COMMENT : A golden nonsense from policy on the hoof

'The electricity industry is positively riddled with ownership anomalies - a rag-bag of rules and policy decisions that defy all rational analysis'
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Free-market purists such as the late Nicholas Ridley never thought much of golden shares, a device for protecting newly privatised companies from the threat of takeover. During the brief period he was in charge of water privatisation, the former Secretary of State for the Environment and arch-Thatcherite pushed hard to rid the selloff of all market-distorting paraphernalia. Fortunately for the water companies, more cautious counsel prevailed. Yet the fact remains that golden shares sit uneasily alongside the principles of privatisation, which dictate that, once sold, companies should become subject to all the usual disciplines of the market place, the threat of takeover included.

If there is a justification for golden shares, it is this - that newly privatised companies need a period of adjustment, a breathing space in which to establish a sufficiently robust track record to ensure independence and deter predators. For companies that have golden shares of indefinite duration, there is a further defence - that they are companies of vital national importance that should not in any case be taken over.

The National Grid, apparently, is one. It is an article of faith among ministers that the National Grid should be seen to be completely independent. As a result an even more perplexing golden share than usual has been put in place. Nobody is allowed to own more than 15 per cent of the grid. Furthermore, other electricity companies are banned from owning any more than 1 per cent - the regional electricity companies that presently own the grid have been given a year to divest down to that level.

The result of this is an electricity industry riddled with ownership anomolies - a rag-bag of rules and policy decisions that defy all rational analysis. For starters, there is no logical reason why David Jeffries, the present grid chairman, should be thought sufficiently independent to satisfy the Government's article of faith, but others with no connection with the industry should not. There are plenty of companies and businessmen capable of guaranteeing independence, and delivering a better grid to boot.

Nor is it clear why those who push power around the country at high voltage should be guaranteed independence, while those who push it around at low voltage - the regional electricity companies - should not. So far the Government has done nothing to stop the frenzy of takeover activity among the Recs. The generating companies, too, have indefinite golden shares protecting them from takeover yet if the guidance they have had from ministers is anything to go by, the Government is perfectly happy to see them acquiring regional electricity companies. One of them Scottish Power, already has, while the other two, National Power and PowerGen, only await the Government's formal go-ahead.

While it may be important to protect "the pool" from interference by the Recs and the generators, the Government has had no problem up until now with the Recs owning quite sizeable stakes in the grid; indeed that is the way the industry was privatised. In any case the pool will cease to have much meaning once full competition is introduced post-1998.

The whole thing is plainly a nonsense, an ill-thought-out muddle of decisions designed and executed on the hoof. Mr Ridley may have been right after all. A government that fully believes in the virtues of the free market should have the courage of its convictions and dispense with golden shares.

Regional revolt not all bad news for ITN

The news service provided by ITN to ITV and Channel 4 has come under some heavy fire, not just from viewers (many of whom prefer the BBC's version) but from ITN clients, too. At least four of them - the regional ITV companies HTV, Yorkshire-Tyne Tees, Anglia and Meridian - have formally asked the Independent Television Commission to find a competing news provider capable of supplying news services in place of ITN.

The only obvious alternative to ITN at present comes in the form of Sky, the 24-hour news service provided by BSkyB, 40 per cent owned by Rupert Murdoch's News Corporation. Just what is being proposed here? To replace one news service that many don't rate highly, with another that many do not rate at all? Hardly. None of the leading ITV companies is really serious about bringing in Sky. They are seeking, rather, a lower-cost news contract from ITN, and some of them view Sky's willingness to undercut ITN as the perfect lever. Are not the ITV companies in danger of seeing things the wrong way round, however? They might well be better advised to view ITN as a real investment, open to improvement, and able to earn a decent return in the expanding world of television news.

That is certainly how Carlton and Granada, the lead investors in ITN, should be behaving. But even the four complaining ITV companies might want to take a long-term view of ITN. Rather than push for cut-rate news, their better course might be to develope a reinvigorated ITN. There is, of course, a more cynical reading of the complaining four. All of them are thought to be interested in buying the shares in ITN being sold by Granada and Carlton, which must lower their stakes below the 20 per cent maximum set by the ITC. If there is a chance of ITN facing competition from the likes of Sky, the price at which the shares change hands might drop. The four could get their hands on cheap stock.

That doesn't change the long-term attractiveness of a well-financed, aggressive news service. ITN should be a jewel in its owners' crown, not a cost centre to be whittled down to size. With the explosive growth of digital television just around the corner, broadcasters will be desperate for product. News and current affairs are always in demand. Why not create an ITN to fit the bill?

Holidaymakers resist travel trade hype

No matter how hard the travel industry tries to talk up the market, it keeps running into a brick wall of customer resistance. After a blazing summer, which burned a hole in many a travel agent's pocket, the whole industry was banking on a better 1996. Capacity has been cut. Brochure prices have been hiked by nearly 10 per cent. So far to no avail. The fact is that holidaymakers are not buying the marketing hype and their bargain-hunting tendencies are causing a steady drizzle on the travel companies' parade.

With bookings for next season off 30 per cent so far, it appears that far from being weened off the drug of late booking, the Great British holidaymaker is becomingmore addicted. It is possibly premature to talk this early of disaster to come. But if the booking slump continues much longer the industry will be looking at drastic discounting yet again. There is no panic yet. January is the key month for summer bookings. None the less, there is real concern in the air.