Chapter 1
Economy: Rising prosperity in
an opportunity society
Forward to increased prosperity,
not back to boom and bust
1979-1997: Interest rates average over
ten per cent
1997-2005: Britain, the fourth largest economy
in the world, with the longest ever
period of continuous growth
2010: Full employment in every region
and nation
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Labour’s economic record is unprecedented – the highest
employment ever, longest period of uninterrupted growth in
modern history, lowest sustained interest and inflation rates
for a generation. Our economic policies will build on the platform
of stability and growth in three ways: entrenching a lowdebt/
high-employment economy which generates investment
in public services; supporting enterprise and wealth creation
by making Britain the best place to do business; and helping
every part of Britain and every person in Britain to contribute
to and gain from the strength of our economy. And
as we work globally to tackle climate change we recognise
the challenge and the opportunity of achieving sustainable
development at home.
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The new Labour case
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Our economic record has finally laid to rest the view that Labour could
not be trusted with the economy.We are winning the argument that
economic dynamism and social justice must go hand in hand. In the
future the countries that do best will be those with a shared purpose
about the long-term changes and investments they need to make – and
have the determination to equip their people for that future. So, we
approach new challenges with a progressive strategy for growth. In our
third term we will build new ladders of social mobility and advancement
on the firmfoundations of stability, investment and growth.
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Low debt and high employment
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In the last eight years we have pioneered a British way to economic stability.
Our economy has grown in every quarter with this Government.
Interest rates have averaged 5.3 per cent since 1997, saving mortgage
payers on average nearly £4,000 per year compared to the Tory years.
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Only with Labour, which constructed this framework, will this
continue.We will maintain our inflation target at two per cent.We will
continue to meet our fiscal rules: over the economic cycle,we will borrow
only to invest, and keep net debt at a stable and prudent level.
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Public spending and taxation
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The longest period of uninterrupted economic growth in modern
times has enabled the Government to deliver the longest period of sustained
investment in public services for a generation. Social security
bills for unemployment have been halved since 1997, saving £5 billion
a year, and we are also saving £4 billion a year on debt interest payments.
Over the ten-year period 1997-98 to 2007-08, real-terms
investment per year in education will have risen by 4.8 per cent and in
health by 6.5 per cent.
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Every pound we invest goes further because of our drive for efficiency
and reform. Labour will complete the implementation of Sir Peter
Gershon’s recommendations to improve public-service efficiency
and root out waste, liberating over £21 billion for investment in frontline
services.
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Labour believes tax policy should continue to be governed by the
health of the public finances, the requirement for public investment
and the needs of families, business and the environment.
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We will not raise the basic or top rates of income tax in the next
Parliament.We renew our pledge not to extendVAT to food, children’s
clothes, books, newspapers and public transport fares.We will continue
to make targeted tax cuts for families and to support work. As a
result of personal tax and benefit measures introduced since 1997, by
October 2005 families with children will be on average £1,400 a year
better off in real terms. Living standards in Britain have been rising, on
average, by 2.5 per cent per year since 1997 – a total increase of
nearly 20 per cent.
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We want a tax regime that supports British business.That is why we
have cut corporation tax to its lowest ever level, introduced the best
regime of capital gains tax in any industrialised country, and introduced
a new Research and Development tax credit.
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Full employment
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Our goal is employment opportunity for all – the modern definition of
full employment. Britain has more people in work than ever before,
with the highest employment rate in the G7. Our long-term aim is to
raise the employment rate to 80 per cent. And, as we move more people
from welfare to work, the savings on unemployment benefits will
go towards investing more in education.
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We will make work pay.With Labour’s tax credits a family with two
children pays no net tax until their earnings reach £21,000.
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We will implement the recommendations of the Low Pay Commission
to raise the minimum wage to £5.05 from October 2005 and £5.35
from October 2006.
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The New Deals and the creation of JobCentre Plus have made a major
contribution to cutting unemployment. The active welfare state
created since 1997 is working.
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The Tories trebled the number on incapacity benefits.We will help
people who can work into rehabilitation and eventually into employment,
recognising the practical assistance to disabled people of the
Access to Work scheme.We will build on the successful Pathways to
Work programme and reform Incapacity Benefit, with the main elements
of the new benefit regime in place from 2008.The majority of
claimants with more manageable conditions will be required to engage
in both work-focused interviews and in activity to help them prepare
for a return to work.Those with the most severe conditions will also be
encouraged to engage in activity and should receive more money than
now.We will continue to welcome new independent and voluntary
sector partners to provide job-seeking services.
