HC Deb 16 December 1998 vol 322 cc969-83 3.33 pm
The Secretary of State for Trade and Industry (Mr. Peter Mandelson)

With permission, Madam Speaker, I shall make a statement on competitiveness.

The White Paper that I am publishing describes the Government's strategy for modernising the UK economy. Overall, our industrial performance still lags well behind that of the United States and our European partners, despite all the privatisations and trade union reforms of our predecessors' 18 years. Yet a new economic landscape beckons, which will radically change the terms on which businesses compete with one another. As a Government, we have to create the conditions for an economic step change. The White Paper is a wake-up call to the nation to do just that.

The starting point for the Government's analysis is that knowledge and its profitable exploitation by business is the key to competitiveness. An advanced industrial nation such as ours cannot sustain the growing prosperity we want by producing standard products and services made with pedestrian methods and commonplace technology. Others can do that, just as well and more cheaply. We shall win only by developing innovative goods and services that customers want to buy and that use world-class production systems and the most sophisticated technology to keep us ahead of our rivals. We need also to ensure that the best environment for business in the world is here in the UK and the rest of Europe, which is our home market.

The bedrock of that business environment is macro-economic stability. Business hates uncertainty. That is why this Government are so determined to steer a stable course through the world's current economic turbulence. We fully understand the difficulties that this turbulence can cause.

The Government have no illusions that they alone can transform Britain's economic performance. Of course they cannot. It is not the Government's job to second-guess boardroom decisions; nor is the hidden hand of market forces sufficient to secure our competitive success. The false hopes of planning in the 1960s and 1970s and the obsession with laissez-faire in the 1980s both failed. This Government steer a new path: to work with the grain of markets, to use our regulatory powers to promote competition as the single most important spur to innovation; to encourage businesses to collaborate with each other to compete more efficiently; and to invest in the capabilities of the economy, including its skills and technological awareness.

Within this framework, there are three key roles for my Department. First, we must invest in our world-class science and knowledge base. Secondly, we will step up our efforts to convert the fruits of this vital resource into hard commercial success. Thirdly, we will lead a crusade to develop in Britain the spirit of enterprise so characteristic of the United States, so that we seize the new business opportunities that are before us.

The quality of the UK's science and engineering base is the foundation on which the knowledge economy is built. It is the mainspring of innovation, yet university research has been the victim of long-standing under-investment. This Government have acted to reverse the decline.

With the Wellcome Trust, we are investing an extra £1.4 billion in British science and engineering. We also need the private sector to increase its commitment to research and development. That is why my right hon. Friend the Chancellor will be consulting business on supplementing the current tax system with a research and development tax credit for small businesses. That is also why we will back strong participation by UK business in the European Union's R and D programme. However, research by itself does not generate wealth.

We must ensure that more research is transformed into commercial success, and that new ideas lead to successful innovation and new products. My Department will therefore switch resources to increase its support for innovation by 20 per cent. An expanded teaching company scheme will pay for 200 technology champions every year from among our best science and engineering graduates to help businesses innovate and to exploit the latest technology. In addition, the Government will offer a range of new incentives to reward universities which work effectively with business. Our target is to increase by 50 per cent. the number of innovative start-up businesses each year from the public sector science and engineering base by 2002.

Exploitation of science and business development is often strongest when businesses cluster together, creating a critical mass of investment, skills and co-operation. Governments cannot create clusters out of nothing, but they can help emerging clusters to grow. In a new initiative, which I regard as of fundamental importance, the Government will for the first time set up teams, each led by a Minister, to tackle barriers to growth of nationally significant clusters, co-ordinating action across Government and with business. The first of those teams will concentrate on biotechnology, and will be led by the Minister for Science, Lord Sainsbury.

Boosting enterprise will be given the highest priority in what the Government say and do. We must encourage more people of all ages and backgrounds to start their own business, and we must help those businesses to grow. I have no magic wand that can create an enterprise culture in Britain, although Government can play a role in changing attitudes, facilitating finance, offering networks of support and enabling businesses to learn from one another, improving technological awareness, especially access to the new digital technologies, and promoting at every opportunity liberalisation and competition, without which an enterprise culture cannot flourish.

