The political circus is coming to Harrogate

The two main parties will be out in force at the CBI's annual meeting, reports Michael Harrison

For an organisation which eschews political labels, the Confederation of British Industry's annual conference which starts in Harrogate on Sunday will be bustling with the stuff of politics. A bevy of Cabinet ministers will be in attendance, led by the Deputy Prime Minister, Michael Heseltine.

Not to be outdone, Labour is fielding Gordon Brown, the shadow Chancellor, and Margaret Beckett, its trade and industry spokesman. Throw in for good measure Eddie George, the Governor of the Bank of England, Peter Sutherland, the former director general of Gatt, and Bill Gates of Microsoft, and it is some line-up. The blue-rinse ladies of this prosperous north Yorkshire town are not going to know what has hit them.

Whatever the CBI may care to pretend, this annual gathering of captains of industry is quintessentially a political occasion. When it takes place a fortnight before a pre-election Budget, it is guaranteed to be doubly so.

But there is not just the election to think about. There is also Europe. It is a theme which is likely to dominate the three days in Harrogate, not just inside the conference hall where John Redwood will debate the merits of a single currency with the likes of BP's Europhile chairman, Sir David Simon, but also on the fringes, where the European Movement has invited Peter Mandelson and the former Paymaster General, David Heathcoat- Amory, to speak.

Attempting to hold the ring will be the CBI's director general, Adair Turner, one of the many urbane and youthful-looking ex-McKinsey men who are inexorably taking over the world.

Although a contemporary of William Hague, the equally youthful Welsh Secretary, Mr Turner, like the organisation he runs, has, for the time being, taken the political pledge. He drinks, he says, from neither of the two main parties' manifestos. Indeed, the CBI has published its own business manifesto against which it will judge the performance and the pledges of the politicians as polling day nears.

"We are not going to make a judgement as to which party's manifesto most closely aligns. But there are two elements of good news. There is a high degree of consensus about commitment to a stable macro-economic climate. Everything one hears from Gordon Brown points to a strong commitment to macro-economic stability and strengthening the independence of the Bank of England. Second there is a strong focus from both parties on education and training - it is an area Britain has got to get right."

There is one issue, however, on which the CBI will cast its vote. "We are opposed to any party making a commitment in its manifesto excluding the possibility of Britain entering a single currency in the lifetime of the next Parliament," Mr Turner said.

This, he said, did not meanthe CBI had joined the ranks of those who would rather continue to just fudge the issue. "There are plenty in the business community who think we should go ahead in 1999 and there are those who are clearly against. People hold stronger views than they did a year ago. The CBI is arguing for Britain to keep its options open, not because it is politically useful, but because it makes sense for Britain to do so.''

Britain, said Mr Turner, may opt not to join a single currency in 1999, leaving a smaller core group of states centred around Germany, France and the Benelux countries to form phase one of EMU. But that does not mean it could not join, say, a year later - an option which would be ruled out by boycotting EMU for the lifetime of the next Parliament. Monetary union is the future but the Budget is almost upon us. The CBI is firmly in the camp that believes the Chancellor has little, if any, scope for tax cuts.

"It should be prudent and cautious," Mr Turner said. "The scope for tax cuts is very limited. In our Budget submission we said pounds 1bn worth at best but on the evidence of the past two months the scope is closer to nil. The economy is growing quite fast enough. The consumer side of the economy is growing at 4 per cent a year and our accumulated debt as a percentage of GDP is growing, which is not a good position to be in four years into a recovery.

"Nor do we want an approach to controlling inflation that rests on interest rates rather than the fiscal side. We do not want a fiscal giveaway offset by interest rate rises because that may feed through to the exchange rate which can then affect external competitiveness.

"That would be precisely the wrong course of action in an environment where its the consumer side of the economy which is growing rapidly and the export side which is relatively slower."

Faced with an ever-strengthening pound, manufacturing industry had not yet hit the panic button, Mr Turner said. But it will if sterling rises above DM2.50 and stays there.

For once, education will not be the subject of a specific debate in Harrogate but it is a subject close to Mr Turner's heart. "There is a deficiency in Britain's training and educational system. There is a need to focus on the quality of technical information and the basic quality of pre- 16 education which is not as good as that of the Japanese or Singaporeans or Germans.

"It is a very important area to fix. If you haven't got that right in terms of basic numeracy and literacy then it is difficult, perhaps impossible, to put it right later on."

His personal view is that part of the problem lies with deteriorating standards of discipline in schools. "How do you ensure discipline among adolescent boys who are bigger than their teachers, who are notafraid of their teachers and not afraid to do what they like? The answer is that the social aspects of discipline are built up in an incredibly subtle way from very early in life.

"Broadly speaking, if you enforce discipline on very small things early in life you inculcate the habit. It's how armies work. You bawl someone out for not having their shoes shined and they end up being willing to obey orders even when it is life threatening.

"These are the subtle ways that you establish the legitimacy of authority. They are issues that educationalists and policymakers have to think deeply about."