For the past few months, I have been urging a more radical approach for investing in digital infrastructure in the UK (see 23 March).  What could be more poignant than to see the desire of a village to be hooked up to broadband reach such a level they have taken it upon themselves to dig the trench needed to get connected, having no hope of being connected in any other way! (see The Daily Telegraph on 26 April)

This week, the headlines have focussed on discussions between the new French President Francois Hollande and German Chancellor Angela Merkel on how to balance austerity with going for growth. This goal will also apply to the negotiations which will shortly start on the EU’s next multi-annual financial framework (MFF) (2014-2020) to be jointly agreed by the European Parliament and Member States. It is essential that we get value for money as the outcome of these negotiations.

One area that is being overlooked in the quest for ’smart’ spending is the need to invest in mobile and broadband infrastructure. A fundamental reason for this is that it is a new area of expenditure: little was spent on this in the last financial perspective. When budgets are tight, the traditional lobbies hang on to what they have got.  And yet this cannot be right given that investment in ICT generates up to 25% return on investment compared to 15% on other forms of capital investment (see Oxford Economics, 2011).

From the figures available, Europe is lagging behind in this type of investment.  It was estimated that in 2009, only 1-2% of Europeans had access to a fast fibre-based internet, compared to 12% in Japan and 15% in South Korea (the UK itself being below Latvia and the Netherlands!). It is no surprise to find that, in 2010, the internet only contributed to 3.8% of GDP in Europe compared to 4.7% in the US and 7.3% in South Korea. Even Africa and Asia are seen to be moving ahead of Europe, with Ben Verwaayen, chief executive of Alcatel-Lucent, saying in the Daily Telegraph in January that “They are building a physical infrastructure that allows people, wherever they are, to participate in the global digital economy… That will give them an enormous advantage in the years to come”.

Those businesses which suffer the most due to a lack of digital infrastructure are SMEs, which account for 99% of businesses in Europe and 80% of the new jobs created over the past five years. Costs of launching internet ventures have been significantly reduced over the past decade. The internet is also providing huge potential for SMEs to expand their business base, allowing them to go global from day one. Non-tech ventures also benefit, with one third of all SMEs extensively using cloud technologies.   In the UK, the overall sales of high and medium use web businesses grew by 4.1% annually from 2007 - 2010, about 7 times faster than the sales of low and no web use businesses. But, without a secure high-speed internet connection, they are unable to reach their true potential for growth.

Is there a strong political will to resolve this shortfall at a European level? In principle, yes. As part of the 2020 Vision, President of the European Commission José Manuel Barroso said, “The next European Commission will develop a European Digital Agenda … to promote investment in high-speed Internet and avert an unacceptable digital divide”. The Digital Agenda for Europe set targets for 2020 of broadband access for all at speeds of at least 30 Mbps, with at least 50% of households subscribing to speeds above 100Mbps. And in October last year, Commission’s proposed infrastructure programme for the next MFF, The Connecting Europe Facility, proposed EUR 9.2bn (£7 bn) for ICT infrastructure. Of this, at least EUR 7bn (£5.6) would be used for broadband internet projects and the remainder on Digital Services Infrastructures such as eGovernment and eHealth.

Is this enough? In practice, it seems that the allocation of funding is grossly underestimated compared to what is required, especially if the speed which needs to be reached is closer to 100mbps rather than 30mbps. At present, only 2% of connections in Europe operate on fibre, and the figures available show that the cost of upgrading the network from copper to fibre for at least half the EU population could be EUR 270 billion (£216 billion). Current assessments show that up to EUR50 billion (£40 billion) could be covered by private investment, leaving a EUR 220 (£176 billion) gap.  Thus, we cannot leave this up to luck and the whims of the market alone. If we do not invest in digital infrastructure as a matter of urgency, not only will this hamper our efforts to achieve growth, but it will put us at a real disadvantage in terms of future global competitiveness. The real question is how long are we going to keep staring at the facts like a rabbit into the headlights of an oncoming car? Clearly more investment is needed, and it is needed now.

Is there anyone else, like me, who would prefer the principal priority for public investment in UK infrastructure to be high-speed broadband rather than high-speed rail?

European Digital Agenda - No Comments »

Another week, another country. This week, it is Washington for meetings run by the Transatlantic Policy Network in support of the emerging initiative to promote jobs and growth across the Atlantic. Is this a simple wish or is this more than a pipe dream?

