Stephen Timms – 2000 Speech at the Economist’s Electronic Business Conference

The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 4 April 2000.

“The benefits and challenges of e-commerce”

Introduction

Thank you for inviting me to join you this morning.

We are on the threshold of a new era for business. Across the country people are talking of the impact of Business to Consumer – or ‘B2C’ – e-commerce. But the growth of Business to Business – or B2B – e-commerce has the potential to be even more explosive and pervasive. I have seen US estimates suggesting B2B turnover on the net could amount to 4 trillion dollars in America alone by 2003, compared with less than 400 billion dollars of online sales to customers.

That is a staggering amount of trade – with potentially staggering implications for our economies and our consumers, as well as business itself.

So I am delighted to be able to join many of the world’s B2B experts here this morning.

Budget aims

Let me begin by putting our hopes for electronic commerce and the knowledge economy in the context of the Government’s wider aims.

After the UK election in 1997, our first economic objective was stability. The Budget two weeks ago confirmed that in a remarkable way that has now been achieved. We are delivering a platform of stability and steady growth, with inflation low and the public finances under control.

More people are now in work than ever before: unemployment is at its lowest for 20 years; youth unemployment is at its lowest for 25 years and there are one million vacancies on offer across all the regions of the UK.

Inflation in Britain has also now been lower for longer than at any time for over 30 years. And today British inflation is lower than in any of our major competitors in the European Union.

And we are also investing now a bigger share of our national wealth than our largest competitor countries in the European Union, and a bigger share even than in the US.

The state of the public finances is sound as well.

So things are in good shape as a consequence of the prudent measures the Chancellor has taken.

But we have always said that our prudence is for a purpose.

And the Budget took the next steps towards that purpose, of building a modern and decent Britain, towards the four ambitions that we set ourselves last November:

• our prosperity ambition: that we should be bridging the productivity gap with our competitors;
• the full employment ambition: that we should achieve employment opportunity for all, and a higher proportion of people actually in jobs than we have had before;
• the education ambition: that for the first time at least half of our school leavers should go on to university by the end of the decade;
• our antipoverty ambition: that we should halve the number of children living in poverty by 2010, on the way to the Prime Minister’s ambition of eradicating child poverty altogether within 20 years.

Four ambitions which I think are now attainable and which encapsulate our commitment to a modern and decent Britain. Our best route for achieving this modern and decent Britain – for an enterprising society which is also a fair society – is success in the knowledge economy.

First Tuesday report

A few weeks ago, John Browning, a cofounder of First Tuesday – the global B2B start- up market and meeting place for entrepreneurs – gave an intriguing evidence to the House of Lords e-commerce sub-committee on the future of e-commerce in Europe. This evidence he gave was based on an e-mail survey of their members on what they wanted national and European governments to do.

The overwhelming view was that government has a very limited role – that it does most good where it treads lightest. Well, that is our view too.

The Internet and e-commerce world is moving at speeds difficult for anyone to keep up with. As Tony Blair says, the wind of economic change has never blown through our economies with such force as it is doing today.

We know the market sets the pace of that change. And it always will do.

But our role as a Government is an important one still. Not to dictate. Not to attempt to control. But to help to enable and to empower every business and individual to win from the changes, and to extend the new opportunities to all.

That is why we have set ourselves two parallel targets to these challenges.

First, to make the UK the best place in the world to trade electronically by 2002.

And second, to aim for universal access by 2005.

Those two goals are complementary. Making sure everyone has access to the Internet will both improve our competitiveness and reduce social exclusion. A very clear example of enterprise and fairness working together.

And we are working very hard indeed in a number of areas to achieve these goals.

Back to John Browning’s evidence to the Lords Committee: his statement consisted of a number of lessons First Tuesday had learnt in the course of their rapid growth. I want to spend a little time examining these lessons and what they mean for governments and for e-businesses as well.

Lesson 1: Europeans are passionate entrepreneurs

The first lesson learned by First Tuesday was that Europeans are passionate entrepreneurs. And, to quote him, ‘contrary to conventional pessimism, they are neither defeatist nor risk averse.’

That, I think, is clear enough from the number of European companies we have here today.

It is also clear from the signs that the technology gap between Europe and the US is narrowing. In some areas, of course, Europe already leads.

The first wave of the Internet came through PCs. But the next wave will come through broadband mobile and digital television.

In both, the United Kingdom in particular ­ and Europe more generally ­ have a pretty impressive lead.

Last month we launched the world’s first auction for third generation mobile telephone spectrum. Thirteen bidders from all round the world have been taking part and all have put in significant bids to play a role in the future market.

Third generation mobile will give businesses the Internet on the move. Everything we now get from our PCs, digital cameras and good old voice telephones – all on our mobile phones, our PDAs, our laptops and palmtops, and a host of new devices now emerging from the research labs.

Digital TV – interactive TV ­ is also taking off. It’s only just begun. But some forecasters suggest that as much as 75 per cent of UK households will have DTV by 2008.

Both of these – digital TV and third generation mobile – are technologies where the UK is a world leader.

And both are creating extraordinary opportunities for new businesses in both B2C and B2B e-commerce, new applications, new services and new jobs.

That is why we’re seeing venture capitalists, technology and telecoms companies, and individual entrepreneurs so active today in the UK, confirming our position as the single most popular destination for inward investment into Europe.

European enthusiasm for the new economy was out for all to see as well at the Lisbon Summit on European economic reform two weeks ago. There, the Heads of Government of our European States set a new strategic goal for the next decade – to become the most competitive and dynamic knowledge based economy in the world.

