COMMENT : Does New Labour have an old view on RECs?

`Gordon Brown may have trouble demonstrating the legality of the windfall profit tax in Westminster or Brussels but successive posses of Americans with bulging wallets have comprehensively demolished the myth that the utilities cannot afford it'

There's just a possibility, if only a remote one, that the decision on whether to refer the latest American bid for a regional electricity company to the Monopolies and Mergers Commission will fall to a Labour government. If it does, it will be an interesting test, for when the first of these bids came rolling across the Atlantic a little under two years ago, Labour's knee-jerk reaction was to say that the thing must be referred at all costs.

Very Old Labour. These days and with power now within its grasp, attitudes seem to be a little more sanguine. "It seems a bit stupid to refer this bid as there are hardly any RECs left. The time for referral was when all this process started," says John Battle, energy spokesman. So what if Labour did have to decide? What would it do? If the bid comes from the US, the policy seems to be clear. "We are not opposed in principle to foreign takeovers," reiterates Mr Battle.

As well he might, for the Americans were positively falling over themselves yesterday to say that Labour's windfall profit tax presented no kind of obstacle and had been fully factored into the bid calculations. Gordon Brown may have trouble demonstrating the legality of the tax in Westminster or Brussels, but successive posses of Americans with bulging wallets have comprehensively demolished the myth that the utilities cannot afford it.

AEP and PS Colorado brushed the issue aside like a fly bothering a horse in the Ohio sun. As proposed - a one-off levy of pounds 3-5bn widely spread among the utilities - would not be a problem, they said. This is a bit of an embarrassment for Labour, for the Americans seem a good deal more relaxed about the tax than the Brits, whose position Labour's policy of referral would have protected.

Still, never mind. It looks as if timing will spare Labour the discomfort of having to make the decision. With every possibility that Southern Electric will have been snapped up by the time of the election too, Labour's scope for doing much with this industry beyond the windfall profits tax and tampering with price regulation looks severely limited. As for a clear statement of policy on mergers, we are still waiting...

Defence rivals are missing an opportunity

That long-mooted merger between GEC and British Aerospace is the longest on again and off again story in British industry. What was billed in a Sunday paper at the weekend as a new round of talks about to begin turns out to have been an old round on the point of failure. The market yawned and the two share prices hardly moved.

All the same, this is a serious issue that will not go away. The rapid consolidation in the US aerospace and avionics industry is bound to put heavy pressure on European rivals with the Americans turning increasingly to export markets for relief from vicious home-market cutbacks.

It so happens that the UK has not done too badly as a defence exporter, to a great extent as the result of its successes in Saudi Arabia and elsewhere in the Middle East. Exports of helicopters and aircraft to Germany and America are also generating substantial income. As a result, the UK was the second-largest defence exporter in the world last year with approximately a quarter of the global arms markets.

Whether a merger of GEC and British Aerospace, or perhaps of the defence avionics businesses of the two companies, would make much difference to this record is an interesting question. There would certainly be cost cutting, which would be reflected quickly in jobs and profits. But there might also be upward pressure on prices charged to the Ministry of Defence by a single dominant supplier. Nor on present form is it obvious that a reduction in competition would improve the performance of the British defence industry overseas.

Gobbling up national competitors should not be the main priority of this industry. The chief issue remains the insular, fragmented and national nature of the defence market in Europe, an enormous defence market which is excluded from the provisions of the European Union single market. Individual governments still treat their defence companies like nationalised industries. As the power of the American giants grows, an enormous opportunity is being missed.

Look at the way the French are battling to produce a new national champion through a merger of Aerospatiale and Dassault and how they are determined to keep the privatisation of Thomson CSF in French hands. Common sense says that integration in the European defence industry should be cross- border to make real gains, giving companies access to the wider European market. That is the target GEC and British Aerospace should aim at. A domestic merger within the UK is a sideshow and a distraction from the more important agenda.

Just a bout of Euro-pessimism

Anybody who follows closely the ebb and flow of debate over European monetary union will have known of Wilhelm Nolling's views long before he graced a British Sunday newspaper with an account of his plan to use Germany's constitutional court to block the country's membership of the single currency. Not only had newswires and continental newspapers been running stories about the threat all week, but Mr Nolling, a former Bundesbank council member turned academic, is also a known Eurosceptic.

Not surprisingly, some Germans - and he is one - are opposed to the single currency. Every time one opens his mouth, the predominantly Eurosceptic British press seizes on it with evident glee. Why even the Germans think it's crazy, it can be said, and so the impression deepens that the whole thing is in trouble and probably won't happen.

That may be the ultimate outcome, but for the time being it would be foolish to bet on it. Every day brings a raft of speeches and statements about the single currency, few of which advance the sum of human knowledge very much. Each one is nonetheless used by financial markets as another trading opportunity.

So there is a new mood in the markets this week, partly because of the Nolling effect, partly because of rumours that the Bundesbank has had a row with a leading candidate to run the European Central Bank, Wim Duisenberg. After a bout of euphoria about prospects for the single currency going ahead on time, the markets are having a bout of Euro-pessimism. Traders will for the moment believe any old rumour about in-fighting and obstacles.

In truth, it is far too early to say what is going to happen one way or the other. It is more than a year before the decision on whether to postpone the start of the single currency needs to be taken. No politician has ever taken a tough decision 12 months ahead of schedule.

The financial markets will probably go through the cycle of over-optimism and over-pessimism at least once or twice more before spring 1998. By then, the outlook might be very different; the French and German economies could be expanding fast and unemployment falling.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
News
news
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
New Articles
i100... with this review
PROMOTED VIDEO
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
Sport
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
i100
News
ebooksAn unforgettable anthology of contemporary reportage
News
news
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
News
Blahnik says: 'I think I understand the English more than they do themselves'
people
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam