CBI Conference

Written by Vincent Cable MP and published in House Magazine on Tue 1st Oct 2002

This year's CBI conference will take place in the shadow of sobering and worrying developments internationally which have significant repercussions for the economy and British business.

It is now clear that the world economy is heading for a recession with simultaneous downturns in the US, parts of Western Europe and East Asia. Most forecasters missed early signs of this recession before the September 11 events provided an additional shock to consumer and investor confidence (offset in part by more relaxed monetary and fiscal policy). It is difficult to believe that the UK will be insulated from global trends. Indeed, for manufacturing, there will be the double blow of weakening export markets and continued lack of competitiveness from an overvalued exchange rate in real, effective terms.

There are several policy implication arising from the emerging economic problems. The first is that the government's so far quite disciplined approach to industrial policy will come under a lot of strain with growing political pressure to bail out loss making enterprises in aviation, aerospace and manufacturing more widely. The government should continue to resist these pressures. Even in stricken sectors like aviation the government has to continue to insist that there is no strong case for rescuing shareholders in leading airline companies which were already in financial trouble before September 11, beyond some highly specific payments for compulsory grounding and insurance cover.

Third, the best way to help UK business through the coming down turn is a supportive general environment rather than selective bailouts. Macro economic policy is already established on a stable footing. But the government's interventions at a micro level have often been unhelpful to business and overall economic efficiency: over complicated tax measures and burdensome regulation. The tortuous complexity, lack of sensitivity over timing and arbitrary exemptions of the Climate Charge Levy epitomises the problem. There will now be pressures for new regulations in the more security conscious environment - with a move, perhaps, to compulsory escrow arrangements for electronic communications - which could further add to the cost and burdens of doing business unless carefully managed.

Further, the overriding importance of international economic co-operation has been underlined by the need for a coherent response to the incipient economic slowdown and the blow to confidence of the September 11 events. Ideas of self-sufficiency, even for the US or the EU, are simply absurd in a world of global economic integration through investment and trade and instant electronic communications. The most important single international initiative which can now be taken to create a feasible long term business environment is to launch and make a success of the next round of multilateral trade negotiations so as to liberalise trade and investment flows and to strengthen the rule of law in international disputes.

The approach the Liberal Democrats and I will bring to the CBI Conference is that of a party committed to a competitive market economy. That was the spirit in which we invited Digby Jones to be the first CBI Director General to address our party conference in September. We do not - like the government - feel the need to claim to be "pro-business" but recognise that without profitable enterprise there cannot be growing living standards and full employment.