SO WHAT WOULD HE DO?

David Cameron is sending shadow ministers to Rolls-Royce in his latest move to court business. By Sean O'Grady

Business Analysis

Tony Blair once famously appealed for "eye-catching initiatives" with which he could be personally associated. David Cameron's decision to "embed" some of his shadow ministers with Rolls-Royce isn't so much eye-catching as eye-popping. The Conservatives spent a good deal of the 1980s telling us why manufacturing and the balance of payments didn't matter. Now Mr Cameron wants to learn from Rolls- Royce, a great British manufacturing success story and a major exporter. The Conservative leader said yesterday that "we want to understand in detail the factors that contribute to successful science, technology, engineering and manufacturing in the 21st century". They've taken another leaf out of the New Labour playbook; just as Blair and Brown before 1997 sought to build up a relationship with a sector of the economy that their party had been traditionally hostile to - the City of London - so too do the Cameroons now seek to make friends with the UK's unloved manufacturing base, concentrated in the North. Mr Cameron asked yesterday of his party - perhaps almost on his own behalf as much as that of the country - "how will you respond to the increased scrutiny you will now receive as the alternative government in waiting?" When it comes to business and the economy, some of the answer, surely, lies in how they have responded so far.

*THE ECONOMY

The Shadow Chancellor, George Osborne, has a basic narrative: they will deliver what New Labour failed to - social justice with economic efficiency. Mr Osborne, like Mr Cameron yesterday, has identified "the terrible state of our public finances", falling international competitiveness on tax and the "narrow base" of economic growth - financial services and property - as fundamental problems. But the answers are essentially institutional: enhanced independence for the Bank of England; independent judgement of the fiscal rules; a "measurable commitment" to "share the proceeds of growth over an economic cycle": "Government will grow more slowly than the economy". There is, so far, no Thatcherite rhetoric about rolling back the frontiers of the state or the "ultra-low tax economy" (copyright Michael Portillo, long ago). The closest Mr Osborne gets to any of that is the woolly phrase "sustainably low taxes". Instead, Mr Osborne has promised to match Labour's spending plans for the first two years. But he has hinted he might want to move beyond pure inflation targeting and ask the Bank of England to "tame the credit cycle" through measures other than interest rates, such as varying the capital requirements of the banks. The aim would be to control the debts run up by households and companies in booms via so-called "counter-cyclical" regulation.

Green taxes such as air travel duty are still favoured, but they and the radical Green Tory Zac Goldsmith don't get such an airing these days. Maybe with oil at $120 a barrel, the Conservatives judge that they don't need them any more.

*TAX

In terms of the overall burden, a "measurable commitment" to "share the proceeds of growth over an economic cycle" presumably means lower taxes than under Labour. Just as Brown waited until Labour's second term to raise taxes, so Osborne may postpone any more radical cuts until a second Cam-eron term, if that thought isn't a touch premature.

Osborne has made a few specific promises: he wants to cut the small companies tax rate from 22p to 20p in the and the main Corporation Tax rate from 28p to 25p. These moves would be paid for by dropping capital allowances, ironically hurting the capital- intensive manufacturing industries Mr Cameron wants to help. PricewaterhouseCoopers is advising Mr Osborne, who sees a "powerful case" for taking foreign earnings out of tax, which would stem the flow of companies leaving the country. Mr Osborne's other tax polices, such as their own 25,000 non-Dom fee, the abolition of stamp duty for most first-time buyers; the 1m inheritance tax threshold and capital gains being taxed at the same rates as income have been well advertised. The Tories decline to say if they would reinstate the 10p tax rate or CGT taper relief. Intriguingly, Mr Osborne has floated the possibility of downgrading the annual Budget palaver and leaving tax rates unchanged for longer. He wants to see technical tax changes published before the Budget and scrutinised by a committee of MPs.

*REGULATION

The author of the 1995 libertarian classic Saturn's Children: How the State Devours Liberty, Prosperity and Virtue, Alan Duncan, Shadow Secretary of State for Business, Enterprise and Regulatory Reform, these days contents himself with a plea for a little less red tape. He will "ensure that for any new regulation that is introduced, two or three will be removed".

*ENERGY

The Tory policy is: "To enable nuclear capacity to be built, we need to sort out the planning system, put a price on carbon, ensure there is clarity on waste and decommissioning, and maintain a long- term climate for investment. Crucially, there must be a guarantee that there will be no government subsidies - nuclear should not be allowed to detract from an unrelenting effort to improve industrial and domestic energy efficiency, and encourage renewable technologies, microgeneration, decentralised energy and feed-in tariffs." But what if nuclear or renewable power aren't viable without those government subsidies?