The Interview: Man on a mission has quangos quaking

Philip Hampton, Chairman of J Sainsbury
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The Independent Online

Although Gordon Brown mistakenly referred to Philip Hampton as a "Sir" in his Budget speech on Wednesday, the chairman of J Sainsbury probably does deserve a medal for helping businesses escape the avalanche of red tape engulfing them.

Although Gordon Brown mistakenly referred to Philip Hampton as a "Sir" in his Budget speech on Wednesday, the chairman of J Sainsbury probably does deserve a medal for helping businesses escape the avalanche of red tape engulfing them.

His recommendation that 36 regulators should be squished into nine has left quango land shocked. Government inspectors should not, however, be that surprised at the radical nature of Mr Hampton's changes. An Oxford University English graduate turned accountant, he has joined battle to sort out some of Britain's worst corporate basket cases ­ British Steel, British Gas, BT Group and latterly Sainsbury's.

Never a chief executive, always a finance director except in his latest supermarket incarnation, Mr Hampton is generally used to getting his own way. "I don't think you can do these sorts of changes without some bumps in the road," he says.

One of the biggest bumps will be over the future of the Office of Fair Trading (OFT), which he wants to relieve of its consumer protection functions and merge into a new Consumer and Trading Standards Agency.

As The Independent revealed on Thursday, Sir John Vickers, the chairman of the OFT, told his staff by e-mail that Mr Hampton's proposal was bound to create "uncertainty and anxiety". Sir John is not going down without a fight, arguing that the OFT is the natural home of trading standards issues and should be expanded accordingly.

But sitting in the chairman's office at Sainsbury's headquarters, the same second-floor corner occupied until last summer by the hapless Sir Peter Davis, Mr Hampton is in determined mood.

"You could do it structurally the other way and say 'let's expand the OFT and give them control of local authority trading standards'. That's not a stupid idea but we don't think it's the best idea for a number of reasons. First the OFT has not had the managerial experience of running a disparate bunch of local authority trading standards officers and secondly the historic core of the OFT still has an important focused job to do reviewing mergers and cartels."

His confidence as an agent of change reflects his whole outlook on life. "I don't like just minding the shop," he says. His first finance director's job was at British Steel. Between 1990 and 1995 he saw all the fluctuations of the commodity cycle. The company enjoyed a £900m profit in his first year, going to a £1.2bn profit in his last year but suffering a £600m loss in between.

"I thought I had run my course there after six years and I was approached by British Gas which was in a bit of a pickle."

He was hired by Cedric Brown, the original privatisation fat cat, but by the time he arrived Mr Brown had left. Just nine months later Mr Hampton was organising the demerger of Centrica. Later BG Group was split again, this time between its energy production business and its pipeline network.

By now Mr Hampton had demerged himself out of a job which was when BT Group came calling, just as the financial crisis in telecoms and media companies was coming to a head. "One of the reasons I was brought in was to examine the separation of the core network and the retail operations. I concluded at the time there wasn't a good case for such a separation from a shareholders' point of view."

So what about now? With the threat of a break-up still lurking in the background of Ofcom's current strategic review of the industry, is there more of a case today?

Basically, Mr Hampton thinks there is. However, it is nowhere near as simple as British Gas. His analysis is that a split could leave the two halves at a competitive disadvantage if there is a proliferation of other, still integrated platforms including cable, satellite and broadband.

But the inherent contradiction of BT's retail rivals also being increasingly important customers of BT's own wholesale division looks untenable to Mr Hampton.

"If the regulator wants strong retail competition at the customer end, then having BT Retail as the biggest customer of BT's network creates horrible managerial tensions. Paul Reynolds, who runs the network, has to be even handed with all his customers but his biggest customer [BT Retail] sits at the same management table. It's a very difficult position to be in."

Anyway, during his time as BT's finance director there were probably more pressing things to address such as the company's £30bn debt. BT was the world's biggest borrower in the overnight commercial paper market when he joined in 2000, with a £25bn liability.

"We launched a crash restructuring." This involved the world's biggest rights issue to raise £5.9bn and the sale of its Japanese operations.

"We sold Japan to Vodafone. Sir Peter Bonfield [then the increasingly maligned BT chief executive] did a fantastic job taking BT into Japan. He spent £2.5bn getting in and sold for £5bn a year and half later. Vodafone bought it and it certainly hasn't done very well under their ownership."

BT also demerged its Cellnet mobile business, which became O 2. After two years the restructuring was done and Mr Hampton was on his way to Lloyds TSB, a bank with ambitious expansion plans in Europe. But collapsing equity markets and Lloyds' problems with its 2000 Scottish Widows acquisition put paid to development plans.

So by last year he was talking to headhunters again when the Treasury asked him to review regulation ­ 12 months later he has concluded his work and the vision is set. That's not to say arguments relating to things such as the OFT are over; discussions will take place but Mr Hampton is confident his plans for simplifying business regulation and making it more effective will become a reality.

"I'm confident the combination of these organisations will take place because it's within the gift of government to do it and the Prime Minister, the Chancellor, the Secretary of State for Trade and Industry and the Cabinet have given a clear commitment that this will get done. We've had a lot of good discussions between the Treasury and the DTI about how this should be looked at and we think we will get to the right place."

And in case there's any doubt about it, Mr Hampton, 51, is not about to hand in his review and go home. He wants to make sure his year-long project is acted upon. "I personally believe if you have done one of these things the right thing to do is have some sort of follow through and commitment to see things happen, or understand why they don't. I think that's increasingly the view the government has picked up."

Anyway, the Hampton review is about much more than the future of the OFT. It's about changing the whole approach to regulating business behaviour. Companies should no longer be interfered with without good reason, the 2.6 million forms sent out to business should be reduced by 1 million and inspections by one-third through cutting out overlapping functions.

Greater consistency in applying penalties will be introduced and there will be an end to regulatory proliferation so that when new measures are required they will be an extension of existing bodies, rather than setting up new ones.

Undertaking this mammoth review has not been as turgid a job as it might seem. Intellectually it was virgin territory and it's not been without humour. Imagine a merger of the Sea Fish Industry Authority with the British Potato Council to create a new Fish & Chips Agency.

But don't be fooled by the levity. Mr Hampton is taking things seriously and he's got the backing of Government. The quangos should be ready for change.

How career adds up

Age: 51.

Education: English degree from Oxford.

Career: Left Oxford in 1975 and joined Coopers & Lybrand where he qualified as an accountant. From 1981-1990 he was a banker at Lazard. An
old- fashioned generalist, he did mergers and acquisitions, capital raisings and defences. One of his clients was British Steel, which he joined in 1990 as finance director. In 1995 he left to join British Gas where he stayed until 2000. After that he was finance director at BT Group for two years. Joined Lloyds TSB in 2002 and stayed another two years. Joined Sainsbury's as chairman in July 2004.

Pay: £395,000.

Family: Married.

Hobbies: History, sailing, skiing.

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