The new Labour Party, in its unashamed zeal for office, is frequently accused of being all things to all men, of shying away from policy commitments and even slavishly following the Tory line. British industry cannot make that complaint of Tony Blair. For the Labour leader is prepared to set out his intentions very clearly. He is proposing the most far-reaching changes to the business environment since Margaret Thatcher took office in 1979. And with Labour far ahead in the polls and a virtual certainty with the bookmakers to win the next election, such changes deserve serious study.
Tony Blair is leaner and taller than one imagines from photographs, and his charm is much more straightforward than comes across from television. The smile, which can appear bogus on the small screen, is disarming and genuine in the flesh. And he comes over as tougher. He is resilient and hard-hitting in argument and gives nothing away.
He has one claim he wants to get across above all: Labour rather than the Tories is now the party which speaks for business. When the Labour leader was the party spokesman on financial affairs just before the 1987 election, that was a hopeless proposition to sell. No matter how charming young Blair might have been, in the boardroom he faced a forlorn task.
It is a different matter in 1995, he claims. He leans back in his chair and declares: 'It is important to realise there is a vastly different attitude in the Labour Party today. I'm not really any longer in the business of reassuring them that we're not crazy. We've got to move beyond that.
'They've got to open their minds in the same way that we have and realise that the Labour Party in many ways is a party better able to represent industry than the Conservative Party which has produced neither the economic policies nor the innovation and industrial policies that we require.' Blair is quite explicit that Labour embraces the market economy ('though I don't believe that is incompatible with living in a decent and fair society') and that profit is no longer a dirty word, with one exception: Blair insists that 'the vast profits of the privatised utilities are wrong'.
But, that special case aside, business is welcome to 'whatever profits it makes and the best of luck. If you are asking me if we want to impose general caps on profits - absolutely not. We want profitable companies.' This statement is significant. Blair disowns plans to put a windfall tax on banks - shadow chancellor Gordon Brown's attacks on the profits of high-street banks have given rise to fears that he might favour the idea - or on supermarkets, a suggestion which has come from Labour's tame thinktank, the Institute for Public Policy Research.
He is less enchanted with the telephone-number salaries enjoyed by the bosses of British industry - though here again he makes it clear that he has no plans to stop them. 'In general terms,' says Blair, 'I would always say that people should exercise responsibility and I think there is a very strong feeling among the average young employees that there has not been a fair distribution of the rewards. I am also very surprised that sometimes you see companies with poor performance and massive salaries for the chief executives.
'But that I merely make as a comment as if I was having a pint with someone in the pub. I'm not intending to legislate about it and in general terms there are plenty of wealthy people who now support the Labour Party. I don't want to penalise success but I want us to enhance opportunity for large numbers of people who don't get anything.' Blair remains elusive on the question of personal tax. 'You wouldn't expect me to give the specifics of Labour's tax policies at this stage. We have made it very clear, however, that there will be no return to the marginal tax rates of the 1970s.' On company profits, and his apparently academic distaste for excess salaries, Tony Blair could be John Major. Where he differs radically from the prime minister - and scares much of Britain's business community - is in his commitment to the Social Chapter.
But Blair fiercely disputes both that British business dislikes the Social Chapter - former EC president Jacques Delors once famously claimed that Britain's opt-out provisions made the country a 'paradise' for foreign investors - and the suggestion that it will load costs on UK industry.
He insists: 'There are a lot of companies that are perfectly happy to work within the Social Chapter. But there is more ignorance about this than virtually any other topic and that is because it has been in the interest of the government to pretend that the Social Chapter is a nightmare network of rules and regulations that Brussels wishes to bring in.' He declares that the Social Chapter, in so far as it enshrines a set of principles about fair treatment at work, is something that 'no one in their right mind would disagree with'.
He insists that Labour in office would never roll over to the rest of Europe. He insists that 'we would agree with things that are sensible, we will not agree with things that aren't,' adding that nothing would be accepted without consultation with business and industry. By far the most dangerous course, he asserts, is for Britain to stand outside the Chapter: 'It is very damaging for British industry to be in the position of legislation being agreed with an empty chair, which is where we are now.' To back up his case, he cites the sole piece of legislation already to have come in under the Social Chapter - on works councils. 'We could have got even more flexibility into that system but we didn't because we weren't there,' says Blair.
