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Sunday, 10 June, 2001, 16:52 GMT 17:52 UK
Labour's business prospects
Marks and Spencer workers protest against closures
EU employment law would force business to consult workers
The new Labour government's relationship with business will be under the spotlight almost before ministers have had time to get over the election and settle into their new jobs.

In the last term, the Blair government tried to present itself as business friendly but was also a thorn in its side with 'rip-off' Britain campaigns, inquiries into supermarkets and banking, windfall taxes on utilities and the introduction of worker-friendly labour laws.

With the election over, as if on cue, a number of key events will focus attention on where Labour is going with its business friends.

Labour's plans for a referendum on Britain joining the euro in the first half of this term has divided business, as it has politicians and the public.

The prospect of a Labour landslide left currency markets in little doubt that the chances of the UK joining the euro were rising fast and pushed the pound to a 15-year-low against the dollar last week.

Since it is widely acknowledged that sterling cannot enter at its recent rate, currency traders sold, also taking the pound to lows against the euro.

But the falling exchange rate could endanger UK's recent record of low inflation.

Labour has said it will not make any early announcements on the euro and that the Treasury would apply Gordon Brown's five economic tests over the next two years.

Employment defeat

First off the rank, the government is expected to lose its fight to block European laws requiring employers to consult with workers.

A breakthrough is expected at an employment ministers summit in Luxembourg on Monday, after Denmark, Germany and Ireland reportedly withdrew support for the UK's position.

The employment directive would require UK companies to regularly consult with workers on the business' economic and financial situation and future employment prospects.

The UK would have to introduce laws similar to those in France which unions are using to challenge Marks and Spencer's closure of its European outlets.

Competition laws

At the heart of the Labour business manifesto was a commitment to take ministers out of decisions on mergers and acquisitions.

Trade and Industry Minister Patricia Hewitt
The new Trade and Industry Minister Patricia Hewitt
The Competition Commission on Tuesday will pass a hot potato to the new trade and industry minister Patricia Hewitt when it delivers its report into Lloyds TSB's takeover of Abbey National.

There is increasing speculation that the 20bn takeover will be blocked unless a way can be found to weaken the combined groups 27% market share on current accounts.

In theory Ms Hewitt should accept the Commission recommendations after the government promised to take ministers out of the equation last October.

"The new system will benefit businesses and the consumer," then trade minister Stephen Byers said in a written parliamentary answer at the time.

"Competition should be at the heart of the mergers process."

Rocky passage

But this policy has not had a completely smooth passage.

The new system will benefit businesses and the consumer. Competition should be at the heart of the mergers process

Former trade minister Stephen Byers
The High Court overruled Mr Byers acceptance of the Commission's recommendation to block Interbrew's takeover of Bass Brewers and his intervention in the consolidation of the cable television industry was considered ill-judged.

Mr Byers stunned regulators by referring cable group NTL's planned 8.5bn purchase of the cable television arm of Cable & Wireless Communications to the Competition Commission, against the advice of the Office of Fair Trading.

The decision lead to criticism that the government's relationship with Rupert Murdoch, owner of rival BSkyB, was more important than its aim of promoting competition.

The Commission eventually cleared the deal in March last year.


Railtrack proved a regular embarrassment for the last government, with a number of deaths from train accidents compounded by dividend payouts to shareholders.

Train derailment
Railtrack will not be re-nationalised
But Labour comprehensively rejected the possibility of re-nationalisation of the rail operator during the election.

The new transport minister, Stephen Byers, will face many of the same problems as his predecessor, John Prescott, on restructuring the company.

Railtrack's share price plummeted below its privatisation level last week after a negative brokers report and on fears of government intervention in the company's operations.


Meanwhile, Labour has said it will push ahead with its partial privatisation policies, which are also known as private finance initiatives (PFIs) or public-private partnerships (PPPs).

Hangovers from the last government include the 13bn sell-off of London's tube system and the 500m sell-off of National Air Traffic Services (Nats), which should have been completed on the Friday before the election but was unexplainably delayed.

But the battle ground for this term will be the acceleration of the controversial PFIs, which have yielded generous returns to the private sector on schools, hospitals and prisons but with questionable improvements in service.

Unions hit back

There is disquiet amongst the trade unions about how far Labour will bring the private sector into the running public services.

Labour has introduced the minimum wage, union recognition in the workplace, paternal level to compliment maternity rights and paid holidays for part-time and causal workers.

But the party's paymasters are now questioning whether it needs to listen to them more closely.

In an telling move, the Fire Brigades Union (FBU) last month, for the first time, supported non-Labour candidates in protest over plans to privatise some parts of the service.

Union support for candidates, or even parties, apart from Labour, that share their goals could determine how far the government moves forward on privatisation and how the next election unfolds.

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