The New Statesman Interview - Stephen Byers

The sensible Blairite at the DTI admits to caution in 1997, but now he talks of redistribution and m

"The next election provides us with a once-in-a-generation opportunity to change our country fundamentally. We need to ensure that the manifesto is modernising and radical. It really is a golden opportunity."

The start of a new political century has emboldened one of the more cautious Blairite ministers to look ahead with uncharacteristic adventurousness. Stephen Byers sits on his sofa in his large office at the DTI, making striking observations on the next election and the second term: a golden opportunity to change our country fundamentally? This is exciting stuff.

But his hopes for the near future also imply that the government in its first term has not yet brought about any fundamental change. This is different from Tony Blair, who often claims that government policies are "radical" and "revolutionary". The terms are Blair's favourite adjectives, applied to policies such as the introduction of NHS Direct. Byers offers a different interpretation.

"I happen to believe that we were very cautious in 1997. Then we had to demonstrate we were competent. That was the issue. Now we've demonstrated that, especially over our handling of the economy, and in the next term we can be really radical."

Byers is in charge of the party's industry, agriculture and culture policy commission, responsible for devising new ideas in all three policy areas. As he acknowledges with unusual cheek, "it's an interesting mix. We are going to propose that we train cows to perform ballet in steel mills."

New Labour would never be that bold. It is the sensible party and Byers is reflecting on some sensible policies. Here are some of his thoughts, the first inkling of policies that will be included in the manifesto. "I'm very keen on introducing a Knowledge Bank. At the moment banks will lend against collateral for an old-style factory, or something very tangible. But if you've only got an idea, people won't lend you money. So a Knowledge Bank, which would encourage and support innovative ideas, would be a radical change. I am also looking at ways we can use digital TV as a knowledge resource in everyone's living-room."

Bearing in mind the government's problems with its "core vote", I suggest that such policies would not exactly rouse the passions of his constituents in the north-east of England. He strongly disagrees. "The Tories wouldn't have a Knowledge Bank, for example. This is a policy that would require government financial support to encourage enterprise. One hundred years ago Labour was all about encouraging opportunities and now we need to kick that same principle on with some fresh ideas."

After a speech he made in Japan last year Byers was wrongly portrayed as one of the cabinet's Eurosceptics. In fact it was a speech that kept firmly to the government line, and he insists that there was no attempt to spin it as being against the euro. Now he is much more precise about where he stands. "Recently, for the first time, big inward investors are telling me that we need to make a decision on the euro early in the next parliament."

Are they also telling him that they want the decision to be in favour of entry? "Yes. They're saying the productivity gains are not always finding their way through because of the strength of the pound." Byers stresses that he is sticking to the government's view that Britain should enter only when it is in the country's economic interests to do so. But he is also signalling that the highly influential business leaders he meets at the DTI believe it will be in the country's economic interests to join soon after the next election.

He views the next big EU summit in Lisbon in March as a vital staging post. "This is a very important event in which we'll be addressing the future direction of the EU. We need to show that the EU has changed from being rather bureaucratic, relying too much on directives, to an institution that encourages enterprise and innovation. Only then can we move on properly to the debate on the euro."

After the summit, will the reformers have the ammunition to argue that the EU has changed? "I think we could well have. That would be the big prize."

Much of what Byers says is based on the understanding that a second term is almost guaranteed: the talk of business leaders seeking a referendum early in the next parliament, the references to the next term being a once-in-a-generation opportunity. At the start of a new political century the Blairites, although never complacent, know they are in command. But what does it mean to be a Blairite minister? After more than two-and-a-half years in government, it is not clear whether the term "Blairite" stands for much more than managerial pragmatism. Even Byers' hopes for a radical manifesto do not convey a sense of long-term political direction.

Still, this most Blairite of ministers claims to know precisely where he is going. "Some people don't believe new Labour has a philosophy because we are pragmatic. That is quite wrong. The Third Way, as it has become known, is a philosophy that is delivering results." He claims to have applied the philosophy to his own department. Senior civil servants have been told that the twin objectives of wealth creation and social justice should be applied to all policies. He says they are "two sides of the same coin".

I put it to him that his Third Way for the DTI was a statement of the obvious and encompassed aims shared also by Conservative governments. Conservatives were not "against" social justice.

"No, I disagree. We need to make strongly the point that if you don't have wealth creation you can't begin the debate about redistribution. I am not a believer in "trickle-down" Reaganomics. That doesn't work. But the New Deal is a good example of what I believe in. The privatised utilities made big profits from which we were able to start the New Deal. We couldn't have done it without the big profits, which we were then able to tax. It also shows that we are prepared to use the authority of government to introduce policies such as the New Deal and the minimum wage. We don't just believe that the markets should be left to get on with it."

The answer intrigues for two reason. First, Byers used the term "redistribution", a word that never leaves the lips of Gordon Brown, let alone Blair. I press him further. Is this government redistributionist?

"The figures speak for themselves." By that, he means "yes".

I also ask him about the importance he places on intervening in the markets. "The business community has to accept that this is the way it is going. The minimum wage was a huge change in the labour market and it's gone through remarkably smoothly. There will be more family-friendly initiatives to come in this parliament. Too many parents are juggling the demands of work with a family. We've extended paternity leave and introduced time off for emergencies, but this is just the beginning."

How do business leaders respond to government intervention of this sort? "Most in the private sector accept that change is necessary. I believe strongly that employers will benefit from a more motivated, loyal staff."

He points to his so-called "rip-off Britain" campaign as another area where he has intervened on behalf of the consumer. "The Fair Deal for Britain campaign is an attempt to mirror the United States, where they've got confident, assertive consumers. You build strong companies where they need to innovate and compete, so the Competition Commission is investigating cars, supermarkets and motorway [service] stations and we'll hear their recommendations later this year."

So is Byers an instinctive "interventionist", happy to wade in even when most business leaders cry out for a lighter regulatory touch? "No. I'm instinctively against intervening in markets. I would rather not, but I think there is a role for markets to work fairly, therefore if someone is abusing a monopoly position we do have the power to intervene. Governments have a responsibility to make sure the markets do not become the master, but the servants of the public."

The paintings on the wall of Byers' office are those chosen by Peter Mandelson during his brief tenure. He has not had the time or inclination to replace them. But Byers inherited more from the Mandelson drama than an art collection. The unfinished business included the Post Office review, which introduced greater commercial freedom and competition while keeping it within the public sector. I suggest that Blair and Mandelson would have privatised the Post Office had it been politically feasible. Byers hints that he thinks along similar lines. "The issue for the Post Office is how it's going to be able to compete in a rapidly changing market. There will be shares in the Post Office owned by the government, which gives us the option of share swaps with other companies, so that's a possibility, but it would be clear and above board. Such a move would need the authorisation of parliament." He adds that he has "no plans" to privatise the Post Office.

The cabinet's leading Blairites are under strong pressure to come up with fresh ideas as the next election comes into view. Indeed there are some influential members of the Blairite entourage who have been privately disappointed at Byers' performance in this respect. Perhaps alert to such criticism, he is now picking up the gauntlet.

But will the party's core vote be enthused? On this the Blairite minister plays an ace card, against which its dissenters have no obvious answer. "No one seems to define what the core vote actually is. All I know is that they certainly didn't support us in the early 1980s and there's a broad measure of support for what the government is doing now."