Podium: New Labour has had to adapt its economic policy to suit the times

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The world of 2008 is simply not the world of 1997. In the mid-1990s, New Labour's vision was an "enabling state" that strengthened the supply side of the economy, welcomed the dynamism of markets and worked to ensure that as many people as possible benefited.

The priorities of macroeconomic stability, supply side investment and public service reform were crucial and right. It is essential that they are taken forward now with continued commitment.

But they are no longer the whole picture. Why? Because the last decade has reshaped the global economy and our understanding of what is at stake in managing globalisation and securing our share of its growing markets.

I am absolutely confident of Britain's competitive future in the global economy. But while the Government is doing a lot to back enterprise and support entrepreneurs, some of its efforts appear to business as insufficiently joined-up and often overlapping.

Britain is at a critical juncture in its economic fortunes and the Government cannot afford to underperform. We will repair our banking system and we will get through the downturn. But on the other side we will encounter an even tougher place to do business.

Globalisation is going to continue to push us to improve productivity and carve out our specialisations and comparative advantages in the global economy. Those specialisations should be based on the high levels of value added we bring to what we produce.

We all know we are going to come out of this financial crisis with a consolidated – that is, smaller – financial services sector. As much as we admire the resilience of the British shopper, we recognise that consumer spending is going to have to be driven less by debt, and the retail sector may also account for a smaller share of the economy. British public service employment is also not going to grow at recent rates.

What these things mean in practice is that we will need to widen and diversify the specialist bases of the British economy by investing further and better in the technologies, skills and infrastructure that will allow us to set the pace in the industrial revolution that will define the current century.

Lord Mandelson gave the Hugo Young Memorial Lecture at Chatham House on Wednesday