexible, family-friendly employment practices are not a burden but a boost to the productivity and performance of their business.

Richard Lambert, your thoughtful new Director, was not being anti-business when he promoted social responsibility in the Lambert Challenge.

David Cameron and I went to the most recent meeting of Business in the Community and listened to the country's leading Chief Executives explain why corporate social responsibility is now a way of life for them.

For too long my Party abandoned issues like the environment, flexible working, and social responsibility to our opponents on the left.

And the result was that there was no coherent political voice there to say: Can't we work with business, get you involved, harness your experience and talent, so that we have actually got a chance of achieving something?

So I make absolutely no apology that we have been talking about the new business agenda.

We are not just engaged in this debate - I believe we are helping to lead it.

I want to work with you as we answer the big challenges this country faces in the next decade.
Those challenges do not come bigger than globalisation. I congratulate you on the range of overseas speakers you have at this Conference. It is a powerful symbol of how open Britain is to doing business with the world.

I think it is one of the remarkable things about this country that we are almost the only advanced western economy where you will not hear the siren calls of protectionism.

Neither of the main political parties in Britain now even flirt with the idea that we might block foreign take-overs, shelter national champions or prevent outsourcing.

That is, sadly, not something Hank Paulson could say of American politics or Jean-Louis Beffa could say of France.

The greatest threat to the progress of our global economy comes not from the developing world but from the developed - from those who, faced with the flight of manufacturing jobs to China or services to India, believe we
can pull up the shutters.

We have seen it in this country with the European Union quotas on textiles and shoes. - a narrow short-sighted gesture that hit Britain consumers and British retailers.

So we all have a responsibility to make the case for a globalisation as a force for good.

A force that will lift two billion people - one third of the world's population - out of grinding poverty in the next decade.

These people will make the things we buy and, we hope, buy the things that we sell.

It is a great opportunity for us. Eighty million Chinese people bought a mobile phone last year - imagine how many will want to buy a phone next year? Think how many will want reliable, transparent banking or sophisticated pharmaceuticals.

We should be doing much to increase our exports to these fast growing economies, yet in China and India I have heard the same complaint again and again: we do not see enough of Britain here. Our exports to China and India
make up just 2.5% of our total. Globalisation is an opportunity, but it is also a huge challenge - for you
in business, and us in politics.

How are we going to compete against countries with low wages and high ambitions?

I think there are quite a lot of lazy assumptions out there that we need to confront. There's the assumption that we'll do the clever stuff, we'll move up the value chain, and leave the Chinese and Indians to do cheap things.

Let me tell you - no one has told them that.

I was in India with David Cameron in September. We saw internet start-up companies in Delhi to rival the start-ups I saw in Cambridge a couple of weeks ago.

We met with Ratan Tata in Mumbai, whose companies are setting up engineering research facilities in Coventry and a call centre in Northern Ireland. We had lunch with Anand Mahindra, who you have just listened to, and talked
to him about his plans to launch a Mahindra hybid car into the UK market. And we pressed the Indian Prime Minister to further open up his economy to, among others, British retailers.

There is an ambition, an appetite for hard-work, a drive to succeed in countries like India which I have to say I think is lacking in too much of this country.

The second lazy assumption is that because our Government talks about China and India, about the need to meet the big challenges, that that amounts to doing something about it. I suspect you will hear a lot about tough choices and big challenges from my political opponents when they speak to this Conference.

But remember this: for a decade they have been talking about education, but we have one of the weakest skill bases in the OECD and our exam standards are declining. Despite talking about an "integrated transport strategy" your figures show that congestion is costing British business £20 billion every year.

Despite calling for "dignity in retirement", our pension system, which was once one of the strongest in the developed world, is now one of the weakest. Pension fund shortfalls have been a major drag on business
investment and expansion.

Despite the machismo on energy security and nuclear power, not a single nuclear power station has been built in ten years. Last winter you paid the price for a lack of action on gas liberalisation in Europe. Our development of renewable sources lags far behind some of our competitors. In the Mansion House speech earlier this year, Gordon Brown even had the audacity to say that "progress" demanded a "competitive tax environment".

But as Richard Lambert has said today, our economy is becoming less and less competitive.

70% of business leaders in the CBI survey published today believe that the UK is a poorer international business location than it was five years ago. Three quarters of you say that the corporate tax regime has got worse. Our business tax rates have gone from being some of the lowest in the developed world to some of the highest.

And our tax code has become far too complicated - it has doubled in size in a decade. You have to spend £5 billion just working out what tax you have to pay.

Add to that the problems we face with poor skills, a declining science base and a creaking transport system and there real grounds for concern.

The rise in unemployment - the largest of any major economy in the world over the last year - may be a portent of things to come. We hope not.