I have covered this issue in previous blogs, illustrating where the genesis of this initiative came from (see 15 July).  From discussions on Capitol Hill this week, I can report that this initiative is alive and well, even if its shape or final destination is not yet finalised. It is not only a wish, but it is a dream beginning to become reality. Why?

From remarks made by leading representatives of the United States and the European Union during our meetings - including a lunch hosted by the Speaker of the House of Representatives, John Boehner - there is a growing consensus on the next steps to be made, consistent with the mandate agreed last November by the EU/US summit attended by President Obama and President Barroso. Why is this friendly development on its way to strengthen the Transatlantic relationship when the EU has ongoing troubles with it’s economy and the Euro?

Three major factors seem to be critical in pushing the agenda:

• First, there is no hope left that the multilateral trade round - the Doha Round - is going to be concluded any time soon;
• The rise of Asia, and in particular China, is giving real cause for concern about the ability of the West to ensure a global rules based system for trade and investment;
• Last, and not least, both sides of the Atlantic are desperate for the revival of their economies and to promote sustainable growth and jobs.

The recommendations from the series of roundtables at the TPN meeting are not limited to trade and investment. They also urge more joint action in such areas as financial services, research and innovation, the digital agenda (cloud computing, cyber security) as well as resource management. (These will be available shortly on the Transatlantic Week website.).

Furthermore, if more evidence were needed for the growing dimension of EU/US cooperation, I participated as one of the speakers at the US launch of the ESPAS document on global trends 2030, hosted by the Atlantic Council…the same organisation which presented Prince Harry with his well deserved award for Humanitarian action for wounded soldiers. A warm reception, not only from senior US policy planners (with one describing it as a “ground breaking” report”) but also from those welcoming the EU beginning to think strategically.

Will anything happen? Sceptics are always strongly present as there have been so many false starts in recent years…but this looks like the strongest effort made to deepen Transatlantic economic links in the past 20 years. In the words of one of our speakers, the brilliant Bob Zoellick, President of the World Bank, there are several options open to the EU and the US. As the world is changing very rapidly, they need to move faster.

Thus the rationale is stronger than ever, and strengthening by the day. The number of business and political supporters are proliferating, the strongest business pressures coming from the US Chamber of Commerce, which is the largest business group in the US. Key words used by senior administration figures on both sides of the Atlantic are ” a time for opportunity with responsibility….the need for progress with caution”.

It is  now a question of political will on both sides of the Atlantic? Will it be strong enough…? Only time will tell….it would certainly be a real shame if this great opportunity were lost through a lack of political resolve.

Transatlantic Partnership - No Comments »

Recent blogs have covered the launch of a document on Global Trends 2030 seen from a European perspective. Looking through the document, predicting a continuing economic shift towards the East, with the inexorable rise of China to be the world’s largest economy within a decade, it looks very much as if there is going to be a greater, rather than a lesser, need for Europeans to work together to find solutions to the challenges ahead and look after their interests.

Now, in early May - as many Europeans take a holiday break and before crucial elections in France and Greece - is a good time to take stock on a few major economic and financial issues of concern to European policymakers…before we in Britain become swept away over the summer months with the Diamond Jubilee celebrations and culminating with the 2012 Olympics in late summer.

- Resisting protectionism so far…

Following the financial crisis of 2008, with pressures in international markets not dissimilar to the 1930s, it was to be expected that barriers would be raised and protectionist forces would rise. Surprisingly, the EU and the rest of the West have managed to avoid trade wars, even if Western leaders have been less successful in finalising the end of multilateral trade negotiations called the Doha Development Round. While it is quite possible that conditions will worsen, a sign of their determination to keep markets open is the enthusiasm of the EU and the US to consider negotiating a trade deal which could lead to lower barriers for businesses across the Atlantic. (This is likely to be touched on informally in the margins of the G8 to take place at Camp David later this month).

- Shortage of funds to reduce debt and deficits…

Debt levels remain very high historically in the Western world. As one commentator put it recently in the US election campaign, it took the US 233 years to reach 10 trillion dollars debt; only to add another 5 trillion over the past 5 years! In the UK, it is no comfort to realise that we have one of the highest debt levels in the EU. Higher than Spain and Greece, lower only than Ireland should private, corporate and public debt all be added together.

