As a member of the commission which produced the most talked about business book of 1997, Promoting Prosperity: A Business Agenda for Britain,* I have, on the one hand, been pleased with the attention it has received, thanks not least to the efforts by the deputy prime ministerto discredit it. On the other hand, I am disappointed with the dearth of discussion about what the report actually says.
If you only read the newspaper reports you would think that we had deliberated for 18 months over only the minimum wage and the Social Chapter. In fact, our conclusions on these two issues occupy just five pages in a 300-page book.
Reviewing the strengths and weaknesses of British business, we identify in the report key barriers to greater prosperity, which include long tails of under-performing firms and under-achieving people.
The top British firms compete effectively in the global market and we have an elite group of world class business people, engineers and other experts. But we have many more sub-standard performers than our main competitors. This is borne out by reputable studies of the manufacturing and service sectors.
The key question is then, of course, why do we have a longer tail than other countries?
For poorly performing firms, this is because they have it too easy and too hard. Too easy in the sense that there is insufficient pressure from the product market, partly because competition policy is too feeble. Too hard because the regional networking environment for disseminating best practice and benchmarking performance is inadequate compared to our main competitors. The under-achieving people are partly explained by insufficient interaction between industry and education and training authorities at local level.
This diagnosis led us to the two major themes of the report: that a Government wanting to improve business performance should promote competition and cooperation and that it should address education and training issues seriously, which includes providing appropriate expenditure. Let me explain what this means in terms of policy recommendations.
Promoting competition is relatively straightforward. British competition law should be strengthened and applied more vigorously. First, the tenor of competition policy should become more like European legislation. Once identified, restrictive agreements and abuse of market power should be banned, and also be subject to stiff penalties.
There should also be a substantial increase in the powers of the director general of fair trading to investigate suspected anti-competitive behaviour. In extreme cases, offending companies could be fined a significant proportion of their turnover in a market, whereas now they are simply told to desist.
We also believe that the institutions of competition policy require reform. We are concerned about the degree of political interference and recommend that the secretary of state’s decisions are made more transparent.
We do not favour merging the Office of Fair Trading and the Monopolies and Mergers Commission, but we do argue that they be more focused. The OFT should become the principal agent of investigation and prosecution and the MMC perform an adjudicatory role.
Encouraging cooperation is rather more difficult, and the German practice of obliging firms to join associations or chambers of commerce would not work in the UK. Rather, we need to reorient a number of different policies so that they encourage, or at least do not inhibit, co-operative networks or ventures.
On education, we recommend a range of measures from nursery education and class sizes to the long-term objective of phasing out A-levels in favour of a more broadly-based qualification along the lines of the French baccalaureat. My suggestions of restarting apprenticeships found its way into the report with mandatory traineeships for all young workers. The scheme would replace Youth Training and be compulsory for all employers with young workers. We also recommend that additional cash should be made available to allow the UK to catch up in the skills stakes.