A love that Labour's lost

The Government's populist Budget failed to impress business leaders

Gordon Brown's big day last week was undoubtedly a resounding political success. In one fell swoop his pre-Budget statement drew both the sting from the pensioners' protests and the fuel lobby, and enthusiastic applause from the Labour rank and file.

Gordon Brown's big day last week was undoubtedly a resounding political success. In one fell swoop his pre-Budget statement drew both the sting from the pensioners' protests and the fuel lobby, and enthusiastic applause from the Labour rank and file.

No wonder, then, that the headlines next day were flattering. But although Mr Brown announced some goodies for business - tax breaks for share options, simplification of VAT and proposed tax breaks on research and development - captains of industry contacted by the Independent on Sunday were left largely unimpressed.

With an election in the offing, Mr Brown may have once again reinforced his standing in government but he still has a lot of persuading to do to convince the business community that he is genuinely on its side. While his pensions giveaway pacified the grey lobby, it incensed more than one business observer.

"Gordon Brown took advantage of everyone's supine attitude when this government first came to power to mount a £5bn smash and grab raid on corporate pension schemes," said one director of a well-known company, who did not want to be named. "A lot of the surplus that he merrily gave away to the pensioners last week came from that initial heist against other people saving for retirement. He then had the gall to herald it as a great giveaway to pensioners."

Mr Brown frequently came under attack in the IoS's survey for "showmanship" and "shamelessly playing to the gallery". Many of the business leaders interviewed asked for guarantees of anonymity before speaking out.

A director of one well-known services company said the Gov- ernment's populist instincts were creating "a profoundly unhelpful, even dangerous atmosphere" for business. One particular area of concern was the Government's plan to increase directors' liabilities, making them more personally accountable if things go wrong.

"This is undoubtedly very popular, not least since the Hatfield rail crash," continued the director. "But if Labour wants competent people to run companies like Railtrack in future, it is going to have to avoid creating a situation where no one sane would want the job."

Another cause for concern was the Government's propensity to pour vast quantities of taxpayers' money into politically sensitive, but now economically marginal, industries such as coal and cars.

Mr Brown does, almost without saying, score high marks for helping to create economic stability. But many business leaders thought that made for a dangerous situation, in which it had become difficult (inside or outside government) to question any other aspect of his performance.

The Department of Trade and Industry was widely thought to have improved recently, shifting from the overly consumer-focused and regulation-mad approach of its early days. One director contacted, Stephen Falder of Manchester-based HMG Paints, which employs 170 staff, said he had been surprised to find that under Labour the DTI "had proved more attentive to the views of SMEs [smaller businesses] like us than the Tories were".

But the Trade and Industry Secretary Stephen Byers was widely seen as hindered by Mr Brown - his Treasury colleague and political foe - who actually calls the economic shots.

Bryan Gray, chief executive of the Preston-based boiler manufacturer Baxi, said the DTI has "got the message" on business's concern about regulation, for instance, but that "the Treasury hasn't".

"Gordon Brown has done a good job," continued Mr Gray. "We all want economic stability, which he brought, so he is difficult to criticise ... This makes it difficult for the DTI to wield any real clout on behalf of business."

Mr Brown was also praised for his reforms of capital gains tax. But even there he was accused of being out of touch. "The reforms are so complex when they needn't be," said the director of the services company. "He seems to like his unnecessary red tape and his 100-page forms, which just put more burdens on business."

One of Britain's most successful entrepreneurs, often courted by New Labour (not least through power breakfasts with the Prime Minister at No 10), warned of a disturbing schism within the Government over business policy.

"There are two very different schools," he said. "One, which encompasses Tony Blair and Stephen Byers, is pro-business in a number of areas and genuinely tries to understand our problems. The other, led by Gordon Brown, is not anti-business as such but has no appreciation of the role of business in bringing the money into the Treasury coffers."

The euro is at the heart of this issue and the increasingly sceptical Mr Brown was widely accused of "ignoring" the effects that Britain's failure to join was having on its manufacturing base in particular.

Stewart Davis, a managing director at the steel maker Corus, took the opportunity of the CBI conference last week to make clear his frustration at the Government's inaction. In a passionate speech he accused it of creating "destructively unstable conditions" by failing to stem "currency exchange rates that have wiped out a decade of productivity".

Senior Treasury officials privately fret at the lack of contact the Chancellor enjoys with business. Many would welcome the return of none other than Geoffrey Robinson, who resigned over the Mandelson loan affair. He had at least got his hands dirty in industry before entering politics and, say Treasury officials, he "talked businessmen's language".

With Tony Blair hinting in a recent interview that Mr Robinson's political career may not be over, perhaps those who hold such views are shortly to be rewarded with his return.

MONEY, PAGE 18