CBI warms to Labour's Budget thoughts

DONALD MACINTYRE

and PETER RODGERS

The CBI has told members in a confidential bulletin that Labour's developing theme of increasing business investment "is not out of line with our own thinking".

In a surprisingly warm assessment of Labour's Budget proposals, the confederation's Business Update reveals that Gordon Brown, the shadow chancellor, met Adair Turner, director general of the CBI, and Kate Barker, head of economics, last month "at his [Mr Brown's] request".

The 3 November issue of the bulletin says that "the meat" of Mr Brown's Budget announcement - which he will amplify at a news conference today - is aimed at increasing investment and includes a "two-tier capital gains tax to encourage longer term holdings of assets". It adds that this is "an idea lifted from our Budget proposals last year, and which we welcome, although our own debates suggest that the details of tapering may prove problematic".

It also says that the shadow chancellor's proposals for an expansion of Tessas and Peps to stimulate savings are also "welcome in principle, although again the details are not clear".

However, the CBI directorate sounds rather more cautious on Labour's plans to ease the burden of VAT on small business so that they can hire more employees. The bulletin warns that it means "businesses which are too large to benefit have to compete on unequal terms". It adds: "But overall the theme of business investment is not out of line with some of our own thinking."

In a separate interview ahead of the CBI annual conference next week, Mr Turner confirmed the CBI view that Labour has moved closer to industry's thinking on a number of key issues, including macroeconomic policy, although the employers' organisation still objects strongly to the proposed minimum wage and Labour's espousal of the European Social Chapter, from which the Government has opted out. But Mr Turner also made clear that there is still considerable distrust among industrialists about whether Labour can deliver on its more industry-friendly policies.

He said: "What our Conservative members may well say is that the Labour Party's words don't sound bad, but can you trust them? That is still a legitimate question, of course not in the personal sense - but if they were in government, how would they react to stress? Would they stick to what they say? That is a legitimate question for people to ask."

At the CBI conference in Birmingham, Tony Blair, the Labour leader, is to speak on the same day as Michael Heseltine, the Deputy Prime Minister.

Mr Turner acknowledged that the CBI is in a sensitive position because anything it says about the political parties can be read as taking sides: "I don't think we have any choice but to state the facts of where we stand and our priorities, and then comment on the policies of the Government and the Labour opposition as they line up against our priorities."