Jones: Labour has made the UK 'less benign' for business

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The UK is a "less benign" place to do business than it was in 1997 and the Government is to blame, Sir Digby Jones, the outgoing director general of the employers group the CBI, said in a valedictory interview.

The public face of business for the past six-and-a-half years, who steps down at the end of this week, praised the Government for its achievements such as its contribution to macroeconomic stability and strong support for free trade.

But he castigated it for failing to improve basic education, reform the archaic planning system and for hitting business with new taxes and red tape.

But Sir Digby refused to endorse either Gordon Brown or David Cameron as the best potential prime minister for the business community, saying the business "jury was out" on both parties ahead of the next election.

Sir Digby steps down after a tumultuous time for the CBI, the business community and the UK economy in general. He took over the reins from Adair (now Lord) Turner who had taken the organisation into a high-profile position at the forefront of the campaign to join the euro.

"I had been a member of the CBI in the West Midlands and I'd experienced quality policy coming out of [the CBI's London headquarters] CentrePoint but losing touch with the membership in the country," he says. "I had a democratically elected government that was ducking the issue the CBI had let itself become a punch bag and I said until the Government intends to have this scrap then why should we. That was a pretty brave thing to do but it paid dividends."

Sir Digby concentrated on building the membership, visiting every English region and Celtic nation of the UK three times a year to speak to everyone "from business owners to prison officers".

So looking back over his six-and-a-half years in charge, does he believe the business community is in a better shape than in January 2000? "It is a less benign environment [in which to do business] and the Government is responsible," he says. "Could it be worse? Definitely. Could this Government have done better? Definitely.

"From a regulatory, taxation and transport point of view it has got more difficult to do business in the last six-and-a-half years."

He said two aspects of business life had clearly deteriorated while two others had improved under Labour. On the debit side he singled out the failure to tackle public sector reform, citing the decision to allow state workers to retire at 60 while proposing the rest of the workforce carry on to 68. "All the low-hanging fruit the Government has picked but every time it gets difficult to get the apple off the tree they give in to their union paymasters," he said.

His other chief gripe was over the level of business taxation, which he said had soared since Labour came to power. "I get more and more business men and women who say to me 'I'm paying more tax than ever' and it is more expensive to do business in Britain than Germany from a taxation of point of view," he says, throwing his hands up in incredulity.

"This drive to tax business has got to stop and that has definitely got worse," he says. "There are many public companies running the numbers to see whether it will save them money if they relocate their headquarters.

On the credit side - as well as macroeconomic stability - he praises the Government's investment in science, R&D and innovation. "That has definitely got better in the last six-and-a-half years."

Surprisingly he also credits both Tony Blair and Mr Brown with stemming the flow of new regulations for business. "The penny does seem to have dropped," he says. "The Governments has woken up the fact that regulating society and telling them nanny knows best, they will eventually let nanny do it."

Sir Digby refuses to select Mr Brown or Mr Cameron as the best next prime minister for business. Asked bluntly to choose, he instead rephrases the question. "A lot of business people are concerned that if Gordon Brown becomes prime minister will he keep the pedal down on reform of the public sector and will he not increase business taxation," he says. "They have a legitimate concern he will not be as reformist and that he will increase taxes. Gordon Brown has got to work hard at calming businesses' fears on those two points."

He warned Mr Cameron that he could "out-Blair Blair" without occupying the same middle ground on business issues that the Prime Minister had. "But what we worry about in his seeking popular approval we don't want him to lasting damage to the reputation of business.

"Business is socially responsible, works hard on not polluting the environment and is working hard to get a better reputation in schools. If David Cameron stands up and says 'let's beat up business for polluting the planet,' if it gets a kid saying 'I don't want to into business, they're horrible,' that is lasting damage.

"They jury is out," he says. "Neither of them can rely on the support of business and they have to win it."

Sir Digby plans to take a couple of months off before he takes up a number of advisory posts at organisations such as Deloitte and Barclays. He is also looking at taking a column in a national newspaper and presenting a radio programme on business.

At the age of 50, most people would expect to have two more big jobs in them, but Sir Digby won't be drawn. "My first plan is to take a couple of months off."