Consultation is the keynote

Labour economic policy: A document due next week shows a new realism

The Labour Party's economic and industrial policy has been changing faster than business can keep up. Out goes the enthusiasm for a high national minimum wage, the commitment to a small business bank, the notion of a compulsory training levy on employers and the idea of a tax on excess dividends.

In their places are policies forged from a process of intense consultations with business, which Tony Blair, the Labour leader, claims is the largest exercise of its kind to have been undertaken by a political party.

New Labour, new realism. Political enemies might characterise it as a chameleon-like tendency to adopt the colouring most likely to win votes. Labour can defend itself by paraphrasing Maynard Keynes: "When the facts change, I change my mind. What do you do?"

The party will launch on Monday its most important economic policy document so far. A New Economic Future for Britain will be a comprehensive summary of the principles and policies agreed at a recent party forum. It will be sent for approval to the party conference this autumn and developed further for incorporation in the manifesto.

The document will focus on promoting productivity and competitiveness and raising investment, which will be described as fundamental to economic performance. But many of its proposals are presented in language that would not frighten a dyed-in-the-wool Tory.

There will be lengthy statements on the importance of competition in creating a vibrant business sector, the role of markets and the value of small business, entrepreneurial culture and wider share ownership to a wealth-creating nation.

Labour's fundamental aim, the document will say, will be to increase the long-term growth rate of the economy. It has repeatedly blamed the present government for under-investment that has limited the economy's productive potential and left a bleak choice between inflation or slow growth. According to Gordon Brown: "We now have an economy which is too small, with too narrow a technological base, with too few successful firms - all because there has been too little investment."

There is little detail on how Labour would encourage higher investment, although improving the long-term relationship between companies and shareholders is seen as part of the solution.

Partnerships with the private sector would be sought to fund infrastructure projects. This is very like the Private Finance Initiative, and is one of a number of areas where Labour and Tory ministers accuse each other of theft of their best ideas.

Some of the detailed plans being drawn up by Jack Cunningham, shadow secretary for trade and industry - such as a network of small business agencies - overlap with the ideas of the Tories' most interventionist politician, Michael Heseltine. And Labour's working papers are replete with references to ideas such as benchmarking and financial management training for small business, which are also on the Tory agenda.

Education and training are key areas, and yesterday Labour was again accused of stealing the present government's best ideas. Detailed ideas for industrial training are still on the drawing board. Mr Brown has talked of a new University for Industry, parallel to the Open University.

The party is keen to develop a consensus with business about how to proceed on these crucial areas of policy. NatWest and 3i have been influential in development of Labour policy for small business, and the utilities are continually banging on Labour's door and in some cases being listened to.

Labour will propose giving the market a helping hand to rejuvenate the economy's potential at minimal cost to the the public purse, rather than launching new forms of subsidy or ambitious spending plans.

The cautious approach to interest rate policy and public spending spelt out recently by Mr Blair and Mr Brown will be confirmed. Labour expects to inherit public finances in a bad shape and has understandably made no commitments on the level of taxation and spending.

Although there will be no commitment in next week's policy document, higher taxes for the rich are a safe bet.

Dr Cunningham has sent proposals to the Greenbury committee on executive pay backing high rewards for exceptional performance but suggesting there should be penalties for failure as well, but these ideas do not yet feature in official policy.

Effective competition policy will be billed as a key to industrial strategy. Dr Cunningham says: "We aren't going to be in the business of saying who should own what and who should buy or not buy what . . . What we are saying is that the market should work more effectively and fairly, so we want a very much more coherent approach to competition policy."