Not surprisingly, proposed rises in the EU budget for 2013 have sparked outrage, in particular on this side of the Channel. Although justifiable in theory given that commitments have arisen as the end of the financial perspective is reached next year, only a freeze in expenditure is realistic (even if, as is argued, the EU is not permitted to run a deficit). And, as discussions open to start negotiations for the 2014-2020 period of the next financial framework, a successful conclusion is not looking good to complete the negotiations by the end of the year.

- Doubts about the survival of the Euro persist…

With election results due in Greece and France over the next few days - and Holland in September - the short term perspective for the Euro seems very choppy. But I remain optimistic about the long term outlook given the level of political commitment which exists to ensure that the Euro survives.  Earlier this week, I was invited to attend a seminar in Northern Spain on the future of Europe organised by the Konrad Adenauer Foundation.  I was asked to chair the debate on European finance issues between the German Finance Minister, Wolfgang Schauble, the Spanish Minister of the Economy, Luis de Guindos and other commentators.

The common approach agreed by both speakers is that “fiscal consolidation is a precondition for sustainable growth.” Thus the injection of huge funds into the European banking system over the last few months has been conditional on the decision taken on fiscal discipline in December at the European Council, not before. While Spain is being seen by some as a country soon to follow Greece with a bailout, a very different message is coming from the Spanish Government with its absolute determination to implement a whole series of domestic reforms to fulfil the terms of the fiscal compact. There was no disagreement between the 2 speakers about the need to promote urgently measures for increasing jobs and growth. Indeed, austerity and growth are two sides of the same coin.

One interesting comment for observers of the Euro and it’s current difficulties was made by Mr. Schauble, as quoted in the Financial Times (Wednesday 2 May)…”Of course, we were not able to find a perfect solution from the start. But if it doesn’t work, we will correct it. If we had waited until it was…perfect, we would never have started.”

- What does all this mean for the UK?

Should the Euro break up as some people fear or want, then the task will be to salvage what remains of European unity in the decades ahead. But, as seems much more likely, with the current show of strong European political will, in particular from Germany, that the Euro survives, then the nature of the European Union will substantially alter, not least for the UK. The EU will increasingly be made up of several  economic layers, the principal one being the Eurozone, followed by those countries which have signed the fiscal compact. Currently, only the UK and the Czech Republic are in a third layer outside both of them.

As time evolves, we will have to take these developments into account in our national debate and in particular within the Conservative Party. Are we to continue the whole debate on Europe in our Party, looking for ways to diminish EU competences in Agriculture, Fishing, Structural Funds etc? Or, will we realise that the emphasis of the European debate is beginning to move ahead, integrating rather than fragmenting? Should we ask to withdraw from further policy areas when we are already not in the Euro, the Schengen area and the area of Justice and Home Affairs, then I am in no doubt that we will be politely asked whether we would not find our role better outside the EU rather than in it in the decades ahead.

Long term trend analysis - shown in the ESPAS report mentioned above - shows that the need for European cooperation to meet the challenges ahead is growing rather than declining. The decades ahead look like being increasingly focussed  on the rise of Asia and in particular that of China. Will we be better to deal with this perspective alone or will we be better to make sure that the EU becomes dynamic and outward looking, ensuring we build allies with substantive players rather than being on the margins of European decision making where our interests will be either ignored or impaired? I am certain that the interests of the UK will be best looked after by being inside rather than outside the EU.

Economy - No Comments »

First visit to Latin America. British Airways flight late arriving in Rio at midnight…but first face on a billboard is that of Jamie Oliver…home from home! Doing some background reading on the flight over, Brazil is an astonishing mixture of contrasts. Taken from the beginning of a guidebook to Brazil, this passage describes in a nutshell the nature of the country….

“Brazilians often say that they live in a continent rather than a country….The landmass is bigger than the United States if you exclude Alaska; the journey from Recife in the East to the Western border with Peru is longer than that from London to Moscow; and the distance between the Northern and Southern borders is about the same as that between New York and Los Angeles.”

Add to this that it is a country with vast natural resources. But, despite such a large expanse of terrain, it comes as a surprise to many that around 70% of its population of 200 million people live on or near the coast and well over half live in cities. Rio and Sao Paolo - both of which I have just visited - are rightly called metropolises with populations of over 11 and 15 million respectively, both having quite a European feel to them. Lastly, there is an extraordinary diversity of cultures and traditions which contribute to such a rich cultural mix in Brazil.

I was visiting Brazil to participate in discussions both in Brasilia and Sao Paolo organised to introduce the Global Trends 2030 document to the Government, think tanks and journalists. In Brasilia, the meeting was hosted by the Institute of International Relations Research (FUNAG); in Sao Paolo, by the Foundation Institute of Fernando Henrique Cardoso (iFHC).

