Election '97: Blair puts forward his party of business

Reassurance for the City as Labour leader accepts need to embrace free enterprise system

Tony Blair espoused the virtues of a mixed economy yesterday, promising an end to "beer and sandwiches" with the unions while promising more support for the dynamism of the market economy. "Labour," he said, "is now the party of business."

In a keynote speech to business people in the City of London, the Labour leader put forward his plan for a "third way" of running the economy, one which lay between state control of industry and the laissez-faire policies of the Tory right.

"Our task is not to return to the past," he said. "It is to equip Britain for the future ...

"We accept, and indeed embrace, the new global economy ... I accept the need for economic discipline and embrace the role of free enterprise in economy. There will be no retreat from any of that."

The speech, at the Corn Exchange, was designed to calm City fears of a Labour victory at the general election and to set out Labour's credentials as a party which recognised the value of wealth creation.

Mr Blair flagged Labour's new support for some aspects of privatisation, committing the party to a National Inventory of asset-rich government departments. He promised to borrow only to invest and to match the Government's target of 2.5 per cent inflation or less.

Most of all, he stressed Labour's determination to encourage business, leaving it to flourish where left alone but to be supported by the state where improvements in infrastructure were needed.

"Let me be crystal clear what this partnership entails and what it does not," he said.

"This is no re-hash of 1960s corporatism. There will be no national plans, no grandiose strategies. But there will be an acceptance that business and government have to work together.

"We have no proposals to return to tripartite institutions or beer and sandwiches at Number 10. These are things we are not going to do.

"We have moved beyond reassurance. Our aim now is to build a partnership with business that is broader and deeper than any post-war government has contemplated."

He spoke of the need for flexibility of labour through better training and education, a concept he termed "flexibility plus" - flexibility, plus policies to ensure economic stability; partnership with business; leadership in Europe; backing for small firms; investment in infrastructure, science and research; and welfare reform and minimum standards at work..

"In addition, we must ensure that the operation of monetary policy is above suspicion of political manipulation," he said.

The intention, he said, was to end "the plague of short-termism" that had dogged British industry. "The Tories argue that things are fine, that this is as good as it gets.

"We argue that Britain deserves better and can do better. Better than 35th in the world skills league. Better than 18th in the world prosperity league. people are not feeling good for one simple reason - there is not enough to feel good about."

Mr Blair last night endorsed the strong line taken on Sunday by his shadow Foreign Secretary, Robin Cook, on the European single currency - that the probability of a Labour Government joining up in the next Parliament was slender.

Mr Blair said in an interview on BBC television's Panorama: "The option remains open. But it is a matter of commonsense, for obvious reasons, it is highly unlikely we will be in the first wave [of the currency formation in 1999], and that then reduces the probability that you would enter in the next Parliament.

"But the option remains open and what is essential in Europe is we start to rebuild a relationship in this country when we're leading again in Europe."