It is time for a new direction.

And it is my Party that is providing that new direction.

To put it bluntly, we are more likely to form the next government than has been the case for the last decade.

What can you expect from us? What can you expect from me?

Well you may have heard me say this already - but stability comes first. You tell me that low interest rates and low inflation are your number one priority - and they are mine too. We have published proposals to further entrench the independence of the Bank of England and make the appointments to the MPC more transparent. Properly independent national statistics are also important - so that we know the true liabilities of government and the full consequences of the deficit in the public finances.

But stability is not enough by itself to succeed in the global economy. We need to be more competitive.

That is why I would like to reduce taxes The example of Ireland shows what a low corporation tax rate can do. I could promise up-front tax cuts at the next election to win some cheap applause. But even the Chancellor predicts we will be borrowing £24 billion by then and so those tax cuts would not be sustainable. Sound money matters.

I would rather offer you a long term approach to lower taxes.

As the economy grows, and money comes into the Treasury, we want to share the proceeds of that growth between the spending on public services like education which our country needs and lower taxes which our economy demands. Those lower taxes must include lower business taxes.

I would also like to simplify radically the business tax regime.

That is a central recommendation of the independent Tax Reform Commission which I established last year, and which the Chairman of the CBI in Scotland - Melfort Campbell - served on with real distinction.

There is a challenge for you, however. Real simplification means removing complex business tax reliefs and then using the money for a substantial cut in business tax rates. Are you ready for that?

I have asked one of the country's leading accountancy firms to provide a detailed and technical plan for how it can be done. I would like to begin that radical simplification in our very first budget. The Stern Report lays to rest the argument that there is a trade-off between tackling climate change and having a strong economy.

Of course, international agreement is essential for really meaningful action on climate change - and we would like to see a global carbon trading regime. But Britain must also lead by example.

That is difficult to do when our carbon emissions have risen over the last ten years and continue to rise.

I note in today's CBI Survey that you feel that taxes on labour and profits are the most damaging, and that taxes on environmental pollution are the least damaging. That makes it even more surprising that the Chancellor decided to increase National Insurance and at the same time reduce the proportion of taxes collected by green taxes.

We want to go in the opposite direction. We want to shift the tax burden away from income and investment and onto pollution. Pay as you burn not pay as you earn. We are today publishing our first detailed consultation paper on green taxation - our plans for a new Carbon Levy.

This would replace the Climate Change Levy, which the Royal Commission on Environmental Pollution calls a 'blunt instrument' because it is based on energy use not carbon emissions.

I would like your thoughts and input into the exact design of the Carbon Levy - but let me stress, any additional revenues that it raises will be off-set by reductions in other business taxes. That is a guarantee.

So far I have talked about our approach to taxation. Let me tell you about spending.

Of course, we need properly funded public services. Our country's low skill levels and poor school standards are one of our great handicaps. Yet, at a time when our competitors are reducing the size of their governments, we are increasing the size of ours - and often with precious little to show for it.

I do not think that is sustainable. We would reduce the share of national income spent by government over an economic cycle. We would make sure our economy is growing faster than our government. We are also developing a series of reforms that would liberalise our economy and raise its rather dismal productivity growth rate.

Representing a constituency in the North West of England I am convinced that the best regional policy you could have is providing the country with a modern road and rail network. We will shortly publish proposals to do just that.

We are working on plans to force government departments into annual reductions in the regulatory burden they impose and our DTI team have just fought a fierce and Parliamentary battle on your behalf over the Companies
Bill.

We are also working on how we can get science back into our classrooms and help our universities get better access to venture capital.

Stability. Lower business taxes. A much simpler tax code. Spending control. A more competitive and dynamic economy.

There is still much more work for us to do.

We want to work with you to build our new direction.

You know better than most what British business wants.

But do not wait until the general election is called before you publish your manifesto for business - by then, for us, it is too late. Our own manifesto is already at the printers.

Instead engage with us now; work with us; help us develop our policy; tell
us and we will listen.

Yes we have an ambitious agenda - but, ladies and gentlemen, we live in an
ambitious age.

It is my pleasure to be with you here today at this annual CBI conference. As Richard has said, he and I will be having a more informal discussion on some topical issues relevant to this gathering. By way of introduction to this conversation, I would first like to take a few minutes to share with you some thoughts about my own industry: steel.

Steel has scarcely been out of the business news this year. The companies dominating the headlines may change but the theme is constant: Consolidation. Even as we speak there is a new battle underway with the target none other than the former British Steel, Corus.

Today steel is a consolidating and globalising industry and I have been one of the biggest proponents of this. When I started my company in 1976, the landscape could not have been more different. Steel was a strategic industry, a badge of pride worn by each nation - albeit usually a rather unprofitable one. It was not run with a commercial focus, being focussed more on maintaining production levels than profits. Indeed many of the companies I acquired through privatisation during the 1990's were in a precarious financial position, often on the verge of bankruptcy.