In addition to constructing a permanent interinstitutional system examining long term trends by 2014 within the EU and presenting a report to the incoming Presidents of the EU institutions about policy challenges ahead for the 2014-2019 legislature, part of the ESPAS remit is to build linkages with those countries elsewhere in the world who are working on long term trends. The idea in the budget amendment is to set up a website which will serve as a repository for all information relating to long term trends.

This particular series of meetings was of considerable importance. Not only did it allow the author of the Global Trends 2030 document to set out European thinking to our Brazilian counterparts and get their initial reactions, but it also had a strong Transatlantic flavour. For the EU visit coincided with a visit of the National Intelligence Council (NIC) team, currently in the process of drafting their Global Trends 2030 document, to be released in Washington later in the year. The meetings both in Brasilia and in Sao Paolo were thus organised as trilaterals, with the EU, the US and Brazil meeting together to discuss long term trends… First time!

Discussions were both focused and revealing. Reviewing future trends has the advantage that people have their views but no one knows what the final outcome will be. It is the direction of trends which provokes the greatest attention, allowing action to be taken where weaknesses are shown. Opening presentations from the EU and the US were very similar in analysis, in particular with regard to the importance of the empowerment of the individual. But the US gave more emphasis to cyber security and was concerned about the fragility of the global economy over the next 20 years.

Reactions from our Brazilian interlocutors were very varied but three specific points come to mind:

• One commentator presenting the Brazilian point of view in a debate about the rise of the middle class, observed that Brazil is at the top of the life happiness league in the world, being optimistic in outlook with poverty levels declining over the past decade.

• Second, it was striking how much progress Brazilians have made with environmental policy. For example, 47% of their energy in 2009 came from renewable sources, of which 18% of the total came from sugar cane. Not surprisingly, sugar cane workers are the best paid in Brazil. Moreover, the CO2 emission level in Sao Paulo is one of the lowest in the world.

• Lastly, they recognised that there will be significant global challenges of governance ahead, taking the example of the difficulties in the follow up of the Rio summit on climate change. Nevertheless, Brazil prides itself on being a stable democracy. To quote one participant, “we have had problems, but so far we have been able to deal with them. We are, unlike other countries of our size, benign in both profile and outlook”.

Is this a one-off or a way of shaping dialogue in the future? Given the Brazilian reactions, it looks to be the latter. Until now, there have been two international meetings organised bringing together those working on Global Trends across the globe, one in Virginia last May and the other in Brussels in November, pioneered by the Americans. A third is being planned in Asia over the next few months. Should this network continue its progress, it will make a refreshing change to the headlines always talking about the BRICS against the West. In the interest of building a global community where all can have a role to play, reaching out in this practical way must be the way of the future.

For us in the UK, we must of course keep our friends and build up our contacts. But it is also vital to realise that the 21st Century will see a whole new set of countries have a stronger presence on the global stage where being able to participate with the European Union on trade and other matters will be to our advantage as the weight of Europe declines in GDP terms with other countries such as the BRICs.

Long-term trends - No Comments »

At a Chatham House seminar launching a document called “Global Trends 2030: Citizens in an Interconnected and Polycentric World” last Friday (see 13 April), the question of scarcity of water, food and, in particular, energy was discussed. A neat summary of this is made in this document, which says that “Fossil fuels will continue to dominate the energy mix in 2030, accounting for 80 percent of global energy supply. Fossil fuel reserves are finite, but reserve projections have proven very difficult in the past as patterns of use change and new reserves are discovered”. The report continues by indicating that, “looking forward to 2030, the pace of change remains uncertain due to the wide range of possible technology and policy scenarios”.

Here are three factors which are shaping the debate about the future of energy security:

• Shale gas - This week, the headlines have shown that a government-appointed panel of experts concluded that extraction of shale gas should continue with checks as there is a low probability of future tremors. The UK energy market could be transformed by this new form of gas extraction. On 2 April, British shale gas company IG more than doubled its estimate of gas at its site in north-west England to up to 4.6 trillion cubic feet (130.26m cubic metres), making it the largest reserve in Europe - enough to cover UK demand for generations (see Reuters). Across the Atlantic, shale gas has turned the American energy market on its head. Production has soared twelvefold since 2000 and prices have come crashing down (Economist, November 2011). In an article in the April 2012 edition of Prospect magazine, it is predicted that the US has at least 100 years of shale gas to meet current demands, and a lot of shale oil too, meaning that the Middle East could be of little strategic importance to the US in a decade or so.

