If you look at Rover you've got a multinational that is deciding that it wants to come out of a particular market and that has had a consequence on not just the 9,000 or so jobs in the company. It's actually an implication of 50,000 supply manufacturing jobs in the West Midlands. That is about structural change, it's about the social impact and getting companies to make different things, make them differently, in manufacturing.

But in the West Midlands there's, for example, there's Marconi, they're one of tomorrow's manufacturers. They are still there and they need the people. If you look at Vauxhall that was about an American multinational saying we need to take car making capacity out of Europe and they're closing car manufacturing but not van or four-wheel drive manufacturing at Luton. But they've also taken 2,500 jobs out of Germany. And they've taken 500 jobs out of Belgium. So there it's about reducing capacity on a European footprint basis. And the consequence of course, which is dreadful news for Christmas for people is all the uncertainty and the loss of morale, but they are actually living in an area of Great Britain where there is a skills shortage. There is a shortage of good quality people and the people at Luton are good quality people. So there one would hope that the knock on effect into communities is not as great.

If you look at Nissan, that is about a Japanese manufacturer, now in certain ways controlled by the French, deciding whether to build something in France or in Britain. And you have the most productive car plant in Europe actually losing money because of the weakness of the euro because Euroland is where those cars are being sold.

Just to complete the picture, Land Rover - £14 million investment by Ford going on in the next few weeks. If you look at Jaguar they've chosen to build the new baby Jag in Liverpool, not in Europe or in America. There are some very good examples, Honda, when they changed their model profile, they still kept building in Swindon. So it's certainly not a sector which is having an easy time but it's not actually all doom and gloom. And the implications each time are definitely different.

You ask where could the government have done more. In two or three areas, yes they could. One is that the climate change levy which is being brought in in the early part of next year is a definite impediment to companies deciding where they invest. It's not the climate change levy itself- business wants to be a good neighbour, business wants to step up to the plate and lead and set an example in getting the UK to meet the Kyoto recommendations. It's not even that business doesn't acknowledge that it needs carrot and stick. It needs a system in which it can negotiate away liability by behavioural change. It's the way it's being implemented. It's the fact that there are car factories where the price per car is going to go up or if it doesn't, the cost per car to the manufacturer is going to go up and there's nothing they can do about it because at the end of the day environmentally they've got there or they've met what they've got to do, but the tax is still going to apply. Now at the very time when the whole sector is certainly having a very difficult time, is that quite the time to implement this? And could it have been implemented in a more sensitive way? Could it have happened over a longer period of time? And it's very important that people understand that business is not saying that the whole aspect of forcing through change to deal with climate change effects isn't a good thing. We do, but it's the way it's being implemented. We believe it's definitely hurting businesses. I know that with Nissan, one of the factors on the decision will be about implications of the climate change levy on the cost of production in Sunderland as opposed to France where it doesn't apply.

Another thing they could have done is that there has been so much more red tape and so much more regulation. Fifteen new pieces of employment legislation have come in in the past two years and will have cost businesses as a whole £12.3 billion. Now, at the end of the day, while some of that won't be relevant in cost terms to the major big car company, it does set up an atmosphere where overseas investors feel, is this a new way in Britain ? Is this a losing of labour market flexibility ? Are we beginning to lose that edge we have, that competitive edge as being the place to invest if you want to be flexible in the way you deal with work forces and the way you actually maximise productivity out of employees ? And in that respect it doesn't create a good atmosphere for overseas investment. So that's something to be jealously guarded.

And lastly we have always jealously guarded the fact that we are one of the low tax regimes in Europe and British businesses have paid £5 billion more tax every year for the last three years than they did before. And again there's a sign going out are we losing the competitive edge on taxation? So whilst we are still the place to invest in Europe, when you look at the competitive tax regimes, we are losing some of that competitive edge and it might just tip the balance over when people think where does the next piece of investment go ? So the government has got to show that they understand, not what they do, not what they say, but they understand just how globally mobile business is and just how vulnerable the UK can be to decisions taken in Detroit or Tokyo or Johannesburg, as to where the next piece of capital investment will go.

Question: Union leaders have urged the government to drop their opposition to the European Directive on work place information and consultation. What does business think about this?

Digby Jones: We would call the government definitely to hold the line on this. Their policy so far has been absolutely right and it's very important that the blocking minority in Europe holds the line against it. It's very important and the reason is that whilst any good employer will consult where they can inform their workforce, it's just good practice. It's the way you get the best out of people. And whilst good employers do, it is wrong to have a one size fits all directive on consultation if anybody employs more than fifty people on a plant by plant basis. So you actually are in the position where the same rule will apply to a business employing 51 people in Blackburn Lancashire as General Motors. Now that can't be right. It's just not the way. It shows an ignorance actually of the way business runs.

