A new European model for growth and employment

The jobs summit

Europe's 4.8 million young unemployed would be rightly unimpressed if today's Luxembourg jobs summit produced only another photo-opportunity for presidents and prime ministers.

Which is why Britain, represented by Tony Blair, is determined that this summit must launch a new European way which can bring new opportunities not just to the young unemployed but to the 18 million people across the Continent without jobs.

Mass unemployment on this scale does not simply represent personal tragedies, but also a huge waste of economic talent. Europe cannot develop as long as there is the alienation and social division that long-term unemployment brings.

Indeed with the introduction of the euro only 13 months away, Europe's 20 million unemployed have a right to insist that we find a more effective, more modern economic model that delivers employment opportunity for all. Monetary union cannot work successfully without action on jobs.

Today as the Luxembourg summit opens a new European way can offer new hope. The American economic model has brought job creation but it has brought ever widening inequalities and denied communities social cohesion. The old European model has brought social cohesion but little jobs growth. The challenge for a new, more effective European model is to have job creation in a fair and cohesive society.

The new European model states that while sound finances are necessary so growth can expand, it is not sufficient if we are to meet our commitment to high and stable levels of growth and employment.

It states that achieving our objectives of high and stable levels of employment and growth requires new approaches for welfare and tax reform, for investment and competition, and for tackling social exclusion.

First, job creation requires Europe to modernise social security systems and welfare states. The old welfare model assumed that unemployment was merely a function of low demand, and that the unemployed could do nothing but wait for an upturn as passive recipients of benefit. Today unemployment is structural and technological as well as cyclical, skill shortages remain even when there is high unemployment and languishing on benefit is unfair when the out of work will invariably need new skills.

In my view no young person should be left for months - and no long-term unemployed adult - without work training or work experience. So we need new employment and benefit policies. Just as we have made a start in Britain, drawing on the welfare to work programmes of other countries, so other countries are now ready to do likewise. For all of us there is more to be done. That is why Europe tomorrow will offer new guarantees to the young and long-term unemployed.

Job creation requires, secondly, a new approach to employability. Today Europe is considering new targets for increasing training opportunities for the unemployed. Most of Britain's unemployed have the lowest skills, 75 per cent of those who have been unemployed for longest have no skills worth their name. The countries which succeed in mastering waves of technological change and fiercer competitive pressures will be the ones that invest in their one national resource, their people.

The key to the new European agenda is thus rising investment in education and training. Even in the most training-conscious countries in Europe only a fraction of today's workforce are upgrading their skills. Yet their skills are, all the time, becoming obsolete. Britain has a great deal to learn from mainland European apprenticeship, craft and vocational training programmes. All of us have to do more in lifelong learning, not least by using the modern interactive technologies to make it possible.

For the unemployed taking starter or transitional jobs and for the low paid, work must pay and that requires tax reforms that encourage rather than penalise work. In Britain we are considering a 10p rate to help the low paid and reform of both tax and benefit systems to back up our proposed minimum wage. In Europe this weekend other countries will signal their determination to change their tax systems where they discourage people or businesses creating jobs. So Europe is agreed that taxes on income must be geared to making work pay and business taxes should be modernised to encourage investment, growth and jobs.

Third, the European way to creating jobs rejects both old-style regulation and crude deregulation; it favours a competition policy that creates more dynamic markets, is effective against those cartels and monopolies that hold new businesses and job creation back, and - in large areas where European-wide competition is still inadequate - pushes forward the frontiers of the single market.

In this way small- and medium-sized businesses are now recognised for the job creators they are and can be. The small business sector has produced most new jobs in the United States. The European way must now be to do what we can to encourage innovation and dynamism. Britain's venture capital market has been a significant creator of high quality jobs and companies. There is a new interest throughout Europe in examining how to enlist venture capital as a more effective route to job creation. Our presidency will reflect this.

So in each area the European model suggests supply-side measures and structural reforms to create new growth and employment. Indeed monetary union which requires greater flexibility cannot work in any other way. So the new way recognises that while, in a fast-moving world of constant innovation and technological change, there is far less that government can do to stop people losing their last job, there is a lot government can do to help people secure their next job.

This week's initiative by the Luxembourg presidency is an important step forward. Already the UK has submitted its own action plan, building on our "getting Europe to work" initiative of last June. It admits how much we have still to do and sets our own experience and action priorities. Our hope is that, by the Cardiff summit, each member state will have produced their own action plan, sharing their best practice on employment so that we can learn from each other.

The new European model rejects the crude free market dogma of the Tory years which does nothing to enhance employability, just as it rejects old-style regulation which suppressed markets and dynamism. Instead the European way combines dynamism with employment and educational opportunity for all. In this way, Britain can take a lead in ensuring that Europe is changing to meet the needs of the unemployed.