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Supporting enterprise
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Government does not create wealth but it must support the wealth
creators.That is why our priorities are the national infrastructure of
skills, science, regulation and planning, and transport.The economy of
the future will be based on knowledge, innovation and creativity.That
applies both to manufacturing and services.
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In a fast changing global economy, government cannot postpone or
prevent change.The modern role for government – the case for a modern
employment and skills policy – is to equip people to succeed, to be
on their side, helping them become more skilled, adaptable and flexible
for the job ahead rather than the old Tory way of walking away
leaving people unaided to face change.
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Successful manufacturing industries are vital to our future prosperity.
The Labour Government backs manufacturing: from launch investment
for Airbus A380 Super Jumbo to the successful Manufacturing
Advisory Service helping 13,000 of our smaller manufacturing businesses
in its first year. In a third term we will continue to do so.
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Public procurement is a big opportunity for business in Britain and
the source of many jobs.We will promote a public procurement strategy
that safeguards UK jobs and skills, under EU rules, to ensure that
British industry can compete fairly with the rest of Europe.
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Britain has some of the strongest capital markets in the world.We are
determined they – and our financial services industry – should
prosper.We will ensure that companies have the right framework of
corporate governance and relationships with the institutions that invest
our pension funds and savings in them.
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Skills at work
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Our reforms to 14-19 education (see chapter 2) will raise the quality
and quantity of apprenticeships and vocational education.We are now
putting in place a comprehensive and ambitious strategy to help everyone
get on at work:
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* All adults to get free access to basic skills in literacy,language and numeracy.
*A new national programme, working with employers, to ensure that
employees who did not reach GCSE standard (level 2) at school will get
time off for free training up to level 2.
*A new partnership between government and employers to fund workplace
training at level 3 (technician level)
*A genuinely employer-driven training system – in every sector there will
be a Sector Skills Council determining the training strategy and a leading
edge Skills Academy.
*A nationwide system of advice – bringing together support on skills, jobs
and careers – helping people to get on at work.
*A strong partnership with trade unions to boost workplace training including
a new TUC Academy and continued support for Union Learning Reps.
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Supporting science
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The alliance of scientific research and business creativity is key to our
continued prosperity.
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Looking ahead, we are committed to a ten-year strategy on science
and innovation that will continue to invest in our science and industrial
base at least in line with trend GDP. Our ambition now is to raise the
UK’s total private and public sector investment in research and development,
as a proportion of national income, from its current 1.9 per
cent to 2.5 per cent by 2014.
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Our pharmaceutical and biotechnology industries are world leaders.
We have created one of the world’s best environments for stem-cell
research.We have now passed legislation to protect our researchers
from the activities of animal rights extremists.
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Across a range of environmental issues – from soil erosion to the depletion
of marine resources, from water scarcity to air pollution – it is
clear now not just that economic activity is their cause but that these
problems in themselves threaten future economic activity and growth.
We will continue to work with the environmental goods and services
sector – which is already worth £25 billion to the economy to promote
new green technologies and industries in the UK and internationally,
and use the purchasing power of government to support environmental
improvement.
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Competition, planning and regulation
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Competition is a driving force for innovation. Our competition regime
has been toughened with independent competition bodies and
stronger penalties.
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To the benefit of business and household consumers we are liberalising
the postal services market, while protecting the universal service at
a uniform tariff.
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As we said in our policy document Britain is Working, we have given
the Royal Mail greater commercial freedom and have no plans to
privatise it. Our ambition is to see a publicly owned Royal Mail fully
restored to good health, providing customers with an excellent service
and its employees with rewarding employment.We will review the
impact on the Royal Mail of market liberalisation, which is being progressively
introduced under the Postal Services Act 2000 and which
allows alternative carriers to the Royal Mail to offer postal services.
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We have reformed our energy markets to make them open and competitive.
And we are a leading force in the campaign to make Europe’s
energy markets the same. Our wider energy policy has created a
framework that places the challenge of climate change – as well as the
need to achieve security of supply – at the heart of our energy policy.
We have a major programme to promote renewable energy, as part of
a strategy of having a mix of energy sources from nuclear power stations
to clean coal to micro-generators.
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We will only regulate where necessary and will set exacting targets for
reducing the costs of administering regulations.We will rationalise
business inspections.The merger of the Inland Revenue and Customs
and Excise will cut the administrative costs of tax compliance for small
businesses.