Even so, he refuses to lay to rest fears often expressed by small businessmen that Labour will intervene to determine conditions on the factory floor. Blair insists that 'Labour is opposed to arbitrary limitation on the working week'. But he goes on to say that 'we do see a case for saying that everyone should get at least some minimum holiday entitlement'. He makes plain that government has a role in the workplace, ensuring that 'there are minimum standards of fairness that are adhered to'.
Nor will he apologise for Labour's commitment to the minimum wage and dismisses Management Today's suggestion that the concept is hopelessly naive because if set too high it costs jobs whereas if set any lower it loses its point. Blair claims that the minimum wage will benefit employers as well as employees, by ensuring that they 'are not undercut by very low rates of pay'. To bolster his case he argues that 'the Government was prevented from abolishing the agricultural wages board because of the opposition of employers as well as employees'.
He admits that if set too high the minimum wage will cut jobs, but refuses to say at what level Labour would bring it in because any commitment now would get 'hung round my neck'. He goes on: 'There are a million people in Britain paid under £2.50 an hour. I don't think that's morally right these days.' Educated at Fettes College in Edinburgh and Oxford before proceeding to the Bar, the Labour leader's direct experience of industry and commerce is just as limited as most politicians. He says that he does not, and never has, owned stocks and shares.
But he nevertheless lays claim to more knowledge and understanding than most, and not just from his time as Labour's Treasury spokesman in the mid-1980s: 'Before I came into Parliament, as a barrister my work was almost entirely commercial and business. I spent most of my time with companies and I got a pretty clear feeling of what their priority of concerns was.' He claims to have a number of personal friends 'who are either small business people, or people who went into industry'. From these, he claims to gain some of his most telling insights into commerce: 'It's extremely important in politics to have friends who are not particularly political and I find that I get a lot out of them.' It could be from them that he gains his understanding of one long-term problem that Labour is determined to change: what Blair calls the 'anti-industrial bias' of British society. He declares: 'We've still often got a hostile attitude to industry and trade in Britain. If you look at a lot of people from my generation and younger at university, how many of them saw their future going into business and industry? I think fewer than saw it as going into accountancy, the law and banking. I think that's changing bit by bit because the rewards are getting greater. But they have still probably lagged behind.' And this, for Blair, is one challenge for Labour. He claims - and it is a giant claim - that the new Labour Party he has forged over the past year is uniquely qualified to reverse Britain's industrial decline since the war. 'There's no future for the Conservative vision of a low-wage, low-skill economy and neither is there any future in returning to the industrial battles of the past. That is why I say that the new Labour approach is based on partnership which is where neither Conservative nor Labour used to be.' Out goes old-style Labour corporatism and its ambitious proposals for nationalisations and business development banks (this notion, a legacy of the 1960s and still present last summer in Labour's industry document produced by Robin Cook, Blair explicitly disowns). In comes something which Blair thinks is very different. He stretches his legs and declares: 'My whole case is that we require a new industrial approach based on a proper partnership between government and industry to realise specific objectives. What we are not about is government assuming it can run industry or pick winners, or old-style corporatism.' Blair explains that these 'key specific objectives' include 'how we improve the infrastructure of the country; how we upgrade the technology in schools and education in the workforce; and how we encourage regional investment.' This all sounds fine, but it is rather nebulous. As an example of what he means Blair cites the 'North-East where there's been a huge restructuring of the local economy that's been very much on the basis of public and private sector and help for small businesses'. The Labour leader insists that education, infrastructure and regional investment 'are the areas where our priorities really lie'.
These positive reforms will be bolstered by some negative ones. The City of London is still a target for Labour. Blair praises it as 'an important part of Britain's export earnings and an institution of importance to the country'. But he has two profound criticisms: 'A lot of the attitudes in the City are still pretty old-fashioned and I think there has been a very short-term outlook on behalf of those who are the chief investors.' Labour, he insists, is examining tax incentives to promote long-term investment. But he admits that 'the question is whether it's feasible and practical, whether it's going to introduce distortion or promote good. We want to examine this pretty carefully and we will consult very widely on it.' He is far less cautious about the new regulatory system that Labour is proposing to handle takeover bids. 'Takeover bids and mergers can sometimes act as a valuable spur to greater efficiency, but they don't always. There is a strong case for shifting the burden of proof in takeovers so that the bidding company demonstrates that a takeover would enhance efficiency and further the public interest.' Most City practitioners believe that this could mean the end of the hostile takeover bid and thus signal the most radical shift in the City's equity culture since the 1950s.
