No reason for the Government to block this deal
`The takeover could be made conditional on National Power selling a lot more of its generating capacity than presently envisaged. It would thus enhance competition rather than dilute it'
Thursday 18 April 1996
These days it is not so simple. News of Southern's intentions brought the usual knee-jerk condemnation from Labour and a few "bad business, this" mutterings from the Tory backbenches. But it is a measure of how far attitudes have changed that the prospect of a foreign takeover of Britain's largest power generating company could have resulted in such a subdued political reaction. Does it really matter any longer in this age of global markets and corporations whether our industries are British owned?
Ten years ago it would certainly have been thought so. These days? Well, maybe not, provided our companies remain properly run and regulated in a publicly accountable way. Some businesses, notably the car industry, have enjoyed a positive renaissance under foreign ownership, and plenty of others thrive. In any case, while National Power is plainly still the most powerful force in the British electricity market, it does not hold the same pivotal position it once did. Its share of the market, already down from more than a half six years ago to a quarter now, is being forcibly further reduced to just 20 per cent over the next couple of years.
None the less, there are clearly public policy issues involved in such a takeover. Southern already owns the regional distribution company, South Western Electricity, so its takeover involves a degree of vertical integration of previously segrated distribution and generating businesses. That issue is about to be resolved by the Monopolies and Mergers Commission in favour of generators who want to buy distribution companies. Even if ministers wanted to block the Americans on grounds of vertical integration, therefore, they would be hard pressed to do so.
The Government has an important extra lever in all this, however - its golden share in National Power. The golden share was put there for precisely this sort of eventuality and is plainly worth something. At the very least the Government could use its power of veto over any National Power takeover to extract big concessions from the Americans. Indeed this seems to be the most likely and sensible way forward for the Government. The takeover would be made conditional on National Power selling a lot more of its generating capacity than presently envisaged. The takeover would thus enhance competition rather than dilute it.
At this stage, Mr Baker is keeping his door gently ajar to the American approach. Southern seems to be genuine in its promise of a proper merger with a serious position for the British company in the combined group, though this is tempered with the threat that if it has to, it will go hostile. It is easy to be sceptical about Southern's smooth-talking banter, to dismiss its talk of all the supposed benefits of a global partnership as little more than a cover for good old-fashioned American imperialism. But it would be wrong to do so.
Southern is prepared to be as accommodating as it has to in its determination to bring about this marriage. If the sort of structure that allowed the merger of Britain's Beecham with SmithKline of the US, or Reed with Elsevier of Holland, has to be put in place, so be it. There is no reason for the Government to block this deal; nor, if the price is right, are there apparent reasons why National Power should oppose it.
Part-time boom will not win the election
It seems almost churlish to find fault in the remarkable reduction in unemployment revealed by yesterday's figures. Ministers, rightly in some respects, see their achievement in bringing Britain's unemployment rate below the European average as key evidence of the success of the Government's approach to managing the economy. Britain's deregulated, flexible labour market has not been created without a good deal of pain, but there is surely some reason for believing the economy is about to emerge strengthened by the Conservative surgery.
Unemployment - even on the internationally accepted definition, not just the manipulated headline count - has now been in retreat for four years. That must be some kind of vindication of policy. But the Government should beware of too much triumphalism. The new figures are not unambiguously good news. The reason lies in the mix of new jobs being created. Out of 118 added in the three months to February, 75,000 could be identified as part-time jobs for women, 13,000 as part-time jobs for men, and 24,000 full time (18,000 men and 6,000 women). Part-time work is real work and suits many women, but it is hardly a sign of a booming economy if it accounts for three-quarters of all new employment. City economists see the predominance of part-time work as a good reason for expecting wage rises, and inflation, to remain subdued. In many industries underlying earnings growth is at a record low.
So if there is to be the recovery in consumer spending predicted by the Chancellor, it is unlikely to be fed by big rises in pay. A modest improvement in the economy based on a lot of part-time and temporary jobs are hardly enough to return him to Number 11.
Unfortunately for the Conservatives, just as people only realise that they were happy when they have become unhappy, they will only feel good about the economy long after we have all stopped having to hunt for the feelgood factor. Politically, there is not much in these figures for the Government to rejoice about.
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