Winning back industry to the Tories

The President of the Board of Trade is determined to drive a wedge between the CBI and business-friendly Labour, writes Peter Rodgers; THE MONDAY INTERVIEW; Ian Lang

Ian Lang, President of the Board of Trade, has a splendid opportunity this week to win industry back for the Tories when he addresses what could be the most politicised CBI conference for years.

The new President, who stepped into the job in the summer when Mr Heseltine became deputy prime minister, has a message for employers as they arrive at their conference in Birmingham: wake up and recognise their real friends.

The CBI's senior people, led by the director general, Adair Turner, have made clear their willingness to enter a serious policy dialogue with Labour, displaying a pragmatic attitude to political change that has rattled Tory strategists and made some business leaders uncomfortable.

Tony Blair is due to take the rostrum this morning to present the new face of Labour policy to industry and the economy, Michael Heseltine responds after lunch and Mr Lang will follow on Tuesday with a speech focused on the labour market. Gillian Shephard for Education and Employment and Virginia Bottomley, National Heritage, will also address the conference.

Speaking last week at his office in London Mr Lang said: "I think business is sensible enough not to take at face value what is being said by a party that has done so much damage to business in previous periods in power." The softening of Labour's formerly anti-business approach was a pretence, he said.

"If they take at face value the lip service Gordon Brown is paying to fiscal and economic responsibility they are in for a rude awakening."

As for the CBI's closer dealings with Labour, Mr Lang said: "I hope they aren't being taken for a ride." On specifics, he said, the CBI was against all the things Labour wanted to do. "They just have to make their minds up and acknowledge that we have been fighting for them. They had better wake up to their own self interest. Most of the businessmen I speak to aren't being taken in. They are well aware of where their interests lie."

In a speech tomorrow Mr Lang will concentrate on the employers' most sensitive spot - fears of union-dominated industrial relations, demarcation disputes and strikes under Labour. Mr Lang will praise flexibility in the labour market as necessary for enhancing quality of life, improving skills and wages and breaking down barriers to employment.

But what the argument is really about - the wedge Mr Lang would clearly love to drive in further between employers and the Labour Party - is the minimum wage and the European social chapter, the package of industrial relations policies from which the UK has opted out. These are the two big areas where the CBI is at the moment point blank opposed to Labour, and is not in serious dialogue.

Mr Lang said the CBI estimates pounds 4.5bn as the cost of a pounds 4 minimum wage. His own officials estimate that if only half of previous wage differentials were restored by other workers, the number of job losses would be 900,000. "This is a staggeringly dangerous policy," he said.

Mr Lang was equally critical of the social chapter and its impact on UK companies if it were adopted by Labour. He does, however, plan to confirm tomorrow that the Government will streamline the UK's industrial tribunal system.

The CBI has made clear that where mainstream Department of Trade and Industry policies are concerned - such as help for small businesses, trade promotion, and work on competitiveness - it sees considerable common ground between the two parties, and perhaps even continuity, whoever wins the election.

This suggestion of policy convergence is a red rag to a bull for Mr Lang. He said Labour would ruin, for example, the privately run Business Links network of small firms services that has been set up by the DTI, by putting them under the influence of local authorities.

In the wake of Labour's controversial deal with BT over rewiring Britain, Mr Lang will emphasis that his agenda is also close to big business. The BT deal, which he attacked as anti-competitive, of doubtful propriety and against consumers' interests, was "all for a quick fix, a quick soundbite. One can't grace that with the word strategy".

One of the significant changes in the summer ministerial reshuffle was that the DTI lost responsibility for the Government's competitiveness and deregulation policies, which Mr Heseltine took with him to the Cabinet Office. So has that put the DTI - and Mr Lang's role - in the shade, especially given Mr Heseltine's ability to attract publicity? Mr Lang denied he had any problem: "It is a collective effort, not something I see in personality terms at all."

He insisted that competitiveness was still a big story at the DTI. "It is absolutely essential to what we are trying to do. You can no more take competitiveness out of the DTI than you could change our bloodstream.

"What Michael Heseltine is now responsible for is injecting competitiveness into every other government department. The same is true of deregulation.

"I regard my department's position as stronger now than it was before because he and I are both injecting the industry interest into it and encouraging other departments to come up to the mark instead of just one of us doing it."

Mr Lang will also be using the conference to praise the new benchmarking services to be launched by the CBI and the DTI. These are low-cost methods with which small and medium firms will be able to measure their performance against the best industry standards and work out how to improve competitiveness.

"What is important is that business itself takes possession of this initiative. It shouldn't be imposed or handed down from Government."

He relished a compliment a few weeks ago from Howard Davies, the new deputy governor of the Bank of England and former CBI director general, who described the new benchmarking services as "the exciting thought in this year's competitiveness White Paper".

Mr Lang was wary of discussing the most controversial item in his in- tray: the wholesale restructuring of the electricity industry that has resulted in pounds 14bn of bids. He has not yet referred any of them to the Monopolies and Mergers Commission.

Mr Lang made clear he is not unhappy with the new shape of the industry, which from 1998 will have to face the challenge of competition in the domestic supply market.

Competition in electricity is essentially safeguarded by the regulatory system, he said. Some view competition as best maintained by keeping the pure structure of the industry as it was when it was privatised. Others say this produces an artificial and protected situation and that market forces are the best guarantees of competition. There is no doubt where Mr Lang's sympathies lie: "I hope the industry is becoming stronger and more robust. ... What is important is that the regulator can still gain access to the data he needs to do the job."

He revealed that the Government is prepared to have another look at the wider system of utility regulation. " I don't think it is necessary to go back to the drawing board." But he is prepared to look at some aspects of what he regards as an evolving situation, especially since the later regulators to be installed have rather different powers and duties from the earlier ones.

However, Mr Lang warned those regulators with ambitions to broaden their remits, such as Don Cruickshank of Oftel, that he has a sceptical attitude to empire-building.