Once upon a time I, too, thought business was bad

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HISTORY DOES not record that the first pre-budget report of this millennium came in November 1000, when Stirfroth the Stingy, purse-keeper to the king, advised his boss that the royal treasury hardly had enough geld to buy off the Danes that year, and that therefore everyone should be prepared for some industrial-level pillaging. Since his liege lord at the time was Ethelred the Unready, we may wonder whether any notice would have been taken of these possible warnings. Or whether Ethelred, under pressure from Bishop Bickerstaffe, would nevertheless have sunk all his hard-earned revenues into endowing abbeys so that the monks and nuns could be paid more.

Whoever was first, the last pre-budget report of the millennium (coming before the earliest budget of the new one), was given by one of the least unready politicians of the last thousand years. Gordon Brown is always almost frighteningly ready. The extent of his preparation for government in the five years before the last election became evident when he let the Bank of England loose on interest rates in the first days of his reign. Ever since May 1997 his rock-like countenance and gravelly voice have given an almost geological impression of unchanging purpose over time.

Depressingly for the Chancellor, most debate about his statement has been stuck in the era of Danegeld. Should he buy off the public sector and his restless colleagues with a great dollop of largesse, or should he shell out on tax breaks for the barons of industry? His prudence - and that of his air-brushed predecessor, Kenneth Clarke - have created what we in the journo-political trade call a "war chest" - in itself a wonderfully first-millennium concept. And before yesterday, all anyone had been talking about was how, when or whether it would be spent. One BBC correspondent, who had made passing reference to proposals to encourage enterprise, then sensed his editor's impatience and hurried back to the war chest with the words, "but those will take some time, if ever, to work. And in the meantime..."

In the meantime, I would argue, we are all dead. Forget hi-falutin', omni-purpose and often meaningless words such as "globalisation". You don't have to buy all that schtick to see that many of our attitudes towards the way the economy, our taxation system, business and public services work, are nearly as relevant to the new millennium as Stirfroth's budgeting are to the Nineties.

I was brought up believing that those involved in business were essentially evil. At May Day demos in the mid-Sixties the members of the Cartoon Archetypal Slogan Theatre would perform little alfresco plays in which a bloke with a horrid voice, wearing a black top hat with a pound symbol on it, would come up behind the worker and shout "profit!". For many people the names Railtrack, Monsanto, Tesco, Shell and (more recently) Microsoft, will today conjure up much the same image. Business is still seen as rapacious, piratical, monopolistic and amoral.

By contrast the public services are inevitably composed of noble firepersons, nurses, teachers and white-haired old grannies, who do their best with the inadequate resources they have to work with. The Thatcherites, of course, reversed these values, and characterised all business as good, risk-taking, buccaneering and courageous. The public sector was sclerotic, inefficient, producer-dominated and union-ridden.

Yesterday the Chancellor characterised this debate as the "sterile and century-long conflict between enterprise and fairness". And it is certainly the case that these ancient cartoons, and the suggested dichotomy between public and private, mark the completest of divisions between the current level of general debate, and those thinkers who are looking ahead.

If you believe that there is something in Charles Leadbeater's idea of the knowledge economy, or our own Diane Coyle's weightless world, you have to wonder at how little these concepts have fed themselves into public discourse. Here we are still vigorously discussing fat cats, grammar schools, privatisation and free TV licences, and a new world is taking shape all around us, in which these issues are barely worth the breath expended on enumerating them.

It is hard to stop words such as "entrepreneurial", "skills" (or "skiws" as Tony Blair calls them), "training" and "knowledge" sounding impossibly abstract. But let's take the proposition that the future belongs to those who are most knowledgeable, flexible and agile, most willing to take a risk, most adept at innovation. How can we construct a private and a public sector in which those characteristics are encouraged?

Yesterday some of the Chancellor's proposals seemed to speak to that future. The reductions in capital gains tax on long-term investments were tentative steps in the right direction. But only tentative. If you really want to send a message to investors to get out there and back risky ventures by men and women with good ideas, then there is an argument for cutting capital gains tax, in some circumstances, to zero. Perhaps that will come. If so, it will need to be accompanied by a cultural shift in the way in which we look at business failure. At the moment bankruptcy is regarded as the modern equivalent of the scarlet letter, and the number of firms going bust is used to calculate economic weakness. We should learn to look at failure as an inevitable by-product of endeavour.

When it came to the public sector there was also the hint of moving in the right direction. The knowledge economy requires high (if not universal) levels of higher education, and the announcement that there will be 50,000 new college places linked to IT studies suggests that Mr Brown understands something that Chris Woodhead seems to have completely failed to grasp.

At the moment of writing this, just as Mr Brown sat down again, I had to rely on recent history to tell me what some union leaders would be likely to say about the Brown package. How come, they would ask rhetorically, that money was there for business, and not for public-sector workers? This, they would argue, is inequitable.

Little about pay, these days, is equitable. The Ford strike called this week seems (and is) anachronistic. If Ford workers are worth more than the company is prepared to pay, then they will get jobs elsewhere, and the company will have to make do with an inferior product, or change its pay structures.

But there is no such mechanism available in the public sector. On the whole, most of us cannot shop elsewhere for our education or medical care. We rely on the government, then, to set pay at levels that will attract good teachers and nurses. But not all teachers are good ones - many would struggle in the private sector. Simply increasing the salaries of everyone would be to reward the useless with the brilliant.

This is only an illustration of the problems of a public sector that is, at the moment, discouraged from innovating and behaving in a more entrepreneurial manner.

And a reminder that the size of your war chest isn't everything. It's what you do with it that counts.