Outlook: Barrett does a Ratner as well briefed MPs move in for the kill

Russian roulette; Brown's agenda

The board of Barclays might like to reconsider its decision to appoint Matthew Barrett as its next chairman after yesterday's inept performance before members of the Treasury Select Committee.

Business leaders always dread being called to account by parliamentary committees. Almost invariably, they tend to get treated like something you'd want to wipe off your shoe, yet Mr Barrett carried off his previous appearance with some aplomb, outraging his mainly Labour inquisitors by insisting that he didn't recognise any such thing as an excess banking profit. Members of the committee were so gob smacked they couldn't respond.

Maybe it was a revenge thing, but this time MPs had done their homework, unlike the hapless Mr Barrett, who virtually had to be stretchered out of the room after the mauling he received over the extortion of the credit-card business. Select committee hearings are theatre, and this time MPs were determined that Mr Barrett would not be allowed to steal the show.

The Barclays chief executive presumably intended to raise a laugh by admitting he would never use a Barclaycard himself to borrow money because it was too expensive. Instead it sounded like a Gerald Ratner, the man whose company nearly went bust after he described one of its products as "total crap".

From then on, the hearing was remarkable only for the repeated sound of Mr Barrett shooting himself in the foot. Mr Barrett sees himself as a big picture rather than a details man, yet on the evidence of this hearing he's out of the picture altogether. He had no apparent knowledge of the Barclaycard product which is advertised under the slogan of "Nought per cent for ever", which is odd because its iniquities have been well enough aired in the press. In fact it's not zero per cent even for a month, let alone for ever. Nor did he appear to have much grasp of the Monument card offered by Barclays, which charges people with impaired credit histories an astonishing 31.9 per cent interest rate.

Mr Barrett's mistake was to believe that platitudes and generalisations would be adequate protection against MPs armed to the teeth with a detailed knowledge of his products. Someone will get the bullet for this one. Of that there is no doubt, but it won't be Mr Barrett.

If there is a defence of apparently high rates of interest on credit and store cards it is this. As the banks never tire of telling us, around a half of all credit card users pay off their bills in a timely fashion, so that they don't incur any interest at all. That loads the cost of running what has become the nation's biggest payments system on to those that do clock up large amounts of outstanding credit. Those with good credit credentials are subsidised by those with bad, which may sound unfair but it's the way of the world.

Unsecured short-term credit is in any case always expensively priced by lenders to take account of the risk of default, and in fact credit card rates in Britain compare favourably with elsewhere in the world. Add to that the fact that credit cards have democratised credit, spreading it out to the masses in a way which past generations could only have dreamed of, and it's sometimes hard to see what the complaint is.

That said, the terms and conditions of credit plainly do need to be made more transparent. The Consumer Credit Act, dating back to a time when only the better off had access to credit cards, has yet to catch up with the reality of widely available mass credit. It seems unlikely that the legislative time will be found for a new one this Parliament. We are in the mid of the biggest consumer credit boom of all time. In these circumstances, extortion is bound to flourish, yet there are few protections against it.

It is therefore essential that banks and other card providers do more to improve their game. If the chief executive of Barclays hasn't the foggiest about the rudiments of his credit card operation, what hope for everyone else?

Russian roulette

The three Russian oligarchs with whom Lord Browne shared a platform in London yesterday are reformed characters - "reasonable, business-minded people" as one of them put it. BP's chief executive must hope so because the last time he danced with the Russian bear he got badly mauled. That was back in 1997 when BP bought a 10 per cent stake in a company called Sidanco. By the time it arrived in Moscow to inspect the assets, the juiciest bits had mysteriously been siphoned off. BP's next stop was the courts.

The businessmen BP was dealing with then are the self same businessmen it has now paid $6.8bn to for a 50 per cent share of Russia's third-largest oil company, TNK-BP. So how are relations these days with Mikhail Fridman, Len Blavatnik and Victor Vekselberg, the respective heads of Alfa, Access and Renova?

Lord Browne's frank, if not altogether re-assuring, answer is that the better they get know one another, the less he suspects them which suggests there is still a long way to go before he stops counting up the cutlery after dinner. Trust, as Lord Browne also observed, is never an absolute concept in business. But it is the basis on which the City is going to judge this latest investment. Despite some very bullish numbers on TNK-BP's future oil production and reserves, and a five-hour presentation to the investment community yesterday, BP's shares ended the day lower.

There are, none the less, some important things in favour of BP's Russian advance. For a start, it has first-mover advantage. Exxon and Shell, which are now scrabbling to follow BP's lead into the country, will have to pay a fat premium to the price that Lord Browne achieved. Second, who is to say that putting money into Russia is any more risky than investing in, say, Nigeria, where Shell has a big exposure. Third, although BP's $7bn investment in Russia is large by most companies' standards, it is a small one for Big Oil. Russia will represent 15 per cent of BP's production but tie up only 3 per cent of its capital.

BP has put plenty of safeguards in place - UK-style corporate governance standards, incorporation in the British Virgin Islands, equal board representation and dispute-resolution based on English law. But still a nagging question remains. BP's favourite oligarchs may be in in Vladimir Putin's good books today. But will the same be true tomorrow?

Brown's agenda

Gordon Brown, the Chancellor, made another impassioned plea for European economic reform in an article for The Wall Street Journal yesterday. There was nothing particularly new in his argument, but it was more strongly stated than I've seen it before in explicitly urging Europe to reject tax harmonisation and fiscal federalism.

The economic challenge for Europe was to be flexible, competitive, reforming and open, he said. "Europe must conclusively rule out tax harmonisation, agree it is a barrier rather than spur to global competitiveness, and resolve that tax competition is the basis on which Europe can compete with the rest of the world as well as command popular support".

Amen to that, but hold on a moment. There is not much sign from one Mr Brown of wanting to compete on tax, deregulation or labour market flexibility. As business leaders keep pointing out, the burden of all three has been rising steadily under Labour. The tax burden, which had fallen to as low as 33 per cent of GDP in the early 1990s, making it one of the lowest in the developed world, will be back above 40 per cent before we know it.

In a plodding but determined manner, Europe is meanwhile moving in the other direction. For all the Chancellor's reforming rhetoric, Britain will soon be meeting Europe coming the other way. Mr Brown can point to full employment and rising living standards as a vindication of his policies, but look forward 10 years and will it still be so? Only if he practices what he preaches.

jeremy.warner@independent.co.uk

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