CBI leader launches scathing attack on 'pro-union' Labour

The leader of Britain's biggest employers' organisation has attacked the Government over its handling of the Railtrack crisis and for being too pro-union.

On the eve of the CBI's annual conference in Birmingham, its director general Digby Jones also accused ministers of failing to understand the needs of industry and saddling businesses with far too much employment legislation.

His comments are the first sign of a serious cooling in relations between Labour and big business and set the scene for a blunt exchange of views in Birmingham next week as business leaders gather in the shadow of 11 September.

Tony Blair is scheduled to address the conference along with four other Cabinet ministers including the Chancellor Gordon Brown, the Secretary of State for Trade and Industry Patricia Hewitt, and Stephen Byers, the Secretary of State for Transport.

Mr Jones said that the business community had detected a much more favourable atmosphere between government and unions. He singled out government backtracking on reform of the industrial tribunals system and plans to allow mothers to return to work part-time. "The unions are more confident of receiving a better hearing from the Labour government than they got in its first term. I shall be very keen to hear what Tony Blair and Patricia Hewitt have to say about this.

"If the Government does not act I will be forced to conclude that it is more union friendly than business-friendly. What I am fearful of is that in one or two areas the Government intends to come down on the side of the unions and not on the side of job creation and wealth creation. They have got some difficult choices to make because the unions have their tails up and think they are getting a better deal from this government than they ever had."

Mr Jones said he did not believe that the Government's handling of Railtrack had caused serious or permanent damage to the Public Private Partnership. But he accused Mr Byers of lacking clarity and being naïve in failing to anticipate the backlash from the investment community over the treatment of Railtrack shareholders. "The City and business doesn't like surprises and it does like transparency and it got one hell of a surprise and it is still not clear today how it is all going to work going forward. They could have gone for more clarity and no surprises," said Mr Jones.

Mr Jones also criticised the Government over the climate change levy which, he said, showed ministers were "in thrall" to the environment lobby. "They talk about understanding and helping manufacturing but by their conduct they are not. The climate change levy is an obvious example. I go around the country and I can tell you of businesses which are laying people off because they have to write a cheque to the Government and they say we cannot spend the same money twice."

Mr Jones said he believed Britain would avoid a recession, arguing it was better placed to cope with the downturn than almost every other western economy. Nevertheless, he called for a package of Budget tax measures to boost industry and a half-point cut in interest rates when the Bank of England's Monetary Policy Committee meets next week.

Mr Jones said the message he wanted the conference to send out was that it is "business as usual" despite the terror attacks and heightened fears of economic slowdown. To emphasise this he will be on Concorde next Wednesday for its first commercial flight since last year's crash. The day after he flies to Qatar as part of the UK's official delegation for the World Trade Organisation gathering.