• Nuclear Energy - A year after Fukushima, many countries including the UK still see continuing investment in nuclear energy as part of the cocktail of options for energy supply that cannot be neglected, being a key source of low carbon energy production. This reality is acknowledged by the public in the UK, with an Ipsos Mori poll in January 2012 finding that support for new nuclear plants to replace those being shut down had risen to a new peak of 50%. The form that nuclear power plants might take in the future is still under debate, with some advocating small modular reactors of up to 300 MW as opposed to big power plants, which could supply companies, towns or small countries more locally. This decentralisation of nuclear energy may create concerns about safety, with people not warming to the idea of having a nuclear plant in their backyard. More likely to transform the nuclear energy market is research currently underway here in the Thames Valley at the Culham Science Centre, near Abingdon, into how to achieve nuclear fusion, which, if successful, could provide us with an inexhaustible and environmentally benign source of energy (see October 14).

• Decentralisation - Nonetheless, decentralisation of energy in general is likely to increase. The “Global Trends 2030″ report foresees the increasing empowerment of individuals, a subject to which I will return in a future blog. Jeremy Rifkin’s new book, “The Third Industrial Revolution”, suggests that people could create green energy in their homes, offices, and factories, and share it with each other in an ‘energy internet,’ just like we now create and share information online. This idea is touched on in the European Commission’s roadmap Energy Roadmap for 2050 which says that “Decentralisation of the power system and heat generation increases due to more renewable generation” will become more of a factor in the longer term.

Trying to assess the pattern of long term trends is of real importance for energy security. The more we can predict the possible outcomes for current policies, the better we can avoid the occurrence of energy shortages.

Energy Security, General - No Comments »

Readers of this blog will know that its basic premise is to look at long term trends. Back in November last year, a conference was held in Brussels to discuss a document on Global Trends 2030, produced in the context of the  ESPAS initiative (European Strategy and Policy Analysis System). Today, this report is being discussed at a seminar held at Chatham House. Other launches will be taking place in Brazil, Paris, Washington D.C and Beijing over the coming weeks. What are the main issues being debated and where does the ESPAS initiative go next?

This document, entitled “Citizens in an Interconnected and Polycentric World”, is now online and can be viewed on the following website. Not only is it available in a PDF format, but videos of the November conference can be viewed as well as a concise outline of the report’s three main conclusions. As set out in the executive summary on page 11, there are three main global trends emerging today that will shape the world in 2030:

• The empowerment of individuals, which contributes to a sense of belonging to a single human community;

• Greater stress on sustainable development against a backdrop of greater resource scarcity and persistent poverty, compounded by the consequences of climate change;

• Emergence of a more polycentric world characterised by a shift of power away from states, and growing governance gaps as the mechanisms for inter-state relations fail to respond adequately to global  public demands.

What next? Is the report the end of the process or is it simply the end of the beginning? It is the latter course which is being taken. Contained in the 2012 Budget is a line (25 01 10) for a Preparatory Action between 2012 - 2014 “to have in place by the end of 2014 a fully-functioning ‘European Strategy and Policy Analysis System’ (ESPAS), involving all relevant Union institutions”.

On the basis of the plans developing between the institutions, there are three main areas of action planned to ensure that this goal will be achieved:

• Trend reports “will cover specific trends which have real long-term significance for policy-making in the EU, and will encompass both global and specifically European dimensions”. These will focus on the economy, society, and governance and power;

• Networks: The preparation of these reports will continue “to widen and deepen networks of relevant officials in the strategy, ‘foresight’ and policy departments of the various European institutions and bodies, and to nurture a regular and effective habit of cooperation between them;

• Outreach activities will include the development of links with third countries undertaking global trends work of this kind.  The maintenance of an open ESPAS website, as a global repository for all relevant information to facilitate access to citizens will help this process.

As I gave the introductory comments at today’s conference at Chatham House, I found myself thinking back to my first ever blog on 8 May 2009. I commented that, “I find it astonishing that we have so little fundamental appraisal of long-term trends when the EU takes decisions, for example on climate change, establishing the goal of reducing carbon emissions by 20% by 2020, relying on international evidence but having no independent process to assess information for itself”. Now, three years later, it looks as though we are well on our way towards establishing such a process which will  help the EU begin to think strategically.

