Question: Looking ahead to the Comprehensive Spending Review - you said that public service delivery is vital to prove that the public is getting value for money. What kind of delivery are we talking about?

Digby Jones: It is no use just putting money into the health service, putting money into transport, putting money into education and the prisons, unless we get a cultural systemic change in the way the service is delivered to the public. We need to bring the private sector ethos into public services - put the customer first, ensure that the system doesn't win, but the tax-paying customer wins. Of course the system needs more money and business must surely play its part, we must put more money in ourselves, but it will not deliver unless we also get change as well.

Question: Is business concerned about the structure of our public services such as the NHS, in ensuring that delivery. For instance, do you think that we can still have a free at the point of delivery NHS under the current structure?

Digby Jones: I don't call £75 billion a year free. We do need a structural change. You can't run a 1.2 million employee business with £75 billion a year turnover from a few offices in London. You have to decentralise, you have to put more power in to regions, more power into hospitals.

It is also a cultural change that is needed. There are some good hardworking decent people in the health service, they are being as let down by the system as the taxpayer is. The vested interests are arranged against it. Whatever, they may say - the consultants, the doctors, the nurses, the unions, they all come up with reasons for why change shouldn't apply to them. We have to have some strong leadership from the Government to force change through.

The private sector should play its part too, but it doesn't necessarily mean that the private sector is right all the time. There are many many times when it isn't suitable - I think Railtrack is a good example of that. But there are many many times when it is really suitable and where it ought to be applied.

Question: The Government has talked about the need to deliver on public sector reform - how do you feel about the pace of these reforms?

Digby Jones: We're two years into the 10 year plan on railways and transport generally. We have got to say that what the Government is doing on roads is going quite well but on railways we have seen no progress at all. It is not a time for ditching the 10 year plan - it's a time for strengthening resolve and getting behind it and making it work but what we need to see is that money get through and making a difference to ensure that people can get their goods to markets and get people to work. We want people in Britain to come to work in the morning ready for the battle for the day, not having done the battle for the day by just getting there.

With the forthcoming Comprehensive Spending Review, the CBI majors on transport, education and around the edges there are some other issues that are very important for business. We are looking for £300 million to be put into making sure there are more and better planning officials in local authority planning departments, to make sure that we get good quality, speedy planning decisions. We are looking for £50 million to go into tourism. Tourism supplies £75 billion a year in to the British economy.

Question: How do we compare with our international counterparts in our investment into tourism?

Digby Jones: For instance, we are the only country in Europe that doesn't have a tourism minister in the Cabinet of the Government, solely dedicated to tourism.

Question: Would you like to see that here?

Digby Jones: Yes we would. Tourism is important. It employs 2.1 million people and we are saying put £50 million in, re-energise the way England, for example, is marketed to the rest of Britain - to put it in line with Wales, Scotland and Northern Ireland, and re-energise the quality of the product, energise the way we train employees in the tourism industry and then get out around the world and market the United Kingdom and get people over here. It's a huge issue but it is just £50 million when you are talking about £180 billion for transport.

Question: You say it is essential that we have public sector reform to make public spending increases value for money - what's at stake if the Government go wobbly on this?

Question: Talking about the investments that will be announced in the Comprehensive Spending Review, Vicky Pryce, who will be the economic adviser to the DTI, has described how taxes will need to go up to meet increased spending commitments - what do you make of that?

Digby Jones: During the Budget in April I said and I repeat it now, the Chancellor is giving one big hostage to fortune which is that he is dependant on economic activity and economic growth not only continuing at present levels but increasing from present levels to generate sufficient tax revenues in quantum terms from the rates that are now applicable. And if we can't deliver the growth, the rates will have to go up simply to get the quantum right if he is going to continue with his spending pledges. So it has never been more important to stimulate growth in the British economy, and within that we want to have tax competition - it's pointless if we are no longer seen as a low tax economy and a lot of what's happening at the moment isn't working that way.

Its no good if we lose our labour market flexibility, so much more is coming out of Brussels in the unions' favour damping down the enthusiasm to employ people, that doesn't help in growing your economy. And also we need investment in transport, investment in education, to make sure that we have a productive workforce that can get round the country and get to work. So all of that together means we need the growth in the economy if rates are not going to go up in the future.

Question: Vicky Pryce also described how the five economic tests for deciding whether we should go into the euro will boil down to an informed guess - how does the business community feel about that?

Digby Jones: I won't comment on what Vicky thinks of those, what I will say is they are the Government's tests and we will await what happens there with interest but business does have one or two other tests of its own. The exchange rate itself is of enormous importance to British business, we have to make sure that the rate that would be applied is sustainable at a very competitive level, otherwise it condemns British business to uncompetitiveness in global markets for a long time. For instance, its not just about 'euroland' its about the relationship between the euro and the dollar because Britain is a unique trading nation. She trades with America, she trades with Europe, so the euro's relationship with the dollar as well as sterling is very important.

Labour market flexibility is very important here. I have to say that the average member of the CBI is far more concerned about creeping regulation from Brussels gold-plated by Britain than it is about a couple of cents on the euro.

Question: Are we at the right exchange rate to join?

Digby Jones: We don't think a sustainable rate for entry would be anything under 70p for a euro. Its about 65p at the moment - we think its going in the right direction but its got a way to go yet.

Question: The business community faces a problem over regulations. You dislike regulations and describe them as red tape but incidents such as the accounting failures at Enron and Worldcom make people think that regulations are more and more necessary?

Digby Jones: If you look at British business, we learnt our lessons from the Polly Pecks and the Maxwells and the BCCIs of the early nineties. British business put its house in order. A lot of it was transfer of best practice, a lot of it was self-governance and the last thing in the world we need is to muzzle every labrador in Britain to get at one rotweiler.

What is very important is that we work hard to ensure that confidence is maintained in British business. We have the most transparent accounting system in the western world, it is far more efficient and open than the American and European systems, its very important that that is maintained.

I do accept that around the edges we need to make improvements, we certainly need to look at the role of non-executive directors, we need to look at the way the remuneration committee and the audit committee of a company is manned and how much we pay non-execs and what do we expect of them. But at the end of the day, the system itself in Britain is superior to America and I would call on American to look eastwards and think 'There is something to be learnt in the British system' instead of heading off into isolationism and protectionism and not actually learn from other parts of the world.

Question: Do you think some people are non-executive directors of too many companies?

Digby Jones: Its difficult to say because I can show you examples where you could be on the board of seven or eight small companies no problem, I could show you examples of being on the board of two or three big companies that have problems and that's too many. So it is very difficult to legislate against that. And of course the other thing is that our system in Britain isn't perfect and if there is a senior person who wants to be up to no good probably at the end of the day no amount of rules will stop a wrong 'un intent on doing wrong. But the system in Britain is actually better than the system in America for delivering safeguards to investors and employees and that is what is important.