The Prime Minister has called on business to put productivity and wage restraint at the top of the agenda as a means of creating more jobs and improving living standards.

Speaking at the annual dinner of the Confederation of Business Industry, Mr Blair said one of the major economic challenges facing Britain was to raise productivity.

He appealed to the "British spirit" to close the productivity gap which meant a British employee produced 20% less than a German and 40% less than an American.

"That is a big gap, a gap we have got to close," he said.

"We need to raise our game. Improving our productivity is central to a stronger economy. It is the route to more jobs, higher growth, better living standards," he added.

He also urged business to exercise wage restraint, saying it would be "the worst of short-termism" to pay ourselves more today at the expense of jobs, economic growth and interest rates in future.

Mr Blair called on the private sector to follow the lead set by government with its comprehensive spending review.

"I regard being prudent on public finance and money as a necessary badge of respectability for New Labour and I intend to keep wearing it," Mr Blair said.

He also stressed the importance of the continuing partnership between government and business and underlined the importance he placed on education and the "skills revolution."

Little on workers' rights

Mr Blair made only a passing reference to the controversial White Paper on Fairness at Work which covers workers' rights and trade union recognition in the work place.

The paper - which hands new rights to workers - has been heavily criticised by some sections of industry for switching the balance back towards the unions.

There is also a row looming over the rate to be set for the national minimum wage which many bosses fear, if set to high, could destroy jobs.

Wage fears

Speaking just hours before Mr Blair's speech, CBI president and chairman of British Airways, Sir Colin Marshall, called for the minimum wage to be no higher than £3.60 an hour - the unions have been pressing for a rate of £4.40.

Marshall: CBI wages warning.

"We want to keep the minimum wage at a relatively low level. From our members' standpoint, we are anticipating and hoping it's going to be in the £3.50 - £3.60 range.

"The higher it goes, there is a risk of creating more unemployment and that we don't see as being in the interests of the country as a whole," he told BBC Radio 4's Today programme.

He said the confederation was "pleased with the progress" made so far by the government.

On the Fairness at Work proposals he said: "You're never going to please everyone. We understand that. The government has listened to the concerns of employers as well as the concerns of the TUC.

"But it's extremely important not to take this proposed legislation in isolation. One has to consider it against a background of what is really happening in the workplace.

" By and large, we have productive partnerships between employers and trade unions."
 

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