CBI hits the right wavelength for Downing Street: The employers' lobby is back on speaking terms with the Government - for now, at least. Michael Harrison reports

Click to follow
AS Howard Davies sat in his 10th floor office in Centre Point listening to the Autumn Statement last month, the director-general of the Confederation of British Industry must have permitted himself a smile of quiet satisfaction.

In front of him lay the shopping list of spending and tax proposals that the CBI had so assiduously promoted in the preceding weeks. By the time the Chancellor, Norman Lamont, had finished speaking, the ticks on Mr Davies's list well outnumbered the crosses.

It would be an exaggeration to say that the CBI could have written Mr Lamont's speech. But the similarity between its thinking and the contents of the Chancellor's red box was remarkable.

The employers' organisation wanted interest rates cut, public sector pay reined in, capital spending programmes protected, investment allowances increased, export credit cover extended and new funds channelled into housing associations to allow them to buy repossessed homes for rent. Mr Lamont delivered on all fronts.

In the words of a rival industrial lobby group, the CBI had a good Autumn Statement. The widely drawn conclusion was that, after years in the comparative wilderness, the CBI's political rehabilitation was complete.

A decade ago the CBI had promised the government a bare-knuckle fight, the pugilistic tone reflecting as much its own irritation at being marginalised from the policy-making centre as industry's desperation over the recession. The tactic backfired. As the 1980s progressed the CBI came to be regarded with the same disdain as the trade unions. In the end the Thatcher government showed its contempt for both by announcing that the Chancellor would cease to attend their monthly fireside chats at the National Economic Development Office.

But here in 1992 was a Chancellor listening to industry's needs, clenched fist replaced by open hand. Lately Mr Davies and the CBI president, Sir Michael Angus, have begun to wear the doormats thin at 10 and 11 Downing Street. So, is the CBI back in business?

Three constructions can be put on the CBI's performance in respect of the Autumn Statement. The first is that it lobbied very effectively, the second that it was simply very well-informed and the third that it offered a Chancellor grasping at straws something more solid to hold on to when he came to spell out his strategy for growth.

One of Mr Lamont's advisers says: 'I think there is some truth in all three. The kind of things the CBI was putting forward were clearly designed to benefit its constituents, and a government which was prepared to do what it wanted was bound to get brownie points. But the CBI was also batting on an easy wicket. When the promise of recovery aborted for the third time the pressure on the Government became irresistible.'

Mr Davies is more inclined to view the CBI's success as a tribute to its lobbying: 'The Government was in a very receptive mood and we were further advanced than they were in thinking about what measures to adopt if you were to stimulate the economy with a package for growth.'

A freeze on public sector pay, for instance, was something the CBI had agitated for long before it featured on the Government's agenda. Other proposals were simply borrowed from elsewhere and repackaged - the scheme for removing the overhang of repossessed homes from the property market, for example, was dreamt up by the Council of Mortgage Lenders.

In any event, the CBI proved more adept at influencing, or perhaps second-guessing, the mood in government than other business lobbyists, such as the Institute of Directors, the chambers of commerce or the engineering employers.

The next test will come in the spring when the Chancellor starts putting the finishing touches to his Budget. In Mr Davies, the CBI has an important asset. He may not be as accomplished a public speaker as his predecessor, Sir John Banham, but he is widely credited with greater intellectual rigour and a better grasp of Whitehall's ways, having been, among other things, special adviser to Nigel Lawson at the Treasury for a year.

The CBI's Budget submission, due to be published in January, will urge the case for tax increases to be kept to a minimum. The Government has already said it intends to recoup the pounds 750m in revenues lost by the abolition of car purchase tax through higher motoring taxes.

But the CBI will argue strongly against any increases in business, personal or indirect taxation. Mr Davies accepts that the public sector borrowing requirement will have to be reduced in the medium term. But to raise taxes when there is no evidence that the country is pulling out of recession would be counter-productive. 'If the economy stays roughly as it is we think it would be right for the Government to stick with its projected PSBR and not increase taxation,' he said.

How successful will its overtures prove? 'It is incumbent upon us to present something which is achievable.'

The tactical advantage of this pragmatic approach is that the CBI gains credibility by being seen to have the Government's ear. The disadvantage is that its room for manoeuvre is reduced when many of its members want it to be bolder in its criticism of the Government. Anyone who heard the hostility directed towards government economic policy at the CBI's annual conference in Harrogate this year might have concluded that the leadership was slightly out of step with the membership.

Mr Davies and Sir Michael show no signs of changing tack. They know the CBI's new-found influence may not last. As one Treasury insider commented: 'When the economy begins to strengthen, the CBI's views will not be accepted so readily. What sounds so plausible now could degenerate very quickly into special pleading.'

(Photograph omitted)