http://portal.telegraph.co.uk/news/main.jhtml?xml=/news/2001/11/05/ucbi.xml

Beating terrorism will boost economy, says Blair
(Filed: 05/11/2001)

DEFEATING international terrorism would be a major
victory for the economy, Tony Blair told Britain's
business leaders today.

In a keynote address to the Confederation of British
Industry conference in Birmingham, Mr Blair told
delegates: "The effect of the 11th of September on
world economic confidence, not to say on airline and
tourist and other related industries, is there for all to see.

"And we know these people would commit further
atrocities if they could. So winning the battle against
international terrorism is to win for the economy too."

Mr Blair said: "Jobs and living standards, business
and trade need us to defeat this terrorist menace.
Each step towards that goal is a step of
reassurance about our own way of life and our
ability to protect it.

"However as you know well even before September
11 the world faced a more difficult economic climate.
The US, the Japanese, the European economies
were all slowing.

"Britain is not immune from such changes, though
we are better placed than any other G7 country to
weather them. The fundamentals of our economy
are indeed strong, the strongest in fact they have
been in a generation."

Mr Blair said inflation was the lowest across the
European Union and Britain had had the longest
sustained period of inflation since the 1960s. He
added interest rates were at their lowest for 40
years and unemployment was at its lowest level for
25 years, while Britain's employment was the
highest out of any country in Europe.

"I think it's important to understand how we got this
strong position. I think it's for two reasons
essentially, that in the 1980s under the previous
Government there were fundamental Labour market
reforms which we have built on through the New
Deal.

"And as a result we have in the UK one of the most
flexible labour markets anywhere. And then secondly
there were, if you like, the macro-economic reforms
of the late 1990s under this Government."

Mr Blair added: "We have tried to build a strong
base in financial terms for business, through
independence of the Bank of England, high financial
discipline that has cut the deficit, and trying to
reduce the cost of economic failure.

"In my judgment our task is to keep these reforms in
place and then analyse and deal with the remaining
structural and fundamental weaknesses of our
economy. So for example on issues of employment
and regulation, we have a minimum wage and fair
rights at work, but there will be no dilution of our
essentially flexible labour market.

"According to the OECD the UK is among the least
regulated product and labour markets of any major
industrialised country - and it will stay that way.
There is one continuing reason as you know why
last year the UK was the third largest recipient of
inward investment - over $130 billion in the world -
and is and remains the leading location for
companies in Europe.

"And to answer directly concerns that your Director
General stated last week, yes there may be areas
for example where employees are transferred to the
private sector and they lose their pension rights,
where we will look to improve the rights they have.

"But there will be no new round of employment
legislation that takes us back to the 1970s, the
basic settlement in the last Parliament will remain.
And likewise we will not take risks with the
hard-won macro-economic stability. Those fiscal
reforms will stay. And they're not just right in
themselves, I believe that they're vital to encourage
the long-term investment that we need.

"If we can succeed in flattening as far as possible
the swings of the economic cycle, then I think as you
know business then has greater confidence in its
ability to plan ahead and to invest."

The Prime Minister said there remained weaknesses
in Britain's economy however, including productivity.
"Although there are many areas in which we do
extremely well, the gap between us and our
competitors remains worryingly large in other key areas."

He said the gap could only be filled in investment
particularly in education, skills and technology. Mr
Blair added that education spending was rising
every year as a proportion of national income, and
17,000 out of 25,000 schools had seen substantial
capital improvements.

He said the UK was already one of the most
connected economies in the world, Internet use was
higher than in any other European country and that
the next challenge would be broadband technology.

He added: "We are in the early days of broadband
but it has the potential to revolutionise many
aspects of our lives."

Mr Blair said the Government's policy on potential
British membership of the European single currency
had not changed. "Despite what you read, warming
up or cooling down, the policy on the single currency
has not altered an iota. In principle we are in favour,
in practice the tests must be met.

"Provided that the assessment of the five economic
tests for membership of the euro - and as you know
that assessment is to be completed within two
years of the start of this Parliament - provided that
that assessment is positive, we will make the case
to the British people in a referendum.

"As the Chancellor said to you yesterday, the
benefits in terms of stability, trade and investment
are plain to see, and the technical work to complete
the assessment is under way."