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We will take further action in Europe to ensure that EU regulations are
proportionate and better designed.We strongly support the creation of
an EU single market in services to match the single market in goods –
and want an effective directive to provide real benefits to consumers
and new opportunities to British business.We will protect our employment
standards. In developing the directive we will want to avoid any
undermining of our regulatory framework.
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We will continue to work to protect the rights of consumers, bringing
forward proposals to strengthen and streamline consumer advocacy.
We look forward to action from the banking industry to remove delays
in processing cheques and other payments and, if necessary, will legislate
to ensure this early in the next Parliament.
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There are many bank accounts that are lying dormant and unclaimed,
often because people have forgotten about them or because the owner
has died.We will work with the financial services industry to establish
a common definition and a comprehensive record of unclaimed assets.
We will then expect banks, over the course of the Parliament, to either
reunite those assets with their owners or to channel them back into the
community.
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An effective planning regime protects the environment while promoting
economic growth – and does so quickly and responsively. In the
next term, we will ensure that our planning system continues to protect
the sustainability of local and regional environments – and we will
continue to develop a regime which is simpler, faster and more responsive
to local and business needs including the need to create jobs and
regenerate our cities.
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Fostering entrepreneurship
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There are 300,000 more businesses now than in 1997.We are tackling
barriers to financing for small and growing businesses – especially
enterprises in deprived areas.Through Business Links we will offer
start-ups, social enterprises and small businesses access to tailored
intensive support and coaching.To foster the entrepreneurs of tomorrow,
by 2006 every school in the country will offer enterprise education,
and every college and university should be twinned with a
business champion.
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Modern transport infrastructure
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An efficient transport system is vital to the country’s future, to our
economy and to our quality of life.We welcome the freedom that additional
travel provides and support the continuing development of a
competitive and efficient freight sector. Investment, better management
of road and rail, and planning ahead are vital to deal with the pressures
on the system in a way that respects our environmental objectives.
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We have doubled transport spending since 1997 and will increase it
year on year – committing over £180 billion in public money between
now and 2015 as well as private investment.The Eddington Review
will work with the Government to advise on how this investment
should be targeted – in particular, where transport is vital to underpin
economic growth.
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We are now taking charge of setting the strategy for rail to further raise
the standard of service and reliability.We will examine options for
increasing capacity, including a new generation of high-speed trains
on intercity routes and a new life for rural branch lines as community
railways.We are committed to continuing to work to develop a funding
and finance solution for the Crossrail project; and will look at the feasibility
and affordability of a new North-South high-speed link.
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We will support light-rail improvements where they represent value
for money and are part of the best integrated transport solution.To
that end, we are working with cities across the country and have committed
£520 million to Manchester for Metrolink.We will support the
continuing upgrade of the London Underground and the extension of
the East London line.
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Major investment is planned to expand capacity on the M1, M6 and
M25.We must also manage road space better.We are examining the
potential benefits of a parallel Expressway on the M6 corridor.We will
introduce car-pool lanes for cars with more than one passenger on
suitable roads and explore other ways to lock in the benefit of new
capacity.We will complete the introduction of Traffic Management
Officers to keep traffic flowing. Because of the long-term nature of
transport planning,we will seek political consensus in tackling congestion,
including examining the potential of moving away from the current
system of motoring taxation towards a national system of
road-pricing.
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We will give all over-60s, and disabled people, free off-peak local bus
travel and give local authorities the freedom to provide more generous
schemes.We will continue to support growth in bus provision including
innovation in school transport, with greater opportunity for local
authorities to control their bus networks where they are demonstrating
value for money and taking strong measures to tackle congestion.To
facilitate improved public transport provision, we will explore giving
Passenger Transport Executives greater powers over local transport.
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We will continue funding local authorities and voluntary groups to
make cycling and walking more attractive.We are committed to reducing
child deaths and serious injuries on the road by 50 per cent, and we
will continue to work to reduce dangerous driving, especially drink
driving and uninsured driving.We will work with industry to make
travel on public transport safer and more secure.
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Government will continue to support technological innovation to
reduce carbon emissions such as the hydrogen fuel-cell buses in
London.We will explore the scope for further use of economic instruments
as well as other measures to promote lower vehicle emissions.
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We will continue to support air travel by implementing the balanced
policies set out in our aviation white paper.We are committed to using
the UK’s 2005 presidency of the European Union to promote the
inclusion of aviation in the EU’s emissions trading scheme.
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For shipping, our introduction of the tonnage tax has led to a trebling
in size of the fleet since 1997.We want more ships to fly the British
flag, to boost jobs and training, and to increase shipping and port
capacity.