No business can be sustainable on these terms as the severe downturn of 2001 demonstrated. During that downturn 40% of domestic steel-making capacity in the United States alone went into Chapter 11. It was the worst crisis the industry had suffered, which sounded a very loud warning bell. Without a significant restructuring the industry could not survive.

Where the steel industry is concerned, I have never had any doubts that globalisation is the right way forward and indeed the only way the industry can survive and re-invent itself as profitable and sustainable through the cycles. At the core of the industry's problems has been an inability to effectively manage supply and demand, leading to massive volatility and cyclicality. This fundamental issue could never be addressed against the backdrop of a fragmented industry, where both our major suppliers and customers were much more consolidated than steel.

Furthermore, steel is a global product. As such there are very sound operational reasons, not to mention financial synergies, for operating a global business model. For example the very same customers Mittal Steel produced for in the United States, Arcelor - the company we recently merged with - produced for in Europe.

The industry has also proved in recent years that it not only has considerable earnings power, but also very respectable margins by any industry's standards. Now the challenge must be to demonstrate that this can be sustainable through the cycles.

The steel industry will always suffer from some degree of cyclicality, but I see no reason why this cannot be reduced to more manageable levels, provided the industry keeps up the current momentum of moving forward with consolidation.

China of course has a big role to play in this. As they largest producer and consumer of steel, it must also be part of the consolidation process if we are to have any long-term success in creating a more stable operating environment. China today has around several hundred steel companies. Reassuringly though the Chinese Government has announced ambitious plans to consolidate its industry, with the target being to create national champions, each with a 20-30 million ton capacity, at the expense of smaller companies. It is important that a large step in this direction be achieved.

The strategy of Mittal Steel has always been to build a global business model leveraging operational and financial synergies across the globe to create a more sustainable company operating in a more sustainable sector. Our recent merger with Arcelor has enabled us to take another large step towards achieving this.

Consolidation and globalisation must continue to be the dominant industry trends of the future. Against a good economic backdrop the industry now has a real opportunity to demonstrate that it can build a healthy and sustainable model, with considerable benefits for all stakeholders. Clearly there are challenges ahead but we have a much larger chance today of achieving this than was the situation ten years ago.

I now look forward to continuing the discussion with Richard.

Thank you very much.

Beffa argued that France did believe in open markets, but also believed in employee involvement and participation and employee ownership. Beffa also spoke about how the Euro has benefited the UK.

In the Q&A session Evan Davies asked Beffa whether he found Anglo-arrogance annoying. I think he manages to avoid answering….....

Next up was the panel session on globalisation and company ownership, which Beffa was also involved in. The panel included Stephen Nelson of BAA, Andy Bond of Asda, Harvey Nash’s Albert Ellis and Alex Brummer of the Daily Mail.

Nelson was first up, As a CEO of an organisation that had been acquired by a Spanish firm, he chose to talk about the sale of BAA and made five points:-

Foreign ownership doesn’t have to lead to a lack of control

Change in capital structure doesn’t mean those who invest in BAA are any more or less British

BAA now only has three shareholders, which actually is more efficient

High levels of debt gearing helps to’ focus the mind’ (perhaps looking for a silver lining from a bad sitation?)

BAA is price regulated

He continued by addressing the question of whether national strategic assets exist, with an overwhelming yes - since the treaty of Rome governments have been able to intervene in a sale.

Bond spoke about how, despite being part of the Wal-Mart Group, Asda is still a British company, how there was no US person on the Asda board, and how there were great benefits for Asda being part of such a successful global brand (best IT, best sourcing and the ability to share and identify talent). His personal view was that the consumer was the main beneficiary from Wal-Marts acquisition.

Albert Ellis was next to air his thoughts. He argues that the big issue wasn’t just about Capital it is also about Talent and how in an age of globalisation and global benchmarking of talent, Britain must keep up. He spoke about graduates leaving university with irrelevant degrees, about how the post-graduate interest in education seems about getting a piece of paper and having fun and about how the business school culture is too theoretical and not results focused enough.

And to add a bit of spice to the debate the session finished with Alex Brummer of the Daily Mail. Brummer agued that he was ‘concerned’ by the level of foreign ownership, even in the financial sector. He argued that the London Stock Exchange is part of our excellence and should be considered a national champion. He spoke about the many firms that the UK has sold overseas in recent years, citing Pilkington, P&O, British Oxygen. He also cited the case of RWE’s ownership of Thames Water and how this disengaged the owners with the consumers. Like I said, Brummer was indeed brought on to add the spice.