Blair promises control over tax

Blair: Europe's labour markets need reform

Prime Minister Tony Blair has told business leaders that Britain will keep control over taxation, despite the new European constitution.

Speaking to the CBI conference he added that many European countries needed to press ahead with economic reforms.

Mr Blair defended the government's economic record, saying that the UK had weathered the recent economic downturn better than many other countries.

And he said that Britain should "keep the option open" of joining the euro.

"Ruling it (the euro) out serves no one and simply limits our options unnecessarily," he said.

Protecting interests

We need to put jobs and competitiveness right at the heart of Europe's economy," Mr Blair said.

Britain is a low-tax country and I am adamant that we will remain that way Tony Blair

"We need further reform of Europe's labour markets."

Mr Blair said he supported a new European constitution, but sought to assure business leaders that he would fight to protect UK interests.

"On the matters of tax, social security and the EU budget, we oppose any move away from unanimity," he said.

"Within Europe Britain is a low-tax country and I am adamant that we will remain that way."

Bureaucracy

Earlier on Monday, the CBI had warned the government that red tape and extra taxes were making the UK a less attractive place to do business.

A CBI survey found that businesses could shift to cheaper markets if UK competitiveness continues to decline.

British business has made it abundantly clear that tax and regulation are going in the wrong direction Shadow Chancellor Oliver Letwin

Of those questioned, 70% said that the business climate had become markedly worse over the past five years, and three-fifths expected it to worsen further in the next five years.

By far the biggest complaint was over the volume of bureaucracy: 95% said they spent more time complying with regulations now than five years ago.

The CBI said its "deeply worrying" poll laid the blame on the Labour government, for not delivering on promises to create a favourable legislative environment.

Could do better

In his speech Mr Blair said he noted "the strong words" that had been used on regulation.

Digby Jones: US needs to obey trade rules

He said he felt that the government now had better processes in place to counter red tape, but he admitted there was still a long way to go.

Shadow Chancellor Oliver Letwin said Mr Blair's argument that red tape was being tackled was "strangely surreal".

"British business has made it abundantly clear that tax and regulation are going in the wrong direction," he said.

Trade row

Mr Blair said the UK economy had "huge strengths" and had "weathered the recent economic downturn best of any in the G8".

He defended his close relations with the US, ahead of President Bush's visit to the UK.

"Whatever others may say, most people know that our alliance with America and our position in Europe gives us unparalleled purchase on international affairs for a country our size," he said.

The CBI is using its conference to highlight what it says is protectionist US trade policy.

British business is particularly vulnerable to any tariff barriers from the US, the CBI said, since it is so heavily involved in the market.

The US has said it disagrees with the ruling and has not indicated whether it will comply with it World trade: At-a-glance guide Steel dispute explained

Digby Jones told BBC Radio Five Live that the recent row over steel tariffs was worrying.

"We don't want a full scale trade war," he said.

"We want them (the US) to behave according to the rules and help the world out of its economic slump."

Mr Jones added that a 'Buy American First' policy pursued by some companies could damage the UK.

"That's going to cause unemployment in Britain from what is supposed to be our best friend," he said.

Mr Blair said he would press the US to follow the World Trade Organisation ruling against its tariffs on steel imports.

"The WTO rules have been breached. It's important that America responds to that and we look to them to respond to it properly," he said.

Long-term view

Before Mr Blair's speech, Trade & Industry Secretary Patricia Hewitt praised UK businesses for not following the protectionist route.

"I know that often it is much easier to see the short-term benefits of protectionism than it is to see the long-term costs to consumers," she said.

But Ms Hewitt angered unions by describing resistance to companies opening call centres in India as a protectionist move.

The Amicus union said the government was "missing the point".

"Outsourcing is not about developing the Indian economy, it is about companies pursuing short-term profits," the union said.

"Once India has been sucked dry, off-shoring companies will move on to China and south-east Asia leaving India and the UK in their wake."