Blair aims to heal rift and strengthen links with business

Tony Blair called for a "new and deeper" relationship between the Government and business yesterday in a move that is likely to alarm the trade union movement.

The Prime Minister used a speech to the CBI conference in Birmingham to rally support for a business-friendly agenda and enlist the help of employers in devising policy across a range of areas from transport and university funding to pensions and social security.

Mr Blair's comments will be seen as a fresh attempt to win back the business vote after increasing anger over the burden of tax and red tape heaped on companies since Labour came to power in 1997.

Addressing delegates at the end of a 20-minute speech, Mr Blair diverged from his written text to say: "We need to take the partnership with business to new and deeper levels. There are fundamental issues of public policy where we desperately need business to be engaged, telling us not just what the problems are, but the solutions as well."

Mr Blair highlighted not just transport, where he said toll roads were the direction Britain needed to move in, but also higher education, where he said the Government hoped to "engage business" in solutions for university financing.

But the Prime Minister also said business should have a greater say in policy areas such as social security and pensions - touchstone issues for the unions, who are already concerned about the increased influence of employers on government policy.

Mr Blair also said he understood business concerns about the seeming tide of regulation and promised: "An enormous amount of effort is going into seeing how we can limit new regulation and kick out unnecessary legislation. I am not sitting there thinking how will I regulate today. A lot of time is spent thinking how we can stop this happening."

Patricia Hewitt, the Secretary of State for Trade and Industry, will announce new measures this week to aid small businesses by easing the burden of regulation on them and extending tax breaks. The Government is to exempt a further 69,000 companies from the requirement to have an audit - saving an estimated £94m - and raise the turnover threshold for what constitutes small and medium-sized companies so that more can qualify for capital allowances.

The Prime Minister was also resolute that in negotiations over the new European constitution, the UK would not permit its "red lines" to be crossed. "Specifically, on matters of tax, social security and the EU budget, we will oppose any moves away from unanimity," he said.

Mr Blair was unapologetic, however, over the level of public spending and rejected claims by the CBI that productivity was failing to match investment in public services such as health and education. He said the claim that a 20 per cent increase in NHS spending had been accompanied by a productivity gain of just 2 per cent was "bizarre" because this statistic was based on only elective hospital admissions and ignored improvements in waiting times, and preventative measures to combat lung cancer, breast cancer and deaths from heart disease - three areas in which the UK had made big advances.

He was also uncompromising in response to a plea for more support for manufacturing industry from delegates. "What I can't do is shield you from the world economy," he told delegates.

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