First, on attitudes, we will back a business-led campaign to promote enterprise in every part of the country. We have asked the Qualifications and Curriculum Authority to consider how best entrepreneurship skills can be introduced to teaching in school. This year, the Government are spending £15 million to promote links between education and business, and are co-sponsoring, with the private sector, the expansion of the young enterprise scheme into higher education, helping students to run their own businesses. That will build on the measures that the Government have already taken to invest in and reform the education system at every level.

Secondly, the financial community needs to be as entrepreneurial and innovative as the business community. This Government have already introduced a much-needed cut in capital gains tax. Today, I can announce the creation of a new £150 million enterprise fund to bring together public and private finance for high-growth businesses. The fund will help financial providers to develop the expertise to understand and back growth businesses and new innovative technologies. It will help to create in the UK a far-sighted financial community that will be capable of taking risks alone.

Thirdly, to help innovative business start-ups through their crucial early development, I have set the business links network a target of supporting each year 10,000 new growth businesses. In a modern, enterprising economy, businesses need to learn from one another. The Government can play a crucial role. Indeed, we are full partners in the Confederation of British Industry's "Fit for the Future" best-practice campaign. My Department has helped the Motor Industry Forum to bring master engineers from Japan to advise and train vehicle component suppliers on world-class practice. That has produced truly outstanding improvements in performance. My Department will fund up to 10 similar programmes in other industrial sectors.

To help the regional development agencies in England to promote innovation and competitiveness, we shall provide them with an extra £10 million. We have decided to re-focus regional selective assistance on high-quality, knowledge-based projects that provide high-value jobs.

Fourthly, new digital technologies are the nerve system of the knowledge economy. Electronic commerce will be among the most revolutionary changes to markets since the industrial revolution. I recognise that many smaller firms find it difficult to make the leap into electronic trading, so I am launching a new programme to ensure that we achieve a target of 1 million small businesses exploiting the internet to the full by 2002. The Government will invest £20 million in new comprehensive advisory services to ensure that that target is met.

My ambition is that Britain should, by the end of this Parliament, have the best environment world wide for electronic trading. I have today published a document that benchmarks our performance in the digital economy against our main competitors. I will introduce an electronic commerce Bill later in this Session to take our laws into the electronic age and reinforce confidence in electronic trading. I will appoint an e-envoy to help to lead the United Kingdom in international discussions on electronic commerce. The performance and innovation unit in the Cabinet Office will conduct a study to build on that. I am also developing proposals further to liberalise communications markets.

Finally, if enterprise and innovation are to flourish in the UK, we need greater competition in markets, and those markets need to modernise. For 18 years, our predecessors preached free markets, but took fright at big business. We have already passed the new Competition Act, and we will use it to attack anti-competitive practices, strengthening the Office of Fair Trading so that it can expose all corners of the economy to the stimulus of competition. I will also consult next year on the case for reform of merger policy to ensure that that, too, promotes competition.

The White Paper sets out 75 commitments to boost business capabilities, promote business collaboration and strengthen competition, all aimed at closing the performance gap against our main competitors. In addition, we need to measure how well we are doing. I have therefore decided to develop and publish indicators to track the country's progress: a new competitiveness index. Each year the Government will review Britain's progress against those indicators, and agree what further action is required. A new competitiveness council, drawn from across business, will advise the Government on the action needed.

In one respect only is this a modest White Paper. It is a mere 67 pages, compared with the 634 pages of the three competitiveness tomes published by the previous Administration. The right hon. Member for Henley (Mr. Heseltine) was thoroughly dedicated in his goals, and I commend him for telling Britain some home truths, but still Britain slipped behind. The growl was there, but I am afraid not the bite. Now even the growl has left, and just a squeak remains in the Conservative party.

In contrast, our White Paper charts a realistic and attainable way forward. For too long, a dignified retreat from economic success has satisfied us. Britain has played on half the pitch—inventing but not selling; competing but not working enough with others. Now we are going to do things differently. Government and business will act in partnership, with focus, energy and enterprise. I commend the White Paper to the House.

Mr. John Redwood (Wokingham)

I thank the Secretary of State for fitting the House of Commons into his busy media schedule today. When we heard him this morning, he seemed to avoid telling us in advance the content and substance of his statement, but now we know that he was briefing ahead of it—there is nothing new, and nothing of substance, in it. This time, the leaks contained nothing, and the statement contains nothing. The emperor has no clothes.