Blair insists that Labour has discussed the change 'at fair length with British business and industry'. He calls it 'a change of very great significance. The studies that have been carried out suggest that they have put the performance of companies under enormous pressure without any great evidence that there is a beneficial impact.' For years Labour has talked about interfering in the management of pension funds to direct their investment in approved areas. Blair is more cautious on this. Using far more moderate tones than Labour has tended to use, he says: 'You've got to use very great care with legislation in this area because in the end the aim for the pension fund is to raise the maximum income for the fund.' And he rejects any suggestion that Labour will attempt to influence investment strategy by intervening in corporate dividend policy. 'It's not practical at all for government to try and set dividends for companies.' One area where Labour is looking for a change in legislation is Britain's bankruptcy law. 'We believe that basically sound firms facing short-term problems should be provided with greater opportunities to secure a viable future, rather than go under. Britain needs a culture which puts the emphasis on enabling firms to trade through difficult periods and restricts bankruptcy to those cases where it is genuinely unavoidable. This is why, subject to safeguards against abuse, we believe there should be a legal right for any company in financial difficulty to a moratorium on its debts for a limited period to provide a breathing space in which a suitable rescue package can be put in place.' The Labour leader insists, however, that he is sceptical about legislation as a way of changing investment: 'I think that cultural change is as important as anything else.' 'And in my judgment the single most important factor in encouraging long-term investment is the economic framework. If you create a stable economic framework within which people understand that you will have fluctuations but within as small a framework as possible, then they will plan ahead. Business is like a family in that sense. The reason why the recession under the Tories in the late '80s was so damaging was that it just blew apart everyone's plans for the future.' Over this year Blair has delivered a series of powerful speeches about Labour's economic policy in a bid to drive home the message that Labour in government would be if anything even tougher on inflation than the Tories. His speeches are said to have been guided by his economic adviser, Derek Scott, economist at investment bank BZW, one-time candidate for the breakaway Social Democratic Party and now one of the 'inner sanctum' which surrounds the leader and so deeply resented by the Labour party at large.
The tough macro-economic message that the Mais Lecture in particular conveyed played well in the City. But it caused fury among the unions and left-wing MPs. It is difficult enough for a Tory leader to push through unpopular economic policies - twice as difficult for a leader of a party which still has folk memories of Ramsay Macdonald's 'betrayal' in the recession of the inter-war years.
Many Labour watchers who have been deeply impressed by Blair are still sceptical about whether he could force through the tough economic policies he pledges when and if he finds himself in government - and faced by rebellion from his own side. Here Blair shows his toughness: 'People have been telling me ever since I became leader of the Labour Party that I couldn't do any of the things I wanted to do because the Party wouldn't let me. The Labour Party is a changed political party, the intellectual debate within it is with me. I was elected leader of the Labour Party; people know what I stand for and, by and large, they accept it because the arguments happen to be correct.
'The last thing I would have support for in the Labour Party is engaging in some sort of great boom that ended up in catastrophe.'
What Labour would do in Government
Blair would take Britain into the Social Chapter at once. Labour believes that Britain suffers from not having a 'seat at the table' and fiercely disputes suggestions that it would load costs onto British industry. Labour has no objections in principle to the single currency, and Blair would sign up once the Maastricht criteria were met.
The Minimum Wage
Labour is pledged to deliver a minimum wage, and believes that it would benefit industry as well as employees. The Labour leadership is under pressure from the unions to impose a minimum wage of about half the national average hourly wage. But Blair has refused to say at what level the wage would be pitched until after the general election.
Labour is studying a new 'public interest' criterion for takeovers, putting the onus of proof on the bidder to show that the bid will produce public benefits rather than, as at present, on the target company to prove that it operates against the public interest. According to the City, Labour plans could mean the effective end of the hostile bid.
Labour is considering tax incentives for shareholders to hold shares long-term. In practice, this could mean special penalties for short-term speculators.
