Stephanie Flanders
Welcome back to the star turn of today. The session which is on global opportunities and putting everything in the global context and we are very pleased to have with us the Rt Hon Alistair Darling who is a politician who has managed to survive nay prosper in perilous political positions that have been the death of previous politicians, or the political death I should say. He was Chief Secretary to the Treasury, he then moved on to Social Security, the other hot seat, he then went on to Secretary of State for Department of Work in Pensions. He was then one of the more long standing ministers, Secretary of State for Transport, a position from which he escaped or moved in May of this year to become Secretary of State for Trade and Industry where, of course, he has inherited the process of implementing the Cox Review findings. So Alistair Darling thank you very much...
Rt Hon Alistair Darling
Thank you very much Stephanie. You mentioned transport and the acoustics in here are strangely familiar. It is like speaking over the tannoy at King’s Cross Station I think. I think the last time you and I met was when I was talking about buses so it is a great pleasure to be speaking about something slightly different today. But thank you very much for allowing me the opportunity to talk to you and I can see from the agenda today that you have got very many people who know a great deal about the importance of design and I hope that this is just one of many meetings in which we can spread the message that if we are going to prosper in the future, then we have to be able to show that we can innovate, that we can use design, not just in relation to products but in relation to processes and to make sure that we can do things better in the future. I firmly believe that if we are going to compete, in what it a very rapidly changing world, the only way that we can do it is on quality and excellence.
Do you know there is massive change taking place across the world? And what’s different now is the changes taking place at a pace that would have been unimaginable only ten years ago. And the changes that are taking place are in their own way as profound as those that took place in this country during the industrial revolution of the 18th and 19th century.
I was in China last week and it is now producing 80 per cent of the world’s photocopiers, 60 per cent of digital cameras, 50 per cent of textiles. I am told that in one factory alone it is producing almost 40 per cent of the world’s microwaves and it is doing it at wages that are just a fraction of those that we pay here in the West.
Now each share of the global economy we reckon is going to grow from just under 7 per cent in 1980 to nearly 20 per cent by 2020. So that is in the space of 40 years and I think any one in this country, whether you are in business or whether you are in government, wherever, need to understand that the changes that are taking place in the world today are profound and if we don’t adapt, we don’t change, then we will not be able to compete in the future, which of course would have very real consequences for everyone in this country.
The fact that China and India together are going to account for nearly half of global growth over the next 15 years is something that ought to concentrate our minds and so to is this. It may be that they are making photocopiers and digital cameras and microwaves today but anyone who has been to any of these countries will know that they don’t intend to stay that way. What they are really interested in doing is producing goods at the high value end of the chain which is why they are spending so much on education, so much on university graduates, because they, quite understandably and quite rightly, want to compete in quality and excellence to.
So although this globalisation process brings huge challenges, it will bring opportunities for those who have got the innovation, the skills, the entrepreneurship to cease them.
And we do have a choice. There are people who believe you can compete on low wages and low skills. I don’t believe we can do that. We have got to compete on quality and excellence and particularly on design and creativity. Something we are good at in this country. Because if you bring research and development into the market place, if you can produce new products and services that the world wants to buy then you can succeed.
So the challenge is there provided we are prepared to meet that challenge. That is why the Review which Sir George Cox carried out last year was so important. And we are here today not just to assess the progress that has been made, and a lot of progress has been made, but also to emphasise again the value of design and creativity to the economy. This is a process, as I think George said this morning, that needs constant attention. This isn’t something where you can just produce a report and expect people to act and everything will be alright. It is something that all of us, whether in government, in business, whatever, have got a role to play to make sure that we change the face of what we do at the moment.
Now innovation and business success have always gone hand in hand. That’s why science and innovation is so much central to our economic strategy. We have put in place various measures to help cumber and respond to the challenge of globalisation and technological advance and we need to seek that competitive advantage by exploiting our capabilities that our competitors can’t easily emulate.
We do have distinctive skills and innovation and creativity that we can draw on to produce high value goods and services and there are many good examples of that. I was struck last week when I was speaking to a Chinese businessman who was talking about what countries from the European Union are doing in China, companies from America and it said quite simply “what is it that the UK can do that is different?”. Because he has made the point that lots of people can produce many of the things we do. What people are looking for is something that is different, something that is distinctive and it seems to me that design is absolutely key to that. We have tried to encourage businesses to invest in research and development, we have created incentives for companies to invest in the future, that’s why we introduced the research and develop tax credit to promote investments and to stimulate innovation and so far it has provided 970 odd million pounds of support for small and medium enterprises. The majority of it has gone to manufacturers.
We have more than doubled the science budget to three and a half billion pounds a year, indeed it is half the DTI’s budget now and we’ll increase it again in the future because it is absolutely necessary for this country. But often it is the design, either of the product or the process that holds the key to turning research and developments into commercial products, taking them from the lab or the design bench on to the shop shelf. For example the technology behind the iPod was well known, and actually developed in my constituency in Edinburgh as it happens, but it was a consumer friendly way and the up to date design that brought a revolution to the market.
So design is often a key to transforming a world class science into the products and services that the world wants to buy and that’s something that we want to encourage because in the face of that increased global competition I referred to it is a creativity that can make or break a product particularly in manufacturing where it’s the fiercest competition from low wage economies and research has shown that firms that take designs seriously and integrate it into their business thinking are much less likely to be competing purely on price. They need to be more innovative, they need to produce more and sell more and in this country we do have a dynamic, world class design industry, whether it’s a web designer on the Isle of Mull or an interior design firm on the Isle of Wight. There are designers, there are design companies in all parts of the United Kingdom. Indeed the industry employs nearly 900,000 people and I’m told it is a youthful profession with nearly 62 per cent under the age of 40, so that’s another career opportunity for me ruled out. But the creative industries contribute 8 per cent of our economy and between 1997 and 2003 the sector grew by about 6 per cent, twice as fast as the rest of the economy.