The Secretary of State just told us that he has published a paper of only 67 pages. Has he not bothered to read the other two volumes of his own White Paper, which comprise 58 extra pages? He obviously has not got around to that in his ministerial box. How can we believe that the Secretary of State has his heart in this, if he did not even know that there were two additional volumes that he had not read?

The truth is that the Chancellor calls the shots. He has stolen the Secretary of State for Trade's garments. The Government's policies on competitiveness, such as they are, were announced in the pre-Budget statement by his right hon. Friend. The Secretary of State once again—metaphorically speaking, for the radio audience—comes naked into the debating Chamber.

Today, British businesses know that their competitiveness has been gravely damaged by the Government's policies. Now they hear from the Secretary of State that, under Labour's economic policy, they have no future if they are making standard products and providing standard services. What a chilling message for his own constituents.

Mr. Ian Stewart (Eccles)


Mr. Redwood

The hon. Gentleman says, "Nonsense." We have just heard the Secretary of State read out a statement saying that there was no future in Britain under Labour for businesses that supply standard products and services. What offer of hope does he have for his own constituents, who make just such goods and provide just such services? He tells us of more money for science and technology, which has been announced several times before, originally by the previous President of the Board of Trade.

Is the e-envoy in addition to the digital envoy announced a short while ago? Will those two gentlemen or ladies be in competition, or has the digital envoy been abolished before being appointed, only to be replaced by the putative e-envoy? The whole thing is risible and muddled.

The truth is that the Government have made it too dear to make things in Britain, through increased taxes, extra regulations and high interest rates. Fearing many more redundancies and bankruptcies, the DTI wants to make it easier to try again when a business has gone bust. There is confidence in Labour's economic policy for you. When the Government redesign the bankruptcy laws, they must be careful not to design a con man's charter. We could not support that.

All we get from the Secretary of State are endless criticisms of management and workers, while he makes their task all but impossible. How will £2.3 billion of extra cost each year for the working time regulations make for cheaper goods and services? How does £2.9 billion a year of extra costs from the minimum wage stimulate jobs? How does £25 billion in extra tax over the life of this Parliament help business to find the money to invest? How can an unspecified amount of extra pension contributions—announced but not quantified yesterday—help our businesses to compete in a price-sensitive market around the world? Does he not see that all those measures make it dearer to make things in Britain, and less attractive for companies to go on investing here or to invest here for the first time?

Will the Secretary of State at least provide some answers to the detailed but important questions that the McKinsey study and the Government's work on competitiveness have thrown up? For example, do the Government intend to make it easier to get planning permission for new hotels, out-of-town superstores and hypermarkets and housing estates in busy areas? Is he aware how unpopular such a McKinsey policy would be in some of those areas?

Will the Government go to Brussels to demand more milk quota to help the dairy industry, which, on the Secretary of State's own analysis, is held back by this quota system that is unfair on Britain? Will he open up the new car market in Britain to full retail competition? Now that he has told the Financial Times that Labour was wrong to oppose privatisation in many cases, will he think again on his policy towards the Post Office, and privatise it, or will he tell us how, without privatisation, it can afford to buy businesses abroad, how much he will let it borrow, and whether he has squared that with his right hon. Friend the Chancellor of the Exchequer?

Will the Government veto damaging European Union plans for a withholding tax and the abolition of corporate tax breaks in Britain? Will they stand up for the financial centres of the Channel Islands and the Isle of Man, which bring substantial business to London; or does the Chancellor intend to abolish those centres, which are so popular with rich Labour Ministers, and lose the business from London and those centres to Bermuda, the Bahamas and New York?

How much will the Government give in tax breaks to new companies and entrepreneurs? Will those tax breaks, such as the small one at which he hinted in his statement, survive the work of the Financial Secretary, who chairs a working party in the EU to abolish such tax breaks? Perhaps her work will be completed before the Chancellor's consultation.

What will the Government do to persuade the British pharmaceutical industry to invest in the United Kingdom rather than in Ireland, which it tells me is now so much more attractive thanks to Labour's tax increases? Under us, it invested here; under Labour, it is thinking of going elsewhere.

The pantomime season has arrived today with the Secretary of State's performance in the House. He wants to play Aladdin. Unfortunately, as he rubs his lamp no riches will appear. The genie has already worked his 48 hours this week and is nowhere to be seen. Perhaps he is stuck at the dome, awaiting the late arrival of the Jubilee line, like the Secretary of State and his officials.