'New' Labour has abandoned plans to take back privatised industries into public ownership. Instead it promises far more rigorous regulation for public utilities like water, gas and electricity.
Labour is at last beginning to admit that Whitehall is not better at making investment decisions than industry.
Blair insists there will be no return to 'old-style' corporatism. The notion of a British investment bank - a key idea up to the 1992 election has been abandoned.
Blair favours the idea of 'regionally based venture capital funds that can assist small businesses'. In a further move to help small businesses Labour is promising legislation if necessary on late payment of debts. Blair calls companies using their market muscle to delay payments 'absolutely scandalous'. Labour is also examining tax incentives to promote the investment of retained earnings.
Labour has been chary of announcing its tax plans but it is determined to avoid the mistake made in the 1992 general election when its 'shadow budget' hit middle-income earners on less than £30,000 a year. But those on high salaries will draw limited comfort from the statement that 'there will be no return to the marginal tax rates of the '70s'.
Labour claims that the tax system is far too complex, and hinders rather than helps long-term investment. It promises to simplify the tax system, to make changes to help small businesses plan for the future and give fresh encouragement for spending on research and development.
The Labour leadership is insisting that it will be at least as hard on inflation and as fiscally prudent as the Tories. Shadow cabinet members are banned from making spending pledges which cannot be paid for - giving rise to the question of where the party can raise the money for the extra investment in areas like infrastructure and training which it says is desperately needed.
Labour's long march
Before the 1983 election Tory Party treasurer Lord McAlpine sent thousands of copies of the Labour Party manifesto to prospective business donors. His strategem worked brilliantly. Labour's pledges for exit from the European Community, widespread nationalisations of major British companies and fears of punitive taxation brought a record response to Tory Central Office's demands for cash.
Since then,Labour has gradually junked virtually every commitment made in Michael Foot's manifesto - the 'longest suicide note in history'. A succession of the party's brightest rising stars were given the critical role of financial spokesman in a bid to convince industry and the City that they could do business with Labour.
But even the 1992 manifesto showed a residual distrust of the free market. The party was still promising to take back public control over the water and electricity industries. It threatened to dictate pension fund investments and set up a new British investment bank to make strategic investments in the economy.
Blair is planning a crash programme of public speeches to convince industry that Labour can offer a radical economic strategy with appeal for business. But he still has much to do. Labour's commitment to the Social Chapter and the minimum wage will appeal more to the party's union backers than employers, while talk of a new 'partnership' between government and industry is hard to justify.
Four capitains of industry react to the prospect of Labour in power
John Gardiner, Chairman The Laird Group
The world has changed out of all recognition since Labour was last in power. The ability of both foreign and domestic investors to direct their capital anywhere in the world has reduced government's influence on business and economics.
At the same time, the swing from manufacturing towards service industries has sharply reduced the power of organised labour and thus further diminished the role of politicians in industry. But government still has considerable industrial responsibility: it can give a lead to business by stimulating activity in particular areas, be it education, defence or whatever.
I'm less worried than many about any tax changes Labour might introduce, as the UK currently has one of the lowest tax regimes in Europe. I just hope they understand that no country in recent history has thrived whilst levying high taxes on its citizens and corporations. I do however have major concerns about charging into the Social Chapter. The dramatic changes over the past 25 years show that a country needs a responsive workforce capable of adapting quickly; the UK is currently way ahead of most of Europe in deploying its people flexibly. Any procedures which slow this up run counter to the way the world is moving.
I believe that France and Germany have a particularly hard task ahead of them and I cannot see why we should drag ourselves back into those problems. Both countries show every sign of being compelled by their high labour costs to seek greater flexibility.
Both Labour under Blair and the Conservatives say they understand the need to let business and industry get on with their jobs. But the Conservatives can't resist stepping in occasionally, and the fear is that Labour will be worse - that somehow they'll go against logic and feel they ought to step in.
What is certain is that a Labour government that does try to intervene will find the markets forcing it into the same sort of embarrassing U-turn that we saw when Mitterrand had to turn his manifesto upside down after two years in office.
Christopher Haskins, Chairman Northern Foods
Any democracy which remains for a very long time in the hands of one party becomes stagnant and prone to corruption-Italy and Japan are classic examples. In Britain, these tendencies, after 16 years of Conservative rule, are apparent. A Labour government thus would be good for the country, and maybe also for the Conservative Party.
