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Monday, 14 May, 2001, 08:08 GMT
Wooing the business vote
Tony Blair responded to business questions at Warwick
Tony Blair meets business leaders in Coventry
by BBC News Online's Steve Schifferes

It was no accident: Tony Blair's first engagement in the country after launching Labour's General Election campaign was a meeting with businessmen in Coventry.

Mr Blair's visit to Warwick University, accompanied by Stephen Alambritis of the Federation of Small Businesses, was rich in symbolism - aimed at appealing both to Labour's heartland constituencies in the industrial West Midlands, and to its newer target group, the business vote.

If the questions put to Mr Blair by local business leaders were somewhat anodyne, covering familiar areas like regulation and training grants, Labour's emphasis was clear.

Again and again Mr Blair referred to the benefits of a stable economy, with low interest rates and low inflation, which are crucial for companies worried about the global economic slowdown.

And this week Labour is trumpeting the fact it now has broad business support, citing the 58 business leaders who have written to the Times newspaper supporting Labour's economic policies.

Chancellor Gordon Brown accused the Tories of being not just "anti-euro but anti-business."

But the Conservatives' Andrew Lansley says that Labour "could never be the party of enterprise, because it is the party of rising red tape and increasing taxes on businesses."

Appealing to business

But all political parties are trying to attract the support of business in this General Election, not least because their backing is seen as a test of economic competence.

Labour's success in the 1997 election in attracting prominent company executives to endorse their campaign played a crucial role in widening their appeal to middle class voters.

Labour is struggling to maintain that allegiance, while the Tories hope to attract particularly small business voters with their policies for lower taxes and further deregulation.

The Liberal Democrats, meanwhile, believe that Labour policies have harmed manufacturing industry and farming. They argue for greater investments in infrastructure and euro membership for the benefits that a permanent fixed exchange rate would bring.

Tax and regulation

Labour is vulnerable to the charge that it has raised taxes on business.

According to the independent Institute for Fiscal Studies, two tax changes made just after Labour came to power (changes to advance corporation tax payments and abolition of dividend tax credits) have cost businesses 2bn and 5bn per year respectively.

That has more than offset the cuts in the headline rate of corporation tax, which has gone down from 33% to 30%, saving 3bn per year.

And Labour has annoyed companies large and small by trying to tackle tax avoidance.

The Tories have pledged to repeal the controversial IR35 regulations which tax consultants as employees rather than small companies if they work for only one employer.

And they are also opposed to Labour's climate change levy, which has just come into force and is designed to limit the production of greenhouse gases. The Tories say the levy is hitting the UK manufacturing industry hardest.

However, Labour has decided not to go ahead with plans to allow local councils to charge higher business rates, and says it has plans to do more to stop excessive regulation.

Small business fears

Small businesses have been especially concerned about the burden of regulation - changes like the minimum wage, the working time directive, extra rights for parental leave, and the right of union recognition.

In response, Labour has modified some of its polices, and exempted small firms from some of the red tape.

But it says it wants to maintain a "balanced" approach, backing neither unions nor companies.

Small businesses also fear the prospect of the UK joining the euro, which they believe will lead to increased competitive pressures and more taxes and regulation.

But business, like the rest of the country, is divided on the issue, with many large multinationals keen for Britain to join the single currency area - simplifying their global operations.

Economic strength

The Conservatives appear to have an uphill struggle in regaining their mantle as the best party for managing the economy.

Most business organisations have endorsed Labour's management of the economy, and surveys have shown that business leaders give high marks to Gordon Brown compared to Michael Portillo.

In a recent survey conducted by the London Chamber of Commerce of 365 business executives in April, 83% rated the Chancellor as "very" or "fairly" competent, with 65% saying the same of Tony Blair, compared to 46% for Michael Portillo and just 25% for William Hague, and 19% for Charles Kennedy.

And while the economy remains strong, with low inflation and interest rates coming down, it seems that business will be able to co-exist with a Labour government, if not learn to love it.

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