Industry's leaders split on level of state aid: IoD hails Portillo hard line as CBI backs government support programmes

A DEEP split has emerged in Britain's business community over calls for sharp cuts in government support for industry, made in the leaked letter from Michael Portillo, former Chief Secretary to the Treasury.

Tim Melville-Ross, director-general of the Institute of Directors, has firmly backed Mr Portillo's stance, saying that the DTI spends too much. The Confederation of British Industry is supporting Michael Heseltine, President of the Board of Trade, in his battle with the Treasury over spending cuts.

Mr Portillo's letter, written while he was still at the Treasury, roundly attacked Mr Heseltine for failing to produce cuts in spending at his department in areas including exports, aerospace, regional aid, and small business.

At a briefing on UK competitiveness yesterday, Mr Melville-Ross said that Mr Portillo was absolutely right to call for cuts and that it was now up to Mr Heseltine to respond.

'Every expenditure should be analysed. Mr Heseltine is being asked to examine critically expenditure in his department and it is right that this should happen. I am on Michael Portillo's side if the message he is trying to get across is the need to reduce public spending,' he said. Mr Heseltine should admit that it was 'a fair cop' and come up with some savings.

Mr Melville-Ross said he was in favour of the abolition of regional selective assistance, with the caveat that some areas might need transitional help while the aid was phased out.

His views are in sharp contrast to those of Howard Davies, director-general of the CBI, who said the DTI's spending programme should be maintained. Mr Davies said the CBI did not want public spending to overrun, but added: 'Those programmes which are in effect an investment in individual success should be well-supported, and that includes support for exports.'

Mr Melville-Ross, who took up his position at the IoD only three days ago, said the DTI's role was not to hand out money to business. Companies would be best served by lower public spending coupled with reduced taxes. The DTI would do best by promoting market access, reducing regulations and arguing Britain's case in Europe.

Rather than giving support to Britain's aerospace industry, the Government should fight for the abolition of subsidies in other countries, Mr Melville-Ross said. He described as abhorrent the plans by the French to inject billions of francs into Air France.

He said calls for lower spending were consistent with the institute's desire for better education and training. These emerged as areas of top priority in a survey of IoD members, published yesterday.

Education and training should be better managed and the Government's spending in these areas should be scrutinised to see if the country was getting value for money.

The survey, which aimed to gauge directors' reactions to the recent White Paper on competitiveness, showed that just under half were unaware of the Government's proposals.

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