Gordon Brown went to the CBI conference for the first time as Prime Minister with the Government's reputation for competence more tarnished than at any time since Labour came to power.
Mr Brown and Tony Blair worked hard to reposition the Labour Party as pro-enterprise, a stance that helped them to win in 1997 and which has sustained them in office since.
Mr Brown was keen to remind his audience that he remained sympathetic to the business community – and was still the man for tougher times.
First, though, came some outrageously cheesy flattery: "Today, let me congratulate the leadership of so many companies represented today – we can see how the vast majority of British businesses are meeting the global competitive challenge – fitter and stronger than ever... Britain can be one of the great global leaders of this century."
Then came a series of initiatives designed to impress the delegates.
Most welcome was a hint about concessions on reforms to capital gains tax announced in the pre-Budget report last month. Mr Brown said: "The Chancellor is willing and ready to discuss implementation and how the reforms can encourage entrepreneurs" and "we will continue to listen and discuss with you the representations we have received about capital gains tax, ensuring that we maintain reforms for a fairer and simplified system that rewards enterprise".
However, the Chancellor Alistair Darling is expected to defend his decision to introduce a simplified tax system for capital gains when he speaks at the conference today. He is believed to be ready to say that he will continue to work with representatives of the business community on the details of the reform. One possibility that he could explore would be to make changes on the margins of the policy without affecting any of the rates, say by making some special arrangements for retirees.
The Treasury Select Com-mittee has joined business leaders in asking Mr Darling to take action to "mitigate the effects of the withdrawal of taper relief, particularly for those already within the two-year qualifying period and with special reference to small businesses".
The Government's language has been softening on CGT, and recent criticism from MPs on the lack of consultation over the reforms may help push a compromise though. However, any change needs to be implemented quickly: otherwise those who sell businesses to take advantage of the grace period before the proposed changes take effect in April 2008 may suffer what will turn out to be a completely unnecessary financial loss if ministers abandon the move.
The Prime Minister also pledged to maintain economic stability, develop London as the centre of a global carbon trading market, "potentially" commission new nuclear power stations and prepare young people for a declining number of unskilled jobs.
"We will take no risks. There will be no irresponsible relaxation of pay discipline, no unfunded spending commitments, no unaffordable promises and no short-term giveaways." Mr Brown said he backed plans to expand Heathrow airport with a third runway.
The Prime Minister said the £16bn Crossrail project, the long-postponed plan for an east-west line through London, will go ahead. "Our prosperity depends on it: Britain as a world financial centre must be readily accessible from around the world," he said. This was welcomed by the aviation industry. A BAA spokesperson said: "Heathrow's dependence on two runways can lead to delays and the cost of this congestion can be measured both economically and environmentally. It is Government policy that there should be two new runways in the South-east, and BAA will be submitting a planning application for a second runway at Stansted shortly."
The wider business community was reserving its judgement, however. Speaking after Mr Brown addressed the conference, the CBI's director-general Richard Lambert said that Mr Brown had "ticked all the right boxes" with his speech, but the changes to capital gains tax were still damaging.
"He addressed all the areas business cares about – skills, planning and infrastructure – but we're still waiting to see whether the Chancellor will go back on the changes to capital gains tax. I don't think it's deliberately anti-business, but it's an area of judgement where I just think they've got it wrong. The Chancellor will speak to us and I'll be very interested to hear what he has to say," Mr Lambert said.
Mr Lambert noted that the other main political parties had been working hard recently to appeal to businesses, adding that their vote is "still up for grabs". Chris Huhne and Nick Clegg, the Liberal Democrat leadership contenders, enjoyed a full audience, while the Conservative leader David Cameron is expected to criticise the Government's "incompetence" when he addresses the conference today. He will demand that Mr Darling end uncertainty surrounding CGT.
However, a different perspective was offered by the TUC general secretary Brendan Barber, who said: "The truth is that UK corporate rates are pretty average. And many UK businesses are expert at reducing their tax bill – the Nat-ional Audit Office says that one in three of our 700 biggest businesses paid no corporation tax last year. If there are to be any changes in business tax to help smaller businesses then the Chancellor should make sure that they are paid for by effectively taxing private equity."
Blackstone attacks critics
The private equity lobby, in shape of Stephen Schwarzman, chairman, chief executive and co-founder of Blackstone Group, was in defiant mood at the CBI. Mr Schwarzman said: "Private equity is here to stay as a force for good ... While there is a lot of attention now on private equity's role, most of that attention has been unremittingly hostile and, frankly, devoid of factual support". The credit crunch would, even so, require the industry to adopt a new approach, and the period that lasted for about a year until July of "astonishing" access to cheap capital was an "aberration": "The markets have spoken." Mr Schwarzman claimed that private equity-run firms had better employment and growth records, and that bad publicity was driven by "myths and fears", and "we've done a lot for workers". He added that globalisation had lifted millions out of poverty. Mr Schwarzman did concede that "we've been telling our story badly, if at all" and acting without "sensitivity".
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