That is a huge change. And it is the beginning of a process with tremendous implications and opportunities for our economies and our workforces.

Lesson 2: Scale is critical to entrepreneurial success

The second lesson First Tuesday drew was that scale is critical to entrepreneurial success.

As they said, only by expanding quickly can companies grasp the available opportunities.

But companies can only expand to the extent that there is the sufficient size and sophistication of markets and the quality of skills base needed to be successful.

You cannot build a knowledge driven economy without a knowledge driven society.

So we have to make sure that the opportunities of the new technologies are shared by every business and every worker.

That is why the Budget two weeks ago introduced a special tax reduction to encourage a million small companies to get on line. For the next three years any small business buying computers, or investing in e-commerce and new information technology, will be able immediately to write off against tax the full 100 per cent of the cost in the year of purchase.

We are also legislating for other tax cuts – a 100 pounds tax cut for electronic filing of tax and vat returns, and a further 50 pounds tax cut for electronic filing for those paying the working families tax credit.

And side by side with these incentives, the new Small Business Service – opening its doors this month – will offer consultancy, advice and planning to help small businesses get on line and become e-companies.

Of course, while getting United Kingdom on line is vital, the big prize will come when we create a single European market for electronic commerce – a single market of 375 million people and potentially 100 million more.

Lesson 3: Speed is just as critical

That brings me to the third lesson from First Tuesday’s evidence that speed is just as critical as scale. ‘…because the Internet is evolving so fast, and because first-mover advantage is so powerful, Internet companies have to move very, very fast.’

A key priority for governments must be to ensure the right dynamic market framework is in place to cope with this speed of change.

At the Lisbon Summit, European Heads of Government recognised that the speed of technological change requires new and more flexible regulatory approaches in the future.

That is why they called on the European Council along with the European Parliament, where appropriate, to adopt as rapidly as possible, this year, pending legislation on the legal framework for ecommerce, on copyright and related rights, on e-money, on distance selling of financial services, on jurisdiction and on the dualuse export control regime.

We have already agreed a directive on electronic signatures that introduces their legal recognition throughout the EU and sets voluntary standards for certificate providers.

These further steps will take Europe quickly into the new digital age, boosting consumer confidence and making it far easier for a business based in one country to sell on-line in the fourteen others.

In the UK, we are currently also reviewing every barrier to competition in the emerging e-commerce market and seeking to remove them.

In every area we are asking what we can do to enhance competition and opportunity:

The new Competition Act makes our competition authority independent and for the first time prohibits all anti-competitive practices.

We are driving competition further and faster into the leadingedge communication markets, to bring prices down and give consumers more choice.

In the last few weeks we’ve seen four different companies offering new, unmetered Internet packages.

As the new tariffs come into effect, it will almost certainly mean that for the average Internet user at home and in business, the UK will be cheaper than anywhere else in Europe.

We are working as well on the legal framework.

Our electronic communications bill will allow us to update decades, indeed centuries, of legislation that refer to paper and post.

And we are helping employees in UK high growth Internet companies by tackling the issue of employer’s National Insurance Contributions on share options. I have been asked by the Chancellor to conduct a consultation on a technical solution to the tax treatment of share options in unapproved schemes, and I’m moving quickly to fulfil his request, and, I hope, to resolve quickly the serious technical problem that currently exists.

Lesson 4: Governments themselves are slow in using the technology

The fourth lesson First Tuesday learned from its European survey was that governments themselves generally are slow in using the technology.

Businesses represented here and individuals are responding to the new technologies and the new challenges. And Government has to do the same.

Last week, Tony Blair proposed a challenging target for Government – to offer all services online by 2005.

We need to transform relationships between government and citizen by delivering services on-line. And we need to do it quickly.

We also need to transform policy-making by managing government online.

The first step is to develop a clear strategy. So Andrew Smith, my colleague as Chief Secretary to the Treasury, and Patricia Hewitt, as our e-minister, are heading a crosscutting spending review to look at all aspects of Government and e-commerce.

Our strategy for e-government will be shaped by our view of the new technologies. Yesterday, Ian McCartney, the Minister responsible for e-government, launched our Government’s e-government strategy.

We want businesses and people to be able to access government anywhere and anytime.

From a computer. A mobile device. A TV. A kiosk in a post office or a shopping centre.

So the challenge to us is to make government-content, and government services, available across all our networks – wired and wireless – to all the devices.

It’s exactly the same challenge that content-providers in the private sector are facing. Financial services information providers, for example, now integrating content, and delivering it real-time to market analysts and retail investors alike on the trading screen, the television screen and the mobile phone.

But we also have to re-engineer government on the inside. Like every major global company, we have to move from vertical silos to horizontal processes. We have to move from inputs to outcomes. And we have to use ICT to enable all that to happen.

Like everybody else, we have to contend with legacy systems. E-mail systems that don’t talk to each other. Different data standards.

In the next few weeks, however, we will be publishing a single set of standards for inter-operability across government. We’re following the lead of business by adopting open, I/P based standards for all government systems. Making the browser the key interface for access and manipulation of all information. Adopting XML as the cornerstone for government data inter-operability and integration. And working with the global Govtalk consortium to create the infrastructure we need for implementation.

Conclusion

We are optimistic our British knowledge economy can match the best:

With individuals alive to the opportunities, and businesses sufficiently ambitious, we can rise to the challenge – making Britain and Europe the best place in the world for e-commerce.

Thank you for the contribution you are making ­ let’s work together to make this a success for all our people.