CBI prepares to labour a point: Big names will discuss big ideas next week in a bid to influence Budget policy, says Michael Harrison

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The Independent Online
JOHN SMITH does not know it yet, but next week's annual get-together of the Confederation of British Industry in Harrogate will be modelled on, of all things, the Labour Party conference.

Perhaps they should continue to keep him in the dark - otherwise, there is every chance that Mr Smith will not turn up to address delegates on Tuesday morning. Surely one cliffhanger of a conference, such as the Labour leader had to endure in Brighton, is enough for even the most battle-hardened politician.

Lest the great and good of British industry take fright at the idea, there will be no outbreaks of internecine warfare at Harrogate, no baying press pack, no equivalent of the Red Review and no company chairman waving block votes or, come to that, placards advocating one member one vote.

But Howard Davies, the CBI's director-general, is serious about the analogy. Unlike previous years, it is hoped that Harrogate will be less reminiscent of a Conservative rally or the Tory party at work and more akin, in organisation at least, to a Labour conference built around a working agenda designed to inform policy-making.

The big themes will all be on parade at Harrogate - Europe, world trade, economic recovery, employment and education. So will the big names - among those scheduled to speak are Jacques Delors, Lord Owen, Peter Sutherland, the new director-general of Gatt, and a bevy of cabinet ministers led by the Chancellor, Kenneth Clarke.

There is a central message that Mr Davies would like to see distilled from the speeches and dispatched to the wider world. 'It will be that we have a continuing problem of competitiveness,' he says.

A year ago, the CBI set manufacturing industry three goals for achieving world-class performance in the next decade: raising productivity by 5 per cent a year; increasing its share of world trade by 1 per cent, or pounds 10bn; and doubling investment per employee. Only the first is being achieved.

'Partly it (improving competitiveness) has a global dimension, partly it has a European dimension and partly it has a national dimension,' Mr Davies says.

Globally, the gap could be closed through completion of the Uruguay round of the General Agreement on Tariffs and Trade. On the European front, Britain and its EU partners could recapture the 20 per cent share of world growth they have lost since 1980 by completing the single market, reducing public spending and tax and by operating more flexible job markets and industrial development policies.

And at home . . . 'Domestically, we are achieving productivity gains but we are not investing enough,' Mr Davies says. 'We need an investment Budget.' Ah yes, the

B-word. This year the CBI has put its conference back by a week to bring events closer to 30 November - the day when Mr Clarke will unveil his and our first unified Budget.

The CBI's recent record on second-guessing the contents of Autumn Statements and Budgets has not been bad. This time round, the CBI believes the Chancellor will resist significant and immediate tax increases. However, Mr Davies adds: 'I wouldn't be surprised to see a few ticking time bombs in there, a few deferred tax increases.'

Mr Davies reckons the Chancellor almost certainly started work in the summer from the premise that he could safely put up taxes quite sharply because of steady economic growth in the first half.

Since then, however, it has become clear that the recovery is more patchy and less even than was first apparent, hence the need to tread carefully. The CBI's own Budget submission was based on just such a cautious assessment.

Mr Davies may or may not be proved right on taxation. But the CBI seems to have misjudged the Treasury's mood on investment.

One of the main planks of the CBI's submission was that 40 per cent first-year capital allowances - a one-off concession introduced by Norman Lamont in last year's Autumn Statement - be retained in order to stimulate more investment-led recovery.

Despite the abundance of evidence pointing to industry's unwillingness to spend - manufacturing investment is down 22 per cent on its level of four years ago - the Chancellor does not appear to have bought the CBI's argument. The best the employers' organisation can hope for is more favourable treatment under the existing capital allowances regime.

Mr Davies remains cautiously optimistic about the economy, even though the CBI's latest growth forecasts for next year are in the process of being pared down from 3 per cent earlier this year to somewhere in the region of 1.7 to 2 per cent.

'I don't think the economy is going into reverse again, but it has flattened off,' Mr Davies says. 'Partly that's due to circumstances in Europe, and partly to budget blight itself. Continuing weak export markets are having an effect on business confidence and outlook and undoubtedly that's having an effect on orders.'

Nor does he detect any inflationary pay pressures in the economy, despite evidence that the number of zero wage settlements appears to have come down dramatically since the start of the year.

Partly for this reason, the CBI expects there to be a further cut in interest rates - but not until some time after the Budget. Not so long ago, Mr Davies says, any interest rate cut could confidently have been expected to accompany the Budget for maximum political advantage.

Because the last Bank of England inflation report was not censored by the Treasury, the CBI has been encouraged to believe that monetary policy is slowly being divorced from the quick political fix. Mr Davies should know. In his last but one incarnation as a Treasury mandarin, he was the one who wielded the censor's blue pencil.

The four cabinet ministers will be speaking in Harrogate suggests the CBI's call for a new industry- government partnership is bearing fruit.

Mr Davies is cautious, however. He says that while there has been progress in some areas - such as the initiative to bring private sector finance into public sector projects - the Government still lacks a clear framework for deciding what its industrial policy should be.

Traditionally, the CBI conference has tended to be an opportunity for letting off steam and then being ignored. As an institution, therefore, it has remained slightly detached from the daily workings of the organisation.

The 1,000 or so businessmen turning up at Harrogate this year may be surprised, then, at the format this conference will take. They may be even more surprised to discover that their voices are expected to help shape policy. There again, if the Labour Party can be democratised . . .

(Photograph omitted)

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