And what's more if anybody's going to say that if information and consultation was currently applicable in Britain, Vauxhall would not have laid off those people last week, that shows an amazing ignorance. Because it was a decision on a pan-European basis taken by an American multinational about its European footprint. It was not about just looking at Luton and deciding what to do there. And you just can't have one rule that uniformly harmonises the way you deal with every single business of any size whatsoever, anywhere in the whole of Europe. It's definitely something that is for subsidiarity. It's definitely something that is for a national approach, even sometimes a regional approach on keeping workforces, where you can, informed, consulting with them where you can. Businesses do it, but they can't be forced, they must not be forced. It would be so damaging to attracting new investment into this country if a one size fits all approach was adopted here.

Question: You must appreciate the anger of the Vauxhall workers who found out that they were to lose their jobs from the radio news, and government ministers knew beforehand. The workers were the last to know. In that circumstance that was where consultation broke down.

Digby Jones: Well as I understand it, it was planned by the management in Vauxhall that they would definitely tell the workforce before the workforce heard it on any news station whatsoever. I know Nick Reilly, he is an absolute quality guy, he's a first class manager. He cares hugely for Luton. Two or three years ago he waved his annual pay for a year because he wanted to set an example. It's hardly consistent with that sort of chap to allow a workforce who were going to get some pretty bad news just before Christmas, to find out from the radio. So I really do believe that there was obviously a leak. I cannot believe, I will not believe that Nick Reilly decided that he would let his work force find out from the radio. That is not what quality managers do and Nick is a quality manager.

Question: There's been calls for a post of a chief manufacturing advisor. What about a manufacturing czar?

Digby Jones: I think that begs the question about what is manufacturing today. Microsoft, IBM, Compaq, they're all manufacturers. Glaxo Wellcome is a manufacturer. If you look at traditional manufacturers they're all espousing the knowledge economy, in wonderful ways to enhance their productivity. I was at Corus a few weeks ago. And I said tell me the most unskilled person here, give me an idea what they do. And they said, oh operate a computer. And I said what? And they said, we don't employ anybody who isn't computer literate. This is the old British steel that most people would think employs unskilled people. And I think it's wonderful example of where manufacturing has got to.

And therefore it begs the question what is manufacturing ? It is so important to the country because it earns the current account of the nation. It does enable a cluster effect of service industries around it, it is a great place for people to be trained and skilled, and it has a pivotal role to play, especially in those communities that in the past were reliant on old industry totems - coal, ship building, steel, car making - the old communities that had their social fabric dislocated by a fundamental shift in the making of commodities around Western Europe and especially England. Now manufacturing plays the real role in giving people the opportunities to re-skill into the industries of tomorrow. So it is important that it is kept at the top of the agenda. It is important that government understands how important it is all the time, and not just either, when there is a crisis at a particular plant, or indeed in a General Election, it's important they are there all the time. And it might be that it would be useful for there to be a minister who had direct responsibility for it. And that sort of presence at the Cabinet table would be very useful. But the CBI would have to be involved in that, I'm sure Stephen Byers would have something to say about it. And what is more of course, it does beg the question what is manufacturing ? Who would they be representing and what would they be doing given the wide nature of it these days.

Question: Is there enough public understanding of this issue of manufacturing?

Digby Jones: Yes I believe it's not just a public lack of understanding, I think there's a lack of understanding in the media. As director general, I have been all around Britain many many times this year and I have seen so many companies that are serious manufacturers that have never beaten a piece of metal in their lives. And we've got to get that message across to a lot of people.

Question: Some people suggest that sterling's persistently high exchange rate combined with the uncertainty over the membership of the euro is starting to have a significant impact on companies' investment decisions. Do you detect this over the last twelve months?

Digby Jones: What does worry me is that the data that people who argue for or against euro membership use as to its effect on overseas investment or indeed investment, not just necessarily by overseas companies but by UK companies who now operate on a global basis. The data that they now use of course reflects decisions taken in board rooms three years ago because the lead time on making investment is a long one. So what concerns me is that there are decisions being taken in the year 2000 for investment in the UK, either from overseas companies, or indeed for UK companies putting down their next piece of kit- do they put it here or do they put in one of their overseas operations - and those will not form part of the stance as here's a piece of investment for two or three years. We don't actually know what is the effect of the current climate of the weakness of the euro, or investment decisions today.