So we are a creative nation, we are good at invention, in fact if you look at all sorts of inventions like the computer, the television, the telephone, the CAT scanner, there is many examples of where Britain has designed products that have gone on to be hugely successful and part of our lives, as well as of course the creative industries which are so important and increasing in importance in this country. We have made huge strides in areas such as photonics, mobile network, broadcast technologies, we’re actually very good at design and we are very, very good at science and indeed perhaps we should shout about it more, particularly to people who are currently at school contemplating what career they might embark on.
It’s very easy to point to the failures in life but there are many good things which frankly people in this room, more than I can, can go and shout about in our schools today if we are going to encourage the rising generation to benefit the rest of us with their knowledge and innovation.
Now the report that George Cox did last year for the government acknowledged all of these things but acknowledged also that there were weaknesses, 70 per cent nearly of UK companies were not spending anything on design, showing that design led planning was not part of business thinking. Now here again I think many of you in this room have a role to play because it strikes me that many businesses will probably take it better from their peer group, fellow businesses what can be done by harnessing design, harnessing innovation to improve their prospects. They can do it, you can do it in a way that I, as a minister, can’t.
But it is important that we spread the message that it isn’t the people in this room that is a problem it is the ones who are not contemplating using design and exploiting the information, the knowledge that’s there at the moment to develop their products in the future. Yes it’s good for the bottom line but unless they get new design then no matter how good the idea then it simply won’t prosper.
Now we’re also putting in place help for businesses to boost the power of design through the new Designing Demand Programme and this programme which was developed by the Design Council will be extended across the country over the next couple of years. It’ll provide advice for businesses, it will team up with them and design managers to investigate what design can do for them to improve their products as well as their profits. It will provide advice on technology start ups and explore what new technology can offer businesses and it will work alongside the manufacturing advisory service. It’ll help ventures design to attract investment, reduce the risks they face as well as refining their strategy and speeding up their production times.
Now it’s already been tested, it’s already been tried out by the Regional Development Agency in Yorkshire, Yorkshire Forward, and more than 700 businesses in South Yorkshire have benefited with some very impressive results. Because companies taking part have recorded increased sales, they’ve launched new products and they’ve attracted fresh investment.
There is one company, for example, which is an established cutlery firm, which took part in the test run with the Design Council, after taking advice and spending something like £80,000 in a redesign of their range it led to a projected sales increase amounting to £800,000 in the last financial year. So there was an established company taking advantage, making a difference and that is the sort of message that we need to spread to other companies who haven’t done so yet.
Now these trials have been extended to the South East of England and to the West Midlands and in the North East and South West we hope to introduce this service early next year and by 2010 we hope that over 6,000 UK companies will be using Designing Demand to boost their business.
Now I’ve asked George Cox to consult further with business and industry and to report in a year’s time on the take up by business so that we can see what else we can do and also to emphasise the importance that we attached to this area.
It’s also necessary to do more to set up a network of centres to encourage creativity and that’s one of the central recommendations of the Review. London, in many ways, is the natural home for the centre of the centre of this new network because it has an international reputation for design, it’s home to the Design Museum and indeed it’s home to nearly half the UK’s design houses. But you will find good examples of this industry, of design, throughout the whole of the United Kingdom. But our aim is that our centre will be developed in partnership with people working in the arts, science, technology and education fields.
George Cox’s Review also proposed that the next generation of business leaders should have better training and as the Leech Report published earlier this week showed that unless we increase skills and it isn’t just skills in the workplace, it’s skills throughout the whole of industry we would condemn ourselves to a decline in competitiveness and diminishing economic growth.
So the case for action is compelling and urgent because we need to become a world leader on skills to enable us to compete with the best in the world. That’s why the new education centres of excellence have been developed by the Higher Education Funding Council who are currently looking at six proposals from educational institutes which will combine management studies, engineering technology and studies in partnership with design and creativity and we hope to be able to announce those centres very soon.
We also agreed with the recommendations that were made on research and development tax credits and the important role that they can play and encourage in bringing forward innovation and already firms like Nissan, for example, which is obviously a very large firm, are using those tax credits to encourage design activity here in this country and the Treasury is currently setting up specialist units in HM Revenue and Customs to handle those claims to make sure we can do it efficiently.
So we are committed to supporting design and creativity in business. It does help drive economic progress and for a country like ours, which has a very liberal and open approach, it is essential that we develop this partnership. I think there’s other things that the government can do as well, in relation to procurement. Right across government whether it’s central government, whether it’s agencies we fund, whether it’s local government we actually procure, during the course of the year, an awful lot of goods and services and I think that we can do more to make sure, not just in goods but particularly in the way in which we procure services and the way in which we look at news ways of doing things, we can do a lot more and we will be publishing proposals to encourage that shortly. Because we do need to make better use of the undoubted ability and innovative capacity that we’ve got in this country.
Indeed it’s absolutely essential that we do so if we are going to compete with other countries in the future. We have a lot going for us in this area. The government has done much but I believe that we can do a great deal more further. I hope that today’s conference is a useful staging post along that way. I hope that you find it useful and above all I hope that we can continue to spread the message to the people who are not here today to just show them what can be done with the right enthusiasm, the right imagination and the right effort.
Thank you very much indeed.