Britain's ambiguous attitude to Europe has bedevilled our economic strategy for over 30 years. Despite the significant benefit of the single market, as exemplified by the huge increase in foreign investment in Britain in recent years, the Conservatives remain dangerously divided on our future policy towards Europe. Tony Blair has the opportunity once and for all to establish Britain as a committed and significant member of the European Union.
The neglect of our educational infrastructure is, belatedly, now recognised by the present Government, but Labour should be more energetic and imaginative in tackling our greatest industrial weakness - the skill shortage.
In the most successful democracies, economic prosperity and social justice go hand in hand. Businesses and countries which promote fair employment are the most successful. The aspirations of the Social Chapter, including a sensible minimum wage, are compatible with this principle. From a position within Europe we can help to develop these aspirations while at the same time resisting excessive regulation.
My concern would be that voters may be led to expect too much. It is no longer possible for national governments on their own to deliver their future destiny - that is why being part of Europe is so important. But external factors, such as a major economic failure in Japan, would inevitably restrict our economic growth and, therefore, our capacity to further social justice.
I am also concerned that Labour remains naive in its attitude to business, with the Blair approach in danger of being too accommodating and the left wing excessively suspicious and hostile. The market economy and those who make it operate are here to stay, but we must take much of the blame for our relative failure to perform over the past 40 years. The Blair government must be ready to challenge our shortcoming, and help us to correct them.
Sipko Huismans, Chief Executive, Courtaulds
If Tony Blair delivers what he says in the interview then I am perfectly relaxed about the prospect of a Labour government. I have no problem with the sort of things he stands for. In fact, from Courtaulds' point of view I am marginally more positive towards Labour than the Tories because of Labour's higher degree of commitment to Europe and the single currency. The 'Let's go back to the Empire' faction in the Conservative Party terrifies me. And even the 'old' Labour Party is marginally more favourable to business than the Teresa Gorman faction of the Tories.
I certainly have no fear of the Social Chapter. If the UK's sole competitive advantage depends on an opt-out then we really are in dead trouble. However I do have some concerns about Blair's policy. I think the minimum wage idea is misguided - largely because it would be applied here which is not always the case in other countries. The issue doesn't apply to Courtaulds but, personally, as an economist I think it will cause unemployment. If you are serious about unemployment then you should be more tolerant of casual work and even slightly accepting of the black economy - that's how Spain gets away with 28% unemployment and yet has no riots.
I find Blair's desire to end hostile takeovers quite startling because it will have more consequences than imagined. It would lead to lower stock prices, market capitalisations could drop and at least in the short term pension funds might find that uncomfortable.
I am slightly afraid of his tough stance on inflation. As an industrialist I like modest inflation even if as a prospective pensioner I don't. And, naturally, I don't like the idea of paying more personal tax. Moreover, high tax and low comparative pay make it hard to attract management talent from abroad. Raising tax is just a social issue: it will make no difference to revenue raised. If Labour wants to create confidence by convincing us that it no longer views making money as a moral issue, then its stance on personal tax is important.
Sir Colin Marshall, Chairman British Airways
This far from a general election, the reaction of much of British commerce and industry to a switch from Conservative to Labour government would most likely be: 'Change? What change?' On the evidence so far, a Blair-Brown expedition could be expected to continue along the economic track opened up by the pathfinding Major-Clarke team. It will set off with policies for sustainable growth, based on low inflation and a reasonable cost of borrowing. This gives no cause for concern.
But while there are signals, we can't be sure of Labour's intended destination for UK businesses, because of the absence of confirmed policies.
We are with Labour on accelerating the scope and pace of training and education but then this is also at the crux of stated Conservative policies.
Concerns creep in when, for instance,it comes to the question of a minimum wage - not whether it would occur under Labour (clearly, it would), but at what level it might be set and how this would affect competitiveness in global markets.
Worries also surround talk of constraints on shareholder dividends in order to retain more profit for re-investment. Shareholders form the front line of industrial investment and the inevitable reduction in the value of the stock market caused by dividend penalties would heap untold damage onto growth prospects.
British businessmen aren't for turning
Tony Blair still has a whole lot of convincing left to do before Britain's captains of industry abandon the Tory ship.
