In his address to the CBI yesterday the prime minister signalled that the EU would pose no threat to Britain's low tax status.

The speech was seen as a tough warning that Tony Blair will defend Britain's red-line issues at next month's EU summit.

He went on to say he wanted the relationship between government and business to move to a "new and deeper level".

In a private meeting Blair also appealed to business leaders to get involved in schools and hospitals.

He said there was no "ideological resistance" to private firms operating key public services.

But big business had its own message for the government - warning the prime minister that they may be forced to establish a two-tier pensions system in response to £1.4 million limits set to be imposed by the chancellor.