Business vote 'up for grabs,' says CBI chief

Richard Lambert, the voice of business, puts his viewson Labour, the Tories and the economy to David Prosser

Richard Lambert, director-general of the CBI, has dinner regularly with his predecessor in the job, and insists that Lord Jones – once plain old Digby – is "doing fantastic work" in his new role as minister of state at the Department for Business, Enterprise and Regulatory Reform.

The employers' group certainly needs an inside man in government – having spent years courting the private sector, the Labour administration has proved a little less compliant in recent months – there have been a series of spats between government and business.

"The business vote is definitely up for grabs," says Mr Lambert. The frustration his members have is that while the current government appears to be very good at listening – "we get plenty of face time", the CBI boss says – policy does not always seem to reflect the case made to it.

Next week's CBI conference is a case in point. The under-siege Chancellor, Alistair Darling, will give the keynote address on Tuesday, with a senior cabinet minister also promised for Monday. Yet when it comes to those spats, there seems to be little prospect of compromise.

The CBI's current bête noire is the capital gains tax reforms announced in the autumn pre-Budget report, under which all gains on business sales will soon be taxed at 18 per cent – rather than the much lower 10 per cent level currently available to businesses sold after minimum holding periods.

Mr Lambert has led a campaign – so far unsuccessful – to persuade Mr Darling to drop the reforms, as much because of the signals they send out to business as the impact on those who will be caught out by the higher CGT charge. What's particularly unfortunate, the CBI boss declares, is that Mr Darling got himself into this position because he didn't think through his proposals.

"I think this was cock-up rather than conspiracy," he says. "I think they decided at the last minute on an announcement to reform inheritance tax, with the joint exemption for married couples, and then had to find a way to pay for it." The result was a rushed plan "that has caused terrific unrest", he says.

Not that the CBI has any intention of abandoning its non-partisan approach to policy and politics. Mr Lambert simply notes that the Conservatives – and the Shadow Chancellor, George Osborne, in particular – have stepped up their attempts to court business. "They're certainly putting themselves about," he says, "though we wait with interest to see what policy initiatives their taskforces come up with."

Nor will the director general be drawn into criticising Mr Darling himself – either for the child benefit security lapses or his handling of the Northern Rock crisis. "It's not our role to take a view on whether we have confidence in the Chancellor," Mr Lambert says. "Our interest is in the performance of the economy."

On that front, much of the CBI remains in sanguine mood, despite warnings about a global economic slowdown led by the US.

"It was always clear next year would be slower, though it's also the case that the further you get away from the City and London, the more business confidence seems OK," Mr Lambert says. "I was in north-east Scotland this week and the mood there was very much 'crisis, what crisis?'"

In fact, Mr Lambert believes both business and the consumer are right to remain upbeat (surveys show that while confidence in both sectors has dipped, it remains positive). "It's already clear that credit conditions have tightened, but our best guess is that the impact on the real economy won't be dramatic," he says. "There's a danger we talk ourselves into recession, but business balance sheets are in pretty good shape."

What does concern the CBI, however, is that policymakers have little room for manoeuvre when it comes to supporting the economy. The main drivers behind the UK's economic growth over the past five years, Mr Lambert points out, have been public spending and a consumer boom – both are now restrained. And with inflationary pressures in the system, the Bank of England's capacity for interest-rate reductions is also limited.

"I've heard business people talk about inflation in recent months for the first time in quite a while, whether it's food prices or the commodities boom," Mr Lambert, a former member of the bank's Monetary Policy Committee, says. "That's a worry, because the economy is going to need an interest rate cut in the coming months and inflation is obviously going to make that much more difficult."

The other impact of the credit crunch, of course, has been a dramatic slowdown in merger and acquisition activity. Not that Mr Lambert is concerned about the growing number of CBI members that have been bought up by foreign investors – of the sovereign wealth fund variety or another kind. "I think the default position of our members would be that Britain has benefited enormously from foreign capital and expertise," he says.

"Having said that, when one reads of trillions of reserves that have been built up in China, or in parts of the Middle East, there must be concerns. We would be concerned if we thought deals were being pursued for political ends, for example, or if there were issues of national security at stake, though we haven't seen any instances of that." Existing laws, he points out, would in any case enable the Government to block deals that raises such concerns.

On the other hand, Mr Lambert believes sovereign wealth funds ought to sign up to the sort of disclosure requirements that private-equity firms are to adopt following the Walker report into the sector. And he has little time for critics of the Walker reforms, who claim the disclosure standards were watered down following objections from the private equity sector.

"The private equity industry in this country has undertaken a degree of disclosure that no other private-equity sector in the world would have agreed to, and it's a regime that is much more demanding than the rules for other privately owned companies," he says. "It's fair to say that about a year ago, the private equity industry had got to a point where the scale of their deals had put them into the public spotlight in a way they had not been before and that the sector was on the back foot – it's now very much on the front foot."