I hope that the Secretary of State will not play crude politics and make misleading statements about me in his reply. I hope that he does not have a pre-planned reply, but that he will get down to answering some of my serious questions for a change. My colleagues and I will go on asking them, because business needs to know where it stands. As he dithers, factories close. As he fails to make up his mind, business gets into a bigger mess.

The Secretary of State has had nothing to say about job losses and factory closures. He has failed to convince the Chancellor to change his policy to help the workers in his constituency. The White Paper is as much use to a redundant industrial worker in Hartlepool as an umbrella in a hurricane. As we face the prospect of more factory closures in basic industry, will he wake up? This is a wake-up call for him, not for the rest of the country. Ministers are failing. Will he now respond to the questions?

Mr. Mandelson

That was a characteristically ritual, ungenerous and extra-planetary response to my statement. We can understand why, of course. The right hon. Gentleman's mind is on other things. His mind is on his job application to become the next boss of the Institute of Directors, which has emerged in the media. It is clear that he has decided to throw in the sponge, or perhaps the bathroom sponge has decided to chuck him. I do not think that that response will do anything at all for his job application, because it will lack any semblance of credibility among business people throughout Britain. [Interruption.]

The right hon. Gentleman asked me to answer his serious questions. If I had heard any serious questions, I would have answered them. On today's performance, the right hon. Gentleman will be staying exactly where we want him—on the Opposition Front Bench.

The right hon. Gentleman talks about the economy in ways that most who practise business in the economy would barely recognise. His problem is that he just cannot come to terms with a new world in which the Labour party works with business, and with the centrepiece of our policies being our commitment to enterprise and competition. He just cannot understand that—he cannot get a handle on it—so he cannot respond.

The right hon. Gentleman needs to understand that what business needs more than anything else is stability—macro-economic stability. That is the precondition on which business can get started, can grow and can become successful. In the Tory world of boom and bust, none of the measures that I have outlined today would have been remotely relevant, because none of them would have stood an earthly chance of succeeding with business in the whirlwind conditions of boom and bust that the Tories created over 10½ years and more while in office.

Macro-economic stability is a vital but insufficient condition for business success. Business success depends on a combination of top-quality products and sophisticated ways of making them by capable firms collaborating with others to bring products to market which are driven by strong competition. It is that combination which underpins the policies that I have set forth in the White Paper this afternoon, on which I notice that the right hon. Gentleman has absolutely nothing intelligent or original to say.

Mr. Martin O'Neill (Ochil)

I congratulate my right hon. Friend on a comprehensive range of measures which will greatly enhance Britain's capability to compete. In particular, may I ask him about the proposals for the enterprise fund? It is clear to anyone who looks at the difficulties faced by British business in recent years that a major problem has been that of gaining access quickly and easily to funds to allow enterprise to develop.

Can my right hon. Friend give us an assurance that the enterprise fund will be administered by a different cadre of officials from those who are currently responsible for such things as regional selective assistance? At the heart of the new proposal must be speed, clarity and transparency of transaction if businesses are to get decisions quickly. That is the way in which they will take advantage of market opportunities. The civil service and those responsible for administering the enterprise fund will need to be told that and told that quickly. Can my right hon. Friend assure us that there will be a different culture in the administration of this much-welcomed and greatly praised proposal for an enterprise fund?

Mr. Mandelson

I am grateful to my hon. Friend for his comments. The aim of the enterprise fund is to provide expertise and leverage to get more funds, primarily from the private sector, into small start-up businesses. That is its aim. It will mark a change in the basis of funding from loans to venture capital and equity-based arrangements.

We propose that the fund should comprise four elements of assistance. The first is a more cost-effective small firms loan guarantee scheme. The second is support from banks for very high-technology venture capital proposals. The third is support for enhanced local and regional venture capital activity. One of the problems with venture capital is that it tends to be highly concentrated in the capital city, whereas, when it is available in the regions, there are inadequate arrangements for levering it into small businesses.

The fourth element is support for innovative proposals by the finance industry to meet the needs of fast-growth businesses. The new fund will contain all those elements, and I have very much taken on board my hon. Friend's strictures on its administration.

