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Michael Harrison's Outlook: Cameron may not care a great deal about the business vote, but he cannot win without it

BAE: Time for SFO to put up or shut up; Network Rail turns the corner

Tuesday 28 November 2006 01:35 GMT
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It is hard to know who to feel more sorry for - the CBI delegates denied a chance to hear David Cameron speak or the troops in Iraq who had to listen to him instead. The Conservative leader's last-minute decision to snub the annual gathering of the employer's organisation in favour of a visit to Basra will have done little to improve the party's relations with the business community. Nor, for that matter, will the speech delivered by his stand-in, the shadow Chancellor George Osborne.

If there is one thing guaranteed to win applause from business, it is an attack on the sheer volume of corporate taxes and red tape introduced since Labour came to power. And yet, gifted with a damning CBI report on the very subject, Mr Osborne announced that he would impose yet another tax on business in the form of a carbon levy should he ever become the occupant of Number 11.

This tax promises to be even more onerous than Labour's Climate Change Levy which the CBI and other business organisations lobbied long and hard against. Mr Osborne's offer to offset it with reductions in other business taxes echoes the promises made by Gordon Brown back in 1997 and deserves to be treated with the same disdain.

But what Mr Cameron's non-appearance really calls into question is whether the Conservatives really care any longer about the business vote. It is true that the CBI's annual get-togethers, much like TUC conferences, are not what they used to be. They do not determine policy and there is little in the way of genuine debate. As for the delegates, they are overwhelmingly comprised, not of captains of industry but their public relations advisers and, increasingly representatives of quangos and the public sector - the big growth sector in the economy.

Even though Mr Cameron is still something of a Westminster novice, having spent much less of his career in politics than business, he already has plenty of form when it comes to criticising the latter. From the moment he became party leader, he has taken a noticeably combative stance. No wonder the latest rider of industry's hobby horse, the CBI's director general Richard Lambert, is unsure what the leader of the opposition stands for.

There is, actually, no secret about that. Mr Cameron, like all politicians, stands for getting elected. Perhaps he thinks that being beastly to business but popular with the electorate will help him achieve that end. Perhaps he believes that snubbing the CBI will be remembered in the same way as Tony Blair's non-appearance at the TUC the year before Labour gained power. The difference is that Mr Blair, though never liked by the unions, was respected.

Right now, the business community cannot quite decide whether it either likes or respects Mr Cameron. That is a dangerous place to be in for the leader of the party which has always counted business as its natural constituency. If Mr Cameron can't win its vote, then it is hard to see how he can command an overall majority.

BAE: Time for SFO to put up or shut up

It is a tale of fast cars and loose women, of slush funds and oil-rich sheikhs. And, if the Westminster rumour mill is correct, it is finally about to reach its explosive climax. Three years after the Serious Fraud Office began poking its nose into Britain's biggest military export order, the Al Yamamah arms-for-oil deal, the customer is at last losing patience.

Saudi Arabia, it is said, is on the brink of cancelling an order with the prime contractor BAE Systems for Eurofighter Typhoon aircraft and placing its business with the French instead. Al Yamamah, a government-to-government contract originally negotiated in the 1980s, has produced a slow drip of negative headlines for the House of Saud almost since the day it was signed. The adverse publicity concerns the antics of some of its more junior members who are accused of taking exotic bribes dressed up as commissions in order to oil the wheels of this particular deal.

Some people might feel that the matter of a few bribes, in the context of a £20bn arms contract, is a mere bagatelle compared with the crime of supplying such a harsh and repressive regime as Saudi Arabia with military hardware in the first place. Moreover, if bribery did take place, then the Saudis have only been bribed with their own money.

Until now, the Saudis have managed to shrug off the SFO investigation while BAE has repeated the same mantra ad nauseam: we always comply with the law of any country in which we operate. The final straw seems to have been Inspector Knacker's threat to open up a number of Swiss bank accounts which allegedly link members of its royal family to the scandal.

The Saudis cannot understand why this investigation was allowed to begin in the first place, let alone drag on for so long. Now they have seemingly decided that enough is enough and are prepared to make the British government pay by ditching their £10bn Eurofighter order in favour of buying the French-built Rafale jets.

This really would be a case of the Saudis cutting off their noses because the Eurofighter is clearly the aircraft preferred by their airforce. Nor would it staunch the flow of negative stories which appear regularly in the British press. The one thing that might is a statement from UK investigating authorities announcing whether or not they intend to prosecute. After three years, it is surely time for the SFO to put up or shut up.

Network Rail turns the corner

Network Rail makes shock profit. Rail now a success story, declares chairman. You do not have to look very hard to discover how the owner of the country's tracks, signalling and stations turned a loss of £108m for the first half of last year into a £747m profit for the same period this year. Its subsidy from the Government went up by £1bn.

To that extent, this year's profit was no more indicative of Network Rail's true performance than last year's loss when it suffered from the delayed phasing of capital grants to allow the Chancellor to balance the books.

Still, it is hard to begrudge the progress made since Network Rail rose from the ashes of the late and unlamented Railtrack four years ago. Running costs are down by some £1bn, investment is three times its level when the network was privatised a decade ago and, most importantly, nine in ten trains run on time. Even debt levels are down a fraction to just under £18bn.

The men who run company will profit handsomely in personal terms from this turnaround. But the question is where the network goes from here. The railways have grown in passenger terms by 40 per cent in the last decade and are forecast to expand by a further 30 per cent in the next decade. The advent of road pricing could force even more people off the roads and onto rail.

It will take massive investment to meet that demand. Does the money come from higher fares - potentially reversing the flow of traffic back towards road - or from the taxpayer? The third option is to allow Network Rail to start raising finance on its own balance sheet. That will be more expensive which means higher access charges for train operators. But at least it will help ministers maintain the fiction that this is a business whose debt deserves to remain off the public finances.

m.harrison@independent.co.uk

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