View from City Road: CBI sings the same old song

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There are few things as reliable in this uncertain world as the Confederation of British Industry's attitude to interest rates. When they are falling, it wants them to drop further; when they are rising, it extols the virtues of 'stability'.

The same old record was given a spin on the turntable yesterday, as the employers' organisation brushed aside a host of indicators from its latest quarterly survey of manufacturers pointing to the revival of inflationary pressure: spare capacity is being eroded, raw material price rises are pushing up costs and companies are succeeding in raising prices rather than merely hoping to do so.

Howard Davies, the CBI's director- general, argued after last month's base rate rise that 'in our judgement it would have been safe to wait a little longer'. Andrew Buxton, the chairman of the CBI's economic affairs committee, had the grace to admit yesterday that 'with hindsight' the decision had been right. But he added that there was no case yet for another rise.

Is the CBI really interested in a sustainable, non-inflationary recovery? Or is it simply pleading the case of its over-borrowed members? With manufacturers only now showing a willingness to invest in the creation of new capacity, there is a serious danger of bottlenecks building up in the production process, with highly inflationary consequences. The autumn wage round also threatens hopes of keeping price increases to a minimum.

The CBI's members have first-hand experience of the damage inflicted on British industry by the Government's cack-handed macro-economic management over the past 15 years. The emasculation of the country's industrial base is one consequence. The CBI would do better by encouraging attempts to keep the recovery steady and reassuring its members that the inevitable rises in interest rates are no cause for panic.