Mr. David Chidgey (Eastleigh)

I do not wish to be considered one of those who are ungenerous in their reaction to the Secretary of State's statement. I should therefore say that, yes, it is high on style, and it is pretty high on ideals—but the key question is whether it will fall short on actions. Building on partnerships between universities and business is, of course, welcome—but will the Government's action reverse Britain's research and development investment record, which has placed us at the bottom of the league? Moves to promote collaboration and best practice in business are, of course, welcome—it is common sense—but where is the Government's action to boost the best of British enterprise through sound economic policies and affordable investment capital?

I should like to ask the Secretary of State three specific questions that may demonstrate the problems facing businesses across the United Kingdom, in every hon. Member's constituency. First, will the Secretary of State, in the spirit of his competitiveness White Paper, confirm the civil aviation research and development grant to the British aerospace industry? The grant—£22 million per year; a vital seed-corn investment in civil aviation and aerospace research—hangs in the balance.

Secondly, will the Secretary of State ensure that his colleagues in government stabilise the pound and bring down interest rates, so that firms such as Carbospar, which is in my constituency, that are winners of the millennium product award—that much-vaunted exercise of his—do not in a moment lose half their projected overseas sales?

Thirdly and finally, will the Secretary of State act to change the investment climate, so that firms such as Lancashire Fittings in Harrogate, which is another millennium products award winner, do not have to take their superb inventions to Sweden to obtain essential finance, instead of employing hundreds of workers in the United Kingdom manufacturing industry?

In a nutshell, in their economic and investment policies, will the Government play their part to help, not hinder, British competitiveness?

Mr. Mandelson

I am grateful to the hon. Gentleman for his remarks. On the CARAD scheme, we have invested more in aerospace and launch aid than any other Government in the history of the United Kingdom. I therefore do not think that we need to take any lessons on our commitment to investment in the aerospace industry. I keep under review all the financial commitments and schemes supported by the Department, and the CARAD scheme is no exception.

I realise, of course, the difficulties caused by the level of sterling and the recent impact of turbulence in Asia on manufacturers and exporters. A number of factors have to be taken into consideration when addressing that issue. However, I should tell the hon. Gentleman that the Government will not resort to short-term fixes that would only sacrifice the long-term health of the economy in return for short-term transitory gains. That applies—right across the board—to all aspects of the macro-economy.

I absolutely agree with the hon. Gentleman that the problem is not with our science and engineering base, which world class and tremendous. The United Kingdom invents an enormous amount. The problem is that we do not have the entrepreneurial climate and the support for business to ensure that what is invented here is also manufactured here. That is what all the measures in the White Paper are aimed at.

Mr. Dennis Skinner (Bolsover)

Is my right hon. Friend aware that, when all the envoys have envoyed and all the other wonderful initiatives have been implemented—including the one on coal, which I readily accept is a wonderful initiative—other areas will remain in need of attention? I refer in particular to the textile industry, which has been hammered by the Asian economies. The effects there are seen by loads of Labour Members.

What is my right hon. Friend doing to ensure that we beat off that unfair competition? Will he bear it in mind that the Remploy factories for the disabled face such severe competition that they are losing Ministry of Defence contracts—unfairly, in my view? Will he look into those issues to ensure that, in addition to what he has done for coal and some other areas, we manage to save those vital jobs in 1999?

Mr. Mandelson

I am glad to tell my hon. Friend that Mr. Budge of RJB Mining has today announced the signing of a £1 billion contract for the supply of coal, which is very good news for all those who work for that company. I am having a meeting on Friday with relevant Members of Parliament and trade union officials to consider what I readily acknowledge to be the serious plight of the textile industry. My hon. Friend the Minister for Energy and Industry is actively considering measures that the Government might be able to take.

Like all traditional industries, the textile industry needs to look to innovation, continuous improvement in how it does business, and the constant sophistication of its products and production processes if it is to compete successfully in tough and competitive world markets. That is the message of the White Paper.

I draw a lot of encouragement from other traditional industries that are doing that. Today I visited what could be described as a traditional metal-bashing company. Thanks to innovation, the introduction of new technology and the use of the internet—which Conservative Members take such delight in sneering at because they do not understand the real world—the company is once again able to compete in world markets, because it has increased its competitiveness. Every industry—new or old, mature or high-tech—has to do that.

Mr. David Curry (Skipton and Ripon)

The Secretary of State has emphasised the importance of the biotech industry and the need for stability. Will he examine urgently the increasing incoherence that is descending on the regulatory process for the approval of genetically modified products in the United Kingdom, and the real danger that, because of that incoherence and delay, Britain and Europe will be overtaken in a technology that is making enormous strides elsewhere? If we want to be at the centre of technology and development, we are going the wrong way about it in that crucial new area that will affect the whole of mankind.

