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Lord Simon of Highbury: My Lords, I assure the noble Lord that it was never my intention to bad-mouth policies of the previous government. In looking at the competitiveness report, I was trying to explain the fact that they were long on analysis and relatively weaker on solution. What was undertaken was certainly a reconstruction of competitive markets in areas where we had had state monopolies. That is a pre-condition for a competitive marketplace, as has been said by my noble friend in another place. We believe that very strongly. However, where we failed--and this refers to the second part of the noble Lord's question--is in understanding how value was created through the system.

While we could create the conditions for competitive markets in the newly-freed areas where there had been monopolies, we did not have the same capacity as in the previous government to create higher value added through the private sector chain as well. It is clear that on the basis of the statistics--whether we take GDP per capita or, more conveniently, as the noble Lord mentioned, GDP per hour worked--we are producing less than our major competitors.

To back that weakness even further, we are certainly investing less per capita in the industrial and service system than our competitors; sometimes in the region of 40 to 50 per cent. less. The congruence of less value per

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capita produced and less investment per capita is indeed ensuring that we are not as competitive as others. Whether we talk of connectivity or value across chains, the final output is not as competitive. That is an issue this paper is trying to address. As I have said, I believe it is the responsibility of all within our country to understand that and to work to improve it.

Lord Barnett: My Lords, I begin by declaring an interest as chairman of an SME as well as of a larger company. I recognise that my noble friend's business experience was not in an SME. However, I should like to take up the point raised by the noble Lord, Lord Howell, on productivity. Would my noble friend accept that improvement in productivity frequently results in a reduction in jobs rather than an increase?

Often we hear great announcements from major companies, but as my noble friend will know, the way they improve productivity is by slicing away a fair number of jobs. In the past, small companies have been helped by the DTI under both governments, but the help has been dependent on the number of jobs created. Can the Minister tell us whether the new enterprise fund, other grants and finance referred to in the documents rather than the Statement, would also be dependent on jobs being created?

Lord Simon of Highbury: My Lords, in response to the first part of my noble friend's question on whether productivity essentially always results in job losses, I am sure that there is some connectivity, but I should like to return to the point I made previously. Concentration on adding value through investment and in the process in the workplace is an important feature of productivity and one which may not result in having fewer workers. A company may find itself with exactly the same or a greater workforce because it has understood the methodology for creating value in a new way. That is what we should be concentrating upon.

However, as has been said, in certain sectors of industry new technologies result in fewer jobs. In asking the question as to whether the new methodology for regional aid and grants will be looking at the number of jobs at stake or to be gained, all we have said in the Statement is that we wish to refocus that policy to take into account the value that will be created through jobs. Therefore, we are looking at the quality of the jobs and the quality of the future value capacity of the investment in perhaps a rather newer way than we have done in the past.

Lord Baker of Dorking: My Lords, I suspect that when the commentators get their hands on this paper tomorrow, or at the weekend, they will find it to be something of a damp squib. It seems to me to contain very little that is new. The schemes announced today have their predecessors in schemes of the mid and early 1980s; that is, the enterprise schemes in support of small businesses and schemes of that sort. I was glad to see that the Minister recognised in his response to the last question--not in the Statement--that the prosperity of the country, which this Government inherited, was due to the policies of privatisation, deregulation and

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liberalisation, all of which his party, of which he was a member, voted strongly against. I hope that there has been a genuine acceptance by the Government that these policies have proved effective for our country.

When the Government took over in May 1997, we enjoyed fifth position in the competitive table. I do not think that Britain has been as high in the competitive table for nearly 100 years. Can the Minister hazard a forecast, as a result of this White Paper, on whether we are likely to improve upon that position? I do not expect him to jump up and say "Yes" because when the figures are eventually announced and measured, he may not be around to take blame or credit. However, my point is that we had a considerable measure of success and that should be recognised. That success came from liberalisation.

The most job-positive area in our country at present is that of telecommunications and the Internet, as the Minister correctly stated. I have some interests in that area. As regards electronic commerce, perhaps I may suggest that the Minister looks at Finland. That country leads the world in electronic commerce on the Internet. Thirty per cent. of all commercial transactions in Finland are now conducted over the Internet. They have achieved that not by government regulation but by aggressive marketing and aggressive deregulation. I believe that that should be the way forward.

Lord Simon of Highbury: My Lords, I thank the noble Lord for his views about the effectiveness of Finland in exploiting the new digital technologies. I share those views strongly. We are delighted that so many of its companies wish to invest in the UK because they find it to be the appropriate environment for the development of that technology. They no doubt see the moves we are making to "Europeanise" our capacity to compete as being very good.

I should like to venture a comment on league tables. The noble Lord reminded me somewhat of those football discussions that we have about the competitiveness of the Premier League and how brilliant, competitive and fast it always is until we actually go away and play games against the opposition abroad, when we find that the results are slightly less attractive. My feeling about the noble Lord's fourth place in the league is that he was not very careful about saying which league it was; indeed, it sounded to me a little like the Premier League. Although we may be fourth in whatever league the noble Lord invented in his mind, I look at 18th in the OECD league table, which seems to be the international one, and wonder to myself whether, when we go abroad, we are quite as fit, quite as athletic and quite as successful as the noble Lord may have thought.

Lord Craig of Radley: My Lords, there is much in the Statement to be welcomed. As a member of the Select Committee that looked at the information society some three years ago, I am especially delighted to see the emphasis which has been given to increasing electronic commerce and other applications of information technology. There are also a number of

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sums which appear to be new money for a variety of research work. However, I believe that I detected the use of the verb "switch" at one stage; namely, that some new money for innovative research would be found by "switching" it. Therefore, in order to get a better balance, can the Minister indicate where the losses, or the lack of support which the Government now feel is necessary in the fields of research, will fall? At present, we seem to be getting just the positive side and not necessarily the negative side of the Statement.

Lord Simon of Highbury: My Lords, when I used the terminology "switching", I did not want to give the impression that we had already defined that we were moving research funds out of one area and into the other. I do not believe that that would be for the Government to predetermine. As I explained, the process whereby the funds are actually directed would be by agreement and discussion with a number of interested parties, whether that be the universities, private research centres or industry. As I said, the research councils will play a strong role in that respect. My use of the word "switching" was truly more related to moving DTI innovation budget funds from one area to research. We are moving funds out of some areas which we might have favoured in the past and putting more, net, into research to make up that £1.4 billion total with the help of the Wellcome Trust, which has already been announced.

Lord Ezra: My Lords, I am pleased to welcome the Statement and the White Paper, which I look forward to reading, just as I was pleased to welcome the White Papers produced by the previous government. It is very important that successive governments should continually take this subject very seriously.

One of the major points that strikes me about today's Statement is the number of positive and practical measures proposed. Indeed, one of the measures which I believe to be of great importance and which, of all the measures supported, could yield the quickest results, is the best practice campaign. Here we can translate that practice very quickly into improved results. I hope that the Government will soon be announcing the sectors to which this campaign will address itself. I hope that they will include in that the energy sector with which I am personally involved, especially the energy efficiency sector.

The reason I make that point is that we now have all the environmental pressures to get greater improvements in energy efficiency, but we have a market situation in which there is no incentive to save energy. Indeed, as the noble Lord will be aware from his past connections--and perhaps he is pleased that he is not in the oil industry at the present time--there is also the way in which prices have fallen. Further, there is a great overseas potential for efficiency in the environmental sector. I hope, therefore, that that will be one of the sectors which will be included in the list.


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