The new BBC

Once upon a time, the arrival of a new Labour government signalled the entry of a leader of the Transport and General Workers' Union into the Cabinet. First Ernest Bevin and then Frank Cousins. No capitalists needed apply. Not today. Tony Blair and Gordon Brown have appointed a clutch of businessmen and City bankers to key roles in government, while the unions are kept at arm's length.

The old socialist dogma, that government can run business better than business itself, has been ditched. We are now being invited to believe that business can run government at least as well as elected politicians. As the Chancellor said at the CBI dinner last week, the Government wants to avoid pursuing "Whitehall knows best" policies and become "a friend of all that is best in British entrepreneurial culture".

In its first three weeks, the Government appointed Sir David Simon, former chairman of BP, as minister at the DTI - with a seat in the House of Lords. Malcolm Bates, chairman of Pearl Assurance, is to review the private finance initiative. Martin Taylor, old Etonian chief executive of Barclays Bank, has been recruited to beef up Social Security minister Frank Field's revolution of the welfare state. And the "often abrasive" Alan Sugar, chairman of Amstrad, has been brought on board to preach the gospel of business to young people. He will be part of a new Treasury unit headed by Geoffrey Robinson, the millionaire businessman and Paymaster General charged with promoting economic growth and industrial productivity.

THIS unofficial elite is already becoming known as the BBC - Blair's business circle - and they are going to have all the fun without any of the bother of standing for election. Martin Taylor will be unpaid head of a new Whitehall task force, but then the bank pays him pounds 820,000 a year. According to the Chancellor, he will examine the tax and benefits system "to deliver the Government's pledge to modernise the system to fulfil the objectives of promoting work incentives, reducing poverty and strengthening community and family life". This is a hefty shopping list for an Oriental languages graduate and former financial journalist.

What, it might be asked, can Taylor do that Frank Field and an army of civil servants cannot? Particularly in the two days a month he has set aside for this mammoth task. Brown insists that Taylor will bring "a first- rate mind and ability to find practical solutions that make a long-term difference". His lieutenant, the Paymaster General, waxes lyrical about a businessman's "practical experience of the real world and big organisations. They have skills, expertise and experience that do not naturally develop in the public sector."

The next big job to be contracted out is chief executive of the welfare- to-work task force to be implemented by Robinson and Andrew Smith, minister at Department of Education and Employment. Robinson is looking for a "top- flight guy, a big name," who will carry conviction with business - and give benefit offices "a new crack of the whip". He - or she (they have all been men up to now) - will have responsibility for spending pounds 3bn of windfall tax cash on getting young people and the long-term unemployed off benefits and back to work. Watch out, too, for businessmen going into a Downing Street policy think-tank.

Not all Labour MPs are unstinting in their praise for this revolution. When the Chancellor spoke on the Queen's Speech last week, David Winnick asked: "Would it be unfair to say that, by and large, bankers have not been particularly sympathetic to what the Labour movement and the Labour Party have stood for: full employment, policies that improve the lot of working people, and a decent welfare state?"

In truth, Labour's relationship with business has historically been at best uneven, at worst disastrous. A list of Harold Wilson's business friends makes unedifying reading. In his diary for 17 July 1973, six months before Labour regained office, Tony Benn recorded a lunch with Wilson, Rudy Sternberg, Sir (later Lord) Joseph Kagan, famous manufacturer of the Gannex raincoat, Wilfred Brown, chairman of Glacier Metals and a former Labour trade minister, "and one or two others". "They are very close to Harold, and hope to be put in positions of authority under a Labour government," relates Benn. "I am rather cynical about them." He had good reason. Kagan was later fined and jailed for conspiracy to defraud the public revenue. Sternberg, knighted by Wilson, came under suspicion of spying for the Soviet Union. Another business crony, the property tycoon Eric Miller, knighted in the notorious "Lavender List", was accused of fraud and shot himself.

The party has always had a consuming interest in business, however. In the Sixties, it set up the Industrial Reorganisation Corporation - for which Geoffrey Robinson worked as an executive from 1968-70 - to encourage mergers in industry. Its track record was reasonably good. It rationalised the shipbuilding industry, helped to make GEC the competitive giant it now is and enlarged Leyland Motors to make the company viable.

In the Seventies Wilson set up the National Enterprise Board, another interventionist instrument, describing it as "the biggest leap forward in economic thinking as well as economic policy since the war". It was neither, and it was short-lived.

OF COURSE, Labour has no monopoly on business-worship. Harold Macmillan hardly ever moved without consulting a construction baron, Percy Mills, over a large whisky and water in Downing Street. Edward Heath brought into his Cabinet the director-general of the CBI, Sir John Davies, to no great advantage. And Margaret Thatcher famously fell for handsome businessmen, most notably David Young, the estate agent who rose to become her favourite minister because he brought her solutions, not problems.

Old Labour's passion for business is different from New Labour's fascination. In the Wilson era, Labour was obsessed with either taking industry over in the name of the state or intervening in the market in pursuit of chimerical economic goals. It was an outlook derived in part from the centralised planning of the war years, in part from an ideological commitment to public ownership and in some measure to an impulse that "we know better". The steady abandonment of that ideology, culminating in the abolition of Clause IV, marked a watershed in Labour's relationship with business. Businessmen are now praised for the qualities that politicians were once supposed to monopolise and given undreamt-of opportunities to shape public policy.

The politicians are taking a risk. There are plenty of reasons for believing that their new-found gurus could do a worse job than politicians and civil servants. "Businessmen often know little outside the markets in which they operate. What they know about management and knocking heads together is generally learnt within the hire-and-fire, faintly military environment of a big organisation. Public life, with Parliament and an electorate to answer to, is entirely different," says one commentator.

What men such as Martin Taylor bring to the party is a single-minded approach. He can read across several vital areas of public policy and recommend solutions. Nobody will cross-examine him at the dispatch box.

Perhaps that is the best way. The only businessman to have gone the whole hog and joined the Blair administration is Lord Simon, whose gruff impatience with parliamentary processes dismayed fellow peers last week. "He'll have to learn," was one private view on the red benches.

Such reservations go to the heart of the matter. Businessmen must wonder why they are on the threshold of policy-making. Stay wondering. The real issue is whether, besides being good at making money, they can make government work. At least they know Frank Cousins couldn't.