Labour consults business on economic policy

The seriousness of Labour's commitment to wealth creation will be underlined next month by the establishment of a new "Commission on Public Policy and British Business", including senior industrialists.

The left-of-centre think tank, the Institute of Public Policy Research (IPPR), which is closely linked with the Labour leadership, has joined a number of leading businessmen and academics to set up the unprecedented commission. Among the businessmen on the commission is Sir Christopher Harding, for more than 20 years a director of Hanson, a consistent donor to Conservative Party funds.

Chaired by Sir George Bain, Principal of the London Business School, the commission is the most concrete evidence yet of the new Clause IV's pledge to create a "dynamic economy ... in which the enterprise of the market and rigour of competition are joined with the forces of partnership to produce the wealth the nation needs."

Although the IPPR is technically in an "arms length" relationship with the Labour Party, the setting up of the commission follows discussions between Jack Cunningham, Labour's Trade and Industry spokesman, and the Confederation of British Industry. The CBI is understood to have promised to make a written submission to the commission, which could pave the way for policies agreed with business in areas such as training, and manufacturing investment.

One criticial issue likely to be considered is how to curb the "short- termism" which can channel investment into unproductive speculation or property, instead of manufacturing. The issue was highlighted in an important economic speech by Mr Blair during his Labour leadership campaign last year.

Possible fiscal measures including capital gains tax breaks for people who make long-term investments in productive enterprise were considered by Stephen Dorrell when he was Financial Secretary to the Treasury. Ironically, in view of Sir Christopher's involvement, Conservative interest in the issue was stilled by John Major in the wake of well-publicised complaints by Lord Hanson.

Other members of the commission are expected to include the economists Professor John Kay, Professor Richard Layard, and a senior member of Anderson Consulting, the leading management consultancy group.

The bold decision to set up the commission, which is expected to produce a report co-inciding with the party conference, could put to the test some of Labour's most cherished policies including a training levy and the national minimum wage.

Although the former could well be the subject of a compromise, the minimum wage idea - though not necessarily a fixed cash target - is unlikely to be ditched, however. It is argued the state should not subsidise low-paying employers through the social security system.