General, Long-term trends - No Comments »

As we approach the Easter recess, this is a good moment to take stock of the last three months. Progress has certainly been made to stabilise the eurozone although quite clearly there are still major decisions to be taken. The agenda for jobs and growth is getting a wider hearing but the search for growth will quicken with intensity in the months ahead.

As these broad issues with a strong European dimension are under public debate, many in the UK could be forgiven for wondering what it is that an MEP does and what their relevance is to British interests. This blog gives an account of some of the activities in which I have been involved in the past week to illustrate a week in the life of an MEP.

Global Finance

First, last Friday I attended, for the second time, the Harvard Law School/CEPS Europe-U.S. Symposium on Building the Financial System of the 21st Century in Armonk, New York, a beautiful corner of the world about an hour’s drive from J.F Kennedy airport.  The session I facilitated was on macroprudential supervision (financial regulation which aims to mitigate the risk of the financial system as a whole). Other sessions included the comparison of derivatives regulation in the EU and the US and also the comparison of bank resolution in the EU and the US. The main message of the conference was that the EU and the US are going to have to work closer together to shape the global financial system of the twenty first century. I was present in my role as Chairman of the Transatlantic Policy Network (TPN), where we are seeking to promote a Transatlantic financial services market to generate jobs and growth on both sides of the Atlantic.

Cloud computing

Second, the European Internet Foundation, of which I am a cofounder, organised a well-attended seminar on cloud computing in Brussels on Tuesday afternoon. The speakers provided more evidence that the cloud is changing how the world uses digital tools and technologies, making businesses faster, better and cheaper. Core themes which were addressed include interoperability (how different devices can work together as part of a whole) and data portability (the ability to take your data from one service to another), security and data privacy, and the use of cloud computing in the public sector.  Peter Dickman, Engineering Manager at Google, commented that as cloud computing continues to develop, it is not enough to have leadership in one company or nation state. The EU, as the only regional institution of its kind, will have a crucial role in leading the way towards a global system for cloud computing.

Golf and Sustainability

Third, as Chairman of the European Parliament’s Golf Committee I was in St Andrews on Wednesday morning to open a two day event called “Working for the Golf Course”, hosted and organised by the R&A in conjunction with the European Golf Association (EGA). This brought together leaders of 25 national associations across the European Union to exchange experience on such issues such as biodiversity, fertilizers, pesticides, water, the protected use of soil and sport and tourism, all of which are the subject of EU action or directives. It is vital for golf representatives across Europe to understand the evolution of European sustainability regulations and practices:  this is why Europe’s golfing interests have to pursue and reinforce sustainability efforts on the ground as well to connect with the EU institutions.

Local work

After returning to Brussels on Thursday morning for voting time at the Plenary session of the European Parliament, I returned to the UK yesterday to address the Buckingham constituency association AGM in Aylesbury. This evening, I will be participating in a debate on the pros and cons of the UK’s continued membership of the EU hosted by the Bramshaw and Fritham Branch of the New Forest East Conservatives. I will emphasise the need for looking at long term trends to see how best to pursue British interests in the European Union. I will return to this theme when the blog resumes on 13th April.

Looking at this diverse range of issues with which I have been dealing over the past few days, not only does this show how widely the European agenda has grown over the past twenty years together with European Parliament involvement; it also shows that there is a deepening need for MEPs and MPs to work together in the interest of their mutual constituents (see 18 November).

General - No Comments »

This week, George Osborne’s 2012 Budget reflected a shift in focus from austerity to stimulating the economy. In his “Plan for Growth”, the Chancellor set out a roadmap including four economic ambitions for Britain to:

• Have the most competitive tax system in the G20. This will be done, for example, by reducing corporation tax by 2% in April this year, and a further 1% in each of the following three years;

• Become the best place in Europe to start, finance and grow a business. One measure taken here is to exempt micro and start-up business from new domestic regulation for three years;

• Be a more balanced economy by encouraging exports and investment;

• Have a more educated and flexible workforce. Measures such as funding 100,000 additional work experience placements for young people and 50,000 additional apprenticeships over the next four years will be critical in this area.

