Blair clashes with business chief

The PM wants the country to embrace global change

Prime Minister Tony Blair has come under attack over the role of government in industry during the CBI's annual dinner.

As the prime minister said ministers would not act over the strong pound, CBI President Sir Clive Thompson told him the government's employment laws were "the biggest and most damaging overhaul of labour market regulation for 20 years".

Sir Clive told the prime minister: "We have had laws on wages, hours and patterns of work to name but a few.

We have to hold to the tight fiscal and sensible monetary policy that is the best guarantee over time of the stability we all want

Tony Blair

"Now, Prime Minister, is the time for you to resist pre-election demands to put more employment legislation in your manifesto."

Sir Clive agreed that ministers should not devalue the pound "artificially", saying a "quick fix" would not work.

But there was a pointed reference to Mr Blair and his QC wife Cherie, expecting the couple's fourth baby, over employment rights.

Guarantee of stability

Sir Clive said: "Everyone understands and sympathises with the call for paid parental leave and a right to part-time work for returning mothers.

"But the nature of work in the future will be insecure and needs for its very existence to be unprotected."

Meanwhile, Mr Blair underlined that there would no immediate help for exporters facing a strong pound, saying: "My own belief is that we cannot try artificially to devalue the currency.

"We have to hold tight to the fiscal and sensible monetary policy that is the best guarantee over time of the stability we all want."

On Monday, the head of the TUC, John Monks, called for government action to lower the value of the pound.

Unions and some businessmen have blamed the strength of sterling for the recent woes of UK exporters and for job cutbacks at major car manufacturers like Ford and Rover.

Six-point strategy

But the deputy governor of the Bank of England, Mervyn King, has backed Mr Blair's refusal to devalue the pound.

During his speech, Mr Blair outlined six points which he said were now "virtually universal in modern economics":

Stability in economic management

Stability achieved through fiscal prudence and monetary policy run independently of government

Government where the primary role was not industrial intervention but investment in education and infrastructure

Encouraging enterprise through a good climate for business, a tax system which rewards success and an active welfare state that moved people off benefit and into work

Apart from that, an economy should have as much competition and access to technology as possible

With stability, over time, there must be real improvements in productivity and investment from business itself.

Mr Blair said: "All this takes time. Such a policy is one for long-term strength. Stability only takes root over time... raising productivity takes years, not weeks or even months."

Responding to criticism of business regulation, the prime minister said the Working Time Directive - which gives a maximum 48-hour working week for some employees - "could have been implemented better".

But he added: "Britain still has one of the most lightly-regulated labour markets in the world."