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HEWITT SAYS BUSINESS WILL REMAIN AT HEART OF GOVERNMENT

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TRADE AND INDUSTRY SECRETARY SPELLS OUT 'GROWN-UP' RELATIONSHIP IN ...
TRADE AND INDUSTRY SECRETARY SPELLS OUT 'GROWN-UP' RELATIONSHIP IN

KEY SPEECH

Trade and industry secretary, Patricia Hewitt has delivered a clear

message that business will remain at the heart of the government's

plans for national renewal.

Addressing leading businessmen and women at the lord mayor's Mansion

House dinner yesterday, Ms Hewitt said:

'Today we have a grown-up relationship between government and

business - a relationship that works in the national interest - based

on fairness, not favours.

'Every family, every community, every part of our country depends

upon the success of our businesses.

'We have the fourth largest economy in the world - because we have

good businesses which yield just over four fifths of the UK's GDP.

'We have record numbers of people in work - because private sector

employment increased by 1-1/4 million over the last five years.

'And working together, we are helping to improve the lives of people

who have been left out and left behind for too long.

'Take the national minimum wage. We knew the minimum wage was right

in principle, but we were determined to make it work in practice.

Through the low pay commission, we built a consensus between

business, unions and government - and we can be proud of the fact

that we have delivered a pay rise to over a million men and women -

and, in doing so, protected good businesses against the bad.

'When the New Deal was launched back in January 1998, only 30

employers had signed up - today, nearly 90,000 are on board.

Altogether, nearly 600,000 people have been helped to find work

through the New Deal - good for them, good for their families and

communities, and good for the businesses where they work.'

'So it is simply a fact that a strong private sector is essential to

create the type of country we want. It raises prosperity and supports

jobs and it creates tax revenues for us to invest more in public

services.

'So our country needs strong, flourishing public services, just as

much as we need strong, successful businesses - and a partnership

between them, to get the best of both.

Ms Hewitt went on to address recent media criticism over the

relationship between government and business. She said:

'We should all be worried about what happens to the health of our

democracy if such cynicism takes hold.

'What does it say to young people considering their future career

when there is a continuous suggestion that business people who talk

to politicians must be up to no good? How do repeated, unfounded

allegations help to create the dynamic, entrepreneurial economy that

we all want to see?

'Ministers cannot govern in isolation. We can only achieve change by

engaging with business, with employees and their trade unions, with

all the groups that make up our community. There is no other option.

governments that only engage in a one-sided consultation process, end

up making bad policies and bad decisions.

'So we're not going to stop talking to business. It is part of my job

as secretary of state to talk to business just as it is part of the

job of my ministers and my officials.

'That is why business will stay at the heart of our government's

plans for national renewal.'

Ms Hewitt also announced new reviews into the role of non-executive

directors and the UK's arrangements for auditing and financial

reporting in a move to strengthen the country's corporate governance

framework.

Notes

1. For information on the reviews announced into the role of

non-executive directors and accountancy rules, please see the

accompanying press release (P/2002/128) also issued today.

2. Patricia Hewitt was speaking at the Mansion House trade and

industry dinner hosted by the lord mayor of the City of London. The

dinner is an annual event, which recognises the vital connection

between Britain's financial and business services and its industries

and business. Guests included leading representatives of major UK

businesses and leaders of major financial and business services.

Members of the government and civil service were also present.

AUDITING REQUIREMENTS AND THE ROLE OF NON-EXECUTIVE DIRECTORS TO BE PROBED

Two separate reviews will examine the role of non-executive directors

and the UK's arrangements for financial reporting and auditing, trade

and industry secretary Patricia Hewitt announced yesterday at the lord

mayor's Mansion House dinner.

The move is aimed at:

- ensuring that companies can fulfil their potential and improve

productivity;

- strengthening the UK's framework for how companies operate; and

- encouraging greater transparency.

Announcing an independent review of the role and effectiveness of

non-executive directors in the UK, Patricia Hewitt said:

'Non-executive directors play a key role in British companies by

helping to drive up performance. It is in all our interests that they

do their job as effectively as possible.

'We need stronger, more independent and more active non-executives

drawn from a wider pool of talent to play their part in raising

productivity.

'This review will look at how this aim can be delivered and will

build on the work of the Company Law Review and the Myners review,

including the government's recent proposal to strengthen the duties

of institutional investors.'

The review will report jointly to the trade and industry secretary

and the chancellor.

In her speech, Patricia Hewitt also set out how the government will

respond to the issues raised in the aftermath of Enron's collapse.

She said:

'We have all been shocked at the speed and scale of the dramatic

collapse of Enron.

'We need to be sure that our systems of financial reporting and audit

regulation are robust enough.

'This is why I have set up a group jointly with the treasury,

financial services authority and the accountancy foundation to

co-ordinate our response to the issues raised by Enron.

'While the accounting and regulatory requirements in the US are

significantly different to the UK, it is crucial that we address

issues which may question the integrity of markets. It is also vital

that our response fits well with our overall company law reform

process.

'I am determined that the outcome should be measured, thought through

and carefully judged.'

Notes

1. Patricia Hewitt was speaking at the Mansion House trade and

industry dinner hosted by the Lord Mayor of the City of London. The

dinner is an annual event, which recognises the vital connection

between Britain's financial and business services and its industries

and business. Guests included leading representatives of major UK

businesses and leaders of major financial and business services.

Members of the government and civil service were also present.

2. The government will announce in due course who will lead the

independent review into the role and effectiveness of non-executive

directors together with the terms of reference.

3. Melanie Johnson and Ruth Kelly will jointly chair the group

addressing the response to issues raised by the collapse of Enron.

The group will bring together DTI, treasury, financial services

authority (FSA) and other interested regulators such as the

accountancy foundation and the accounting standards board. This will

ensure that the implications for reporting and audit are carefully

considered and that work is properly coordinated.

4. If there is a need for specific legislative change in the area of

auditor regulation or other aspects of company law, the government

could take action either under existing powers or as part of the

proposed Companies Bill.

5. Action is already in hand in the following areas:

- The FSA's impending review of the Listing Rules will cover issues

relating to the audit of listed companies.

- The accountancy foundation and its associated bodies - the review

board, ethics standards board (ESB) and auditing practices board

(APB) are addressing a number of issues raised. The review board and

ESB have aspects of the requirement for auditor independence high on

their agendas; The APB is assessing the implications of Enron for UK

auditing standards and guidance for auditors following the standards

it has recently issued on audit quality control and communications

with audit committees.

- The accounting standards board will carefully review relevant UK

accounting standards in the light of the outcome of investigations

into Enron and of international accounting standards.

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