What I can tell you going round the country is that with certain companies it isn't helping at all. In the UK as a whole 60% of everything we export goes to Euroland. And there are a lot of companies that are finding that they are keeping their export books by basically not having any margin at all. So their exports are OK but it's profitless prosperity. There is not the profit being made. And that's born out actually by the fact that in our last quarterly trend survey the investment intention was low. Exports were holding up. Now that must mean that they're not making any profit because that's why they're not investing. So I've seen round the country companies that have been saying well we also have a plant in so and so and we've actually decided to put the next bit there because actually we can't say with any certainty that the exchange risk when this comes on line in three years' time won't hurt our profitability by doing it here. So we're selling into Europe, we might as well build in Europe. Now that is quite a lot.

So do I see it as damaging? Yes I do. Do I see it as a reason as to why it would be useful on economic grounds to be inside the Euroland, this is a purely economic statement. The decision will be taken by a referendum after a democratically elected government has made it's decision to recommend, and that's the way it should be and I'm not going to comment on the rights and wrongs and whether it's a good or bad thing. But companies who make things, want to invest big time, and then sell into Euroland markets, some of them are deciding that they will make their next investment in Euroland because that's where they're selling. And therefore to have your overheads and your income happening in the same currency just factually eliminates one risk. People will decide whether that's the risk they are prepared to stand, or it's a risk that they don't want to stand, and they will decide it on a case by case basis. But it is a fact that it is an additional risk to investment.

Question: Labour and the Conservatives are promising tax cuts and spending rises in the run up to the next election. Do you think we're having an honest debate on tax at the moment?

Digby Jones: I think one of the problems the government has as far as business is concerned is that they tended to put business and people into two different groups, and business is a group that you tax and regulate and people is a group that you give health and education and transport to but don't let them think they're paying for it. And I think there is this concept a lot of people who benefit, quite rightly, from the additional investment in the infrastructure of not only transport but education and health, think it is somehow they who pay for it, whoever they are. And business has coughed up £5 billion a year extra over the last three years, and I'm not too sure a lot of those who benefit from that do understand just what a massive contribution to the Exchequer business is making because a lot of that tax has been taken out indirectly and indeed corporation tax has been reduced. So it's not being taken out directly it's being taken out indirectly.

Question: So would businesses like to see greater hypothecation from the political parties on tax?

Digby Jones: Yes I think they would actually. I think a lot of businesses would like to think that their money is going into certain areas - education is a very good example. I do applaud this government's investment in education. I think they're on the right lines, I think they're doing it very well. They've got a lot more to do but then the uphill struggle was huge to start with. But in a lot of areas, especially local areas, I think businesses would like to see a lot more of their tax pounds going into direct areas. Transport is a very good example.

Question: Do you think businesses would pay more tax for a better transport system?

Digby Jones: If they were certain they were going to get it quickly working efficiently and safely, reliably and effectively, I think businesses would probably not believe in paying more tax but what they would like to see is their tax pounds better directed. But you see at the end of the day because tax is on a percentage basis, if businesses allow it to grow, if it has the fetters removed and gets on with creating more wealth, it pays more tax because it pays x percent of every pound profit tax it makes. So it does pay more tax just by doing it. And therefore as that growth comes business would have no problem in paying its fair share to get those better schools and transport systems.

Question: What are your views on the safety structure we've got on the railways at the moment. Is it adequate?

Digby Jones: There is a short term and medium term problem with transport. The short term is this concept of dealing with this safety issue of the rails on the network. And it's a sad case of physics that you can't send a train at 120 mph over a track that doesn't exist. And it's happened at a major travelling time of the year. It's happened at a time when the weather is not exactly a friend. And we talk about investment being made by business, we talk about the investment being made by government, but there's another investment being made and that's the goodwill and the tolerance and understanding of everybody in Britain. And if they do want a safe reliable network, you and I and everybody have got to tolerate and be understanding of some disruption. And it's not going to stop tomorrow morning. Even when this safety issue is dealt with on the rails, it's going to happen again and again and again as there are better trains, better lines, a more efficient rail network, better roads, better airports, we're going to have disruption. But it's a price worth paying so we can get our goods to market and our people to work.

To go onto the medium short term issue of safety does actually turn into the bigger issue which is the whole question of corporate responsibility for safety and it is absolutely right that there ought to be a legislative framework where absolute flagrant breaches of legislation and good practice do enter into a criminal arena. Business doesn't want to shirk its obligations here, it wants to be a good neighbour and it wants to show how it stands up to it's responsibilities.