The Management Today/MORI poll of chairmen, chief executives and other board members from Times Top 500 companies reveals scant confidence in the benefits that new Labour would bring to British business. Only14% of top businessmen believe that a Labour government would boost business. Less than 10% said they would like to see Tony Blair as prime minister if there were a general election tomorrow.
But it is not Labour's commitment to Europe and the Social Chapter, nor fears of poor economic management, anti-capitalist bias or even a return to rampant trade unionism which most deters industry leaders. Rather, it is the issue of personal tax which agitates top businessmen most. Half of the interviewees fear that personal tax changes introduced by a Labour government would have a detrimental effect on business.
Labour may be hedging its tax plan bets by saying little at present. However, big business clearly fears the worst. And Tony Blair must transform the public perception of his party's tax plans before he can convince industry that, as he stated in his interview with Management Today, 'there is a vastly different attitude in the Labour Party today.' A newspaper columnist recently suggested that he desperately wanted to vote for Labour but that an awful lot of people were at work to dissuade him from it - all of them in the Labour Party. Labour's proposed tax changes alienated the middle-class voters prior to the 1992 general election: three years on, the mere prospect of tax changes is enough to make industry hackles rise.
Captains of industry remain resolutely blue, with 63% declaring support for the Conservatives. John Major's popularity has rallied following his leadership scuffle: 36% of respondents declared they had most confidence in Major as prime minister, Michael Heseltine is the preferred choice of 30%, while Tony Blair attracts less than 10% of industry leaders.
While the Labour Party clearly has a stiff task ahead to convert Britain's bosses, the poll points to Labour's strongest selling points. Its commitment to Europe is viewed as extremely positive by 20% of business leaders. Greater expenditure on education and training, plus commitment to an industrial policy would benefit business, say more than 16% of respondents.
In general, however, the Management Today/MORI poll detects a faint hint of disillusion and disinterest in the political air. Almost 42% of respondents, when pressed to state the likely effect on business of a Labour government after the election, declared it would make no difference at all. Indeed, overall there is less confidence in economic recovery than 12 months ago. Just 57% of industry leaders believe general economic conditions will improve in the next year, compared to 90% in 1994. Britain's top managers were also less optimistic about the prospects for their own companies over the coming year. Some 69% stated that their business would improve - a 16% drop on last year's figure of 85%. Blair has his work cut out to raise industry spirits.
The poll was conducted by MORI for Management Today. The 103 chairmen, chief executives and other board members from Times Top 500 companies were interviewed face to face. All interviews were conducted between 19 July and 11 September.
Q How would you vote if there were a general election tomorrow
A Conservative 63%
Liberal Democrat 6%
Refused to answer 13%
Don't know 10%
Would not vote in election 3%
Q If there were a Labour Government after the next general election, do
you think it would have a beneficial or detrimental effect on British
business, or would it make no difference?
Detrimental effect 43%
Make no difference 42%
Beneficial effect 14%
Don't know 2%
Q What, if any, beneficial effects do you think a Labour Government would
have on British business?
Greater expenditure on
education and training 21%
Commitment to Europe 20%
Commitment to an industrial policy 16%
Strong leadership 9%
Improving industrial infrastructure 9%
Regulation of the City 5%
Controlling excesses of
free-market system 4%
Commitment to the Social Chapter 2%
Greater devolution of power 2%
None/can't think of any 11%
Q What, if any, detrimental effects do you think a Labour Government
would have on British business?
Personal tax changes 50%
Increase in corporate regulation 15%
Poor economic management 15%
Revival of trade union power 12%
Corporate tax changes 10%
Anti-capitalist bias 9%
Decline in UK's ability
to attract investment 8%
Over-prominent social agenda 7%
Commitment to the Social Chapter 6%
Decline in UK's international
Internal dissensions &
lack of clear policies 3%
Q Who would you have most confidence in as prime minister? (Selection may
be from any party)
John Major 36%
Michael Heseltine 30%
Tony Blair 9%
Kenneth Clarke 3%
Paddy Ashdown 2%
Michael Portillo 2%
Margaret Thatcher 2%
Douglas Hurd 1%
Bryan Gould 1%
Chris Patten 1%
John Redwood 1%
Don't know 6%.