Mr. Mandelson

The right hon. Gentleman makes valid and intelligent observations about an industrial sector that is growing in importance, and will probably be one of the greatest contributors to economic growth in this country. We should not take lightly the prospects for that industry or its regulatory framework. That is under active consideration by Ministers. We are consulting widely, not least because, if we are to carry public opinion with us on the new scientific developments and their conversion into products such as genetically modified foods, the public must feel comfortable and secure about the regulation of the industries and the use of such technology. They have to have clear information, facts and labelling about what they are eating in the case of genetically modified foods. We are taking steps to create and maintain that confidence and to ensure that the biotechnology sector moves ahead on a stable and confident footing.

However, I can assure the right hon. Gentleman that the issue is very dear to me. That is why I have announced today that the biotechnology cluster that has sprung up around Cambridge will receive support and help from Ministers, in this case from a team lead by the Minister for Science, Lord Sainsbury.

Mr. Derek Foster (Bishop Auckland)

May I invite my right hon. Friend to ignore the sound growls from the clown prince of darkness on the Tory Front Bench? May I congratulate him on the White Paper, and especially on what he has said about information and communication technology, research and development, innovation and small business development? He will know that Glaxo Wellcome in Barnard Castle employs 1,500 people in my constituency, which, like his, is in the northern region. It is a superb employer, is well regarded in the community and contributes to the community.

My right hon. Friend will also know that the pharmaceutical industry makes a substantial contribution to the British economy—contributing £2.3 billion to the balance of payments and £5.5 billion worth of export—

Madam Speaker

Order. I am sorry to interrupt the right hon. Gentleman, but this is time for questions, and a number of hon. Members still wish to speak. We have very important business ahead of us, so I shall only take questions now.

Mr. Foster

I am sorry, Madam Speaker, but I was carried away with my enthusiasm for the pharmaceutical industry. In view of that substantial contribution, is it not surprising that my right hon. Friend the Secretary of State for Health is not on the Cabinet Sub-Committee responsible for competitiveness and productivity? Will my right hon. Friend rectify that?

Mr. Mandelson

I am grateful to my right hon. Friend, and I accept what he says about Glaxo Wellcome, which pours an enormous amount of investment into research and development in Britain. Indeed, if every other private sector company did the same on that scale, we would certainly be in business.

However, my right hon. Friend should not take it amiss that my right hon. Friend the Secretary of State for Health is not on that Cabinet Committee. He cannot be on every Cabinet Committee, as he is a busy man, but I know that he has very much at heart the interests of the pharmaceutical industry. He has to maintain a careful balance in his approach to pharmaceutical pricing, because he needs to consider the investment by pharmaceutical companies in research and development and the time it takes to bring products to market. In considering all those factors in the round and in close consultation with other colleagues, he will, I am sure, reach the right conclusion.

Sir Peter Tapsell (Louth and Horncastle)

An hour ago, did the right hon. Gentleman hear the Prime Minister again boast that British interest rates have fallen to their lowest point for 30 years? [HON. MEMBERS: "Long-term."] Yes—long-term interest rates. Will he explain to the Prime Minister and the Chancellor that the reason that long-term interest rates in the United States which were 6.25 per cent. in the early summer are now below 5 per cent., and the reason that Japanese long-term interest rates are down to 1.25 per cent., is that business men in America and Asia are apprehensive about the future and are cutting back on their long-term industrial investments? That is also the main reason for the reduction in long-term interest rates in Britain. If Ministers cannot understand the significance of the key business indicator in these matters, they are most unlikely to get their industrial policy right.

Mr. Mandelson

I am not entirely sure what the hon. Gentleman's question was; it seemed a little confused. I would expect him to welcome the fact that interest rates have now been reduced to 6.25 per cent. That level is in sharp contrast with the 15 per cent. peak in the 1990s, which led to so many business closures. He is wrong to suggest that my right hon. Friend the Prime Minister was wrong this afternoon, but he is right to say that long-term interest rates are at their lowest for 35 years.

