Bosses say no to more social legislation

Institute of Directors: Norman Tebbit and Peter Lilley's view of Europe prevails at convention
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Business leaders voted seven to three against a single European currency and against the extension of EU social legislation to Britain at the Institute of Directors' annual convention yesterday.

Overwhelmingly persuaded by the arguments of Lord Tebbit and Peter Lilley during the two-hour debates, the IoD's members agreed that the disadvantages of European Monetary Union outweighed its benefits and that Britain should be free to regulate its own labour market.

The bosses' organisation also called for big tax cuts. Tim Melville-Ross, director general, said: "Much more must be done to achieve significant reductions in both public expenditure and taxation." Capital gains tax and inheritance tax should be abolished right away, he argued, as the move would encourage wealth creation.

The debates on Europe followed a speech in which John Major, the Prime Minister, told delegates that although membership of the EU was central to Britain's prosperity, he would refuse to accept European social regulation.

Mr Major also pledged to continue to press on towards a 20p basic rate of income tax and the abolition of capital taxes. Government spending would fall back below 40 per cent of GDP, and the Government would keep an "arm-lock" on inflation, he said.

In typical fighting form, prominent Euro-sceptic Lord Tebbit told the audience that the economic benefits of a single currency would be tiny. On the other hand, it would cause severe economic and political disruption, he warned.

"The economic advantages of the European currency are so small they were not even mentioned at Maastricht," Lord Tebbit said. It was not "remotely likely" that European economies would converge, and the economic pressures created by the single currency would favour protectionism and extreme nationalism.

The euro was the ERM - "eternal recession mechanism" - writ large, he said.

Opposing these apocalyptic warnings, Georges Jacobs, chairman of the Federation of Belgian Industry, said British interestrates were already mainly determined by German ones. Britain's interests would be best served by influencing European monetary policy from within the single currency. Europe also needed Britain as an advocate of pragmatism.

Separately, business confidence has increased and there are signs of a potential upturn, according to a recent survey of IoD members.

"We are cautiously optimistic that these results may signal the return of that elusive feel-good factor," said Ruth Lea, head of policy.