BUSINESS ANALYSIS: Blair Brief Puts Business Centre Stage ; Tony Blair's Third Term Promises Big Changes in a Number of Key Areas for Business and Industry. the Prospect of a New Generation of Nuclear Power Stations Will Thrust Energy Policy Centre-Stage, While Transport Is Also Likely to Come to the Forefront

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Energy

One of the most pressing issues during Tony Blair's third term will be energy policy. The Prime Minister is personally committed to a renaissance of nuclear power and now, with a pragmatic Blairite minister, Alan Johnson, in charge of the newly named Department of Productivity, Energy and Industry, he has an ally to turn that vision into reality.

The argument in favour of nuclear has steadily gained ground in Whitehall as Britain becomes a net importer of gas, environmental opposition to onshore wind farms gathers pace and increasingly onerous emissions standards force the closure of coal-fired stations. Britain's 12 nuclear stations currently provide 23 per cent of the nation's electricity. But unless they are replaced with new ones as they reach retirement, there will only be three left by 2020, producing just 7 per cent of our needs.

So far the Government has relied on renewable energy to fill the gap and meet targets for cutting greenhouse gas emissions. But this could be at a prohibitive cost. The economics consultancy Oxera calculated it would cost taxpayers pounds 12bn.

Still, formidable obstacles remain in the way of a new nuclear programme " safety and waste disposal to name but two. Messrs Blair and Johnson will also have to convince the City it is financeable and that probably means tearing up Labour's reform of the energy trading market to give baseload nuclear power long-term guaranteed prices.

Prospects of progress: 5/10

Michael Harrison

Productivity

Britain's poor record on productivity has long been the Achilles' heel of an otherwise successful economy. Employment has surged, the jobless total has tumbled, growth and inflation have become markedly less volatile and yet the efficiency of the British workforce has 'flatlined' at around 2 per cent over the past decade.

The only place where productivity is evident is the Treasury where the number of pages devoted to it in the Budget has more than doubled from 16 in 1999 to 38 this year.

Now, after eight years of grappling with it, the issue has been granted pride of place in the name of the new department of Productivity, Energy and Industry that replaces the DTI. Alan Johnson inherits a mixed legacy. A report by the National Institute of Economic and Social Research published before the election branded productivity as a 'substantial flaw'.

Business groups say their members are constantly striving to boost productivity to survive in an increasingly competitive world and argue the Government should put its own house in order by reducing the volume of regulation and boosting the productivity of its own workforce. The Government has responded by accepting the recommendations of both the Hampton report, which proposes reducing the burden of inspection, and David Arculus' Better Regulation Task Force, which called for a 25 per cent cut in the burden of red tape, saving business pounds 16bn.

Prospects of progress: 3/10

Philip Thornton

Pensions

One of the biggest fears for business over the next four years is a move towards compulsory pensions. With the majority of people not saving enough for their retirement, and the state unable to cope with its growing burden, the Government is quickly realising it needs to take action. The choice is stark " force workers to save for their old age, reduce the benefits they receive, raise more in taxes or lift the retirement age.

Although compulsion is still the least favoured option, the new Work and Pensions Secretary, David Blunkett, has not ruled anything out. The Government has promised to set out its pensions strategy after Adair Turner, the former director general of the CBI, publishes his recommendations this summer. Changes to the state pension, including a reduction in means- testing, are likely to be top of the agenda. …