Mr. Gordon Prentice (Pendle)

My right hon. Friend has said that, as part of the drive to increase risk taking, he wants to make it easier for individuals to bounce back from bankruptcy. How precisely will that work? What guarantees can he give that all sorts of unsavoury crooks and rogues who have ripped off honest people will not re-emerge from bankruptcy in a different guise?

Mr. Mandelson

There is a difference between rogue, dishonest directors—who will be brought to book more quickly under the proposals being considered by the Government—and those who have honestly set out with a business idea, but have failed through no fault of their own. All we are saying is that no stigma should attach to the failure of honest business people. On the contrary, we want them to try again, to learn from their experience in setting up businesses, and, if they are so inclined, to try to set up a new business. In offering that encouragement, we will make an important contribution to changing the enterprise culture. At the moment, too many people are discouraged from going into business by fear of failure and the stigma that attaches to it.

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

I welcome the broad thrust of the White Paper, although most of the matters with which it deals will be devolved to the new Scottish Parliament, where the first SNP Administration will be keen to drive forward Scottish enterprise. How much of the £150 million in the new enterprise fund will be allocated to Scotland? Paragraph 2.25 is particularly opaque on that matter. Whatever the sum is, will it be in addition to the existing Scottish block, or will the Scottish Office be expected to fund it from the block?

Mr. Mandelson

I am glad to accept the premise of the hon. Gentleman's question—that Scotland will remain part of the United Kingdom. There would be little opportunity for people in businesses in Scotland to benefit from the enterprise fund if the SNP had its way and Scotland was separated from the rest of the United Kingdom. In so far as he makes a valid observation about the workings of the fund, we will take his point into account when we draw up in detail the operational methods of the fund.

Mr. David Borrow (South Ribble)

I am sure that my right hon. Friend is aware that the Lancashire aerospace industry—which is based on the two aerospace factories at Warton and Salmesbury and on the many small and medium-sized enterprises across the county—is one of the jewels in the crown of British industry. I am also sure that the White Paper will be welcomed by the industry, particularly the proposal to encourage links with education—I know that he recently visited All Hallows school in my constituency, which has close links with British Aerospace.

Will my right hon. Friend encourage the creation of a cluster for the aerospace industry in Lancashire, and ensure that organisations such as the Consortium for Lancashire Aerospace are involved in any discussions on it? Moreover, will he ensure that his officials are aware of the long lead time for aerospace projects? Although the industry is doing well at the moment, the actions that his Department takes and encourages now will have a dramatic effect, perhaps not in five years' time, but in 10 or 20 years' time, when schemes currently on the drawing board are rolled out into the airports.

Mr. Mandelson

I hear what my hon. Friend says in his last observation, and we will consider his point. I agree about the contribution of the aerospace industry to prosperity not only in Lancashire, but throughout the United Kingdom. The aerospace industry has an important set of supply chains—a series of small and medium companies which supply the industry extremely efficiently, among whom it is important to encourage closer co-operation. The Lancashire consortium plays a role, and the Industry Forum draws together all those involved in supplying the aerospace industry. That may well be exactly the sort of endeavour and model that the DTI will seek to encourage further as our proposals are rolled out. I take my hon. Friend's point about the potentiality of the aerospace industry as a cluster in Lancashire, and we will be happy to consider that.

Mr. Tony Baldry (Banbury)

Presumably the Secretary of State can confirm that he has sought to deal in the White Paper with inhibitors to competitiveness. If we are to have competitiveness indices, would it not be sensible to survey British industry on what it sees as the inhibitors to competitiveness at present? I suspect that issues such as high interest rates and non-labour costs would come high on that list.

I believe that there ought to be a wide debate on the matter, and certainly I intend to circulate the White Paper as widely as possible within my constituency. However, I also intend to ask businesses what they see as the inhibitors to competitiveness, and what in the White Paper they see as relevant to them—because I suspect that it will not be very much.

Mr. Mandelson

The hon. Gentleman will be disappointed if that is his view, because all the ideas, proposals and measures contained on every page of the White Paper have been based on unprecedented consultation between the Government and individual business men and women from all parts of the country throughout the drawing up and the discussion of the White Paper. Literally scores of business people have been involved in discussions with the Department, and directly with Ministers.

I pay tribute to my predecessor as Secretary of State, the Leader of the House, who was here for my statement. It was she who put the arrangements in place and decided to involve business people to the extent and in the way that has been achieved. I can assure the hon. Member and the House that, far from being disappointed, many business leaders have already expressed to me their great satisfaction with the White Paper, which they see—for once, and at long last—as the most practical and sensible set of appropriate measures from a Government in 20 years.