But where I am worried is if we are going to create a culture where a middle manager, not on all the fancy salaries you read about in newspapers, but a middle manager at an airport, or train station, or port, or operating one of the trains or ships or planes, if they are being asked the following question is this vessel, ship, aircraft fit to take these people, oh and by the way if you get it wrong you might go to prison - well they're just not going to make the decision. I mean they are just going to say this is not worth it.

If you're giving me a choice between signing off a bit of paper saying this is ready to go, and I might go to prison, but on the other hand if I don't sign this bit of paper I won't go to prison, what is that person going to do? What would you do, what would I do? And of course that's the problem, that's where it's going to get to and then you're going to get paralysis and you're going to get demoralised people, they don't make good decisions, they don't lead they don't drive, they don't get efficiencies, and the whole thing moves down into a vicious circle. Now that worries me hugely. And that's not to say I don't understand why we do need something to make sure that those flagrant breaches go unpunished. They shouldn't. But where's this going to stop?

It's quite interesting that they're sending trains across lines at 20mph, people are now saying that might not be the most safe thing to do because we're killing ten people on the roads everyday and no one ever goes bonkers about that, and at the end of the day it might be that there are certain lines that you can go across at 100mph and it will be OK. And then you say to somebody, maybe a politician, maybe a civil servant, maybe a Railtrack employee, are you going to take that responsibility to send that train over there faster than 20 mph when you don't really know? And they all say, quite rightly, well no.

So it's a big issue about at what point do we expect a human being to take fundamental responsibility and what point do we say no that is something that is part and parcel of flying or going on a train. I don't know the answer to that by the way but it's a major issue that business is absolutely at the forefront and trying to sort out.

Question: Another major issue - crime. Does business have a role in tackling crime?

Digby Jones: Oh definitely. Probably in three ways and all of them are important. Firstly is the way business goes about making things. The best analogy would be to talk about making cars. Years ago, when we were all kids at mum's knee, safety didn't sell cars. If you sold a car on the basis that this thing might kill you but actually we're better, buy our car because our car will kill less than any other - it didn't sell. And nowadays you put ABS and airbags and side restraints and everything else and it sells cars because manufacturers made it a virtue. Well similarly there are many items, and obviously with modern telephonics and electronics, those particularly tend to get nicked quite often, mobile phones and videos and DVD recorders, and everything else, all the stuff which is immensely portable, has some value and is attractive. Now there's one thing that business could be doing and that is looking at whether those things can be made in a way that deters the criminal more. And I like to think that they all are but then of course there's got to be a public equation of making that attractive as a USP for buying it. And I think that's a big issue.

The second one is the whole concept of where business operates, and do they operate in a way that can keep crime down as much as possible. Are their premises secure as possible? Does it deter? Are they designed in a way that deters? Are they actually understanding of the pressures and the ideas driving that community that might lead to it? Are they getting that involved in the why did you come to my premises and nick this concept.

And then thirdly, that it is no use business putting wealth creation on its own at the top of the agenda. It has to be socially inclusive wealth creation. Business has to understand that it has only succeeded if, not only has it made money but it's actually ensured that it's played the part in creating an environment where it's taking everybody with them, where it has the role to play in the community. So many businesses, and I find this as I go round the country a lot, play their part in business in the community and Live Wire and loads of different initiatives and trying to make a difference. And that is very important. Because if you exclude somebody from school for instance you might as well put a date in the diary for the date they're going inside. And what you've got to do is work with the schools, get business into the schools so there's a business ethic, a profit ethic, people, teachers understand that businesses are there to be embraced not to be suspected, get the children to understand that there is a merit in working and turning up for work and having this self respect and having obligations and getting them included in society and getting them included in what business is about, and getting businesses included in those societies. And it's not impossible and I'm a very very big advocate of it. And that's the third element. Do that and you'll find crime levels drop.

Question: Do you see businesses paying for policemen?

Digby Jones: Yes I can. Yes. I'm not too sure you'd have bobby on the beat with "paid for by Tesco" and that sort of stuff. I don't think that would do the bobby, Tesco or anybody any good, but I do see how police initiatives could be paid for by businesses in a locality. Yes I do. And I think it would be a good idea too.

Question: What's the business perspective of politicians playing the race card?

Digby Jones: One of the great advantages of this job is nobody's ever going to hear which way to vote and no one is going to hear what I think about major issues. And I think race is so important as an issue and it is so volatile and full of subjectivity that if the director general of the CBI commented on that, I think I'd be inviting more than I'd ever sold.