This agenda will do a lot to boost our economy. But as was noted in the results of a seminar on the pursuit of growth and jobs at the Oxfordshire Golf Club on Saturday 10 March, we are not out of the woods yet. The level of UK personal, corporate, banking and government debt is 500% of GDP, the highest figure in the industrialised world bar Ireland. Furthermore, the importance of  Small and Medium Sized Enterprises (SMEs) for generating jobs and driving economic recovery was underlined as they currently generate 80% of new jobs (see March 16). There are 23 million people officially unemployed in the EU, and if each of the 23 million SMEs in the EU were to create one new job, the unemployment problem would hugely decline, if not disappear.

Two major issues come to mind to help SMEs fulfil their potential, which have only been partially addressed in this week’s budget.

1) Making money more easily available

In The Times on 19 March, Xavier Rolet made three recommendations to change the “ecosystem” for SMEs: “First, we need a package of reforms to make it more attractive for investors to take equity stakes in SMEs…Abolishing stamp duty for AIM companies, with a reduction in capital gains, would have a profound impact…cut[ting] the cost of capital for SMEs by up to 13 per cent. Second, we need to diversify the financing of smaller companies by connecting a much broader base of investors to trade bonds issued by SMEs….Third, the UK needs a strong negotiating position in Europe as the EU reviews key regulation governing the SME markets”. This overall point was recognised in the Budget as the Government’s growth plan includes some action to support the financing of SMEs, agreeing with the banks a 15% increase in the availability of credit to small businesses to £70 billion, but more remains to be done.

2) Providing the right digital infrastructure

The 2012 Budget provides £100 million to ten major cities to upgrade their super-fast broadband, with £50 million will be made available to smaller cities too. There will also be some funding available to extend mobile coverage to 60,000 rural homes and along at least ten key roads by 2015. Is this enough?

Dr Peter Cochrane, the former Chief Technology Officer at BT who has been providing evidence to the House of Lords select committee on the Government’s plans for superfast broadband roll out, is certainly not convinced. He said on 22 March that “the numbers talked about by the government are out of order by a magnitude. When Osborne is talking about £50 million he really needs to be talking about £500 million”. Cochrane estimates that to get fibre to every home in the UK, £10-£15 billion of investment is needed. And “superfast broadband” is still being defined as above 24Mbps, when even “100Mbps isn’t good enough…it really needs to be at 1Gbt/s so that we are on a par with China, Korea, Japan and Sweden… This country will not be entering cloud computing in a big way because we won’t have the infrastructure”.

This issue, above all, is the one where the Government has paid the least attention, where it would have the most return in terms of jobs and growth for every pound invested. The truth is that they are still in the foothills, while other countries are exploring the mountaintops. I will come back to this issue in a future blog.

Economy, Internet, growth - No Comments »

Last Saturday, a group of around 70 Conservatives gathered at the Oxfordshire Golf Club near Thame to participate in a seminar on “The Economy: In Pursuit of Growth and Jobs”, hosted by the Berkshire, Buckinghamshire and Oxfordshire Conservative European Forum. Experts from a broad range of backgrounds set out their ideas on how to tackle this daunting agenda.  It was noted in particular that at a time of scarce resources, governments in Europe do not have the funds to provide stimulus, so the push for growth is clearly going to have to come from the private sector and in particular from entrepreneurs and SMEs. There are 23 million people unemployed in the EU but if each SME were to create one new job, unemployment would hugely decline, if not disappear. So, what needs to be done to enable SME’s to thrive?

• Improve Digital Infrastructure: ICT (Information Communication Technology) already contributes to 40% of overall productivity growth in Europe and 60% in the US. This difference is due to greater investment in ICT by US industries. The UK is still far behind, with many of those who attended the seminar owning businesses located in remote areas which suffer competitively because they are unable to access adequate mobile and broadband connection. One example cited was a Buckinghamshire agent who was unable to let property to companies because there was no high-speed broadband (see 9 December).

• Embrace Cloud computing: Cloud computing, which enables all data to be stored online rather than on hardware, will transform how businesses operate by reducing capital investment, lower fixed costs and a significant reduction in IT costs due to economies of scale. SMEs will be instrumental in shaping these new markets. They will contribute specific know-how to the large cloud organisations, develop software solutions, provide consulting services, implement projects, and resell cloud based applications (see 2 March).

• Improve skills: A big problem for SMEs at the moment is that children lack the skills that employers are looking for, as the education system has focused mainly on feeding into the professions or the City (see 17 February on the need for a more balanced economy).  This mismatch between skills and the needs of employers has meant that 24% of young people aged between 16 and 24 across the EU are unemployed. Only 3 countries (Germany, Austria and Holland) have an unemployment rate below 10% and so there is a risk of losing a whole generation.