Mr. Ian Pearson (Dudley, South)

May I congratulate my right hon. Friend on his statement? I particularly welcome his focus on supporting clusters; the "D" side of R and D; the expansion of the teaching company scheme and encouraging more spin-outs from universities; the new enterprise fund; and targeting new high-growth businesses?

Will my right hon. Friend do two things? First, will he reward and value academics who work with industry so that that option is not, as at present, the third best, behind publishing in refereed journals, or teaching? Secondly, on regional selective assistance, will he ensure that the metal-bashing companies to which he referred continue to be supported in upgrading their businesses, and that they will qualify for regional selective assistance? That will show that the Labour party values the manufacturing sector—unlike the Conservative party, which devastated the sector when it was in office.

Mr. Mandelson

My hon. Friend can rest absolutely assured that our manufacturing sector remains, and will remain, central to our future prosperity and to the Government's aims, objectives and policies. The key point is that manufacturing, like every other sector of the British economy, has constantly to innovate and to bring in new ideas from our science and engineering base. It needs to bring in people with ideas for new products or production systems and new systems for working, because that is the only way in which traditional manufacturing industries and processes can maintain their competitiveness and their share of world markets. Many are doing that now; even more will have to do so in the future.

It is extremely important to reward academics. At the root of the schemes that the Department already organises and that we will refine in the future are arrangements by which academics can leave tenure and go into businesses without fearing that their jobs will close behind them, which would provide a strong disincentive and discouragement. The teaching companies scheme, which produces first-rate technology champions from the academic sector who go to work in businesses, has proved a great success, and we intend to expand it.

Mr. Eric Forth (Bromley and Chislehurst)

I warmly welcome the Secretary of State's reference to the spirit of enterprise in the United States, and his crusade to bring that spirit here. Recognising that the United States is still the world's most productive major economy, with an unemployment rate at half that of the European Union, will he pledge that, if he seeks to steer the British economy in any direction, it will be in the direction of the United States and not that of Europe?

Mr. Mandelson

It might be worth the right hon. Gentleman mentioning in that context that the United States operates rather an efficient minimum wage. It has had that legislation in place for some time, and it has never had any adverse effect on enterprise, business or prosperity.

My view is absolutely clear: Europe is the biggest integrated market outside the United States. We want to make that market as open, liberalised and competitive as possible. That is the only way in which we will create opportunities for British business. Conservative policies would cut us off from the huge home market that is available to British business and sink us somewhere in the mid-Atlantic, which would be of no value to anyone in this country.

Ms Sally Keeble (Northampton, North)

I warmly welcome my right hon. Friend's statement, and especially his comments in support of the new high-tech industries, which have already proved important in creating jobs in my constituency. Is he aware that many employers, including those in Northamptonshire, say that one of the big barriers to competitiveness is the lack of skills in the local work force? Whether one works in finance, construction or even retail or fast food, one needs some computer skills, so will he say more about measures that will give us a really competitive work force?

Mr. Mandelson

My hon. Friend is right in both her points. The problem for new start-up high-technology businesses, which have a tremendous potential for growth, is the enormous difficulty that they have in gaining access to capital finance in the first place. The venture capital industry in this country is, I think, the biggest in Europe, yet at certain levels, in relation to certain sizes and types of firm—especially high-technology ones—there is an absence of expertise and analytical skills in the financial community.

There is in the financial community a risk aversion and a resistance to financing high-technology firms, which does them considerable harm. It is to get over that prejudice—as some people would see it—or lack of sympathy or understanding that we are taking the measures that we are through the enterprise fund. Through the operation of that fund, we will, as I said, develop a finance community that has much greater expertise and more understanding of that sector, and therefore much greater inclination to offer it seed finance.

My hon. Friend's points about skills are well taken. We are entering an extensive and pervasive information age. The information revolution will touch every part of the United Kingdom economy, and we are doing much to raise skill levels so that we have people prepared, able and willing to work in information and communications technologies. We need to do more, as my White Paper makes clear, and I am glad to say that I have the full support of my right hon. Friend the Secretary of State for Education and Employment in making the necessary arrangements, increasing funding, and bringing to fruition our ambitious targets for skill levels in that area.