CBI chief chides Bush over US protectionism

Digby Jones urges public sector pension reform

The leader of British industry launched an attack on the newly re-elected President George Bush yesterday, calling on him to drop his protectionist rhetoric and adopt a more friendly approach towards the environment.

Digby Jones, the director general of the CBI, said the new US administration urgently needed to tackle trade distortions and sign up to the Kyoto agreement aimed at curbing greenhouse gas emissions.

In a wide-ranging interview before the CBI's annual conference next week, Mr Jones also called for a reform of public sector pensions and said that Britain had a golden opportunity to take the lead in the modernisation of Europe.

Noting that in his first term of office President Bush had introduced the steel tariffs which were ruled illegal by the World Trade Organisation, the CBI leader said: "He seems to be making a virtue out of protectionism. I find that very disappointing. They are the most powerful nation on earth, they have the most powerful economy on earth and yet Bush and Kerry spent the election indulging in who could be more protectionist than the other."

Mr Jones acknowledged that the Common Agricultural Policy was an "absolute disgrace" which Europe had to address. But he added: "We have every right to say to the Americans, right, what are you going to do about trade distortions?"

On the environment, Mr Jones said the President should start his new term with some "statesmanlike behaviour" by signing up to Kyoto. "If Bush is going to say Kyoto doesn't work, he has to give us an alternative rather than just say he is not playing. We haven't a hope of getting China and India to the table and becoming more sensitive to the environment unless the biggest economy and biggest polluter in the world does the same."

Mr Jones also turned his fire on the public sector, saying there was a real need to tackle the huge unfunded liabilities which had built up in Civil Service pension schemes. In the past, the generous final-salary pension schemes enjoyed by public sector workers had been justified on the grounds that their pay was inferior, but this was no longer the case.

"There will be a huge polit-ical problem when council tax demands drop through the letterbox next March and people find their tax has gone up for one reason - to fund the deficit in the council's pension fund," Mr Jones said. "Council tax payers will say, why should I use my money to fund another person's pension fund when they are not using theirs to fund mine? Public sector pensions are in real need of reform and it is going to be seriously unpopular with public sector unions and employees but they can't use the old argument that they have this pension advantage because the pay is not very good."

He said one way of capping the "open-ended liability" for taxpayers would be to close final-salary schemes for public sector workers with less than 10 years left to retirement.

Mr Jones also said there was an urgent need for better channelling of money going into the public sector. "I applaud Gordon Brown for saying he was going to create 100,000 redundancies in the public sector because there are huge productivity gains to be made by better handling of the resources going in. We have three-and-a-half million adults in the workforce pulling a wage every day who cannot read, three-and-a-half million, and a lot of those are in the public sector. Let's put resource in to skill those people up."

Keynote speakers at next week's conference in Birmingham will include Gordon Brown and Peter Mandelson. Mr Jones would not be drawn on whether Mr Brown would make a good prime minister, observing simply: "He has been a good Chancellor."

He adds: "The greatest achievement this government has delivered is macro-economic stability. The oil price has gone up 75 per cent - if that had happened in the 1960s, 70s, 80s or even 90s we would have had the IMF in in five minutes, but today we have taken it in our stride and are still achieving growth of 3.5 per cent."

However, he tempers his admiration for Mr Brown by noting he has been a "meddling Chancellor. He has missed opportunities to reform the tax system. He has brought in a system of credits and reliefs which are very complicated and he does like using the tax system to guide policy."

Mr Mandelson had been scheduled to talk about his new brief as European Trade Commissioner but has now been forced to switch his theme to Britain's role in Europe - a subject close to Mr Jones' heart. "I am more hopeful now than at any time in my five years in the job that Britain has a major role to play in reforming the EU," he says. "We have more allies in Europe than we appreciate. There is an acknowledgement that the Franco-German model, which may well have served an older Europe well, is singularly unfit for the purpose in a 21st century competitive globalised economy."

On a personal note, Mr Jones' mission is to lose three stones. He is taking part in the London Marathon next April and has begun running six miles around Regent's Park to get himself in trim. His aim is to raise £200,000 for Unicef and Cancer Research and, he says, Tony Blair has promised a donation. A few CBI members might also find themselves being asked to contribute and what better opportunity than when they are all together next week in Birmingham?