Post the bad old days of state ownership and direct ministerial intervention in industry, it has always been hard for governments to generate much public interest in their various policy initiatives to "help" business and enterprise. Most business people would reasonably agree that the best governments can do is just to stay out of their way.
On the face of it, yesterday's document, Productivity in the UK: Enterprise and the Productivity Challenge, is just another collection of previously announced intentions and policy reviews. Gordon Brown's crusade on productivity is as old as his Chancellorship, and there have already been at least three other very similar stabs at the productivity issue.
But we should be careful not to be too cynical. There is, in fact, quite a lot which is genuinely new and important here; whether you welcome it or not rather depends on where you are coming from. The Rupert Murdochs of this world will find much to alarm them in the decision to extend operational independence to the competition authorities from mergers to monopolies. But for entrepreneurs, the decision to reduce the rate of capital gains tax on business assets to 20 per cent after one year and 10 per cent after two years, is an initiative of real substance.
Before you go racing off to stick all your savings into the stock market, it should be pointed out that the extra capital gains tax break doesn't apply to ordinary listed investments, more's the pity, but only to unlisted or AIM-listed securities, and even then the whole area is hemmed around with restrictive Inland Revenue terms and conditions to prevent "leakage" from the income tax base.
It is unfair, though unsurprising, that the Government should draw such a distinction. For most small savers, direct investment in private companies is not really an option. For them, the Stock Exchange provides the only accessible way of investing in corporate Britain. But then the Government's priority is to provide a funding boost for small and medium-sized businesses, not those with existing access to the wholesale capital markets.
Even so, this is a remarkably bold thing for any Labour administration to have done, and there is good reason to believe it will have a significantly beneficial effect. There are places, such as Belgium, where the capital gains tax regime is even more benign, but as far as most of the developed world is concerned, this puts Britain in the vanguard of the tax cutters. Mr Brown seems to be serious in his determination to encourage an enterprise culture.
He also seems to be serious on competition policy. For the Government to extend operational independence for the competition authorities from mergers to monopolies is again a bold and significant development, which maybe even Gordon Brown hasn't fully recognised the importance of.
What he's doing is giving John Vickers at the Office of Fair Trading carte blanche to survey the industrial landscape and refer almost anything where there's potential for market abuse to the Competition Commission. The Commission will then in most cases be free to determine the remedies, and the law is to be beefed up to ensure they contain real bite, including making directors criminally liable for operating unlawful cartels and increased third party compensation.
Since "complex monopolies" exist in nearly all industries including those that have traditionally regarded themselves as above accepted competition law, such as media and farming this is quite a Pandora's box that Mr Brown is opening up. Last week Rupert Murdoch went to see the Chancellor at Number 11 Downing Street. Presumably he wasn't there to discuss the weather, or even to congratulate the Chancellor on his election victory. Are Mr Brown and Chairman Blair really prepared to be as good as their word and allow independent regulators to walk all over the affairs of their favourite media barons and business leaders? We'll see.
Jack Welch's fury
Gone are the days when industrialists would deliberately try to engineer their takeovers and mergers so that they were examined for competition purposes by Brussels, rather than the relevant authority in London or elsewhere. European regulators were once justifiably regarded as an easy touch, and going back five to 10 years, any number of takeovers that would these days be regarded as anathema used to sail through, completely or largely untouched. Forty per cent regional market share? Fine by us, used to be the Brussels view, and so much the better if it was being sponsored by a member state.
Today it tends to be the other way around. Although the vast majority of takeovers and mergers go through unscathed, anything border line will get the treatment and sometimes the effective answer is "non". Jack Welch, chairman of GE, is the latest to fall foul of what to many industrialists looks like a quite deliberate attempt to throw a spanner into the works of any big industrial merger. We don't know what to expect any longer, is the increasingly common complaint. Is this fair comment?
Well no, not really. European merger regulation in its present form is still only 10 years old, and certainly in the early years, when Europe was seen as a soft touch, the authorities were feeling their way. Globalisation and the growing multi-national nature of big mergers has added a new layer of complexity, as has the evolution of competition policy, which is today much tougher in its view of what constitutes monopoly or could lead to abuse of market position.
Both Jack Welch and President Bush have to all intents and purposes accused Europe of anti-American bias in putting the kibosh on GE's takeover of Honeywell, but the facts don't bear this out. True, Europe prohibited MCI's takeover of Sprint and made life exceptionally difficult for Boeing's takeover of McDonnell-Douglas. But it allowed other "all-American" deals with big implications for Europe, such as Time Warner and AOL, which was eventually cleared with only minor conditions.
As it happens, anti-trust regulators in Europe and the US have made a fair amount of progress in establishing a harmonised approach to these matters. But however hard they try not to let it colour their judgement, in the end regional interest is bound to get a look in. The competition issues are broadly similar in the GE/Honeywell merger as they affect both the US and Europe, but aerospace is one of those industries with a comparatively limited number of "national champion" players, and this has coloured the outcome.
The US has Boeing and GE, Europe has Airbus and Rolls-Royce, and on either side of the Atlantic, it is these companies that have been calling the shots. The GE-Honeywell merger advances the US national interest, but it damages the European one. In such circumstances, there is plainly going to be a different response. The election of Dubya, who on paper at least is more sympathetic to the interests of big business than his predecessor, may make such differences more and more common place.
Many big multinationals would love for there to be no mergers regulation at all, or at least a common source of assessment, but as long as different trading regions continue to exist, this hardly looks realistic. Mr Welch may be able to bully his way to success with US regulators, but there is no reason he should be allowed to ride rough shod over European jobs and economic interest as well.Reuse content