Stephen Timms – 2000 Speech at First Tuesday

The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 7 March 2000.

Introduction

Thank you for inviting me to join you this evening.

Let me just say at the outset that I’m excited about First Tuesday. I was in Silicon Valley last September and visited the MIT/Stanford Venture Lab which is also a public forum where entrepreneurs, managers and investors come to swap ideas and learn from each other. I impressed upon them on that occasion the opportunities for investment in the UK today, but the creative energy in that forum was unmistakable and I asked my officials what was happening here in the UK. They told me: First Tuesday. So I am delighted finally to be here.

Just yesterday I visited Cambridge University Entrepreneurs, run by students, which has just announced the winners of its business plan competition. They had four times as many entries as they allowed for. The winners have already had individual mentoring from top industry figures, and now they are going to receive start up funding. There is a real sea change with a new enthusiasm for entrepreneurship, and tonight, I want to talk about our hopes for the knowledge economy. But first, let me put that in the context of our wider aims.

A good way to explain what this Government is trying to do is that we want to build a new Britain which will be modern and decent – both of those things at the same time. A dynamic and enterprising economy, but one where every person has the chance to play their full part and nobody is left out.

The first economic priority after the election was to achieve stability in the UK economy after decades of boom and bust. That has been achieved in a remarkable way, so our focus now is on locking in that hard won stability, and building on it for the future. New stability gives us the chance to express a new optimism about our future, and so Gordon Brown set out at the Pre-Budget Report in November four new ambitions for Britain in this coming decade which encapsulate our commitment to a modern and decent Britain:

1. That we should be closing the gap with our competitors on productivity after years of slipping behind;

2. That we should have a higher proportion of the workforce in employment, and keep it like that. Actually, we already have more people in work than ever in our history, but we want to achieve the highest proportion and do so on a durable basis;

3. That for the first time over half of our school leavers should go on to study for a degree; and

4. That we should halve the number of children living in poverty, on the way to the Prime Minister’s target of eradicating child poverty altogether within 20 years.

Four ambitions for a modern and decent Britain. And, as the Chancellor spellt out in his speech about the Internet a couple of weeks ago, this industry has a vital role to play.

Some say we have become obsessed with the knowledge economy and the Internet. But the truth is that immense strategic opportunities lie ahead of us in Britain. For example, we are leading the mobile Internet revolution. We are at the forefront of 3rd Generation Wireless development, as the current auction is demonstrating. It would be utter folly to let these opportunities pass us by and we are not going to do that.

So this year we are focusing on putting in place three building blocks to create the most competitive, enterprising and fair knowledge economy in the world.

Competition

The first building block is the most pro-competition policy in the world because that is the sharpest spur to innovation, efficiency and improvement. We are reviewing every barrier to competition in the emerging e-commerce market and seeking to remove them:

We are building on the decision to create a new independent competition authority with the Competition Act which came into force last week with its new powers to prohibit anti-competitive practices;

For banking and financial services, the Financial Services Authority will now, for the first time, be required to facilitate competition – with a new scrutiny role for the competition authorities;

And for the telecommunications industry, we are squarely behind OFTEL in its promotion of competition, to ensure the price of telephone calls is not a barrier to greater Internet use or to the future growth of UK e-commerce. Last month the Chancellor challenged the industry to get the cost of using the net down to US levels by end-2002. It is good to see the industry already taking up that challenge, in the recent announcements by Alta Vista and NTL.

Finally, we are promoting a competitive environment for broadband access. BT is rolling out ADSL from the Spring, and OFTEL is ensuring that other operators can provide their own broadband services over BT’s local loop by July 2001 at the latest. In 1987, working for a start up company, I wrote a book about commercial broadband applications and its great to see these things starting to happen.
Finally, we are looking to roll out rapidly fixed wireless technology, with the first licence available this summer.

A more favourable tax environment

For a higher degree of enterprise we need higher levels of investment and entrepreneurship. So our second building block is the best tax environment for investors in start-ups and high tech businesses, with improved rewards from enterprise and wealth creation.

Corporation tax has been cut from 33 to 30 per cent. And to encourage and reward new business investment, we have cut the long-term rate of capital gains tax from 40p to 10p. We have proposed a cut in the taper so that those investing for five years will pay only 10p and for three years only 22p. Final decisions will be announced in the Budget in two weeks time;

For the people with the skills and talent who are prepared to move from safe jobs to risk time, effort and savings to create wealth in a more challenging environment, we are also introducing a new targeted tax cut from next year. The Enterprise Management Incentive will enable growing enterprises to offer their key employees tax-advantaged options over shares up to £100,000. I know a number of start-ups have been thinking about using this scheme and I would encourage others to do so;

We also recognise the significant role stock-options have to play here and we are currently looking at the role of employer NICs charges which we know is causing concern particularly in the entrepreneurial community.

We want new encouragement for the venture capital industry and especially for the start up and early stage ventures, where equity is more appropriate than bank loans, but where there is insufficient encouragement to invest. Our new network of nine Government-backed regional venture capital funds, and our UK High Technology Fund which is a fund-of-funds, will both help early stage high-technology businesses.

Making Britain the knowledge capital of the world

The third building block for our knowledge economy open to all is to make Britain the knowledge capital of the world.

Knowledge is the key to future business success and productivity. That puts a great premium on education and skills. I have visited a number of our universities in recent weeks – Cambridge, Oxford, Warwick, Newcastle, Durham, Sheffield – to have a look at what they are doing to commercialise the superb research which is being undertaken by them and I have been heartened by what I have seen.

That premium on education and skills in the knowledge economy is exactly why we are pushing through huge educational reform, investing an extra £19 billion in education – so that everyone from our school children to the unemployed and low paid have the opportunity to master the skills and technologies of the new information age.

That way we can make sure the opportunities of the new technologies are open to all, and that Britain has the size and sophistication of markets – and the quality of skills base – needed to succeed.

Conclusion

Our target is that within three years we want to become the world’s best environment for e-commerce. This is a huge challenge for everyone – government, business and individuals. But we are optimistic.

We have started with a foundation of a new stability which we are determined to lock in. The building blocks we are putting in place now for a knowledge economy open for all – in competition, in investment and enterprise and in skills – those are the building blocks to help us make the most of the challenges ahead.

Thank you for the contribution you are making and good luck for the future. Let’s work together to make this a success for all our people.