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Opportunity for all
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We are determined to spread the benefits of enterprise to every community
in the country.Every regional economy has different strengths,
and Regional Development Agencies now play an essential role in
regional economic development.
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We have given local authorities a direct incentive to promote local
business creation, allowing them to keep up to £1 billion over three
years of increased rate revenues to spend on their own priorities.
The Local Enterprise Growth Initiative will work through local
authorities to remove barriers to enterprise in the most deprived
areas of England.
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In 1997, many parts of our towns and cities were suffering from
deeply entrenched and multiple disadvantage.To tackle this we established
a ten-year programme, the New Deal for Communities,
empowering local communities – and this is already delivering
improvements in education outcomes and crime reduction.
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No area in our country should be excluded from the opportunity to
get ahead, to benefit from improving public services, and to be secure
and safe.We will maintain our commitment to tackling issues of
worklessness, low skills, crime, poor environment and health in our
poorest neighbourhoods.
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Fairness at work
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Since 1997, the Labour Government has introduced new rights for
people at work and new opportunities for trade unions to represent
their members.We see modern, growing trade unions as an important
part of our society and economy.They provide protection and advice
for employees, and we welcome the positive role they have played in
developing a modern model of social partnership with business representatives.
The Labour Party has agreed a set of policies for the workplace
(the Warwick Agreement) and we will deliver them in full.They
will be good for employees and for the economy.
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We have introduced, for the first time, an entitlement for every
employee to four weeks’ paid holiday, and we propose to extend this
by making it additional to bank holiday entitlement.
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Promoting equality at work
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A strong economy draws on the talents of all.We have extended legislation
to protect people from discrimination at work to cover not only
gender, disability, race and ethnicity but also religion and sexual orientation
and – from 2006 – age. Labour has transformed legal rights for
disabled people.We will empower disabled people further by joining
up services and expanding personalised budgets.
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We will take further action to narrow the pay and promotion gap
between men and women.The Women and Work Commission will
report to the Prime Minister later this year.
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We will implement the National Employment Panel’s report on measures
to promote employment and small business growth for ethnic
and faith minorities.We will take forward the Strategy for Race
Equality to ensure that we combat discrimination on the grounds of
race and ethnicity across a range of services.The Equalities Review
reporting to the Prime Minister in 2006 will make practical
recommendations on the priorities for tackling disadvantage and promoting
equality of opportunity for all groups.
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Thriving rural areas
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Since 1997, Labour has made it more difficult to close rural schools,
put in £750 million to support rural post offices and introduced a
50 per cent rate relief on village shops.Through our £51 million Rural
Bus Subsidy Grant we have delivered over 2,200 new bus services in
rural areas this year.
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We set targets for the creation of affordable homes in rural areas, which
we have now exceeded.We will explore how to ensure a proportion of
all new housing development is made available and affordable to local
residents and their families.
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Because of our success in achieving extensive reforms in the Common
Agricultural Policy (CAP), 2005 will be the first year for decades when
farmers will be free to produce for the market and not simply for subsidy.
We will continue to push for further reform of the CAP in the
next Parliament, starting with the sugar regime.
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We will continue to promote the competitiveness of the whole food
sector, and assure the safety and quality of its products.We will introduce
an explicit policy for schools, hospitals and government offices to
consider local sourcing of fresh produce.We will continue to improve
the environmental performance of agriculture,rewarding every farmer
in England for environmental protection and enhancement work
through our new Stewardship schemes.We will also promote biomass,
bio-fuels and non-food crops.We will work to tackle diffuse water pollution
through addressing impacts across water catchments without
the costs falling on water customers.
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Under difficult circumstances, Labour is working with the fishing
industry to create a sustainable long-term future for the fishing communities
of the United Kingdom.We have reformed the Common
Fisheries Policy and will continue to protect the marine environment
and ensure fish stocks and their exploitation are set at sustainable levels.
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We will introduce the Animal Welfare Bill as soon as possible in the
new Parliament.
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The choice for 2010
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The Conservatives are the party of high interest rates, high inflation,
mass unemployment and house repossessions.Their taxand-
spend promises do not add up; and they would cut £35
billion from public investment.With new Labour, Britain can
seize the opportunities of globalisation, creating jobs and prosperity
for people up and down the country.We can only do so if
we build a clear sense of shared national economic purpose, not
just around economic stability but also investment in infrastructure,
skills, science and enterprise.The choice is to go forward to
economic stability, rising prosperity and wider opportunities
with new Labour. Or go back to the bad old days of Tory cuts,
insecurity and instability.
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