• Remove barriers: This means the removal of restricting legislation, and overly cumbersome bureaucracy. On a local and national level, this includes allowing planning permission for projects which would create jobs.  On an international level, this means removing barriers to trade and investment across the Atlantic. At a time when we are seeing growth rates of between 7 and 10% in China and India, we must remember that the EU and US still constitute over 50 per cent of world GDP. A joint US-EU High Level Working Group is already looking at how to use this crucial partnership to increase jobs and growth (see 2 December).

What is striking from the ideas raised by the speakers and then in the debate which followed was the particular emphasis placed on productivity with the effective use of technology, and especially ICT. So far, both in the debate in the Conservative party and on a national level have failed to highlight this vitally important factor. This is even more surprising given that there is so little scope for providing additional funds for the normal types of stimulus expected coming out of a recession.

Internet, growth - 1 Comment »

There is a dictum circulating about elections which says that, “In the West, the rules are clear but the outcome is uncertain. In Putin’s Russia, the rules are uncertain but the outcome is clear”. Has this been the case in the recent Russian presidential elections?

The answer must be yes. Nobody was surprised that Vladimir Putin sailed to victory with 63.60% of the vote. He had already announced that he would be returning as President back in September 2011.  But this time, he has met more resistance than to what he is accustomed. Lilia Shibanova, the head of Russia’s independent electoral organisation, Golos, came to give the European Parliament in Brussels an account of the Electoral process on 7th March. She commented that “these elections witnessed a new phenomenon in terms of the civic activism”. The Russian people, empowered by the internet, are no longer taking the fait accompli of their political system lying down.

When I addressed the Moscow School of Political Studies last June, as I have done on many occasions, the most popular issue raised was the likely impact of the internet on Russian society, for individuals, business and politics (see 10 June). Now, we are seeing the impact of this process on the electoral process itself. Mr Putin’s reputation suffered a dent last December after widespread allegations (mostly online) of rigging during the elections for the Duma. In response to the protests which followed, he offered to equip polling stations across the country with two web cameras each for the Presidential elections, which could be accessed by the public online. Nevertheless, a report produced by the OSCE showed that voting conditions were ‘bad’ to ‘very bad’ at a third of the observed poling stations. The ‘Runet’, or Russian internet, was full of allegations of fraud and there has been criticism that the cameras were not able to capture all elements of the count.

The sense of unfairness has been palpable from the outset, with many candidates being disqualified and Mr Putin receiving 70% of airtime on state controlled television.  Mr Putin’s campaign manager may have dubbed the internet as a ‘rubbish dump’, but in reality it is a vital outlet for protest and dissent. The Economist commented on 3 March that, “Although Mr Putin can squeeze the media, he cannot ban the internet, which has a national penetration rate of almost 50% and almost 70% in Moscow”. A month before the election, a liberal opposition group took the risk of hanging a massive anti-Putin banner across the river from the Kremlin with the words “Putin, leave” pasted across his face. Though it was quickly removed, photos reached millions of Russians via the blog of Ilya Yashin, the group’s leader.

The truly global nature of the internet is a principal factor for it being a safe-haven for protesters. ‘LiveJournal’, a blogging site, has long been a critical voice of dissent in Russia because it was an American website, outside of the jurisdiction of the Russian authorities (see BBC Magazine on 1 March). In 2006, fears arose after Russian-language pages were licensed to the Russian company SUP media. But, as media director of SUP, Anton Nossik explained, “If a blog has a Russian hosting, police can check up on the blogger…But if someone has a blog on LiveJournal, the Russian authorities have no way of getting to them other than approaching their counterparts in Sacramento. The typical answer from the state of California is: ‘No can do’.

As well as providing a critical voice, LiveJournal, Facebook, Twitter, Vkontakte, and other popular platforms are being actively used for mobilization of people for peaceful protest rallies which are decentralised and have no clear leader, in a similar process as we have seen in the Arab Spring (see 20 January). Most critically in Russia, the internet allows protesters to bypass some legal restrictions, such as the need to have the approval of the authorities for a big protest. They have organised ‘flash-mob’ protests, during which people with white ribbons on their cars gathered at a specific time and location. They also organised the “Big White Circle”, where an online tool allowed multiple one man protests along the circular road around Moscow’s center, as can be seen from the screenshot below (also see  GlobalVoices).

Russia, democracy - No Comments »