The knowledge-based economy: Blueprint for British prosperity

A preview of the White Paper for improving competitiveness; Peter Mandelson, Secretary of State for Trade and Industry, says know- how and innovation are vital to industrial growth

BRITAIN'S economic performance has lagged behind the other leading industrial economies for too long. A century ago we were the richest country in the world. Now we are in the second division. The Tories told us not to worry. Productivity, they said, was catching up with the French and Germans. So it had been in manufacturing, where employment was slashed in two deep recessions. But across the whole economy the productivity gap has not closed. And even in manufacturing it remains wide, as Rover's problems at Longbridge show.

My task is to create a new industrial policy that will help put Britain firmly on the road to closing the performance gap. The White Paper I will present to Parliament this week sets out New Labour's approach to the modernisation of the economy.

We have already put in place two essential building blocks for sustainable economic growth: the independence of the Bank of England as the foundation of macro-economic stability; and a crusade to raise educational standards. But much more remains to be done to modernise the supply side of the economy. Only business can do this; but government can help.

Knowledge is the key to competitive advantage in the global economy. Business cannot win overseas markets with unsophisticated products that can be made by cheap labour and raw materials available anywhere in the world. But our know-how and ability to innovate can give us real advantage. And we will not maintain our home market - by which I mean all of Europe as well as the UK - if we do not learn how to make the most of electronic commerce. We have the opportunity to take a lead in e-commerce, which I am determined we will not miss.

Businesses have to make much more of the knowledge generated in our universities, develop and use the skills of the workforce, and improve their business processes by learning from other companies. This is true for all business: manufacturing and services; new hi-tech and traditional companies; big corporations and small traders.

Creating such a knowledge-driven economy is for business, not government. But there is an important role for government. This is emphatically not to recycle the failed corporate policies of the 1960s and 1970s when planning and nannyism stifled business. But neither is it just to stand back from business needs and hope for the best, as the last government did in the 1980s. The Tories' industrial policy amounted to privatisation and little more.

Our job is not to plan the outcome of markets - a forlorn quest - but to make markets work well, make them open, robust and effective, so ensuring that competition spurs innovation. That is why one of our first steps was to pass legislation to crack down on anti-competitive behaviour.

But we also have to invest in Britain's capabilities. Few companies will spend much money on long-term scientific research. So the Government has a vital role in building and maintaining a powerful knowledge base in our universities. That is why we are putting an extra pounds 1.4bn, with the Wellcome Trust, into upgrading Britain's science, reversing years of neglect.

We also have to invest in creating a much stronger spirit of enterprise in the UK. Entrepreneurial drive is not in short supply in Britain. But entrepreneurial skills are often lacking. And the people with knowledge and ideas in our universities are not sufficiently encouraged to commercialise their work. Here the Government can make the difference, for example by setting up a chain of Enterprise Centres in our universities. We need to encourage more ideas into the market place, and then let the market take over, enabling our inventiveness to earn profits.

Finally, government can do more to help firms collaborate to compete: not in an anti-competitive way, but to learn from each other's success. Such business-to-business learning is already growing in supply chains, between joint venture partners and in a whole range of partnerships. But smaller firms rarely have the time or resources to make collaboration work. That is why the DTI already helps the motor industry bring top Japanese engineers to the UK to help our automotive suppliers - with a dramatic impact on performance. The White Paper will set out a programme for facilitating this kind of change much more widely in the economy regionally, locally and sectorally.

New Labour's industrial policy is built on these principles: investing in capabilities, encouraging business collaboration and promoting competition. They underpin effective markets and will help put the future on Britain's side.

Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Chocolat author Joanne Harris has spoken about the financial struggles most authors face
Arts and Entertainment
Characters in the new series are based on real people, say its creators, unlike Arya and Clegane the Dog in ‘Game of Thrones’
tv'The Last Kingdom' is based on historical events
Arts and Entertainment
filmSir Ian McKellen will play retired detective in new film
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
Arts and Entertainment
'Molecular Man +1+1+1' by Jonathan Borofsky at Yorkshire Sculpture park
Glamour magazine hosts a yoga class with Yogalosophy author Mandy Ingber on June 10, 2013 in New York City.
newsFather Padraig O'Baoill said the exercise was 'unsavoury' in a weekly parish newsletter
people'She is unstoppable', says Jean Paul Gaultier at Paris show
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultants For Multiple UK Offices

£18000 - £25000 per annum + DOE, OTE £40000: SThree: LONDON - BRISTOL - DUBLIN...

Financial Accountant-IFRS-Gloucester-£300/day

£250 - £295 per day + competitive: Orgtel: Financial Accountant - IFRS - Glouc...

SharePoint/C# Developer - Aberdeen - Circa £40K + benefits

£30000 - £40000 per annum + excellent benefits: Deerfoot IT Resources Limited:...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Day In a Page

The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

Grindr founder Joel Simkhai: 'I've found love on my dating app'

Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

Is it time to ditch autocorrect?

Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
10 best girls' summer dresses

Frock chick: 10 best girls' summer dresses

Get them ready for the holidays with these cool and pretty options 
Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

Westminster’s dark secret

Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

A History of the First World War in 100 Moments

Dulce et decorum est: a life cut short for a poet whose work achieved immortality
Google tells popular music website to censor album cover art in 'sexually explicit content' ban

Naked censorship?

The strange case of Google, the music website and the nudity take-down requests
Howzat! 8 best cricket bats

Howzat! 8 best cricket bats

As England take on India at Trent Bridge, here is our pick of the high-performing bats to help you up your run-count this summer 
Brazil vs Germany World Cup 2014 comment: David Luiz falls from leader figure to symbol of national humiliation

David Luiz falls from leader figure to symbol of national humiliation

Captain appears to give up as shocking 7-1 World Cup semi-final defeat threatens ramifications in Brazil